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Medicaid bill eyes HMO profits

As Florida lawmakers get ready to transform Medicaid into a managed-care system, they are split on a complex question: How do you make sure HMOs don't receive a windfall at the expense of patient care?

A House health-care committee Monday for the first time took up a bill that calls for the state to take a cut if Medicaid managed-care plans make more than 5 percent profits.

Senators, meanwhile, want to require health plans to spend at least 90 percent of the money they receive on patient care --- a concept known as a "medical loss ratio,'' which is highly controversial in the insurance industry. If plans don't hit the 90 percent mark, they would have to refund money to the state.

No matter how lawmakers decide to handle the issue, Ralph Glatfelter, a senior vice president of the Florida Hospital Association, said Monday that experience shows it is important to put a check on managed-care plans.

Glatfelter, testifying before the House Health and Human Services Committee, pointed to accounting maneuvers that WellCare Health Plans used to meet Medicaid medical-loss ratio requirements --- maneuvers that, ultimately, helped lead to a federal fraud investigation and tens of millions of dollars in fines against the Tampa company.

"We think either one (profit sharing or a medical-loss ratio) is very important,'' Glatfelter said.

Committee Chairman Rob Schenck, R-Spring Hill, said he thinks profit sharing is "less of a bureaucratic mess'' than trying to use a medical-loss ratio. At least in part, that is because medical-loss ratios spur murky debates about what costs should be counted as patient care.

Schenck said the profit-sharing idea also will be coupled with standards to ensure quality care.

"What this is really about is making sure that the citizens we serve get the best medical care,'' he said.

But the Florida Center for Fiscal and Economic Policy, a group that is critical of the shift to Medicaid managed care, issued a briefing paper that described the profit-sharing idea as "less useful'' than a medical-loss ratio. It said the idea would not "adequately contain plan administrative expenses'' and would not focus spending on patient care.

Under the House proposal, managed-care plans would get to keep all of their profits up to 5 percent. When profit margins are between 5 and 9 percent, they would have to share half of those profits with the state. All profits above 10 percent would go back to the state.

Michael Garner, president of the Florida Association of Health Plans, said his insurance-industry group favors the House profit-sharing proposal over the Senate medical-loss ratio. He said a 90 percent ratio is too tight because of volatility in patient utilization of care.

"You don't want your health plans to be literally skirting that envelope the whole time,'' Garner said.

The profit-sharing issue was part of a wide-ranging discussion Monday as the Health and Human Services Committee spent about two hours going through its proposed Medicaid overhaul. The committee is expected to vote Thursday on the plan, which is spread over two bills.

House and Senate leaders have vowed to revamp the Medicaid program this year, as they try to rein in the costs of the $20 billion health-care system. But with the chambers offering widely different proposals, they will have to negotiate a compromise in the coming weeks.

Debate and testimony Monday touched on issues such as whether the House proposal would allow managed-care plans to limit services to patients --- and whether the state should even be expanding mandatory managed care beyond a five-county pilot project.

Another issue that drew discussion was how the state should be carved up geographically to run the managed-care system.

The House proposal would split the state into seven regions where HMOs and and other types of managed-care plans would compete to win Medicaid contracts. The Senate has proposed another approach, slicing the state into 19 smaller regions.

Some lawmakers and interest groups raised repeated questions about whether the House map would work, particularly in rural parts of the state.

For example, Rep. Rep. Janet Cruz, D-Tampa, said one proposed region would stretch from Pensacola to Madison County in north-central Florida --- raising the possibility that patients might have to travel hundreds of miles to see a specialist in a health plan.

Conversely, Rep. Mia Jones, D-Jacksonville, said Broward and Miami-Dade counties would be placed in different managed-care regions. She said that could affect patients who might travel across the county line to see doctors or other providers.

But Schenck said each region needs enough population to make the system financially viable for health plans. He acknowledged that will require some changes, such as in where patients are referred for care.

"This is a new day in Medicaid and managed care, so there are going to be some changes,'' Schenck said.

As an incentive to try to get managed-care plans to compete in rural areas, the bill includes a sweetener: If plans do business in the Panhandle, they also will get contracts for heavily populated Miami-Dade and Monroe counties.

"Certainly, the Panhandle is the most-challenging aspect of this, because of the rural nature of it,'' Schenck said.

Glatfelter, meanwhile, suggested using about a dozen regions. The hospital industry wants to create what are known as "provider service networks" to compete with HMOs, which could be easier in smaller geographic areas.

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