Is state on the verge of unhealthy choice?

Medicaid: 2.3 percent rate cut could prod HMOs serving poor to drop out of Maryland program.

April 05, 1999

IS AN innovative and widely praised medical care program for the poor endangered by a proposed 2.3 percent rate cut that managed-care organizations say could destroy it?

HealthChoice provides care to 300,000 people on Medicaid through eight HMOs. The idea is to give patients regular exams and treatment that can prevent serious illnesses and lower costs.

But HealthChoice has run into problems. Major flaws in the health department's assumptions led to millions in overpayments to HMOs. Still, the HMOs have had trouble making ends meet on the state's per-patient fees. Since HealthChoice's inception in June 1997, one HMO has dissolved, one is in receivership and one is intending to sell.

State health officials were wrong to expect early savings. The reverse has been true: As poor patients for the first time received regular medical treatment, costs rose for the HMOs beyond projections. No provision was made for these initial extra expenses.

To adjust for previous overpayments, the administration is proposing a cut in per-patient fees of 2.3 percent over 21 months. The state also wants to give the HMOs $20 million and let them fully cover large hospital bills through private insurance programs. This should help ease the pain. So should a previously mandated 1 percent cut in state hospital rates that will lower HMO expenses.

Still, the HMOs could have trouble coming up with funds to offset inflationary costs in medical expenses, which are rising at 6 percent to 10 percent a year.

Some HMOs warn they may exit HealthChoice. At the least, benefits may be slashed, coverage areas reduced or payments to doctors and hospitals squeezed. Officials worry this could lead to an exodus of providers from HealthChoice.

A legislative panel will vote on this proposal tomorrow. The amended emergency regulation seeks to meet some of the HMOs' objections. There still is room for compromise, though. In the early years of this program, HMOs should receive considerable leeway to get Medicaid patients on solid medical treatment plans.

Giving poor people access to regular checkups and preventive care is healthy for both the individuals and for taxpayers in the long run. The program needs some extra help in its infancy.

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