States Turn to Managed Care to Control Medicaid Costs


In 2010, Texas found itself in a tight spot with its Medicaid spending.

In just 10 years, spending for Health and Human Services had grown from 20 percent to 28 percent of general revenue spending. To make up for that increase, spending on education dropped from 62 percent to 56 percent of general revenue funds.
That irritated Rep. John Zerwas, who also is a doctor.
“I’ve had individuals tell me that Health and Human Services has overcome the education budget,” Zerwas said. “I will be quite frank in saying that’s exactly what we’re trying to avoid. I consider education to be the premier responsibility of the state legislature and I want our checkbook to reflect that.”
Zerwas said Senate Bill 7, passed during the 2011 legislative session, expands managed care for the state’s Medicaid program. It includes a prescription drug plan, creates an incentive program for doctors to deliver quality care and establishes a committee to look at ways to reward quality and efficiency in health care.
“Right now, the health care system we have, and the Medicaid and Medicare system are included in this, … give us exactly what they are designed to do, that is productivity,” Zerwas said. “The more you do, the more you get paid. There really is very little incentive for health care quality and efficiency to be rewarded out there.”
Zerwas was one of the featured presenters last week at The Council of State Governments’ webinar, Medicaid Managed Care: Asking the Right Questions.
In the past, presenters said, states paid doctors a fee for each service they provided for a Medicaid patient. That means the more often a doctor saw a patient and the more tests he or she ran, the more that doctor was paid.
Now, states have turned to managed care to try to control skyrocketing Medicaid costs. Typically, doctors or a managed care organization are paid a fee each month for each patient to provide all of his or her care. Under another option, a general practitioner is paid a small fee each month for each patient to coordinate care, but a fee is still charged for each service the patient receives.
“States are interested in managed care because, at its best, it gives them what the fee-for-service delivery system just can’t provide,” said Kathleen Gifford, principal at the Health Management Associates. “First and foremost, (it provides) accountability, particularly to ensure members have access to the services they need and the care they receive is of high quality.”
Gifford said managed care for the Medicaid population also can provide greater certainty about the costs of the program.
“Can managed care really save money?” Gifford asked. “That’s kind of the $64,000 question. Clearly, the volume of new and expanded state managed care procurement plans underway suggest that these states … are betting it will.”
In 2011 alone, California, Illinois, Kentucky, Mississippi and South Carolina issued requests for proposals to expand their managed care Medicaid systems.
Gifford said two-thirds of all Medicaid patients are enrolled in some type of managed care plan. But these are not the patients that cost the system the most money.
“Despite that, … the vast majority (79 percent) of Medicaid spending overall is still in unmanaged fee-for-service,” she said. “It’s not surprising then that states are increasingly looking toward managed care for persons with complex health needs that otherwise drive those fee-for-service expenditures.”
Chuck Ingoglia, vice president of public policy at the National Council for Community Behavioral Healthcare, said policymakers should look carefully at what they are getting for their money when talking about coverage for Medicaid beneficiaries who are disabled due to mental illness. People with serious mental illnesses need ongoing support to stay healthy, as well as coverage that is flexible enough to cover the intensive kind of treatment that is sometimes required.
“It is the nature of these illnesses that limits people’s willingness even to engage in treatment,” Ingoglia said. “Behavioral health providers sometimes have to spend a lot of time out in the community, working with individuals with these illnesses to keep them engaged in treatment. You need to have benefits that would be flexible enough to provide that kind of mobile, assertive outreach to engage with … this population, which also tends to have multiple chronic health conditions as well.”
Ingoglia noted that this is not a population that is treated at little expense, but it is an investment that is necessary.
“When you think about what happens when somebody becomes psychotic, the two places they usually end up, unfortunately, are either the emergency room or the county jail,” he said. “Both of those are very expensive ways to access care.”
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