Medicine for Medicaid: Will Maine reform health care for low-income residents?

Over the last several decades, most states across the country have shifted how they manage the health care of their low-income residents. Instead of coordinating directly with providers and paying for each medical procedure, states have, more and more, handed over that administrative responsibility to outside entities. The trend has not hit Maine until now.

Art by George Danby

Art by George Danby

A compromise bill proposed this week by Maine Republican Sens. Roger Katz of Augusta and Tom Saviello of Wilton would expand Medicaid coverage to 70,000 residents under the Affordable Care Act and start Maine on a years-long path of converting to a managed care system where the state’s Medicaid program, MaineCare, would be contracted out to private companies or nonprofits.

By all accounts, it would be the largest change to hit MaineCare in years, possibly decades. The goal, Katz and Saviello said, is to ensure all Maine residents have access to quality health care within a system that is ready for them and able to deliver medical care in a cost-effective way.

“The status quo in MaineCare, even if we don’t expand, is unacceptable,” Katz said.

Whether you have ever held a MaineCare card or not, switching to a managed care model would affect you. You might work in the health care or social assistance industry now, or you might in the future; employment in the field grew by 22.6 percent between 2000 and 2012. You might have an elderly parent facing a need for long-term care. Or perhaps you are a taxpayer; MaineCare will comprise about 23 percent of the state general fund in fiscal year 2014.

What it is

Even if you’re not familiar with the general term “managed care,” you probably already know what it is.

The beginnings of managed care can be traced back to 1929, when a physician in Oklahoma established a health cooperative for farmers lacking a nearby hospital or medical specialists, according to the federal government’s National Council on Disability. The physician, Michael Shadid, sold shares to create a hospital and then developed an annual fee schedule to pay for the cost of care. By 1934, he had 600 family memberships.

This kind of prepaid health plan is what we would now call a health maintenance organization, or HMO: People regularly pay a fixed fee regardless of whether they require medical care, and a wide variety of medical services are available if they need them. They also have a primary care provider who can refer them to specialists. Procedures are covered if they see providers within a certain network.

If you have an HMO or a preferred provider organization, a PPO, you have a managed care plan.

Medicaid, however, doesn’t naturally work in such a structured fashion. Once you qualify for Medicaid, you then must find a doctor who is accepting Medicaid patients. There is not necessarily a defined network of providers. The lack of a network may cause Medicaid recipients to put off signing up with a primary care doctor. They may wait until a health problem progresses and then seek out an emergency room or expensive hospital outpatient facility.

In describing why other states have switched to a managed care system for Medicaid recipients, a 2013 Robert Wood Johnson study states, “Without a consistent health care provider to coordinate care, Medicaid beneficiaries tended to get lower-quality, higher-cost services. Policy-makers were especially worried about people with complex conditions — chronic illnesses, mental health problems, and substance abuse — who needed services from multiple providers.”

About 50 percent of Medicaid enrollees nationwide now have the type of managed care plans currently being proposed for Maine. That’s up from 15 percent in 1995. The legislation proposed for this state would have the Maine Department of Health and Human Services pay three or four successful bidders a fixed, per-enrollee payment each month — based on actuarially sound numbers — in exchange for furnishing a range of health services. Medicaid recipients would get those services through a network of participating providers.

“It’s the very thing that, ironically, we all have,” said Sara Rosenbaum, a law professor and founding chair of the department of health policy at The Trachtenberg School of Public Policy and Public Administration at George Washington University in Washington, D.C.

It makes sense to pair expanding Medicaid with the rollout of a managed care structure, she said. Otherwise what would happen to 70,000 new enrollees? “That’s a lot of people to just send a card to and say, ‘Go,’” she said.

What it changes

A managed care system would fundamentally alter the role of the Department of Health and Human Services. Its focus would shift away from processing claims and toward strategic handling of contracts and protection of Medicaid recipients from managed care organizations that might seek to save money by under-serving beneficiaries.

“The issue also is ensuring that the agency itself is ready to step up to the plate and is expected by the legislature to really be a presence in the implementation and oversight of managed care,” Rosenbaum said.

States have typically pursued the managed care model with an eye toward saving money. That’s because managed care organizations have an incentive to contain costs and keep patients healthy; if they exceed their spending projections, they eat the costs, not the state. Katz’ bill even builds in a 5-percent required cost savings.

There are two main ways to lower state Medicaid spending through managed care: negotiate lower reimbursement rates with providers or rework the way care is provided to find efficiencies and reduce beneficiaries’ need for health care services.

Not all states with managed care systems have realized savings. “Shifting Medicaid recipients from fee-for-service into MCC (Medicaid managed care) did not reduce Medicaid spending in the typical state,” reads one report from the National Bureau of Economic Research. Even if managed care plans succeed in cutting down on health care use, they could still result in increased Medicaid spending if they can’t negotiate low-enough reimbursement rates with providers.

Often, the success of a state’s managed care system comes down to what states agree to in their contracts with managed care organizations.

“You need to have a good contract, and there needs to be monitoring of that contract,” said Neva Kaye of Scarborough, managing director for Health System Performance at the nonprofit and nonpartisan National Academy for State Health Policy.

Good contracts ensure Medicaid recipients have access to providers and won’t face lengthy wait times to receive care. They are only signed with managed care organizations that have wide networks, including with numerous specialists, and set clear standards to hold providers accountable. They allow enough time for providers and patients to transition to the new system. They also specify certain public health improvements, such as better birth outcomes or reduced emergency room use.

“It all comes down to how you implement it,” Kaye said.

Erin Rhoda

About Erin Rhoda

Erin Rhoda is a writer and storyteller. As editorial page editor of the Bangor Daily News, she writes the newspaper's opinion on matters from Kittery to Fort Kent.