Rick Scott figured out how to make acquiescence look like victory. When the Florida governor announced last week that he would join the Affordable Care Act’s Medicaid expansion, reversing his previous position, he said he had agreed in exchange for a sought-after waiver from the feds. This allowance would let his state move more of its Medicaid patients into private health plans. But the scheme is not such a rare coup. It’s already the dominant Medicaid model around the country. And it’s not the unqualified boon governors think it is.
States began experimenting with what’s called Medicaid Managed Care in the 1980s. Under this model, the state pays insurance companies a fixed cost to cover its patients, who get a choice of private health plans. A 1997 law streamlined the application process and led to an explosion of new contracts. Around the country, 36 states have beneficiaries enrolled in private health plans. Nationwide, 51 percent of 60 million Medicaid users get their benefits this way, and an additional 15 percent are enrolled in private/public hybrids. Already, states spend $129 billion on private Medicaid plans, and the rates keep growing. “It’s been steady and sustained,” says Joe Moser, the interim executive director of Medicaid Health Plans of America, the trade group for the private insurers, who forecasts more of the same. “Everybody is going to be doing managed care,” says Sara Rosenbaum, a professor of health policy at George Washington University. “Everybody.”
Champions of Medicaid managed care span the ideological spectrum. Red states such as Tennessee and Texas have embraced it. So have blue states such as California and New York, both of which enroll the majority of their Medicaid patients in private plans. State officials cite two main rationales for converting. First, private insurers can do a better job of holding down costs. Second, by overseeing care for beneficiaries, rather than merely paying the bills, they can improve its quality. Unfortunately, no strong evidence supports either of these claims.
On costs, a comprehensive study that will run this spring in the Journal of Policy Analysis and Management looked at the history of privatization nationwide and found that, overall, it hasn’t saved money compared with traditional Medicaid. “It’s just kind of taken as a given: “˜Oh, we moved someone to managed care; thus we’re going to save money,’ “ says the study’s author, Mark Duggan, a professor of business economics and public policy at Wharton. “That is just not true.” He found that some states saved by shifting but others lost. The biggest difference appeared to be how well a state’s Medicaid program paid doctors before the transition. Those that paid well saw more savings, probably because the private plans negotiated lower rates. States and industry have pointed to smaller studies showing positive results, but a recent survey of the scholarship from the Robert Wood Johnson Foundation described the peer-reviewed work on the cost-saving question as “thin.” It concluded that more studies found budget losses than savings.
The data on quality are also mixed. In theory, a managed-care company should keep patients healthier than a government plan that simply pays whatever medical bills come in. It would have incentives to get beneficiaries preventive care, for example, to avoid expensive hospitalizations. But the nature of Medicaid, where patients frequently cycle in and out of the program, means such investments don’t always pay off for the plans, says Janet Currie, an economics professor at Princeton. “If there isn’t continuity of care in the plan,” she says, “then the incentives the plan has for giving good preventive care are really reduced a lot.”
Currie studied pregnant women in California and found that those in managed care got fewer prenatal visits and delivered fewer healthy babies than patients in the traditional Medicaid program. One possible explanation: In its contract with managed-care companies, the state had agreed to pay unlimited extra money in cases where an infant required neonatal intensive care, leaving no financial incentive for insurers to prevent major complications. “It’s very hard for the government not to get ripped off,” Currie says. Connecticut, which swam against the current last year by canceling its managed-care contracts and switching back to traditional Medicaid, said an inability to get good cost and quality measures was its motivation. “The state was not at all sure that the use of the managed-care plans was yielding an effective means of controlling costs,” says Kate McEvoy, the acting director of the state’s Health Services Division.
But those mixed results have done little to dissuade politicians from hoping for the best. (The body of research doesn’t prove the plans are necessarily worse; only that they’re not necessarily better.) Much of the managed-care growth to date has been in the part of Medicaid that covers poor mothers and their children. That population tends to be pretty healthy and uncomplicated. But newer state plans are expanding coverage to sicker populations. Scott’s waiver, for example, will allow Florida to move nursing-home patients into the plans. The Obama administration is pushing states to go even further. In a pilot program begun last year, it encouraged states to move the sickest and most vulnerable patients — the ones who use both Medicare and Medicaid — to managed-care plans that cover both programs. Fifteen states have asked to join up. Even Rick Scott hasn’t asked to privatize care for that group.
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