Medicaid Managed Care Market May Face Growing Uncertainty

Like Medicare managed care, Medicaid managed care "may be on the decline, collapsing under the weight of tight government payments or flaws in design," according to some health policy experts, the Baltimore Sun reports. Kaiser Commission on Medicaid and the Uninsured Executive Director Diane Rowland said, "Just as we've heard the concerns about whether (health) plans (would) stay in the Medicare market, some states are experiencing that in the Medicaid market." Beginning Jan. 1, almost one million seniors had to find new Medicare managed care coverage, as numerous managed care companies left the Medicare market. Similarly, CareFirst BlueCross BlueShield announced this week that it would pull out of Maryland's Medicaid managed care market, leaving 100,000 Medicaid beneficiaries to find other managed care coverage. States and the federal government share financial and regulatory responsibility for Medicaid, but states have "broad latitude" in how their program is run, the Sun reports. In the mid-1990s, many states turned to managed care to contain costs in their Medicaid programs. But some participating HMOs have found that they are losing money on the program. For example, CareFirst said it lost $11 million on Medicaid in the last year. Speaking about Medicaid HMOs in general, Susan Pisano, vice president of the American Association of Health Plans, said, "The payment environment is unstable and unpredictable, and the payment methods are flawed. In terms of being able to make a long term commitment to a program, that's not a good environment to be operating in." Pisano added that the Medicare and Medicaid HMO markets "share some common problems," including "regulatory burden" and "payment issues."

Not All Bad News
But Pisano added that the Medicaid managed care program has not experienced "the kind of precipitous decline that we have seen in the Medicare program," noting that HMOs' participation in Medicaid "continues to be high." In addition, some companies specializing in Medicaid "have remained profitable," the Sun reports. Maryland's assistant health secretary Debbie Chang said that "how much [companies] spend on administration and how [they] manage the care" determines their financial success, not necessarily how much the state reimburses companies for care. Rowland noted that because of the current situation, some states might modify their programs, mixing managed care and fee-for-service models. David Sandman, senior program officer at the Commonwealth Fund, said, "Only a few years ago, Medicare managed care was being hailed as the solution to the program's financial problems. Medicaid managed care was often thought of as the magic bullet. But the reality has proven much more complicated" (Salganick, Baltimore Sun, 1/5).