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Medicaid ‘reform’ HMOs granted 10.8% rate increase

Medicaid managed-care plans in Florida's five Medicaid "reform" counties have been granted a 10.8 percent rate increase because of ever-increasing hospital costs, the president of Florida Association of Health Plans confirmed today.

Meanwhile, said Michael Garner, the managed-care plans in most counties of the state were granted an average 1.3 percent rate increase.

The rates were finalized last Wednesday, he said. A spokeswoman for the Agency for Health Care Administration, Shelisha Coleman, said this morning she lacked information on that. (Update: Coleman provided e-mails later Monday that confirmed the increase.)

The need for a double-digit rate increase in the five-county pilot program -- where most Medicaid beneficiaries are required to be enrolled in an HMO or provider-sponsored network -- indicates that plans lack the market power to hold down costs unilaterally.

This could spell trouble, since the state is counting on expansion of the pilot program statewide to bring Medicaid costs under control. Florida budget officials said this morning that they expect Medicaid spending to be about $20 billion this fiscal year, according to the Associated Press.

Proponents of the expansion said it would improve access to services while cutting costs. Critics of the move said there was no convincing evidence that the pilot program actually saved money.

The project began five years ago in Duval and Broward counties and expanded the following year to Baker, Clay and Nassau.

The statewide expansion cannot begin implementation until the federal Centers for Medicare and Medicaid Services gives its approval in the form of a waiver of federal rules. The federal government pays more than half the cost for the joint program, which provides coverage for extremely low-income families with children and supplements Medicare coverage for the low-income elderly and disabled.

Preliminary estimates had indicated Medicaid rates across most of the state would be stable or even cut slightly, but actuaries calculated that hospital costs were rising more than expected. The state is required to pay rates sufficient to meet costs, so if hospitals' costs go up, the rates for managed care plans have to rise, as well.

"It just reflects the inflationary trend," Garner said.

The rates are averages across all regions, which means a plan may get more or less depending on its case mix in different parts of the state. More than half of Medicaid beneficiaries are currently enrolled in an HMO, 85 percent of them outside the pilot counties.

Deutsche Bank's analyst Scott Fidel said the high rate hike in the five pilot counties "should provide welcome relief" to the Medicaid HMOs that have struggled with medical costs eating up most of their premium dollar.

WellCare and AmeriGroup both pulled out of the pilot counties after initially participating, saying the state's premiums were inadequate.

--Health News Florida is an independent online publication dedicated to journalism in the public interest. Questions or comments can be directed to 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.