Quick change coming for Cook County's Medicaid contract

The Cook County Health and Hospitals System is renegotiating its contract to administer CountyCare, its Medicaid managed-care program, less than four months after it inked the nearly $1.8 billion deal.

The amended contract with IlliniCare Health Plan will be shortened to three years, with the option for two one-year extensions. The total contract amount will drop by $216 million to just under $1.58 billion, and the new deal will call for the vendor, an arm of St. Louis managed-care giant Centene Corp., to manage coverage for about 150,000 people, 28 percent more than contemplated when the first contract was signed in May.

County health officials say the change came because those additional patients will be different from the 115,000 adults newly insured through the Obamacare Medicaid expansion they originally believed would be CountyCare's population. The new beneficiaries will include children and their parents and caretakers who until now have been covered in traditional fee-for-service Medicaid. Also included will be seniors and people with disabilities, who also were covered under traditional Medicaid.

Those populations require different care coordination approaches than new Medicaid patients, many of whom have little or no coverage history. That and their greater total numbers required the health system to rethink the scope and amount of the original IlliniCare contract. Officials opted to shorten the term of the deal to allow themselves the flexibility to respond to changing conditions in the local health care system.

“We determined that trying to predict things five years out was a stretch at best,” said Hill Hammock, chairman of the health system board. Mr. Hammock and the rest of the board this morning unanimously authorized the system to amend the contract.

The shorter contract also allows the system to spend more on a per-year basis without having to ask for more funding on top of the $1.8 billion its board initially authorized. For example, under the three-year deal, the per-year outlay will be $526 million, higher than the $359 million per annum in the five-year contract. If the higher spending level were extended to five years, the total contract amount would top $2.6 billion.

President Barack Obama's Affordable Care Act allowed states to expand Medicaid eligibility to adults who make up to 138% of the federal poverty level. The federal government covers the entire cost of new enrollees for the first three years, tapering to 90% by 2020. CountyCare started in November 2012 as a pilot program under a waiver from the CMS that allowed the system to start enrolling the newly eligible a year early.

On July 1, CountyCare switched into a fully fledged managed-care plan under the Illinois Department of Healthcare and Family Services. The key change in the transition: The program can start signing up more kinds of Medicaid patients, not just the adults who gained coverage through the health reform law.

Under CountyCare, the system receives a flat per-member-per-month payment to cover the care of its members. From that flat fee, it must pay for all care coordination efforts, as well as claims for services and drugs. If it can keep spending below the fee, it can keep the difference. The health system also keeps the reimbursement if a county hospital or doctor provides the care.

About 78% of expenditures in the new contract will go to paying claims, county officials said.

The system's original contract came under scrutiny before it was signed because IlliniCare was the only vendor to respond to a request for proposal sent out in the fall. Procurement officials said they notified nine contractors about the RFP, but when contacted by Crain's, three said they didn't know about it.

Despite being the only company they evaluated, health officials said they were confident IlliniCare was right for the job.

Now, with the quick change of the term, scope and amount of the contract, one longtime watcher of county finances said there aren't enough details available on the change to assess it adequately.

“We recognize the complexity of what they're doing,” said Laurence Msall, president of the Chicago-based Civic Federation. “But there's no public information that explains the changes” other than the addition of new patient populations.

That's a “generally reasonable” explanation, but more details are needed from county officials, he added.

The system said that when it was negotiating the original contract, CountyCare was only authorized to cover newly insured Medicaid adults. For that reason, it didn't include other populations in that deal. It opted to sign the contract in May, rather than wait until it could cover those other patients because it needed a third-party administrator in place when its federal pilot program ended.

The board this morning also approved a $1.5 billion preliminary budget for fiscal 2015, which starts Nov. 1. The proposed budget projects a shortfall between revenue and expenses of $164 million that would need to be filled by taxpayer dollars from the county. That subsidy, health officials say, would be the lowest since 2008.

The proposed budget now goes before the Cook County Board of Commissioners for final approval.

"Quick change coming for Cook County's Medicaid contract" originally appeared in Crain's Chicago Business.