Overview

Introduction

The Great Debate: Medicaid in the eye of the storm

The Challenge of Change: Balancing cost controls with the health of millions

The States
at Work
A report on reforms being road-tested in the states

Medicaid's Third Rail: Long-term care

The Rx Factor: Controlling prescription drug costs

The Great eHealth Hope: How technology can help

Something of Value: Experiments in cost sharing

Tools to Live By: Managing for better performance

Trading Places: Tapping into private insurance

The Radical Reformers:
A New Approach

The printed version of the full report in PDF format

The Radical Reformers

Moving forward with an untested approach.

Many of the ideas for controlling Medicaid costs are aimed at saving significant sums of money without changing the fundamental nature of the program. One concept is different. It upends the bedrock principle that low-income patients have an open-ended entitlement to a broad range of hospital, outpatient and other medical services when they need them. Both Florida and South Carolina are planning to cap the coverage provided their Medicaid beneficiaries.

Florida is in the lead, with a waiver approved in October by the federal Centers for Medicare & Medicaid Services. The plan sets aside a specific amount of money for Medicaid beneficiaries and requires that they use their allotment — in effect, a voucher — to buy health-care coverage from private insurers. People who are sicker will be entitled to higher-value vouchers to allow them to buy more care. While some children and pregnant women will still receive the whole range of benefits mandated under existing Medicaid law, most adults and many of the disabled will not.

”What we’re trying to do,” says Tom Arnold, Florida’s deputy secretary for Medicaid, “is bring some certainty to the process.”

The Florida program, which will rely heavily on managed care, is expected to be implemented as a pilot project this year in Broward and Duval counties, affecting 200,000 of the state’s 2.2 million Medicaid beneficiaries.

Officials in Florida and in South Carolina, which has a similar proposal in the works, argue that one advantage of the program is its simplicity: It cuts down on red tape and gives private plans more leeway in designing benefits.

They also see potential for cost savings. Officials believe that the marketplace will force insurers to compete with each other, offering ever-better benefits at lower prices. In addition, the private sector could help slow Medicaid’s growth as private plans — specifically managed-care plans — find more ways to save money.

The potential payoff of a better bottom line, says Robert Kerr, director of South Carolina’s health and human services department, is worth the gamble for both insurers and the states. “If managed care saves money, the plans keep most of that. So what do we get out of it? We get no growth.”

Causes for Concern

Critics have a laundry list of worries about the plans. For Joan Alker, senior researcher at the Georgetown University Center for Children and Families, the proposals are “based on largely untested concepts which will result in the state’s most vulnerable residents being asked to pay more and receive less for their health care.” Capping the amount of money that the state spends per person does not mean that the health needs of vulnerable families go away. Rather, “their needs will go unmet, which will result in a sicker population, growing levels of uncompensated care, and cost-shifts to private payers.”

Officials in Florida and South Carolina say beneficiaries will not be harmed by limits on their allotments because those allotments will be based on historical claims data for people with their conditions. State officials also say Medicaid will step back in with more funding for catastrophic care if a beneficiary’s health requires care beyond the allotment in any given year.

The reliance on insurance companies to pick up slack worries some observers who point out that insurers have a duty to look out for their own bottom line as well as an individual patient’s well-being.

There are other key concerns:

· Handing each patient a predetermined subsidy based on health status is risky, since quality of health is not very easy to predict.

· Managed care plans and other networks may not want to participate.

· Medicaid recipients — particularly those with limited education — may be overwhelmed when it comes to picking a plan that best covers their needs.

Only time will tell how successful Florida’s pilot efforts will be. One thing is sure: The rest of the states will be watching closely.