Florida's Disappointing Medicaid Reform

Florida’s Medicaid reform law, which takes effect on July 1, mandates the enrollment of most of Florida’s 3 million Medicaid recipients into managed care programs.  It has been called transformational, but it probably won’t deliver on its promise.

There is a lot to write about, so I’m devoting two columns to the subject – and publishing them both this week, instead of one this week and one next week. 

This column focuses on the details of the new program.  It explains how first year cost savings are unrelated to managed care, why families of nursing home residents in particular should be worried, and how a new profit motive has been built into the Medicaid program. 

My next column will focus on seven policy problems built into the new law.   

While managed care got the headline, the first-year savings in the legislation come from a 5% provider rate cut, not from managed care. 

Medicaid will still be a $20 billion+ program.  It will still consume nearly a third of the state budget, and it will still expand significantly in 2014.

By incorporating the 5% cut into the law, Florida legislators anticipated a possible rejection of the managed care program by the Department of Health and Human Services. 

HHS has problems with Florida’s approach.  Florida Senators threatened to drop out of the Medicaid program if HHS did not approve the changes, putting $11 billion at risk.  Cooler fiscal heads prevailed, and this threat was dropped from the final version.

Assuming HHS eventually agrees, the Florida Medicaid program will be divided into three parts.

One will serve mostly elderly people with long term care needs.  Another will serve families, children, and adults with chronic health and mental health conditions.  The third will serve people with developmental disabilities.

Nearly everyone in the first two groups will be required to enroll in managed care plans.  Those in the third group will not.  They will keep their current Medicaid program, but payments will be capped and a plan for restructuring it will be submitted to the Legislature by 2014.

For the other two groups, the state will be divided into 11 regions.  Between two and six managed care plans will serve each region.  There will be separate plans for the long term care group and the families and children group.   One of the plans approved for the long term care group in each region must be offered by a Long Term Care Service Provider Network, led by a long term care provider.  One of the plans approved for the families and children group in each region must be offered by a Provider Service Network, led by a hospital, public agency, or other safety net provider.

The long term care program will be fully operational by October, 2013, and will include incentives to transition as much care from nursing homes to the community as possible. 

The CARES (Comprehensive Assessment and Review for Long Term Care Services) evaluation system will be used to determine each Medicaid recipient’s level of need.  Level 1 recipients must be in a nursing home.  Level 2 recipients still living in the community must have extensive physical or mental impairment.  Level 3 recipients will have mild physical or cognitive impairments.

Payments to plans will be based on three levels of need of the patients in each plan.   

For the first year only, all nursing home patients will be protected from discharge, whether or not their level of need changes.  However, plans will receive incentive payments from AHCA for every 2% shift in their population toward community care in either the first or second year, and for 3% shifts in subsequent years.  Incentive payments will continue until no more than 35% of plan recipients are in institutional settings.

So what could happen to an elderly nursing home resident? 

After the first year, any time her level of need is determined to be less than Level 1, she could be discharged to home care whether or not she or her family agreed.

Also, a managed care company with a motive, not a family and a clinician, will decide when an Alzheimer's patient needs institutionalization.

This new Medicaid program puts a premium on profits. 

In the families and children program, most recipients will have 30 days to choose a plan.  If they don’t, they will be assigned to one.

The state will negotiate rates with plans based on a “per member per month” fee, adjusted for the region and clinical profile of the patients in the plan.  For the first two years, provider service networks will have the option of receiving traditional fee-for-service payments.

Plans will be able to take up to 8.5% in profits, and the state will be their silent business partner. 

Here’s how this works.  Plans can retain the first 5% of total income received as a profit.  They can make another 1% if they exceed state quality measures.  They capture 2.5% of the next 5% of profit.  The rest goes to the state.  After that, all profits go to the state.

Plans are protected from losses in the first year.  The law allows them to subtract those losses from income during the second year.  A plan losing 5% in the first year will be allowed up to 13.5% in profits in the second year.

Is creating a profit motive for safety net health care really such a good idea?

The Florida Medicaid Reform Law is the result of the passage of two separate bills, HB 7107 and HB 7109. Information referenced in this column can be found in the text of one of the two bills.  If you have a question about the specific location of any text, please contact the author at gionfriddopaul@gmail.com.