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Report: Medicaid Reform saved $

By Christine Jordan Sexton
8/21/2009 © Health News Florida 

At long last, the University of Florida analysis of Medicaid Reform is in, and it concludes that the controversial program does, indeed, save money. Critics called it "meaningless" because HMOs have not yet turned in data on patients' actual encounters with the health-care system.

The UF report shows health care spending has decreased in the two largest Medicaid Reform counties, Broward and Duval. But the biggest cost savers are not the HMOs, as many expected, but the “provider-sponsored networks”— managed-care networks sponsored by hospitals and doctor groups.

The 18 page report shows that average expenditures for the aged and disabled were $26 less per member per month in Broward and Duval counties after reform efforts started there, while spending for women and children increased by $4. 

The study’s authors, Paul Duncan and Jeff Harman, note that the report’s conclusions are limited by the fact that researchers could not examine information on patients’ actual encounters with the health-care system. 

“It is difficult to determine the source of the observed decreases in expenditures and whether this is attributable to appropriate management of care by the plan or other factors, such as a possible reduction in services,” the authors note. 

Despite the acknowledgment, the advocacy group Florida CHAIN (Community Health Action Information Network) criticized the report, calling it “meaningless.” 

CHAIN says UF researchers did not include the administrative costs associated with running the Medicaid Reform program or the enhanced benefits rewards program, where 2 percent of payment rates to HMOS are withheld to fund an account.

And without data on actual health care provided, CHAIN said, the analysis shows only a snapshot of spending.

In an e-mail to Health News Florida, author Duncan said he was “irritated” by the criticisms. For months, Duncan wrote, he has been criticized for not releasing the study sooner. Now, he said, those same groups are “arguing that we should have taken a lot more time to pursue every possible nuance before issuing the report.”

Medicaid Reform was championed by former Gov Jeb Bush. The five year pilot project requires most Medicaid patients living in Broward, Duval, Baker, Nassau and Clay counties to enroll in network-style managed care, either an HMO or a PSN operated by a hospital or group of doctors. 

A waiver from the federal government allows Medicaid Reform plans to be flexible in the benefits they offer patients and can include caps on care as in commercial insurance. In traditional Medicaid, the benefits are defined by the government but have no dollar limit. 

PSNs generated more cost savings than HMOs, according to the study, but the findings aren’t surprising, said Michael Garner, president and CEO of Florida Association of Health Plans.. Garner said most patients who are being treated in the PSNs were former MediPass patients, or the traditional fee-for-service program, where they had little case-management. Once the patients were transitioned to PSNs that managed the care, the costs were bound to go down, he said. 

By comparison, many of the patients who are in Reform HMOs had already been in the HMO and their care already was being managed. So there were fewer savings to be had, Garner said.

“When you bring people into a managed environment, that’s when you are going to see the expenditures drop,” he said.

Indeed, the HMOs believe the analysis shows that managed care—whether it’s offered by a PSN or an HMO—is the definitive way to save money.

Garner said: “We thought the study was excellent.”

--Christine Jordan Sexton is a co-founder of