Florida insurers want more money from the state to cover Medicaid patients

Florida reaped substantial savings after switching to privately managed healthcare for more than 3 million residents covered through Medicaid. But it's possible the savings--which accounted for nearly $9.5 billion of state spending last year--could soon disappear.

That's because health insurers in the state asked for a mid-year raise of nearly $400 million, and a 12 percent rate increase on premiums, reports the Miami Herald. The state countered the proposal by offering insurers a statewide average increase of 6.4 percent, Currently, negotiations continue for rates that begin Sept. 1.

The Medicaid managed care program, which began as a pilot program in 2006, still may be able to control costs by turning patients over to privately managed companies, such as health maintenance organizations (HMOs). Florida pays HMOs a fixed rate for each patient while insurers assume the financial risk of providing care for less than that fixed amount. And because the HMOs are on a risk-adjusted basis, insurers are paid more based on the severity of the patient's illness.

For many insurers, however, "this is not a substantial business model," Audrey Brown, president of the Florida Association of Health Plans, tells the newspaper. Medicaid HMOs lost nearly $600 million through March of this year.

But skeptics argue that Florida was misguided to believe that private insurers could manage the care of Medicaid patients for less than it costs the state, Joan Alker, executive director of the Georgetown University Center for Children and Families, tells the newspaper.

"You're assuming there's going to be more cost savings because the private market is more efficient. Well, the private market is more expensive than Medicaid," she adds.

As Brown points out, Florida is meeting its savings estimates on the backs of insurers' financial losses. So while a patient's health improves, that in turn drives up utilization costs. The insurers just want to be reimbursed for the services they're providing, Brown notes.

Recently, the Centers for Medicare & Medicaid Services proposed changes to the Medicaid managed care rules, the first time since 2002. Under Medicare Advantage, the higher the quality rating, the larger the reimbursement. If states decide to structure their Medicaid star ratings in a similar manner, managed care plans with higher ratings would likewise receive larger payments, FierceHealthPayer previously reported. 

For more:
- here's the Miami Herald article

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