No takers for ditched Medicaid enrollees

HMOs tell panel FreeState's 40,000 not cost-effective

January 26, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

HMOs don't want to take 40,000 Baltimore Medicaid enrollees who need to find another health plan April 1, officials of three health plans told the state Senate Finance Committee yesterday.

The 40,000 are enrolled in FreeState Health Plan, which will leave the Medicaid program April 1. FreeState said the rates the state pays in the Medicaid program, which it calls HealthChoice, are too low.

"None of the parties in HealthChoice are willing to absorb these 40,000 enrollees," Eric R. Wagner, MedStar Health's vice president, managed care, testified.

Don Gilmore, chief operating officer for Americaid, told the committee that his health maintenance organization has frozen enrollment in parts of the city and is considering "a further freeze or even withdrawal from the city" unless rates are raised.

"The program needs additional funding now," he said.

Deputy Health Secretary Debbie I. Chang told the senators that she hopes to have a transition plan for the 40,000 FreeState members in about two weeks.

The committee chairman, Sen. Thomas L. Bromwell, a Baltimore County Democrat, indicated sympathy with the call for higher payments, saying current rates are "scandalously low."

In an interview after the hearing, however, Chang said, "Right now, I have the budget that I have. At this point, I'm trying to develop a solution within the current budget."

She said none of the seven HMOs that will remain in the program when FreeState leaves has committed itself to taking additional members in Baltimore. She said discussions are continuing with HMOs, however, and predicted that "we'll be able to work something out with everybody."

If no other HMO enrolls the 40,000 FreeState members, Chang said, the members could be covered under the old fee-for-service system, in which doctors and hospitals bill the state directly if they provide care to Medicaid members.

She said the cost implication of such a switch would be small and that the health department could handle it administratively, but that it would require federal approval.

In 1997, the state replaced the fee-for-service system with HealthChoice, in which the members - mostly welfare mothers and their children - choose an HMO. The state pays the HMO a monthly rate for each member, and the HMO pays doctors and hospitals.

Bromwell said when HealthChoice began, the state expected to save 10 percent on Medicaid because it thought the HMOs could control costs. That was a mistake, he said, and "I'll take part of the blame" for approving low rates. Chang said, the state's rates are about 2 percent lower than fee-for-service costs.

Pegeen Townsend, a lobbyist for the Maryland Hospital Association, told the committee that when the state's actuarial consultant reviewed rates for this year, it failed to adjust sufficiently for costs in Baltimore and for medical inflation. She estimated that the billion-dollar program needed an additional $30 million to $40 million.

"I encourage you to use whatever political will and capital you have to get this program stabilized," she said.

Americaid's Gilmore said an average hospital stay costs 31 percent more in Baltimore than in the rest of the state but that the state pays the same rates for most patients in Baltimore that it pays elsewhere.

Wagner said the rates are a particular problem for handicapped patients. MedStar's Medicaid HMO, Helix Family Choice, which serves about 17,000 members, mostly in Baltimore, is projected to lose about $4 million this year.

About half of the losses, Wagner said, will come from care for the handicapped, although they make up less than 8 percent of the HMO's enrollment.

Sam K. Srivastava, vice president of United Healthcare of the Mid-Atlantic, said his HMO's Medicaid revenue had been increasing 3 percent to 5 percent a year while medical costs were increasing 7 percent to 12 percent. He said his HMO believes rates are inadequate not only in Baltimore, but in the urban parts of Montgomery and Prince George's counties.

"FreeState left this business for a reason," he told the committee.

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