Can Florida’s Medicaid reform plan be the model for the nation?

Miami HeraldOctober 2, 2012 

Quietly, over the past six years, an experiment in providing healthcare for the poor has been playing out in Broward and four other counties around the state. Its basic goal is to relieve the financial pressures of Medicaid on Florida’s taxpayers by turning over poor and disabled patients to private companies, a move lawmakers believe will cut costs.

Conservatives love the Medicaid reform program, pointing to an in-depth University of Florida study indicating that the experiment has lowered costs while not raising consumer complaints. The Legislature has already approved a slightly modified model of the reform to go statewide. At least one national think tank believes it should be a model for the entire country.

Liberals decry the effort as a way to build corporate profits at the expense of the poor. Howard Mallinger, a Sunrise retiree, thinks they’re right. He has two adult sons with mental health problems who are in a Medicaid health maintenance organization. The HMO frequently won’t provide their medications, or is slow to approve them, causing their health issues to spiral out of control, Mallinger says.

One son has been involuntarily committed under Florida’s Baker Act 44 times in the past five years, he says. That often means expensive three-day hospital confinements. “The joke is on the taxpayer,” Mallinger says.

With state taxpayers spending $21 billion a year on Medicaid and 3.2 million Floridians depending on it for their care, including 270,000 in Broward, the stakes are huge. The UF research shows the pilot has saved the state about $100 million a year, and Florida’s leaders are determined to take the HMO-style reform statewide as early as 2014.

But three serious problems with the pilot could threaten the plan’s statewide success:

• R. Paul Duncan, the professor who led the much-discussed UF study, says he has yet to answer one crucial question: Does the new system cost less because insurers are providing more efficient care or are they simply giving patients less care?

“That is a very big deal,” he says.

Though discussion of the pilot focuses almost entirely on for-profit HMOs, two of the biggest and most successful groups in the program are nonprofit provider service networks (PSNs) paid on the traditional fee-for-service basis that the state is trying to abolish.

• Many hospitals love the pilot, saying they’re satisfied with the payments they receive. But many doctors hate it, citing complaints from their patients and their own low reimbursement rates. The conservative Florida Medical Association, which represents the state’s doctors, adamantly opposes the statewide expansion.

• The presidential election is likely to play a role as well, since the federal government provides more than half the funding for Medicaid. The Republican platform favors letting states do what they want with Medicaid, while the Obama administration is likely to demand major changes before allowing the pilot to go statewide.

TAXPAYERS’ PROBLEM

In the last 12 years, Florida’s Medicaid program has grown five times faster than general revenue. It now consumes 30 percent of the state’s budget and keeps growing.

“Medicaid has commandeered the state budget and crowds out our ability to fund other worthwhile priorities, such as our colleges and universities, public safety and transportation,” complains Sen. Joe Negron, R-Palm City.

The pilot program, launched in 2005, was an attempt by then-Gov. Jeb Bush and the Legislature to rein in Medicaid spending by moving most Medicaid recipients into HMOs. As UF’s Duncan summarized in his 2011 report, the goal was to “emulate comparable successes in the private sector,” stop the cost increases and empower consumers to make choices.

Justin Senior, Florida’s Medicaid director, says the reform is often incorrectly seen as a test of managed care. In fact, a million Medicaid recipients throughout the state are already voluntarily in HMOs. But the pilot program would allow the HMOs to vary their offerings to compete for customers and give consumers bonuses for healthy behavior.

To control costs, the state wanted capitated programs, meaning an HMO would get a set fee for each patient and then assume the risk of providing care for less than that sum. To make that fair, the state offered to pay the HMOs on a “risk-adjusted” basis — meaning HMOs would get more if a patient was seriously ill.

ROCKY START

The pilot began in Broward and Duval counties in 2006, expanding the following year into three rural counties near Jacksonville. Even major supporters say the beginning was chaotic.

“When reform first started, it was a disaster,” says Marcio Cabrera, chief executive of Simply Healthcare, which operates Medicaid HMOs. “The reality is they were underfunding the program.”

That meant managed care companies, at first enthusiastic, began to drop out. So did doctors. Patients complained.

Despite the Legislature’s theory of HMOs offering broadly different benefits, there wasn’t much difference in their plans, says Cabrera, “because there wasn’t a whole lot of money to go around.”

Some major providers remained on the sidelines, including Cleveland Clinic Florida, a hospital-physician system highly ranked in many national surveys.

One of the victims of the turmoil was Leslie Rosenstock of Fort Lauderdale, who handles the care of son Jason, 35, brain-injured as a child. Because of HMOs coming and going, Jason bounced among three plans. His medications tended to be expensive. His mother often had to battle to have them approved. She also struggled to find doctors.

“When we found doctors, we got a lot of denials, even for medications he’s been taking since the age of 4,” Rosenstock says. “There was a lot of paperwork, a lot of bureaucracy.”

Each time her son was put in a new plan, she had to renew the struggle for doctors and approvals, sometimes having to badger HMO employees and seek help from politicians and distant bureaucrats. She has a master’s degree in social work, but the problems were so complex, “this kind of brought me to my knees.”

NETWORKS SURGE

As HMOs left, many beneficiaries turned to PSNs. Many were nonprofits. Some were for-profit. They managed care similarly to HMOs — with one striking difference. All of them used the old fee-for-service model that Florida has been trying to move away from.

One of the earliest and largest is South Florida Community Care Network, which includes the hospitals and clinics of Broward’s public hospitals: Memorial Healthcare System and Broward Health.

Today, almost half of all enrollees in the reforms — 48 percent — are now with PSNs. A study by the Florida Center for Fiscal and Economic Policy concluded in December that PSNs “generally provided better access to care than their HMO counterparts.”

“We’re providing high quality care,” says Michael Lawton, a top executive of a large nonprofit PSN in Jacksonville. “We don’t have to pay shareholders, so we’re not trying to squeeze out a profit.”

But for-profit PSNs also do well. Better Health in Broward has 39,000 patients in the county, making it the third-largest Broward network. Cabrera, chief executive of a company with a minority interest in Better Health, attributes the success to customer service. “We assign an individual to a patient, calling them to make sure they keep appointments, that they’re getting follow-up doctor visits after going to the hospital.”

All major PSNs say they are costing the state no more than the HMOs, but Republican lawmakers in Tallahassee have been trying since 2009 to force the PSNs to stop fee-for-service and accept capped rates like the HMOs. The PSNs, lobbying hard, have kept their status.

John Benz, Memorial’s chief strategic officer, says PSNs work because they share any savings they get with the state. He says they should be allowed to continue with fee-for-service: “Since we’re getting similar or better results, why would you not to allow that to happen?”

Negron, the Republican senator championing reform, says the PSNs must change to accept capped rates, so the state can control its costs.

FINDING DOCTORS

The two large nonprofit PSNs have one strong lure for patients: access to specialists who work for the company.

In the HMOs, many doctors, particularly specialists, refuse to take Medicaid patients because the reimbursement rates are so low.

Aaron Elkin, a Hollywood obstetrician-gynecologist and former president of the Broward County Medical Association, has been outspoken about the problems of the pilot program. He says he gets about $1,350 for a Medicaid pregnancy versus $2,000 to $3,000 from private insurance. The Broward medical association has been opposed to the reforms since they began. One major reason: Only 5.6 percent of Medicaid funds go to doctors.

Cabrera, the HMO executive, acknowledges it’s a problem finding specialists. “We cannot pay the specialists the fees they’re demanding because we don’t get paid for these by the state. A lot of specialists say, ‘Hell, no, I won’t take the Medicaid rate.’ ”

Senior, the Medicaid director, maintains there is no shortage of doctors. “We still have a very strong network. Gosh, there’s 80,000 to 100,000 providers statewide.”

Elkin says he often hears complaints from his Medicaid patients, who he believes are reluctant to make formal protests for fear of alienating the insurers they desperately need. “The relatively small number of documented complaints,” he wrote in a letter to Medicaid officials in Washington, “is absolutely NOT an indication that the Medicaid reform pilot is successful.”

During interviews with a half-dozen pregnant Medicaid patients in Elkin’s office, almost all had complaints, the most common one being how hard it was to get approved for Medicaid.

Ebony Mobley, having her first child at 25, said she struggled for almost four months to get approved. “You can’t get through on the telephone line.”

Mayra Villalobos, a Miami Beach woman having her first baby at 35, called the application process “very disorganized.” She said she struggled for two months to get a Medicaid card. Her unborn baby got a card three weeks before she did.

Several women had stories to tell about their children. Laquesha Brown, 21, said she didn’t take her 2-year-old son to see a pediatrician frequently because she thought his HMO required her to pay half of his charges. She waited until he had “a real bad asthma attack” before taking him to the Hollywood Memorial ER. She still hasn’t gotten the bill.

No Medicaid plan requires 50 percent payments, but Elkin, Brown’s obstetrician, called it “extraordinarily frightening that somehow she had gotten that idea, because it would clearly hinder her seeking care for her child.”

But it’s not all negative. Arlene Wilson of South Broward said she was hit with an ER bill of $740 to pay even though she’s on Medicaid, but her 2-year-old son with asthma has no trouble getting a quick appointment with his pediatrician.

Maura Mendoza, 24 and pregnant, said she struggled for months to get qualified for Medicaid for this second pregnancy. But she praised the care of her daughter, Leah, 7 months, who has Better Health, the for-profit PSN. “It’s easy to get an appointment,” she said. “That insurance helped a lot.”

DEFINITIVE STUDY?

Last December, UF released its 76-page study of the first five years of the pilot project. Florida Medicaid, which paid for the report, forwarded it to Washington listing its positives: improved access for consumers, higher scores in quality measures, taxpayer savings.

Lead-author Duncan summarized the report, saying the pilot appears to have cut costs, without “a huge outcry from unhappy patients.”

A UF colleague in health services research, professor Jeffrey Harman, estimates that reform expenses were roughly $100 million lower annually than would have been expected if the patients were in traditional Medicaid.

But the key question — is it greater efficiency or reduced care that is lowering costs? — remains unanswered. Duncan says new data may shed light on that but that he hasn’t yet found the money to continue the study.

“We’re hopeful that we can close some of these remaining questions … before the state takes this statewide,” he says.

Some bottom-line findings of the study: Customer satisfaction in the reform plans differed little from those outside reform. In measuring costs, most PSNs showed greater savings than HMOs. Speciality care “continued to be a challenge,” as it was for Medicaid recipients not in reform plans. And in mental health, two key measures — frequency of patients committed under the Baker Act and arrest rates — showed no change.

Though the plans showed some improvement in quality measures such as breast cancer screening and lead screening in children, most reform plans still ranked well below the performance of Medicaid HMOs elsewhere in the nation. The bonuses offered in return for healthy behaviors showed some benefit, with 70 percent of participants earning rewards to spend on nonprescription healthcare items. Most popular: diapers, sunscreen and toothpaste.

Responses to the report have been across the board. Benz, the Memorial executive, called it “spot on,” while Elkin, the Hollywood ob-gyn, said he was stunned the report was so different from what he hears from patients and colleagues. “It’s truly hard for me to imagine how they are getting their data.”

The Florida Center for Fiscal and Economic Policy concluded the data showed “overall access to primary care in the pilot counties was significantly and consistently worse than prior to the launch of reform.” And a study financed by the Jessie Ball DuPont Fund found that the enhanced benefits program “appeared to be popular with beneficiaries, but there was little evidence that it was changing behaviors.”

A report on the website of the conservative Heritage Foundation cited the Duncan study when it called the pilot “a decided success,” predicting that if it is copied nationwide, patient satisfaction would rise and “Medicaid programs could save up to $91 billion annually.”

ABOUT THE FUTURE

Earlier this year, the Obama administration approved a three-year extension of the five-county pilot but insisted that HMOs and PSNs operating in the pilot spend at least 85 percent of the money they receive for healthcare on recipients, meaning no more than 15 percent can go for marketing, administration and profit.

The 85 percent requirement has been strongly opposed by Florida Gov. Rick Scott’s administration as interfering with private enterprise, but Cabrera, the HMO executive, says most reform plans already operate within those margins.

Meanwhile, there are inklings of improvement in Florida’s pilot. Rosenstock, the mother of the brain-damaged son who has badgered politicians and bureaucrats to get care for her son, said that for the past year, Jason has been in the Better Health PSN with a personal case manager dealing with his problems.

Though she continues to hit occasional obstacles, she’s satisfied overall: “They’re really good.”

The much larger issue is whether the federal government will accept the plan to take the pilot statewide, scheduled to start in 2014 for most recipients.

Senior, Florida’s Medicaid director, says the statewide plan will include fixes to some issues that troubled the pilot. For the five-county pilot, most health plans were allowed in. For the state rollout, the number of health plans would be limited and they would have to bid to get the state contract. If a plan dropped out of one area because it wasn’t doing well, it would be required to drop out of the whole state to prevent cherry-picking.

State Democratic leaders and others have written to the Obama administration asking that it reject or greatly modify Florida’s statewide plans. The Florida Medical Association, which represents the state’s doctors, also sent a letter opposing the plan.

The Obama administration has yet to rule on the statewide plan, but it has rejected two of its provisions — requiring the poor to have a $10 co-pay for doctor’s visits and a $100 co-pay for non-emergency visits to ERs, regardless of age or ability to pay.

Obama’s team has yet to decide on the 85 percent requirement. Sen. Nan Rich, D-Sunrise, who has opposed much of the pilot, believes that’s absolutely key: “You have to protect the consumers. These are extremely vulnerable people.”

Yet after all these years of intense debate, the two sides agree that change is necessary. Both the Obama administration and the Florida pilot aim to eliminate fee-for-service plans.

“Medicaid managed care is here to stay,” Rich said. “Everybody wants to move away from fee-for-service. It’s the most costly way of doing business.” Negron, her Republican counterpart, agrees.

The larger question remains: What’s the best way to manage care?

The Obama administration is looking closely at Oregon, where the governor, a former emergency room doctor, is establishing a “coordinated care organization” in each major city in which the main providers — hospitals, doctors and others — join together to manage care for the poor. While the Florida model depends on for-profits competing for business, Oregon wants to see if cooperation would be better.

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