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Medicaid savings linked to HMOs

By Jim Saunders
 3/9/2010 © Health News Florida

With lawmakers pondering a Medicaid overhaul, consultants said Monday that Florida could save the most money by moving to a statewide managed-care system that includes pushing health plans into rural areas.

The Pacific Health Policy Group, which has a $105,000 consulting contract with the state House, did not make a definitive recommendation about how Florida should change its Medicaid program to deal with growing costs.

But in presenting a report to a House panel studying Medicaid, Pacific directors Scott Wittman and Andrew Cohen said the biggest savings would come from requiring Medicaid recipients statewide to enroll in health-maintenance organizations or other managed-care plans.

Such a move would be similar to a controversial Medicaid pilot program in Broward, Duval, Nassau, Clay and Baker counties that requires enrollment in managed care.

Under the consultants' statewide scenario, health plans would compete for business in different regions of Florida. Urban and rural counties would be grouped in the different regions, driving health plans to serve sparsely populated counties they might otherwise avoid because of a lack of profit.

Pacific, which has done consulting work for governments and health plans across the country, provided a report to lawmakers that examined a series of options for revamping Medicaid.

Along with the possibility of requiring Medicaid recipients statewide to enroll in managed care, the report also explored a more-gradual expansion of mandatory managed care. That scenario could build on the pilot program, adding more counties but likely never covering the entire state.

The consultants also looked at two other options: use a doctor-driven concept known as "medical homes;'' and require managed care for seniors and other Medicaid recipients who need long-term care.

As lawmakers started the second week of the 60-day legislative session, House and Senate leaders have not detailed how they want to change the Medicaid system. But with the program's cost expected to top $19 billion next year, Medicaid likely will be one of the biggest issues of the rest of the session.
The chairman of the House Select Policy Council on Strategic & Economic Planning, which heard the consultants' report Monday, said lawmakers are collecting data before deciding how to move forward.

"There is no perfect solution,'' said Dean Cannon, a Winter Park Republican. "There are different upsides and downsides to what we do here.''

But dramatically expanding mandatory managed care likely would face opposition from lawmakers such as Crestview Republican Durell Peaden, chairman of the Senate Health and Human Services Appropriations Committee.

The state Agency for Health Care Administration recently proposed expanding the pilot program to 19 additional counties. But Peaden said he doesn't know whether mandatory managed care saves money or leads to better treatment for Medicaid enrollees.

"The jury's still out on this,'' Peaden said. "That's why I have great hesitation about expanding it to 19 more counties.''

Also, a massive expansion would cause disruptions for many Medicaid enrollees who would have to move into health plans.

The consultants' report said the state could see potential savings of 2 to 3 percent from a gradual, county-by-county expansion of mandatory managed care. But Cohen and Wittman said it would get at least that much in savings under a statewide expansion, with the state able to use its additional purchasing power to get better deals with health plans.

The report and consultants did not offer specific dollar amounts that could be saved --- or how quickly the savings would happen.

If the state could save 3 percent on a $19 billion overall Medicaid budget, that would total $570 million. But the savings could be lower than that, because some parts of Medicaid might not be included in a statewide mandatory managed-care program. As an example, lawmakers might not include long-term care, which includes costly nursing-home services, in such a program.

Also, it would take time to contract with managed-care organizations and shift Medicaid recipients into a statewide managed-care system. The report described the transition into such a system as a "major administrative undertaking.''

Also, the report said a statewide expansion could help reduce fraud in the Medicaid system because managed-care organizations would have an incentive to root out extra costs. The managed-care organizations would be paid fixed amounts of money to care for Medicaid enrollees, leaving the plans at financial risk for fraud or overutilization of services.

Any expansion of mandatory managed care is expected to draw heavy opposition from doctors, hospitals and other health-care providers.

The Florida Medical Association, for example, wants to see lawmakers consider a "medical-home'' program instead of mandatory managed care. Under such a program, physicians would coordinate the care of Medicaid enrollees, which could help reduce long-term costs for emergency-room care and hospitalizations.

"Our members have made it abundantly clear to us that they do not want to see any expansion of the Medicaid-reform pilot program,'' Jeff Scott, the FMA's general counsel, said last week.

The consultants' report said, however, that the medical-home program likely would increase short-term costs, at least in part because the state would need to increase Medicaid payment rates to get physicians to participate. Many doctors do not want to take Medicaid patients because of low rates.

--Capital Bureau Chief Jim Saunders can be reached at 850-228-0963 or by e-mail at