Last week, I talked about the failure of traditional Medicaid managed care to produce better quality results than fee-for-service. This week, I want to expand on the value discussion on why traditional managed care is an expensive proposition — for Missouri and the state’s providers.
In December 2014, Mercer Health & Benefits LLC delivered research commissioned by the MO HealthNet Division evaluating the value differences between the existing Medicaid managed care program and the state’s fee-for-service Medicaid program. The study found that traditional managed care would have resulted in an annual average cost savings of 1.7 percent or $27 million in combined general revenue and federal funds if “managed care like” fee-for-service beneficiaries had been covered by managed care.
To arrive at this conclusion, Mercer made several assumptions. First, it assumed the cost of care was 5 percent higher in urban areas than rural areas. Second, it doesn’t appear that Mercer severity-adjusted their assumptions, which matters because higher acuity cases are often treated in urban areas where specialists are prevalent. Finally, Mercer applied a 5 percent geographic inflation factor to account for differences in the rural-urban cost curves. The adjustment was applied to all fee-for-service costs and not managed care costs, implying that a dollar of managed care costs fee-for-service $1.05. Pretty straightforward, but there’s one catch — 24 percent of fee-for-service beneficiaries live in urban areas and 30 percent of managed care beneficiaries live in rural areas.
What really changed the conversation is when we applied Mercer’s 5 percent inflation factor according to these proportions. Guess what? The slant in the playing field was reversed. Mercer’s model estimated savings from the fee-for-service program to the tune of nearly $14 million. Eliminating this inflation factor altogether netted $56 million in favor of fee-for-service during the four years evaluated. That’s right, fee-for-service saves money.
There’s more bad news for traditional Medicaid managed care. Since managed care programs don’t have a provider tax, funding the program costs the state general revenue money that it doesn’t have. Moreover, tapping revenue from existing provider taxes — which is highly objectionable to begin with — only leads to a cost spiral, reducing overall resources.
Worse yet, the Affordable Care Act places a tax on Medicaid managed care plans. Not only would this tax mean the managed care plans have fewer resources for care or administrative costs, but also it would amplify the costs to Missouri to pay for Medicaid expansion in other states while receiving none of the benefits.
This salient, but often overlooked point in the cost-effectiveness debate on managed care was brought up yesterday by Sen. Rob Schaaf during a MO HealthNet Oversight Committee meeting. During the meeting, MHA presented the data I reviewed in my column last week on hospital utilization by managed care beneficiaries in Missouri.
The data raises a lot of questions on just how well the care for this population is being managed. Particularly striking to most committee members was the seemingly identical cost curves for managed care and fee-for-service patients. Identical curves, but very different populations — managed care consisting primarily of mothers and children, while fee-for-service has the comparatively difficult task of “managing” care for the aged, blind and disabled population.
The story we were able to tell with the HIDI data set prompted two questions from committee members during the presentation. First, why isn’t this information being shared more widely? And second, how can the state move forward with a fast-tracked request for proposal for the expansion of Medicaid managed care with these data in hand? We wonder the same and plan to distribute the data widely during the managed care debate in this year’s legislative session.
In business, there’s a natural tension between cost and quality. Most businesses choose one as a strategy. Missouri’s traditional managed care plans aren’t delivering on either — yet they’re claiming success at both.
Our principles on Medicaid managed care have been articulated in the 2016 legislative guide. Nonetheless, with the evidence being what it is, it is a fight we shouldn’t have to fight.
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On Wednesday evening, MHA launched a completely updated version of our flagship website, MHAnet. At the same time, we redesigned our daily newsletters — including MHA Today — to reflect the more streamlined, approachable design.
There are two items I want to highlight. First, the search engine is powerful and front-and-center. We designed the site around search to ensure members could find what they want, when they want it, without having to drill through navigation. Second, we’ve added LinkedIn to the site to help us extend the reach of our subject matter experts. We’ll be using the platform to communicate more efficiently will all members, and directly with the experts in hospitals throughout the state.
I would encourage you to take a look.
As always, I want to know what you’re thinking.
Herb B. Kuhn
MHA President and CEO
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In This Issue
Schaaf Contract Transparency Bill Passes Senate Committee
Senate Veterans Affairs And Health Committee Endorses Telehealth Legislation
CMS Proposes Update To ACO Benchmark Methodology
CMS Proposes Rule To Give Providers And Employers Access To Quality Information
TJC Releases New Prepublication Standards For Substance Abuse, Palliative Care
CMS Corrects Dates On Hospital Compare Preview Reports
CMS Issues Report On Star Ratings Methodology And Summary Results