The Solution to Medicaid Expansion or There’s Just Not Enough Meat on the Bone


Health Care reform proposals to cover more of the uninsured by expanding the Medicaid program inevitably stumble over several potholes and obstructions: there aren’t enough providers to cover existing Medicaid enrollees, let alone millions more; Medicaid Managed Care doesn’t seem to save enough money; states can’t afford to pay for it; the feds can’t afford to subsidize it; and most importantly, the poor don’t vote or contribute to election campaigns. Not to worry: I say with all modesty that I believe I have a solution.

Let me tell you a true story about a successful Medicaid Managed Care plan that works. If you wanted a model for such a plan, this would be a good one. Partnership Health Plan (PHP) in Northern California is one of 5 fully capitated County Organized Health Systems (COHS) in the state, covering Sonoma, Lake, Mendocino, Marin, Solano, Napa, Yolo and Sonoma Counties. It has over 200,000 enrollees, of which 31% are seniors and persons with disabilities. PHP has 240 Employees and a $700 million annual budget, and a remarkable 95% Medical Loss Ratio (i.e. 95% of funds go to medical services). Administrative costs for the Medi-Cal product (Medicaid in California) are currently less than 3.5%. PHP actually believes in managing care, they take it seriously, and they generate serious cost-savings as a result, with a 380% ROI in complex case management, and a 220% ROI on a care transitions program to reduce or prevent hospital readmissions.

PHP pays their capitated PCPs very well, and it pays networked FFS specialists better than any other Medicaid Managed Care plan in California, at rates of 120-160% of the state’s MediCal fee schedule. The plan pays claims quickly (less than 10 days on clean claims), and without relying on the typical down-coding and bundling schemes to underpay EMTALA obligated providers. PHP is so well received by providers that its network participation with the primary care and specialist provider market in its assigned counties is remarkably broad and deep. Ninety-seven percent of PCPs and specialists contracted with PHP expressed satisfaction with the plan – you just do not see this kind of thing in most Medicaid Managed Care organizations. Recently, despite California’s scheduled 10% reduction in MediCal rates and capitation payments to MMC plans; PHP decided to maintain current provider rates in order to maintain patient access to these services. So how did PHP accomplish this? Partnership Health Plan is a not-for-profit Medicaid Managed Care Plan.

All over the country, health care policy wonks have been advocating for the expansion of Medicaid through a for-profit managed care structure, ignoring the fact that there just isn’t enough meat on the bone in Medicaid programs to support quality care for enrollees, case management for the chronically ill, reasonable payment to providers, sufficient access to specialty services, and generate profits to Wall Street or equity investors and excessive management fees to overpaid CEOs. The drive for profits, and limited financial support from strapped governments, leads these for-profit plans to adopt strategies that result in provider underpayment, lost claims, selective dis-enrollment, inappropriate denials of coverage, limited access, financial insolvency, and delays in necessary care. Why are so few advocating for a non-profit approach to Medicaid Managed Care? The presumption is that the profit motive should drive creativity and cost-effectiveness, but if policy-makers fail to accurately measure access to care and quality, and only look at the cost side of the equation: it’s easy to get fooled about the value and success of government sponsored for-profit health-care enterprises. The ability of PHP to succeed in the context of such a lean, nearly meatless, Medicaid program as exists in California should cause everyone, everywhere, to reconsider the not-for-profit approach to Medicaid expansion.

This post also published in The Fickle Finger

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