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Medicaid bill drops 90% spending rule for HMOs

Inching toward agreement on a Medicaid overhaul, a Senate committee today eliminated a proposal that would have required HMOs to spend 90 percent of the money they receive on patient care.

Instead, the Senate Health and Human Services Appropriations Subcommittee approved a profit-sharing plan backed by the managed-care industry. Under that plan, the state would receive a cut if HMOs make Medicaid profits of more than 5 percent.

The move mirrored a profit-sharing plan that the House approved last week in its version of the Medicaid overhaul bill. House and Senate leaders agree they want to eventually shift Medicaid beneficiaries statewide into managed-care plans --- but still need to negotiate numerous details.

Members of the Health and Human Services Appropriations Subcommittee voted 4-2 today to approve the Senate's version, with Republicans supporting it and Democrats dissenting.

The committee approved a last-minute amendment to eliminate the 90 percent spending requirement, known as a "medical loss ratio.'' If health plans didn't hit the 90 percent mark, they would have been required to refund money to the state.

The insurance industry argues such ratios are unworkable, at least in part, because of the difficulty in defining what costs should be counted as patient care. But supporters say the ratios hold HMOs accountable for spending money on services, instead of diverting it to company administrative costs and profits.

Sen. Rene Garcia, who proposed eliminating the medical-loss ratio today, and industry official Michael Garner said a profit-sharing model has worked in Texas. Garner said the model prevents managed-care organizations from making "windfall" profits.

"This thing has been used for years in Texas, and it has consistently produced reliable results,'' said Garner, president of the Florida Association of Health Plans.

Under the plan, managed-care organizations would get to keep the first 5 percent of any profits. When profits are between 5 and 10 percent, plans would have to return half of that money to the state. All profits above 10 percent would go back to the state.

House leaders have pushed for the profit-sharing model, and Garcia said at least part of the motivation today was to get closer to an agreement between the House and Senate.

"I'm trying to conform to the House and make sure we have less issues to negotiate,'' said Garcia, who could be seen talking with Garner shortly before the amendment was approved.

The House and Senate have made a top priority this year of moving to a statewide managed-care system, but have numerous major differences in their plans. Republican legislative leaders and Gov. Rick Scott want to control rising Medicaid costs and also argue that many beneficiaries do not receive quality care in the currently fragmented system.

But lobbyist Karen Woodall, a longtime critic of moving to a managed-care system, said the federal government pays about $12 billion of the program's $20 billion in costs. She questioned legislative arguments that Medicaid is "hijacking" the state budget.

"I think the notion that Medicaid is out of control is a little bit of a mischaracterization'' of that part of the budget, said Woodall, who represented the left-leaning Florida Center for Fiscal and Economic Policy at today's meeting.

But Senate Health and Human Services Appropriations Chairman Joe Negron, R-Stuart, said overall Medicaid costs have more than doubled during the past decade.

"Even when you're doing the Lord's work, you still have to balance your budget,'' he said.

The subcommittee today also made another significant change today to try to move closer to the House, eliminating proposed legal protections for non-profit groups that provide foster-care and child-protection services across the state.

Those groups contend such protections are needed to help reduce liability-insurance costs. The House Medicaid bill, however, does not include such protections --- though they are being considered in other pieces of legislation that are separate from the Medicaid debate.

Negron also indicated the Senate might be willing to change a controversial proposal that would reduce services provided to people in the Medically Needy program. That program serves people who have debilitating illnesses but don't meet the ordinary income requirements for Medicaid.

The Senate Medicaid bill would only cover physician services for Medically Needy patients, eliminating payments for hospitalization and drug expenses. The House bill would continue covering those costs.

Negron said today he might be willing to change the Senate stance if House and Senate leaders agree to set aside more money for health- and human-services programs during upcoming budget talks.

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

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.