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Medicaid expansion means more managed care

March 6, 2013
by Alison Knopf, Contributing Writer
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As more Republican governors decide to expand Medicaid under the Affordable Care Act (ACA), the nature of Medicaid itself may be changing. Instead of the old fee-for-service reimbursement method that behavioral healthcare providers were used to, the new scenario is going to be managed care. Medicaid is already privatized for medical/surgical services in many states. But substance abuse and mental illness were separate in many states, and providers were happy to be paid on a fee-for-service basis. Now, apparently, expanded Medicaid is just too big to take on without private insurance companies managing the benefit.

Take the cases of New Jersey and Florida, where two governors who had argued long and hard against Medicaid expansion – and all of “Obamacare” – changed their minds recently to the approval of the behavioral healthcare community. In Florida, Gov. Rick Scott said that he would accept the federal dollars to fund a Medicaid expansion. He did this just hours after the state received a Medicaid waiver which will move all of its Medicaid behavioral health treatment services into managed care.



The prospect of  soon having private, for-profit insurance companies managing Medicaid benefits worries treatment providers, who have not always had positive experiences with managed care companies. “All substance abuse treatment today is fee-for-service, but starting next October, it will be managed care,” Mark Fontaine, executive director of the Florida Alcohol and Drug Abuse Association (FADAA), told Behavioral Healthcare.  The IDN (Integrated Delivery Network) will include all mental health and substance abuse services.

For behavioral health providers who serve people on Medicaid, the good news about support for the expansion is tempered by the bad news about the addition of managed care. “The managed care companies have to carve their 15 percent off the top, and there’s no new money, so what they’re saying is there will have to be efficiencies,” said Fontaine. “This means more rationed care.”

There are also questions about residential treatment, because Medicaid doesn’t pay for residential treatment, said Fontaine.

Governor Scott had made no secret of the fact that the expansion of Medicaid was linked to whether he could use private insurance companies to manage behavioral healthcare. Only hours after the federal government said he could privatize Medicaid, he announced that he would expand it. Privatization will occur right away for the current Medicaid recipients – 3 million in the state, more than half of whom are under 21.

Under Medicaid expansion, single men without children will, for the first time in many years, get health care coverage, with the federal government paying 100 percent of the tab for the first three years. Governor Scott only wants to expand the program for as long as the government is paying the full tab—through 2016.  There will be 900,000 additional recipients – not only men, but people earning up to 133 percent of federal poverty level – under the expansion. If the expansion doesn’t continue beyond three years, what would happen to them? The federal government has indicated that it will be flexible if states want to drop out.


For-profit insurance companies

It can be expected that Governor Scott wants to reduce the cost of care. The state has already run afoul of the federal parity law, with the insurance commissioner refusing to make private insurance companies comply with parity in mental health and substance abuse treatment in the state. The federal Department of Health and Human Services has reportedly been working behind the scenes with states like Florida that are recalcitrant on parity.

The nub of the managed care for Medicaid concern is this: the insurance companies are for-profit, and they are getting taxpayer money to run a program that critics say denies care for patients – the program has already been running as a pilot in Florida, and some physicians have dropped out as a result of the insurance company denials of care. Patients complained that they couldn’t get doctors appointments and were shuttled from plan to plan. Then, health plans complained that they weren’t making enough money.

Under Medicaid now, the federal government covers about 68 percent of Medicaid costs in Florida.

On March 4, the Florida legislature dealt a setback to Governor Scott's approval of Medicaid expansion, when the bill failed to make it out of a key committee due to Republican lawmaker opposition to "Obamacare."


New Jersey

Meanwhile, in New Jersey, Gov. Chris Christie called his expansion “the smart thing to do for our fiscal and public health.” 104,000 more people will be enrolled in Medicaid starting in January. “Accepting these federal resources will provide health insurance to tens of thousands of low-income New Jerseyans, help keep our hospitals financially healthy and actually save New Jersey taxpayers money,” Governor Christie said.

The federal government approved New Jersey’s request for a comprehensive Medicaid waiver last fall – just before President Obama’s re-election. The waiver’s most direct effects on behavioral health are on payment reform: All behavioral health services will move to a managed care entity that will, eventually, be risk-based. What risk-based means is that the entity, called an Administrative Services Organization (ASO), will make more money if it denies more services or authorizes fewer.