Medicaid blues: Hospitals, insurers wage political battle over managed-care dollars

INDIANOLA, Miss.—“That's all I have to say about that—I have to go bury the dead,” undertaker Stephen Holland said after listing his grievances with his state's Medicaid politics early one Friday morning in June. Holland is one of a handful of white Democrats left in Mississippi's House of Representatives, and he helped shape the past 20 years of Medicaid history when he chaired the panel with jurisdiction over the program. Reliving that history rattled him.

In conversation, Mississippi Deltans frequently link death and Medicaid. A 26-year-old barber in B.B. King's hometown of Indianola, who asked to be identified as Calvin Klein in case he gets tended to by a doctor who reads Modern Healthcare, sang his mantra: “If you ain't bleeding, you ain't dying, and if you ain't dying, you ain't trying to see the doctor.”

Arguably, this feeling has become fact in the Delta's health crisis. Medicaid is the foundation and structure of its healthcare system, but there are so many gaps for people to fall through that many don't believe in it. If you are not disabled or pregnant, you can't get coverage unless you have a young child or become pregnant. Even then you have to make less than $5,000 per year as part of a family of three. People increasingly don't trust much else about the system, including the hospitals and doctors who run it.

And hospitals and clinics often don't see the illnesses of this impoverished region—consistently rated by the Robert Wood Johnson Foundation as the sickest in the state and one of the sickest in the nation—until they have blown up. HIV and Stage 3 AIDS infection rates are among the highest in the country, according to the National Institutes of Health. The state's health data system also shows the Delta's equally outsize rates of hypertension, heart disease, chronic liver disease, diabetes and preterm births.

Like most states, Mississippi dipped its toes into managed care in the 1990s with small demonstrations. By 2007 or 2008, the state had started to bid out about 20% of its Medicaid population to private companies.

But the major push didn't start until 2011, when the state contracted with UnitedHealthcare and Centene Corp. (known as Magnolia Health in Mississippi). The shift happened quickly. That first year, the two insurers combined had just over 50,000 people on their rolls and grossed nearly $88 million after paying claims. By 2014 they had 186,000 enrollees and grossed more than $200 million. Last year, nearly 600,000 people—70% of the Medicaid population—were on the rolls, and they brought in $235 million.

All told, the companies have grossed more than $1.1 billion since 2011, according to state insurance filings. This number does not include spending on their administrative costs. The total annual cost for the state's Medicaid program is over $6 billion, about $4.5 billion of which is paid by the federal government. The state's direct spending accounts for just 16% of its Medicaid budget. More than a quarter of Mississippi's 3 million residents are on Medicaid even though it imposes some of the country's strictest enrollment limits.

Mississippi's story mirrors the national push. In 2010, roughly 71% of people on Medicaid were in a managed-care plan — jumping to 81% in 2016, according to the Kaiser Family Foundation. As in Mississippi, Centene and UnitedHealthcare are major forces. As of the fourth quarter of 2017, Centene led with a 12% market share, followed by UnitedHealthcare at 11%, according to an analysis of insurance filings by Mark Farrah Associates.

But managed care works differently state by state, region by region. The speed of the transition in Mississippi and its fallout dismayed Holland, the state's Medicaid godfather.

“If I was a dictator like Tate Reeves, I would go back to fee for service,” Holland said, referring to the state's GOP lieutenant governor who staunchly opposes Medicaid expansion and played a key role in the hospital versus managed-care battle that started when executives in Mississippi decided to angle for a piece of profits.

Spearheaded by the state's hospital association, more than 60 hospitals in May 2017 came together to form Mississippi True, their own Medicaid provider-sponsored insurance plan.

“Lack of (Medicaid) expansion was the brainchild for the provider-sponsored plan,” said Tim Moore, CEO of the Mississippi Hospital Association, earlier this year.

Scott Christensen moved to Greenville, Miss., five years ago to take over Delta Regional Medical Center.

Year over year, he watched Delta Regional's financials decline. Total operating revenue dropped $5.6 million from fiscal 2016 to 2017, according to audited financial statements. Income from operations sank by $3.1 million. The hospital wrote off close to $1 million in charity care.

“Self-pay,” which often means no pay, and Medicaid each make up about 26% of Delta Regional's payments. Adjusted on a per-capita basis for population, Washington County, where Delta Regional sits, ranks top in the state in volume of Medicaid patients. Medicare makes up a little under 50% of the payer mix. The 215-bed medical center resides in a town of just 30,000, but its emergency department gets 50,000 visits a year. It's a Level 3 trauma center; a Level 1 center is roughly 30 minutes away.

Early in 2017, the state's Division of Medicaid issued a request for proposals for the next batch of five-year Medicaid contracts. In addition to UnitedHealthcare and Centene, the division would add a third plan. Hospitals wanted that plan to be Mississippi True.

The provider group was working with the Virginia-based consulting firm Evolent Health, whom they had paid to help structure their HMO. They decided Evolent would process their claims and run point on population health analytics.

“People just thought it was a shoo-in,” said Roy Mitchell, executive director of the Mississippi Health Advocacy Center, although he likened lawmakers' opposition to managed care to "being against gravity." He also blasted the idea that Mississippi True could substitute for Medicaid expansion as "puffery at its best," but said a network run by hospitals with deep community ties could help Mississippians.

As for Holland, he didn't think the hospital plan was the “be-all end-all,” but he liked that it would be led by Mississippi people.

“I think it's fair to allow our own hospitals to do this, since there has not been one public hearing on expanding Medicaid formally since it was presented,” Holland said. “Hospitals are purging and going bankrupt and struggling just to meet the basic needs. Mississippi True would have helped them to a degree.”

But once the bidding process was over, Mississippi True was out. California-based Molina Healthcare won the contract slated to go live Oct. 1. The date coincides with a court hearing on a lawsuit against the state in which Mississippi True leaders claim the process bent against them from the outset.

“On 23 separate questions, Mississippi True was subjected to a more stringent scoring standard than other bidders,” the organization alleged in a complaint filed in Hinds County Chancery Court. Litigation has dragged on since 2017, but the group also hatched a contingency plan. Early this year, Mississippi True lobbied lawmakers for a measure that would require the Division of Medicaid to rebid the contract.

The bill passed the House. But Lt. Gov. Reeves, who serves as state Senate president and can steer legislation, blocked it.

Buck Clarke, a Republican and chair of the state Senate Appropriations Committee, shrugged off allegations of unfair treatment of Mississippi True. He said the hospitals didn't offer clear-cut objective analysis of how their HMO would succeed and that their contract with the outside consulting firm to process claims undercut their argument that they would keep all the money in Mississippi.

“I'm all for Mississippi True, but they can't ask for special treatment in the analysis,” Clarke said.

Reeves' spokesperson Laura Hipp said the lieutenant governor didn't want to set a precedent where the Legislature could challenge the state's contracts.

“Mississippi True asked the Legislature to interfere in the statutory RFP process after the organization did not secure a bid,” Hipp said. “Lt. Gov. Reeves and the state Senate had concerns about setting such an unusual precedent of interfering in agency contracts when a bidder loses. As you can imagine, a move like that would have far-reaching effects across state government.”

Clarke said he doesn't think the story is over yet for Mississippi True, but added, “They have to compete.”

The state Division of Medicaid has been on the defensive about managed care. In February, the consulting firm Navigant delivered a report questioning the actuarial firm Milliman's estimate that managed care has saved the program $210.5 million since 2011.

Responding to Navigant's recommendation that the Legislature verify the number independently, the agency said relying on Milliman data was “the more cost-effective approach to determining the success” of managed care.

Holland joined the skeptics.

Managed care “is not saving one blip of money,” he said. “They say it's saving millions of dollars, but it confuses Medicaid for beneficiaries, and the practitioners have to get permission to provide medical care, and that sucks to me. I'm not too hot on MCOs even though I birthed them.”

He added, “I know one damn thing: Republicans are hot on them now that they're getting $50,000 checks.”

St. Louis-based Centene is the biggest political donor of the state. The company's limited liability company, Centene Management Co. gave Reeves—Mississippi's best-funded politician as he ramps up a bid for GOP governor this election cycle —his largest single contribution of $50,000.

Centene did not respond to requests for comment.

A UnitedHealthcare spokesperson deferred to the Division of Medicaid for questions about costs, savings and whether managed care improved health trends. The Division of Medicaid declined to comment, citing the pending litigation.

But the agency's website cautions that it doesn't yet have a baseline year for comparisons from which to draw trends of health outcomes and cost because the program kept adding new groups of people from 2011 until 2015.

Still, the agency credits a 6% drop in the state's preterm birth rates, where Mississippi leads the rest of the U.S. at 12.9% of all deliveries compared to 9.6% nationwide. The preterm birth rate among Medicaid beneficiaries is even higher, at 17%. Medicaid pays for more than 70% of the state's preterm births.

Dr. Lakeisha Richardson, an OB-GYN from Indianola who directs the women's health clinic at Delta Regional and delivers 300 babies a year, faced off with managed-care companies over their refusal to cover drugs aimed explicitly at preventing preterm births.

When the progesterone drug Makena that averts preterm labor came out in 2013, managed-care companies wouldn't cover it. Richardson worked with a specialty compound pharmacy to secure the drug for her patients who could manage $45 per month out-of-pocket for the 20-week prescription. In 2016, the plans started to cover Makena, but Richardson said it took a lot of doctors complaining, frequent calls to the Legislature, and bargaining with the drugmaker by the American College of Obstetricians and Gynecologists to bring the price down, before that happened.

The problems aren't over, she said. Plans limit how many prescriptions a patient can have at a time. Richardson especially has trouble with her diabetic patients, as some plans deny brand-name insulin prescribed for gestational diabetes.

Most people on Medicaid are capped at five prescriptions a month, but her pregnant patients often have accompanying diseases that all require medication. Diabetics often suffer from chronic hypertension and hyperthyroidism, for example. Delta women may have upper respiratory infections and urinary tract infections that can lead to premature labor. Richardson frequently sees sexually transmitted diseases like gonorrhea and chlamydia—additional drivers of early labor—that beg for drug treatment.

“Patients will wait for the next month to fill a prescription, even if it's for an acute illness,” Richardson said.

The Mississippi Health Advocacy Center's Mitchell said he wants managed-care companies to dig into the communities where their enrollees live, to see what's at stake for the people whose only knowledge of the healthcare system is through Medicaid. Maybe this could help the whole system, he said.

“Every managed-care company that comes to town comes to my office and says, 'We're all about community, and getting consumers involved.' And I never see them again,” he said. “This has been going on for 20 years.”

For him, poor Mississippians' angst and anguish with healthcare comes down to Medicaid issues.

"Doctors and hospitals are no longer the gods in white hats, the good guys,” Mitchell added. “That's what happens when you create a two-tiered healthcare system.”

Christensen, too, is struck by the failure of stakeholders across the Delta to band together make things better. He acknowledged that the forces work against real reform. After all, he is supposed to make the community healthier but what keeps his doors open is the Medicaid and Medicare payments for treating the very ill rather than maintaining health. These systemic forces combined with federal pay rules keep the region down, he said, and outside attitudes don't help.

“Has the Delta been represented in the way that it should from healthcare leadership? Probably not,” Christensen said. “I think we can do better there. But every time we try, there's the attitude back—what's going on in the Delta? Why can't you figure it out? What's wrong with your health statistics?”

Holland, 63, worries about Medicaid every day. After decades reworking the Medicaid system he is looking for a shakeup, starting at the system's roots.

“I'm not driving the machine, I'm riding in the trunk,” Holland said. “I'm waiting for the people of Mississippi to come back to their mother's milk. I don't know how strong they've got to get before they can get there.”

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