Connecticut cuts private health insurers from Medicaid

Robin Wulffson MD's picture
Medicaid, Connecticut health insurance, managed care, HMO, cost containment
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HARTFORD, CT - Beginning Januar1 1, 2012, the state of Connecticut will assume financial responsibility for the state’s Medicaid recipients. Instead of paying private health insurance providers a set monthly fee to cover low-income individuals enrolled in the state-federal plan, the state will cover all costs not provided by the federal government. The move involves more than 400,000 adults and children in the state.

Connecticut's move marks a reversal of a trend over the past decade in which most states have turned Medicaid over to private health insurance plans, with the goal of containing health insurance costs as well as improving care. Currently, almost half of the 60 million individuals covered by Medicaid are in health maintenance organizations (HMOs) managed by large insurers such as Aetna and UnitedHealthcare. The move strikes a financial blow to Aetna, Community Health Network of Connecticut Inc., and Minnetonka, Minnesota-based UnitedHealthcare: together, the companies generated more than $800 million in revenue for 2010.

Connecticut state officials contend that insurers, including Hartford-based Aetna, have failed to fulfill their promise of cost containment together with improved quality of care. "Connecticut has a 15-year history with managed-care organizations, and there has been a diminishing confidence in the value of what they are providing," noted Mark Schaefer, the state's Medicaid director.

Nationally, HMOs provide care for 27 million people enrolled in Medicaid and control $150 billion of the $400 billion in Medicaid spending; these figures are likely to increase partly because of the influx of an additional 16 million individuals expected to be covered by the program beginning in 2014 under the new national healthcare legislation.

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Connecticut's moves bucks the trend of an increasing number of states are requiring more Medicaid recipients to join HMOs. California, Florida, and Texas are among nearly two dozen states planning expansions in 2012. (Medicaid is known as Medi-Cal in California.) According to the U.S. census, Connecticut has more of its residents employed in the insurance industry than any other state: more than 71,000 individuals or 2.1% of the state population. Beginning in 2012, the state is gambling that its employees, working with a private, non-profit company, can ensure that Medicaid patients get better care at lower cost.

Connecticut is only the second state in a decade to drop its for-profit managed-care plan. In 2005, Oklahoma jettisoned Medicaid recipients from private health insurance providers, and state officials claim that the move was successful. "While achieving very encouraging marks in both member satisfaction and quality, the cost per member has grown at a very low average annual rate of 1.2% over the last five years," noted Mike Fogarty, Oklahoma's Medicaid director.

Aetna officials defended their record, saying they held down costs while ensuring patients' access to care. "We continue to see strong interest in managed Medicaid from states that are looking to meet the health needs of this vulnerable population without crippling their state budgets," spokesman Matthew Wiggin says.

Managed care critics are hopeful that Connecticut's reversal will encourage other states to consider alternatives. New Haven Legal Assistance Association, an advocacy group for the poor, has complained for years that managed care erected barriers to care and diverted too many resources to administration and profits. The association noted that a 2009 state-commissioned report showing Connecticut was overpaying private health insurance companies by nearly $50 million a year; about 6% of total expenses. Other state analyses have found the HMOs were spending too little on health services and published networks of doctors that were misleading because many doctors refused to accept Medicaid patients when "secret shoppers" called for appointments.

Many Connecticut physicians are in favor of the move. Each insurer had its own set of rules; thus, generating frustration with compliance. In addition, the doctors noted payment delays as well as difficulty in obtaining referrals to some specialists.

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