The Center for Medicare and Medicaid Services (CMS) released a proposed set of regulatory changes for Medicaid earlier this week. There are a couple of significant changes proposed for the program that covers 15% to 20% of the US population.
The proposed rule from CMS would set the medical loss ratio at 85 percent, which it described as the “industry standard” for large employers in the private health insurance market.
The rule quickly drew ire from Medicaid health plans.
“It’s a lot like a Swiss watch. There are a lot of moving parts, but you know deep down, its going to be very expensive,” Jeff Myers, the president and CEO of Medicaid Health Plans, said Tuesday.
85% is the medical loss ratio for large group commercial plans, while 80% is the MLR for small group and individual market plans. 85% is readily attainable for Medicaid manged care organizations. Modern Healthcare notes that most Medicaid Managed Care Organizations (MCOs) already meet that standard:
In a CMS review of 167 managed care plans in 35 states, one in 10 plans had an MLR below 79% and one in four had one below 83%.
I have to call bullshit on Mr. Myer’s statement that an MLR requirement will ruin MCOs as I know there are MCOs with MLRs in the low 90s and they are profitable, I know of MCOs with MLRs at 89% and they are profitable. It is quite possible to deliver high quality care to the Medicaid population, make a reasonable profit and not gouge the state on rates.
The 85% MLR rule will force the fat, bloated MCOS either become more efficient or hire fewer hookers and buy lower quality blow, but the CMS rule is basically taking average performance and mandating it as the floor, much like PPACA took average private commercial MLR performance and made it the floor. Big, bloated bureaucracies that can’t deliver good value won’t survive, but plenty of MCOs will do just fine.
japa21
Prior to getting my current position I was interviewed at an MCO. One of the things I looked at was the support system in place. There wasn’t much which means they weren’t putting money into those areas.
Nor were they doing special “health awareness” programs that a lot of larger insurance companies do.
I have no doubt that the 85% MLR would have not been a problem for them to meet.
I probably would have acceprted the offer they gave me except that my current position was offered to me on the same day at a better pay with better support mechanisms in place. Was a no brainer decision on my part.
MomSense
Great information, Richard!
mere mortal
Thank you so much for these posts, Mr. Mayhew. Your expertise in the field and ability to show us how health care policy is being implemented has made this blog a more valuable read.
Though I would still show up just for the pet pictures, garden posts, and whatever John is irritated about today.
But seriously, good stuff.
jl
Thanks for an interesting post. My understanding is that in many states, a very old fashioned model of ‘anything goes’ fee-for-service is an important business model for providers (individual and institutional) in the Medicaid market. I am wildly guessing that the complaints of doom are coming from those quarters.
jl
@jl: Though, on second thought, there is a problem with continuity of care in Medicaid, where statutory and regulatory minimum commitment of enrollee is very short, just a few months. What I have read and heard is that there are two reasons for this, at least in CA. First, the desire to provide poor enrollees options of switching providers in the short run if they feel that they are receiving poor service, the idea being that these people are vulnerable to exploitation if they are locked into long term commitments. And second, the effect of eligibility rules that can change a person’s status over just a few months.
For unhealthy, this could lead to very inefficient situation due to increased administrative costs. Though also lots of evidence this increases medical costs as person ages.
Wondering what RM things of this angle.
Richard Mayhew
@jl: In my state, Medicaid members can switch daily if they wished to do so.
On a practical basis, there are different Medicaid populations. Populations that tend to be reasonably healthy (poor kids, pregnant women) tend to be far less sticky than populations that tend to be fairly ill (People collecting Social Security disability for instance), so most people with chronic conditions will find a doc/treatment team/insurance company and stick with them, while the switchers are kids who see their PCP 3x a year (well visit, kindergarten crud, and that funky cough) so continuity of care is not too important to them.
jhe
I worked for an MCO adapting it’s systems to one state’s Medicaid regulations. The changes were pretty significant and ongoing. Not sure if that gets capitalized and spread over a couple of years, but it could create a perception of high cost. Although, making the changes once to cover all the states the company operated in instead of making the changes multiple times might have saved them a couple of bucks ;).
I assume the major switching costs are cards and any kind of health assessment. The latter should transfer over as part of the continuity of care process and the former shouldn’t be too big a hit.
The instability of eligibility in and out of Medicaid could create churn in call centers both with provider questions and customer questions so I could see a somewhat higher cost there.
Does the MLR work the same as with commercial? Does the state or the feds get a refund if administrative costs exceed 15%?