Connecticut Moves Away From Private Insurers to Administer Medicaid Program

At a time when most states are paying private insurers to provide health care for their Medicaid recipients, Connecticut says it has saved money and improved care by going the opposite way.
In 2012, Connecticut fired the companies that were running Husky, as its Medicaid system is known, and returned to a more traditional “fee-for-service” arrangement where the state reimburses doctors and hospitals directly.
State officials, physicians and patient advocates have welcomed the move: Average cost per patient, per month, is down from $718 in mid-2012 to $670 last year, according to state data. The number of doctors willing to treat Medicaid patients is up 7% and as a result fewer patients are using emergency rooms for routine care.
Currently, 41 states contract with private insurers to run some or all of their health programs for the poor, and many are increasing their role. Nationwide, 70% of the 73 million Medicaid enrollees are in private plans. Most states use “full-risk” managed-care contracts, where insurers get a monthly fee per assigned enrollee. If plan members’ care costs less than the fees, the plans make money; if it costs more, the plans lose.
States have turned to managed care as a way to control spending, particularly those that expanded Medicaid under the Affordable Care Act. Health plans say they can provide better, more-coordinated care and save states money-some $6.4 billion this year, according to an estimate prepared for the Association for Community Affiliated Plans, which represents nonprofit health plans in 26 states.
Once known as “the insurance capital of the world,” Connecticut had 11 companies offering Medicaid managed-care plans in 1995, each with different rules and reimbursement rates. Industry consolidation, battles over rates and other disputes whittled that down to four by 2000-near the minimum required by federal law-which some observers say limited the state’s ability to bargain and enforce rules.
Patient advocates complained about denied services, delayed payments and inadequate provider networks. In a state-sponsored survey in 2006, only one in four callers posing as Husky patients was able to get an appointment with a network doctor; the others encountered erroneous listings or refusals to see Medicaid patients. State officials, meanwhile, were frustrated by the plans’ refusal to share data on costs and claims, prompting lengthy court battles.
In 2009, an audit by Milliman Inc. found Connecticut was overpaying the three remaining plans-run by Aetna Inc., UnitedHealth Group Inc. and Community Health Network of Connecticut, a nonprofit-by nearly $50 million a year. Rather than continue sparring, Gov. Dannel Malloy, a newly elected Democrat, severed ties with the plans as of 2012. Spokesmen for the three health plans declined to comment.
Connecticut calls its new system “managed fee-for-service.” A nonprofit administrator processes medical claims, but the state carries the financial risk. Patients have a 1-800 number to call with questions or to find providers. Reimbursement rates are the same across the state.
State officials say the streamlined system has trimmed administrative costs to just 5% of total costs, compared with 12% on average at Medicaid managed-care plans. And having data on all 750,000 Husky patients has helped target those with complex needs for additional support. That saved $12 million on 12,000 patients last year, according to the state.
Officials said one key to Husky’s success are “medical homes,” whereby primary-care doctors are paid extra for coordinating patient care. To qualify, practices must hold slots open for Medicaid patients, use electronic medical records and offer off-hours coverage, so patients don’t have to use ERs by default.
More than 100 practices and 1,332 physicians have qualified. Barbara Ziogas, a pediatrician in Farmington, said the new system enables her to follow patients more closely. “Now, if I’ve sent someone to a specialist, we get the specialist’s notes back and can update their records-and if they didn’t go, we find out why,” she said.
Patients say they have noticed a difference. Under the old system, Marlene Donahue, a foster mother to children with complex medical needs, said she would frequently take her children three of whom were on feeding tubes, to specialists only to find that the required referral had gone astray. “There’s more communication now,” she said. “I can call Dr. Ziogas and talk about anything.”

* Taken from The Wall Street Journal By Melinda Beck.
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