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Medicaid gives HMOs pay raise

By Christine Jordan Sexton
8/13/2009 © Health News Florida

Even though Florida Medicaid already faces a deficit, HMOs are in line to get a 3 percent premium increase to treat the poor, elderly and disabled as of Sept. 1.

While lawmakers had budgeted a slight decrease in HMO rates, state Medicaid officials say actuaries refuse to approve those rates.

Michele Hudson, director of cost reimbursement for Medicaid, told economists on Wednesday that the Agency for Health Care Administration increased the rates it pays HMOs in order to get the necessary approval from two actuaries that the rates are sound, as required by federal law.

The state’s rates barely received actuaries’ certification last year, Hudson said at the social services budget-estimating conference. “We didn’t know when we would hit the bottom,” she said. “But we’ve hit the bottom.”

Florida’s Medicaid program, which is jointly funded by the state and federal governments, faces a $555 million deficit this year if spending continues as-is, including the HMO pay raise. The state’s share of the deficit is $165.8 million.

The deficit is attributable in part to a surge in the number of people enrolling in Medicaid because of the bad economy. Nearly 2.4 million Floridians are Medicaid recipients, and the number is expected to climb to 2.7 million next summer.

Of the current recipients, 929,609 Medicaid patients were enrolled in HMOs as of July 1, reports show.

Michael Garner, president and CEO of Florida Association of Health Plans, said Wednesday night that he had not seen the new rates and could not comment on the 3 percent increase. But he said his group told the governor’s staff and state lawmakers during the spring legislative session that HMO rates were already too low.

“We expressed extreme concern about additional cuts,” Garner said.

Ultimately, the Legislature cut the plans’ payments by just under 1 percent, agreeing to pay the HMOs $2.81 billion through June 2010.

But a bad economy has increased the number of people enrolling in the Medicaid program. Between the spike in enrollment and the 3 percent increase, AHCA now says it needs $3 billion for the current year, according to budget documents released this week. 

Unlike other players in the health-care industry, managed-care companies assume financial risk for their members, losing money if bills are high. “We are all trying to work together to make sure that we continue to be good partners and keep operating,” said Garner.

Sen. Durell Peaden, R-Crestview, who oversees the Senate budget panel on health care spending, said the size of the projected Medicaid deficit surprised him.

"I thought we were more stable than that,’’ he said.

But State Rep. Kevin Ambler, who chairs the House panel on Medicaid spending, said he wasn’t surprised. He said HMO representatives have shared “confidential, proprietary data” that showed the plans were “teetering on the edge.”

“Until you have a replacement model, something better that works for less money,” said Ambler, R-Tampa, “we can ill afford to have Medicaid HMOs just pull up the stakes and say, ‘We can’t operate here anymore.’ “

Peaden said he would push to get more federal stimulus dollars or tobacco revenue directed to health care funding to beat back further reductions in Medicaid.

"Certainly if there are problems, there ought to be money to fill in the loss," said Peaden.

AHCA contracts with 17 HMOs to treat Medicaid enrollees. Florida requires that recipients have someone managing their care – either an HMO or a primary-care practice through a program called MediPass.

Five counties, including Broward and Duval, are part of a Medicaid Reform project. Medicaid patients living in those counties don’t have the option of enrolling in MediPass and must enter either an HMO or a providers’ service network, or PSN.

AHCA’s Hudson said she was expecting two letters from actuaries certifying the rates by Wednesday. But AHCA spokeswoman Shelisha Durden said no letters arrived.

--Christine Jordan Sexton is co-founder of