Benefits unclear as states rush into Medicaid managed care

Nurie Keqi, of Queens, N.Y., is one of the lucky ones benefiting from Medicaid expansion under the Patient Protection and Affordable Care Act. A year ago, her Medicaid plan dropped her and her husband because of a small increase in their household income. The 63-year-old Albanian native, a U.S. citizen since 2007, lost coverage for the pills that kept her high blood pressure in check and lessened her chronic back pain from years of lifting heavy parcels for a small package carrier. Her husband could no longer afford his asthma medications.

“It was difficult. I had no job at that point and drugs are so expensive, and we weren't sure what we were going to do,” Keqi said.

It wasn't until New York expanded Medicaid for people earning above the poverty line that she was enrolled in Health Plus, an Amerigroup Medicaid managed-care plan. Now, the couple are once again filling their prescriptions. “When Obamacare came around, we thanked God,” she said.

The Keqis are two of the more than 6 million people the CMS estimates have joined Medicaid in the past six months, either because they were eligible all along, or because they live in one of the states that expanded the program. The majority of these newly enrolled low-income households are like the Keqis—they were moved into managed-care Medicaid plans run by private insurers.

Under Medicaid managed care, which is in essence an HMO for beneficiaries, the state pays a fixed rate to the insurer, which administers payment for care.

Over the past few decades, 38 states and the District of Columbia have switched their Medicaid plans to some form of managed care for at least part of their government programs.

HHS believes 57% of Medicaid beneficiaries were enrolled in Medicaid managed-care organizations as of July 1, 2011, compared with 10% in 1991. The consulting firm Avalere Health projects that 75% of Medicaid beneficiaries will be covered by managed-care organizations starting in 2015. A recent U.S. Government Accountability Office report, using fiscal 2011 data, found Medicaid managed-care plans received about 27%, or $74.7 billion, of federal Medicaid expenditures.

Even before Medicaid expansion, managed Medicaid organizations have seen their rosters swell in recent years as more states seek to gain greater control over program costs.

In recent years, there's been a greater push to expand Medicaid managed care to cover people living in more rural regions, and to more vulnerable patient populations such as the disabled and those relying on long-term care, said Caroline Pearson, vice president of Avalere Health.

While some Medicaid managed-care organizations are not-for-profit, provider or government-owned, most belong to the major health insurers. United Healthcare, WellPoint, Aetna, Centene and Molina—all publicly traded—have more than 1 million beneficiaries enrolled in their plans. Smaller players include Cigna and Humana, which collectively have just over 150,000 enrollees in the government program, according to their most recent earnings reports.

The rush into Medicaid managed care came despite limited evidence that the plans save money for states and the federal government.

Nor is there much evidence to suggest they are delivering higher-quality care for beneficiaries through better coordination, which is one of the major claims for moving program administration to the private sector.

Evidence that Medicaid managed care saves money over traditional fee-for-service Medicaid “remains murky at best,” said Dr. Michael Sparer, chair of the Columbia Mailman School of Public Health's Department of Health Policy and Management. His 2012 study sponsored by the Robert Wood Johnson Foundation found that no state implemented managed care in the same way, which made it impossible to draw broad conclusions about states' overall success in reducing costs.

“There is much truth to the old cliché that what you learn from studying one such initiative is largely limited to the particular circumstances of that initiative,” his research concluded.

Other researchers cite evidence of cases in which savings come from stinting on care for the poor and near poor, not through greater efficiency and improved coordination. “The plans will do whatever they can to hold down utilization and costs,” said Debra Lipson, a senior researcher at Mathematica Policy Research.

She noted that managed care is attractive to states because it provides greater predictability on costs. Insurers are paid a negotiated fixed rate for each beneficiary. If plans wind up spending more on enrollees than the capitation amount, the insurance company is on the hook for the difference, Lipson said.

Yet more states are creating or expanding their Medicaid managed-care programs. Major initiatives have been launched in the past three years in Kansas, Kentucky, Louisiana, Nebraska, New Hampshire and New York. All have cited the belief that managed care will help contain ballooning healthcare costs, especially by limiting unnecessary trips to the emergency room.

“We can assist (beneficiaries) by quickly finding the proper medical services and by helping to ensure they receive necessary preventive care,” said Steve White, CEO of Buckeye Community Health Plan, a subsidiary of Centene Corp. operating in Ohio. “We will also follow them if they have chronic conditions to ensure they understand and are compliant with their physician's treatment plans. This saves significant medical cost over the long run and avoids unnecessary ER and hospital visits.”

A key approach for managed Medicaid companies is assigning a care coordinator who tracks a patient's social and medical needs to ensure they are getting the services they need. They also help patients find primary-care physicians, which holds down healthcare expenses.

Insurers are also working closely with Medicaid providers to avoid the claims denials that have sunk managed-care plans in the past. WellCare of Kentucky, for instance, installed a program to make sure doctors are being heard on issues that are bothering them, such as payment issues and no-shows.

Provider-relations representatives make as many as 20 office visits a week, accompanied by WellCare employees who can adjudicate claims on the spot. “All these things are important to make sure cooperation isn't an issue or a barrier affecting our members,” said Kelly Munson, the head of the firm's Kentucky operations.

WellCare served 1.9 million Medicaid beneficiaries as of March 2014, an 11% increase from last year. That increase was almost entirely from Kentucky, where it received 60,000 new beneficiaries because of the state's Medicaid expansion under Obamacare.

Anecdotal reports suggest the surge in Medicaid managed care is impacting utilization. Insurers have been able to cut emergency room use from between 6% to 27% through their more hands-on and targeted approach, according to studies.

However, healthcare providers in some states say those reductions may be a mirage. In Georgia, where state officials began transferring Medicaid beneficiaries into care-management organizations in 2006, hospital officials claim insurers have created administrative hoops for receiving payment.

“For hospitals with smaller business office resources, (that) results in no payment for care provided if the provider didn't have the time and resources to track down payment from the companies,” said Kevin Bloye, a spokesman for the Georgia Hospital Association.

Some Medicaid managed-care plans have also run into financial difficulties. Some California hospitals struggled to get payments of any kind from Alameda Alliance for Health, said Amber Ott, the California Hospital Association's vice president of finance. In May, the state's Department of Managed Health Care took possession of the plan because of its lack of assets and working capital.

In Kentucky, some plans have instituted a policy of reimbursing hospitals only $50 for an ER visit if it turns out that a beneficiary was not experiencing an actual emergency. Hospitals that performed thousands of dollars in tests to rule out a heart attack could end up being reimbursed almost nothing, said Michael Rust, president of the Kentucky Hospital Association.

A few states are rethinking the rush into Medicaid managed care. In 2011, Connecticut announced it would no longer use private Medicaid contractors. It shifted the money previously spent on insurers' administrative costs and profits to higher pay for primary-care doctors. State Medicaid director Mark Schaefer said that after a 15-year history with managed-care organizations, there was diminishing confidence in the value of what they provided.

Oklahoma called it quits with managed-care plans in 2003 after plans serving its beneficiaries sought a mammoth rate hike, according to a Mathematica study. Since the state was struggling with budget issues, it offered a 13.6% increase. When there wasn't buy-in, state officials realized they could take over care for patients with lower administrative costs and fewer staff members.

“With Oklahoma and Connecticut, they used to be full managed care and they said, 'With what we're paying and what we're getting, we think we can do a better job,' ” said Matt Salo, executive director of the National Association of State Medicaid Directors.

But other states have had positive results. In the 1980s and early 1990s, Arizona achieved cost savings of 11% for medical services and 7% in total cost savings under managed care, compared with its costs if the state had stayed with fee-for-service medicine, according to a Lewin Group study. In 2002, a managed-care model enabled Wisconsin to achieve 10.7% savings in program expenses.

“Managed care is a tool, it's a vehicle, a means to an end,” Salo said. “If the end is higher-quality outcomes and reduced cost, you can get there with managed care.”

Follow Virgil Dickson on Twitter: @MHVDickson