Managed Care Plans See Potential in Medicaid

Financing of Medicaid is deeply flawed, but there is little political will to deal with the problem, according to Thomas Scully, former administrator of CMS. In recent years, however, some managed care companies have begun pushing to fill that gap by expanding the use of capitated plans that can provide substantial savings without sacrificing quality of care.

“If there is anything that needs to be reformed in the federal budget, it is Medicaid,” Scully told an audience at the National Medicaid Congress here June 4-6. “But it’s just not going to happen.”

Currently, too much energy is spent on devising creative financing schemes to maximize Medicaid dollars and too little is spent on ensuring that the program actually provides health care to the people who need it most, said Scully, who now is a general partner at the law firm of Welsh, Carson, Anderson & Stowe in New York.

However, some managed care companies have been able to capitalize on Medicaid’s complex financing structure, he said.

As of fiscal year 2003 (the most recent year for which data were available), capitated managed care contracts represented only 16 percent of national Medicaid spending, said Margaret Murray, executive director of the Association for Community Affiliated Plans, or ACAP, during the meeting. There still are significant savings to be gained from Medicaid managed care, she added.

As of 2003, only about 30 percent of Medicaid patients eligible to enroll in managed care plans were enrolled in such plans. If all those patients were enrolled, the program could save $4.6 billion in the first year and $82.6 billion during the course of 10 years, according to “Medicaid Capitation Expansion’s Potential Cost Savings," (PDF file: 36 pages / 488 KB. More about PDFs.) an analysis conducted for ACAP by The Lewin Group, a health care policy research firm.

Currently, states have limited options for slowing the growth of Medicaid spending. They can cap or cut eligibility, reduce benefits, lower payment rates to physicians and others, or lower per capita costs by improving efficiency and health status.

Managed care, however, doesn’t have the same barriers to containing costs that fee-for-service programs, such as state-run Medicaid programs, do, said Mark Reynolds, chief executive officer of Medicaid contractor Neighborhood Health Plan of Rhode Island.

Plans such as his are using national benchmarks and other standardized measures to ensure that Medicaid is getting value for each dollar spent, Reynolds said. Such plans also are focusing more on providing patients ready access to medical services, he added, which may mean emphasizing a team management approach that provides patients with continuity of care even when their preferred physician is not available.

Within this managed care setting, physicians are being encouraged to develop new patterns of service, such as open-access collaboratives, which use statistical methods to schedule most appointments the same day a patient calls.

ACAP's Murray noted a particular incentive such plans offer physicians: On average, managed care plans can pay them 10 percent more than can fee-for-service Medicaid programs.