Managed Care Expansion

Managed Care Expansion

Medicaid managed care plans may prove their worth in containing costs in 2012 since states will seek out alternative policies and payment/delivery models to cope with a looming Medicaid expansion under the health reform law, or the Affordable Care Act.

Managed Care Expansion

There are plan sponsors that are focused on expanding into the Medicaid market, including larger plans like United Health Group and Coventry Health Care, Inc. This business opportunity is fueled not only by federal healthcare reform, but also by state interest in outsourcing care of both the ABD (aged, blind and disabled) populations as well as the relatively healthy mothers and children traditionally in Medicaid managed care.

The bottom line is that states will continue to need managed care plans to help both limit costs as well as make costs more predictable and consistent.

Many states are facing massive Medicaid program cuts as they head into 2012. These budget problems in part are the reason why some won’t be able to shoulder the program expansions slated for 2014. The expansion is expected to cover some 16 million to 18 million more Americans whose annual income is over 130% of the federal poverty level.

There are a few factors impacting whether states are ready for the expansion. To name a couple: states are in a budget crunch now and employment in public-sector is declining and affecting state Medicaid agencies.

Even though the federal government is initially paying for the costs of the Medicaid expansion, there will be existing state staff that have to deal with the expanding population and pretty significant changes in rules. So, states have to implement something additionally with fewer resources.

The budget situation in most of these states is both a risk and an opportunity for these Medicaid managed care organizations. Premiums may not keep up with health care costs, and plans, consequently, could face potentially lower margins. If regulators want a viable private Medicaid business, they’re going to have to allow these companies a 1% to 2% net margin or operating margin.

Budget concerns also may create a long-term opportunity for Medicaid plans. More and more states that are dealing with budget issues will turn to private companies to help them manage their Medicaid costs and to make sure their Medicaid dollars are spent efficiently. While only 20% of Medicaid spending is now in managed care, that will certainly go up over time.

The emergence of ‘accountable care organization’ models in the Medicaid space as a way to address the forthcoming expansion is a trend to watch in 2012 and beyond, insiders say.

With at least 16 million more people coming into the Medicaid system under healthcare reform, states are going to have to focus on very cost-effective entities to provide that care. Even in states where there already is capitated managed care, there will probably be a lot of experimentation with these ACO-type entities as well.

States can’t cut enrollees, and can only cut provider rates by a reasonable amount. So the only other place to save money is to change the way care is delivered, and the only way a managed care plan can deliver that is to partner differently with the delivery system.

For instance, Oregon has been in the process of developing “coordinated care organizations” or CCOs to coordinate care of the Medicaid and dual-eligible populations. CCOs will be community run — a structure or entity accountable to the region where it operates — integrating physical health, mental health, substance-abuse services and dental care in one organization.

The CCO initiative is going to require that all MCOs change their business model in order to meet its criteria. These entities will have to develop the ability to manage internally things like behavioral health and other social services, as well as to partner with other organizations to become a CCO entity. How MCOs like CareOrgeon fit into the broader scheme of these CCOs could dictate how others end up interfacing with the Medicaid system during the expansion.

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