Kansas Health Institute | Information For Policy Makers. Health for Kansans.

TOPEKA — The recession’s continuing grip has added new urgency to legislative discussions about how to control the cost of the Kansas Medicaid program.

Tax collections have fallen short of projections three straight months, including a startling $71 million in February. The trend could force another round of immediate spending cuts and rekindle talk about raising sales and tobacco taxes to fill what is expected to be at least a $400 million hole in the 2011 budget.

About $77 million of that would be needed to restore a 10 percent cut in rates paid to providers who provide care for the approximately 315,000 low-income and disabled Kansans in the Medicaid program.

With a total cost of approximately $2.5 billion, Medicaid is the second largest expenditure in the state budget, eclipsed by only K-12 education.

Managing care for the disabled and elderly

Managing the care of elderly and disabled Kansans covered by Medicaid would provide one of the best near-term opportunities for controlling the program’s costs, state health officials told lawmakers on Monday presenting a 43-page report on possible cost savings.

The state currently relies on two managed care contractors to provide services for HealthWave, which combines Medicaid and CHIP to assure health insurance for low- and moderate-income children and pregnant women.

Andy Allison, executive director of the Kansas Health Policy Authority sat down with KHI News Services in the days leading up to the report’s release. He said there are potential savings in using managed care for the disabled and elderly on Medicaid even though his agency’s review of the HealthWave managed care contracts show little evidence of cost savings to the state.

Allison repeated that point to the Senate Public Health and Welfare Committee when he shared the cost cutting options compiled by the agency.

It isn’t clear if the state could afford managed care programs for the elderly and disabled while maintaining its current HealthWave contracts, which cost the state about $400 million a year. But Allison has been asked by the health policy authority board members to review the effectiveness of the HealthWave contracts.

“We simply have to pose the question of whether these (managed care) resources are allocated correctly,” Allison told KHI News Service. “We have to be smart about how we invest these dollars.”

Value of current services questioned

Kansas has major contracts with two managed care organizations – the nonprofit Children’s Mercy Family Health Partners and the for-profit UniCare Health Plan of Kansas. They provide services to about 160,000 children and women enrolled in HealthWave.

The state pays each company a set amount, renegotiated yearly, to handle enrollment, build provider networks, negotiate reimbursement rates and coordinate services.

But Allison said a recent health policy authority review of the managed care organizations raised questions about what the state is getting for its money. For one thing, the review revealed that only about 1.3 percent of those served by the organizations during the first two years of their contracts received care management services.

“That was a surprise,” Allison said. “It certainly makes us wonder what the payoff for that investment was over the first two years.”

Representatives of Children’s Mercy and Unicare countered that the number of individuals receiving care management has increased substantially since the health policy authority last checked. And they said that the definition of care management used by the agency doesn’t capture the wide range of care coordination the companies provide – everything from education and outreach to free transportation to doctors’ appointments.

“Part of our concern with the way (the review) is presented is that it may present this picture that the sum-total of what we do is mange the care of 2 percent of the very sick people,” said Bob Finuf, CEO of Children’s Mercy Health Partners. “When in actuality, 100 percent of the individuals that we serve are exposed to some part of our managed care system.”

Linda Steinke, UniCare’s regional vice president, said she had similar concerns that her company’s efforts were underestimated.

“I’ve got staff across the state that will go to a patient’s home,” she said. “And we’ve had some real success stories in tracking down some hard-to-reach patients.”

Care or case management services are typically focused on ensuring that individuals with specific health conditions get the medical care they need in the most appropriate and cost-effective setting. Care coordination services provide the social and logistical supports that individuals in high-risk populations often need to manage their health.

A question of focus

The question that needs to be asked and answered Allison said is whether the state’s current managed care programs are focused on the right populations. The women and children they serve comprise about 52 percent of Medicaid and CHIP enrollees but account for only about 23 percent of costs.

The aged and disabled make up only 29 percent of the Medicaid population, but the costs of the services they receive account for about 70 percent of the program’s total expenditures.

Finuf said Children’s Mercy is prepared to talk about the value of the managed care services provided by his company and UniCare. But he said the debate shouldn’t be about serving one population over another.

“From our perspective, it’s not an either-or question,” he said, noting that an analysis by his company showed the managed care contracts have saved the state between $11 million and $27 million a year versus the cost of traditional Medicaid services.

Similar debates across the country

Other states have recently made changes in the way they manage the care provided to Medicaid recipients.

The governor of Connecticut ended contracts with four managed care companies that were demanding higher rates. In 2003, the Oklahoma Health Care Authority canceled two managed care contracts over a rate dispute and added staff to manage the programs in house.

“It’s not something we planned,” said Lynn Mitchell, director of Oklahoma’s Medicaid program. “We found ourselves in kind of an untenable situation.”

The Oklahoma agency has saved millions in administrative costs while maintaining the quality of the program, Mitchell said.

“By bringing the programs in house, we’ve been able to make the limited dollars we have go further while preserving health outcomes,” she said.

Allison said Kansas isn’t likely to follow Oklahoma’s lead. He said KHPA doesn’t have the staff to “in-source” the HealthWave managed care programs. But he said Kansas legislators need to “think long and hard” about making significant changes in the way the programs operate and the populations they serve.

“It’s not easy to talk about potentially dismantling flagship programs, but these aren’t the times we used to have,” he said, referring to the state’s continuing budget crisis, which has forced the governor and legislators to make approximately $1 billion in cuts the past two years.