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Wall Street has an effect on Medicaid plans, study finds

A new report on Medicaid managed-care plans finds that those owned by publicly traded corporations spend a larger percentage of the premium dollar on administration than plans with private ownership. The lowest administrative costs were found in plans owned by groups of health-care providers.

It also found that Medicaid plans owned by public companies were less likely to report quality-of-care data than the privately held plans; among those that did report, the public companies had lower scores.

Also, the report noted, "non-profit plans performed better than for-profit plans on...preventive care."

The study has particular relevance to Florida, where corporate HMOs already dominate the health program for the poor and soon will expand.

The report, "Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide," was carried out by researchers at Virginia Commonwealth University. It covers 225 Medicaid managed care plans representing 23.8 million enrollees.

Administrative costs are those not related to delivering or managing medical treatment; examples are executive salaries and marketing expenses.

Of Florida's nearly 3 million Medicaid recipients, about 1.3 million are already enrolled in managed-care plans, according to the Agency for Health Care Administration (AHCA). Gov. Rick Scott recently signed bills that would move nearly all the rest into such plans in phases, beginning with low-income frail elderly sick enough to qualify for nursing-home care.

But Medicaid is a joint state-federal plan, so Florida can't change the rules without federal permission. AHCA is holding hearings around the state this week to accompany its application for a rule waiver on Aug. 1.

Only those Medicaid recipients who have developmental disabilities, such as mental retardation or severe autism, would be exempt from moving into managed-care plans.

Elder-law attorneys and some patient advocates have spoken out against the overhaul, while HMO executives have tried to reassure the public that patients will get better-coordinated and higher-quality care in today's plans.

Florida has resisted a requirement under the Affordable Care Act that would require health plans to spend a certain percentage of the premium dollar on health treatments, which in the industry is called the "medical-loss ratio." The state Office of Insurance Regulation even turned down a federal grant that would have beefed up its capacity for calculating the ratio.

In its Medicaid overhaul, the Legislature dropped a requirement that plans spend at least 90 percent of the premium on health care. Instead, plans that spend less will have to share the savings with the state.

The Commonwealth Fund's study found that Medicaid plans sponsored by publicly traded companies had lower medical costs in managing and delivering medical care than privately held plans.

Lead author Michael McCue wrote that plans could have lower costs for a number of reasons, such as negotiating lower pay rates to doctors and hospitals, enrolling healthier beneficiaries, or offering more cost-effective care.

Critics of HMOs may think they unduly restrict access to costly specialists and treatments. But McCue wrote, "Higher administrative costs may arise from spending more for skilled supervisors and employees who know how to address the distinct health care needs of the Medicaid population.

"Investment in information technology may also account for the higher administrative costs among plans with larger members," he wrote, "especially those owned by publicly traded companies...

"Technology supports the case management programs and information systems that prevent unnecessary emergency department utilization and hospital readmissions and improve patient safety and outcomes."

The report notes that when states solicit bids for the Medicaid population, publicly traded companies are consistent winners. Yet states worry about the long-term commitment of such companies.

In the five-year pilot project on Medicaid managed care that Florida ran in Broward, Duval and three other counties, several companies abruptly left  regions after enrolling thousands of patients. One was WellCare Health Plans, the state's largest Medicaid HMO contractor.

--Questions? Comments? Contact Editor Carol Gentry at 727-410-3266 or by e-mail.

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.