Official says Md. overpaid HMOs Tab for Medicaid was $80 million too high, health secretary says

Health care

July 15, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

The state health department overpaid HMOs $80 million last year to care for Medicaid patients, Dr. Martin P. Wasserman, the state health secretary, told a legislative hearing yesterday.

His testimony brought consternation from legislators, who are concerned about apparent overspending, and from representatives of health maintenance organizations and hospitals, who said they could be pushed into the red if their rates are cut.

The hearing left unsettled the question of how much the HMOs should be paid for the fiscal year that began this month. Until the legislature acts on regulations setting new rates, the old ones, which Wasserman says are too high, remain in effect.

In effect, the secretary is proposing to split the difference with the HMOs, paying them something midway between last year's rates and what he initially had proposed for next year. It wouldn't be fair, he said, to ask the HMOs to absorb such a large cut overnight.

That would cost $56 million this year, in addition to the $800 million the health department had budgeted for Medicaid HMO premiums. "It's a realistic response to put that $56 million back in the system to guarantee the quality of the program," Wasserman said.

The payment problem arose as the state reformed its Medicaid program last year. Instead of paying doctor and hospital bills for those covered by Medicaid, the health insurance program for the poor, it shifted them into HMO-like plans called managed care organizations, or MCOs. Some are run by regular HMOs; others were new ones set up by hospitals or other groups.

The overpayment -- Wasserman said he preferred to call it "a miscalculation that led to $80 million more than expected going to the HMOs" -- came from what the health secretary said was an overestimate of the number of patients with chronic conditions. The state pays HMOs more to treat Medicaid enrollees with conditions such as diabetes or high blood pressure, because they require more care.

In setting payment levels for the new program, the state reviewed two years of health data to identify such higher-cost patients, producing too high an estimate. It should have used one year's data, which would have produced accurate payments, Wasserman said.

Sen. Thomas L. Bromwell, a Baltimore County Democrat who is chairman of the Senate Finance Committee, said, "Because somebody in the [health] department didn't divide by two, we're going to give $56 million away?"

Del. Leon G. Billings, a Montgomery County Democrat, called the proposed $56 million "an additional bonus to companies that have already received more money than they're entitled to."

Bromwell said after the hearing that the legislature would work with the health department to fashion "a remedy to get us into the legislative session where no one gets hurt and we don't have to lose any MCOs."

Del. Ron Guns, a Cecil County Democrat who is chairman of the House Environmental Matters Committee, said he thought the legislature would wait until fuller financial data is in from the first year of the program before deciding how much to pay in the second.

"As the figures get harder," Guns said, "the arguments will be better defined."

With Medicaid enrollment down, he said, "we've got some money to play with."

The committees chaired by Bromwell and Guns were among five that joined in the unusual joint hearing in Annapolis.

Wasserman told the legislators that the $56 million could come from other areas in the health department's budget. Last year's higher payments, he said, were absorbed because enrollment of people with AIDS and other high-cost patients was lower than expected.

The lower costs in those areas, he said, obscured the higher-than-expected premium payments to HMOs until the department did a more detailed spending analysis.

The HMOs said they didn't know how much the payments would be cut until June 29, two days before the health department wanted to put new rates into effect. They said the old rates are adequate but that lower ones would jeopardize the stability of the program.

Cynthia Demarest, chief operating officer of Priority Partners, formed by Johns Hopkins and a group of community health centers, said her MCO expects to lose about $5 million for the fiscal year that ended June 30. Dropping the rates to the level initially proposed by Wasserman would produce an additional $8.5 million in losses next year, she said.

Pub Date: 7/15/98

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