FEDS WANT FLA MEDICAID HMOS TO SPEND 85 PERCENT ON CARE

By JIM SAUNDERS
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, September 21, 2011….Angering some state lawmakers, the federal government will require that HMOs comply with a new spending restriction in Florida's Medicaid managed-care pilot program.

Justin Senior, the state's acting Medicaid director, told legislative committees Wednesday that the federal government is almost certain to require that HMOs spend 85 percent of the money they receive on patient care --- known in the industry as a "medical loss ratio.''

State and federal officials are negotiating a three-year extension of the controversial pilot program, which requires most Medicaid beneficiaries in five counties to enroll in HMOs or other types of managed care.

"For now, it's going to come with a medical-loss ratio, as I understand it,'' Senior told the Senate Health and Human Services Appropriations Subcommittee.

But the federal insistence on a medical-loss ratio touched off subcommittee Chairman Joe Negron, R-Stuart. Along with not including a medical-loss ratio in the pilot program, lawmakers this spring also rejected including such a ratio in a plan to move to a statewide Medicaid managed-care system.

That plan --- which also is pending federal approval --- would instead use a type of profit-sharing system between HMOs and the state. Negron has long complained about the federal government imposing requirements on the state's roughly $21 billion Medicaid program.

"They're dictating unilateral terms of surrender,'' Negron said during Senior's presentation. "They're commandeering our budget.''

Negron went on to suggest that the state should drop out of the federal program and run its own Medicaid system if its plans are not approved. But such a move likely would mean losing billions of dollars in federal matching funds.
Senate Minority Leader Nan Rich, a Weston Democrat who serves on Negron's subcommittee, said she doesn't want the federal government to think that it is a "legitimate option" for Florida to leave the federal program. What's more, she said she disagreed with Negron about the medical-loss ratio issue.

"Some of us feel very strongly there should be a medical-loss ratio,'' Rich said.

The debate came as the state Agency for Health Care Administration and federal officials try to finalize agreement on a three-year extension of the pilot program. That program started in 2006 and requires most beneficiaries in Broward, Duval, Clay, Nassau and Baker counties to enroll in managed-care plans.

Also, AHCA on Aug. 1 submitted detailed proposals to the federal Centers for Medicare & Medicaid Services to move to a statewide managed-care system. Senior, the agency's acting deputy secretary for Medicaid, said talks about those proposals are largely expected to come after the pilot extension is resolved.

Along with the medical-loss ratio, another major issue in the pilot extension is the possibility that the federal government will end the state's Low Income Pool program in December 2013.

That program, which was created in the pilot, funnels about $1 billion a year to hospitals and other types of providers that care for large numbers of low-income and uninsured patients. With the state seeking a pilot extension through June 2014, an earlier end to the Low Income Pool would cost Florida providers hundreds of millions of dollars.

Medical-loss ratios are a complicated --- and controversial --- issue in the health-insurance system. Supporters say requiring HMOs to spend minimum percentages on patient care will ensure that money doesn’t get siphoned away to other expenses such as administrative overhead and profit.

But critics contend that medical-loss ratios do not guarantee better quality of care or low administrative costs. They say, in part, that it is sometimes difficult to differentiate between care-related and administrative expenses and that numerous factors can go into calculating medical-loss ratios.

Carol Gormley, staff director of the House Health & Human Services Committee, made a presentation Wednesday that pointed to difficulties in using a medical loss ratio.

"An MLR (medical loss ratio) might seem simple and straightforward,'' said Gormley, a key staff member in drawing up the statewide Medicaid managed-care plan. "It is not.''

In the statewide plan, lawmakers would allow Medicaid HMOs to keep 5 percent in profit. Any profits above that level would have to be shared with the state.

Federal officials notified the state as far back as April that they wanted a medical-loss ratio if Florida moves to a statewide managed-care system. Lawmakers, however, approved the plan in early May without such a ratio.

While federal officials have signaled they will require a medical-loss ratio in the pilot extension, Senior said they also have indicated the state could seek a later change to the profit-sharing system, which lawmakers dubbed the "achieved savings rebate.''

Also, he said a medical-loss ratio and the profit-sharing idea might not be "mutually exclusive" and might be able to work together.

But Negron and some other Republican members of his subcommittee said federal officials have allowed Texas to use a profit-sharing system. They questioned why Florida couldn't get the same approval.

Hollywood Democrat Eleanor Sobel, however, defended using a medical-loss ratio.

"We're promising the taxpayers that 85 cents out of every dollar will go to services,'' Sobel said. "It sounds like a very high return on investment to me.''