Rauner names winners in Illinois Medicaid overhaul

The Rauner administration has awarded bids to six insurers in his quest to overhaul a major Medicaid cost-saving initiative in Illinois, cutting in half the number of participating carriers.

The winners are Blue Cross and Blue Shield of Illinois, the largest carrier in the state, and the following insurers affiliated with national or regional carriers: Harmony Health Plan, IlliniCare Health Plan, Molina Healthcare of Illinois and Meridian Health, according to the Illinois Department of Healthcare and Family Services, which implements the Medicaid health insurance program for the poor and disabled. They will administer medical benefits to Medicaid recipients statewide.

Also winning is CountyCare, a health plan run by the Cook County Health and Hospitals System, that will operate in Cook County only. IlliniCare also will cover children in the custody of the Illinois Department of Children and Family Services.

Here's which insurers lost: Aetna Better Health, which threatened to leave the state Medicaid program earlier this summer because the state owes it so much money in overdue bills; NextLevel Health, a plan founded by Obama friend Dr. Cheryl Whitaker; and Trusted Health Plan out of Washington, D.C.. NextLevel said last week that the insurer was out of the running and would appeal the state's decision.

In total, nine health plans bid for contracts to oversee the coverage of most of the state's 3.2 million recipients on Medicaid. In what's known as managed care, insurers are paid by the state to focus on prevention and steer enrollees away from expensive ER and hospital visits. The overall goal is to keep Medicaid recipients healthy, ultimately saving taxpayers money.

"The reboot brings enhanced care coordination and stronger quality controls to fulfill the promises of managed care to Medicaid beneficiaries," Felicia Norwood, director of the state healthcare and family services department, said in a statement. "By operating with an ideal number of plans, overhead costs will be reduced while we make sure every beneficiary receives powerful choice. This means more of the program's money going to real people instead of bureaucracy."

OVERDUE BILLS

The news comes about six months after Republican Gov. Bruce Rauner announced he wanted to rebid Medicaid managed care contracts to squeeze out more savings. He did so while Illinois was without a budget for two years (one was passed in July) as the Republican governor and Democrat-controlled General Assembly bickered over forging a deal.

Caught up in the financial chaos were the insurers, who were owed a combined $3 billion as the state's pile of unpaid bills to vendors soared without a budget. Aetna Better Health was owed $698 million. Illinois Medicaid is that insurer's only business here.

Not paying insurers created a domino effect. They didn't pay doctors in full or on time, to stopped paying altogether. Doctors in turn curbed access to patients, cutting back hours and even expensive vaccines.

Meanwhile, state Medicaid programs nationwide are bracing for potentially huge funding cuts from D.C., making cost-saving programs like managed care (if they work as intended) even more crucial.

In Illinois, 12 insurers currently manage the benefits for about 63% of Medicaid recipients, though only nine carriers bid for contracts. Under Rauner's overhaul, 80% of Medicaid enrollees must choose or be assigned to a managed care plan.

While the state now spends about $10.5 billion on managed care, the cost is expected to swell to between $12.8 billion and $13.5 billion. That's partly because enrollment will increase, and health plans are paid a fixed amount of money per enrollee. The initiative also is expanding from 30 to all 102 counties in the state.

Recipients in counties where managed care already exists will become part of new health plans on Jan. 1. Enrollees who will be new to managed care will join on April 1, 2018.

The new contracts are expected to save between $200 million and $300 million a year through such things as cost-cutting incentives for the insurers, the healthcare and family services department said in its statement.

When the carriers bid, they committed to getting paid less money per enrollee, department spokesman John Hoffman added in an interview. There will be efficiencies too, such as a universal credentialing process for doctors to participate in insurers' networks, rather than each carrier having its own process.

Hoffman said state officials could not comment on why they picked some insurers over others, saying the procurement was still ongoing. But he said the selection process involved a multi-agency evaluation team with experts in everything from health care quality to finance and information technology who analyzed insurers' bid applications.

The winning contracts, still to be negotiated, are effective Jan. 1 for an initial four-year term, and will include an option to renew for up to an additional four years. Losing bidders can appeal.

A spokesman for Aetna declined to comment. In a statement, Cook County Health CEO Dr. John Jay Shannon said CountyCare, one of the largest Medicaid managed care plans in the region, "looks forward to continuing to care for Cook County residents enrolled in Medicaid. Cook County Health has proudly served individuals in our community who are most in need for more than 180 years."

Representatives of other insurers did not provide comment or could not immediately be reached.

MISSING RECIPIENTS

In his revamp, Rauner wants insurers to do a better job on the type of care they provide. In a 2015 state report card that measured the quality of nearly all of the participating insurers, most received average to high marks on indicators such as vaccinating children and preventive visits. But among the two benchmarks for behavioral health—addiction treatment and continued care for the mentally ill—a third received below-average grades.

In July, a Crain's investigation found a troubling pattern if the state wants to rein in Medicaid spending. Insurers are doing a lousy job of tracking down and working with Medicaid recipients who chose them or were assigned to them. To be sure, these patients can be tough to track, and some people brush off any help to connect with a doctor.

Illinois pays the insurers regardless of whether they find people, but the state does withhold some money that insurers can earn back by hitting certain quality benchmarks. In 2015, the state withheld about $63 million and paid out just $12 million.

"Rauner names winners in Medicaid overhaul" originally appeared in Crain's Chicago Business.