State Lawmakers Have Growing Concerns About Medicaid Managed Care

Kansas state legislators from both parties have asked Governor Sam Brownback to delay implementation of KanCare, the state’s new Medicaid managed care program. Scheduled to roll out January 1, 2013, KanCare will require low-income children, the elderly and individuals with disabilities to receive their services from a privately owned managed care company.

The state must come to terms with three managed care providers before then.  According to the Kansas Health Institute, the five bidders all were for-profit, publicly traded companies. Two of the bidders were recently awarded contracts with the Missouri Medicaid agency.

Proponents of the delay cite snafus in Kentucky’s managed care expansion, which launched November 1, 2011 after a one-month delay. The three private insurers, who are among the five that bid on the Kansas managed care expansion,  drew fire from providers and legislators for their alleged poor administration. One director of a child welfare agency said that the managed care company handling her claims sent someone over to help her file them; later, when she inquired why the claims still had not been paid, the company representative told her the claims had not been received.

After an investigation, on March 1, 2012, Kentucky’s Auditor General recommended that the state remove behavioral health services from the managed care system, citing apparent “systemic problems”. The three companies allegedly refused to approve or delayed approval of psychiatric medications that had stabilized seriously ill patients, both children and adults, even when the patients had done well on the drugs for years.  A provider also reported a 30 percent jump in the number of inpatient psychiatric admissions for teenagers. There was no influx of new patients. Rather, the MCOs refused to authorize the number of days that the provider requested in order to stabilize patients, and these patients returned.

Requiring individuals with disabilities to receive their services through a managed care organization has been controversial. The law protects this group from mandatory managed care because of their vulnerability. However, CMS has granted waivers to allow states to test the policy.

The waivers have drawn criticism, not just in Kentucky, but in Illinois, where patients and families contended that long-standing, successful relationships with professionals were disrupted and patients required to travel farther to obtain services from network providers.

An essential component of Florida’s Medicaid reform pilot, launched in 2006,  was mandatory managed care. A report prepared for a legislative committee found that the pilot impeded beneficiaries’ access to care.  In particular, access to primary care services dropped and, despite improvement, never returned to pre-reform levels.

Several plans left the pilot in 2008-2009. In the three quarters before their contracts ended, however, their members’ use of primary care services dropped precipitously. Around the same time, five executives of one MCO were indicted for fraud related to their Medicaid managed care contracts.

States adopt mandatory managed care to save money. But the evidence shows that there are limits on how much a state can save. Perhaps the most important determinant of the savings (if any) a state will see is the relationship its fee-for-service payments bore to other payers. If a state’s rates were generous, it may save money. But if the payments were low already, there is not much room for additional savings, according to a working paper published by the National Bureau of Economic Research. When mandatory managed care is introduced along with an enrollment expansion, expenditures are not likely to fall. And when an additional  layer of management is expected to generate a profit, where will cuts come from?As one of the Kentucky providers noted, there will be less money going to pay for services.

Another argument for managed care is that the coordination will improve health outcomes.  Does it work? We’ll look at the evidence next time.