The changing nature of Medicaid Managed Care

Given the new Administration’s focus on Medicaid, SCHIP, and the uninsured as well as state budget woes from lower tax revenues and increasing demand for services, it would seem that Medicaid HMOs are in a prime position for growth.

That is certainly the advice of Oppenheimer analyst Carl McDonald (below), who states that pure-play Medicaid plans like Molina, Centene, and Amerigroup are well-positioned compared to other health insurers.

Yes, managed care will be an increasingly important part of the Medicaid program but the real question is: what type of managed care? I think we are seeing a shift away from the focus on managing cost through combative rate-negotiations and back toward managing care through accountable systems, innovations, incentives, and partnerships. [See this op-ed piece in the Boston Globe by Dr. Don Berwick]

For example, Louisiana’s recent reform proposal, Louisiana Health First, did not even use the term HMO but rather, Coordinated Care Networks (CCNs). Even more interesting, it required that these CCNs have significant provider ownership.

In Florida, the state’s much bally-hooed Medicaid Reform, whose centerpiece is the enrollment of nearly all Medicaid recipients into health plans, is on the ropes as it comes under increasing criticism. According to Florida Health News, Sen. Durell Peaden, who sponsored Medicaid Reform four years ago, now appears resigned to change. “It might be time to reform the Reform,” he says. Additionally, there is increasing pressure in the state to implement a medical home model.

In Vermont, the state basically expanded its PCCM program into a public corporation that operates like an MCO, except that it transfers any “profits” back into public health programs as opposed to the state’s general fund.

In North Carolina, their Community Care model, which is basically an open medical home model (i.e. enhanced Primary Care Case Management), recently won the prestigious Ash Award for Innovations in American Government.

And finally, there’s Oklahoma’s SoonerCare (which got me thinking about all this in the first place). The state recently released its evaluation by Mathematica Policy Research and the item that caught my interest was the state’s decision in 2003 to end its SoonerCare Plus program (capitated Managed Care Organizations in urban areas) and expand its SoonerCare Choice (enhanced PCCM model in rural areas) program statewide.

Also interesting is that the state’s PCCM model is unique in that it features partial capitation (10 percent of enrollees’ total predicted costs upfront). For this amount, doctors, nurse practitioners, and physician assistants are responsible for providing a specified package of office-based primary care services. PCCM programs in other states typically only involve physicians and pay them only $3 per member per month (PMPM) for limited care coordination.

In the 2003 evaluation that helped the state reach its decision after it reached an impasse with MCOs on payment, the findings were that “the Choice [PCCM] program was performing about as well as the Plus [MCO] program on most measures, and somewhat better on several of them.”

Additionally, “During the negotiations, OHCA developed an analysis that indicated OHCA could operate the Choice [PCCM] program in the three urban areas at approximately one-quarter of the administrative cost of the Plus [MCO] program and with one-quarter of the staff.”

Finally, the evaluation notes that the State is moving toward a “medical home model” that puts less financial risk on practitioners and more focus on payments for care coordination services and for achievement of public health objectives.

So what does all this mean? Well, it means that states are trying to find the best ways to balance costs and quality. It also means that managed care will play an increasingly valuable role, with the form and function varying as each state determines what works best for their citizens. Some states, like Arizona, with its leadership in the use of HMOs in Medicaid, will continue down that path. Other states, like Oklahoma, will choose to move toward PCCMs. What we will be left with is fewer states playing in the middle of the street with mish-mash models of managed care. In the end, this will not only be better for states and Medicaid beneficiaries but also for health plans, like the aforementioned Molina, who are already responding to the changing nature of Medicaid managed care.

We should expect that, in the end, states will have simpler systems with straighter lines of accountability so that they can focus more on improving the performance of their health systems and less on administering their health systems. ~BAA