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Critical Questions Remain Unanswered in Medicaid Managed Care Contract

On April 18, Governor John Lynch and the five members of New Hampshire’s Executive Council will meet to consider a contract to implement the first phase of the state’s efforts to institute managed care as part of its Medicaid program.  Negotiated between the New Hampshire Department of Health and Human Services and three managed care organizations – Boston Medical Center Health Net, Centene, and Meridian Health Plan – the contract has widely been touted as one of the largest in New Hampshire history.  Indeed, it involves hundreds of millions of dollars and will ultimately affect not only all of the nearly one in ten New Hampshire residents who count on Medicaid for their medical care, but the hundreds of agencies, hospitals, and doctors who provide such care.

While managed care holds the promise both to improve the quality of care Medicaid members receive and to reduce the costs the state incurs in administering the program, numerous questions associated with the contract must be answered in order for New Hampshire to achieve those goals.  This Issue Brief does not offer a comprehensive list of such questions, but instead focuses on two areas: ensuring access to care for Medicaid members and assessing the effectiveness of managed care over time.

Contract Appears to Lack Important Safeguards to Preserve Access to Care

Medicaid managed care, under which states make prospective payments to managed care plans to provide or arrange for all services for enrollees, attempts to ensure the provision of appropriate health care services in a cost-efficient manner. However, because plans are paid a fixed amount regardless of the number of services they provide, managed care programs require safeguards against the incentive for some plans to underserve enrollees, such as by limiting their access to care.  Access may also be affected by other factors, such as physicians’ locations and their willingness to participate in managed care plans.  Safeguards to ensure enrollees have access to care may include requiring plans to maintain provider networks that provide enrollees with sufficient geographic access to providers or to monitor certain quality indicators through enrollee satisfaction surveys or grievance systems.

Geographic Requirements

At present, the contract requires the provider networks established by managed care organizations (MCOs) to have “providers in sufficient numbers and with sufficient capacity and expertise for all covered services and for timely provision of services and reasonable choice by members to meet their needs,” as is required under federal regulation.[i]  The contract goes on to outline a minimum standard of geographic access to care, requiring that there be a certain number of providers within a specified distance or travel duration from each enrollee in the network.[ii]  While those geographic requirements seem to ensure that members will not need to travel undue distances,   there does not appear to be a corresponding requirement that that the providers within these regions have open panels and actively accept patients.  If a provider does not have an open panel, then his or her relative distance to an enrollee has little meaning because the provider cannot be accessed for care.  The geographic requirements in the contract should therefore be refined to clarify that the providers available within the described geographic requirements have open panels.

Member-to-Provider Ratios

In contracting for managed care as part of their Medicaid programs, states often use more than one measure to assess adequate access to health care, for instance, by establishing a minimum member-to-provider ratio requirement in addition to geographic distance or travel time requirements.  Importantly, there is no uniform member-to-provider ratio requirement stipulated in New Hampshire’s existing managed care contract.  Rather, each proposal submitted by the three MCOs suggests a different member-to-provider ratio.  For example, Meridian Health Plan’s proposal states that it intends to have one adult and pediatric primary care provider (PCP) for every 2,000 members or two per county, whichever is greater.  For high volume specialists, it plans a ratio of one for every 3,000 members.[iii]  In contrast, the suggested member-to-provider ratio in Boston Medical Center’s proposal is one adult PCP for every 200 adult members per region and one pediatric PCP for every 300 pediatric members per region, with continuing distinctions made for specialists and hospitals within urban and rural counties.[iv]  For Centene’s proposal, the ratio is one PCP to every 1,000 members per county.[v]  As a result, access to care could vary significantly among the three MCOs, effectively reducing meaningful choice among MCOs for Medicaid members.  The contract should establish one, uniform member-to-provider ratio that applies to each of the three MCOs.

Selection and Assignment of Primary Care Providers

State officials have frequently asserted that ensuring that every Medicaid member has a primary care provider is vital to producing efficiencies.  Primary care providers are central to accessing care, care coordination and care management for all members, which increases their significance and reinforces that a successful relationship with a primary care provider is critical.   The contract fails to stipulate certain details regarding the choice of primary care providers by members (or the assignment of providers to them); the definition of what constitutes a primary care provider; and the responsibilities and activities the MCOs may require of them.

For example, the contract states that each:

MCO shall implement procedures that ensure that each member has an ongoing source of primary care appropriate to his or needs and a person or entity formerly designated as primarily responsible for coordinating the health care services furnished to the member in accordance with 42 CFR 438.208.[vi]

It further provides that:

The MCO shall allow each member to choose his or her health professional to the extent possible and appropriate.[vii]

These passages, in turn, give rise to several questions that appear to go unanswered elsewhere in the contract.  Among them:

  • How will the state ensure the provision of primary care for each member?
  • What objectives must a MCO fulfill to demonstrate to the state that each member has an ongoing source of primary care appropriate to his or her needs?
  • What will the process be for the selection or assignment of primary care providers?  Will this process be different for each MCO?
  • Will the MCOs engage members in selection of a PCP within a certain time frame?  If the member does not choose a PCP within that time frame will one be assigned to them by the MCO?
  • Can members be locked into a PCP assignment for a particular period of time? Alternatively, will members be allowed to change their PCP without cause at any time?
  • The provision of primary care for people with complex medical needs or disabilities may be most appropriately provided by a specialist or physician not typically considered a primary care provider.  Can people with disabilities or others with complex medical needs select practitioners who are board certified or eligible for certification in other relevant specialties as their primary care providers?

Enforcement of Network Adequacy

The contract further requires the MCOs “to submit documentation to DHHS to demonstrate that it maintains a network of providers that is sufficient in number, mix, and geographic distribution to meet the needs of the anticipated number of members in the service area.”[viii]  There is no description as to what type of documentation will be required by the MCOs to demonstrate network adequacy.  Adequate access to care is a fundamental, threshold concern and should be rigorously monitored.  The contract should require that each MCO produce geographic reports for both adult and pediatric primary care providers demonstrating access by region.  Similarly, the contract should require member-to-primary care provider ratio reports documenting open and closed panel adult and pediatric primary care providers per number of enrollees.

Price Limitations and Capitation Rates

As written, the contract sets the price New Hampshire will pay for the purchase of acute care services for its Medicaid population at a fixed sum of $382 million for fiscal year 2013.  Setting the price as a fixed sum may, however, create pressure on managed care organizations to manage their financial risks by limiting services for Medicaid members and thus ultimately threaten access to care.

Under federal law, Medicaid is an entitlement; any individual deemed eligible for the program must be served.  Consequently, if Medicaid enrollment grows beyond projected levels, the MCOs would still be required, under the contract, to cover the costs associated with those additional enrollees, even if their total costs exceed the price limitation of $382 million.  Under such circumstances, the MCOs may attempt to manage their financial risks by limiting access to services for Medicaid members.   Establishing monthly capitated payments per Medicaid member may bring predictability to state budgeting for Medicaid, but such an approach is distinct from establishing a total capped cost for Medicaid services.

Moreover, according to the Department of Health and Human Services’ Annual Report on Medicaid, the total cost of acute care services was $408 million in FY 2010.[ix] In other words, the current contract would pay $26 million less in FY 2013 than what the state spent two year ago on the same set of services.  While Medicaid enrollment may fall in the future and thus produce a drop in costs, the contract fails to explain adequately this difference in actual costs for FY 2010 and anticipated costs for FY 2013.  More specifically, the contract should detail its assumptions about the number of enrollees, how that number is expected to change in the years ahead, and the eligibility categories into which enrollees will fall.  Further, if a decline in enrollees or a change in their composition does not fully account for the $26 million decline, the contract should present additional information that permits policymakers and stakeholders to understand how the fixed price for the contract was derived.

Step 2 Program Implementation

The contract contemplates that Medicaid members who receive long-term care services – either home and community based care or care in institutions like skilled nursing facilities  – will begin receiving coverage for those services through a capitated risk-based plan by July 1, 2013.[x]  Safely and effectively transitioning this population of individuals with complex medical needs to such an arrangement will be difficult.  Only 11 states offer long-term care supports and services in capitated, risk-based arrangements.[xi]  The contract’s deadlines for submission of plans for this next phase of managed care implementation are extremely aggressive.  Moreover, the contract does not require that MCOs seek stakeholder input in developing their Step 2 implementation plans.   The process of designing and developing Step 2 should be given at least a year and should involve all interested parties – providers, MCOs, Medicaid members and their advocates, and state policymakers -  in a long-term, integrated, and ongoing planning process to ensure that access to effective care is maintained.

Contract Struggles to Establish Structures for Assessing Effectiveness of Managed Care

Contract management and oversight are essential to the success of Medicaid managed care.  The contract should therefore clearly express the outcomes the state is managing toward and the standards for evaluating whether those outcomes have been achieved.

In general, the more specific the state is with respect to the objectives of the program and the standards that will be used to verify that those goals have been met, the more successful these arrangements will be.  While those objectives and standards should be uniform for all three vendors, the MCOs will still have the flexibility to employ their own strategies to achieve the objectives set out by the state.  Below are select areas in which the contract could establish uniform and specific objectives for the MCOs, but this principle is relevant to contract provisions relating to utilization management, quality management, and care coordination as well.[xii]

Medical Loss Ratios and Allowable Administrative Costs

A medical loss ratio (MLR) is a requirement that a health insurance carrier spend a certain proportion of the premiums it collects on medical care and health care quality improvement, rather than on administrative costs.  Federal and New Hampshire law relative to MLR requirements do not apply to Medicaid managed care organizations.[xiii]  Consequently, the contract should have a standard MLR requirement for each MCO.  The imposition of such a requirement would ensure that federal and state funds are used chiefly for the benefit of Medicaid members and the state will benefit from any cost containment gains that the MCOs can achieve.

Payment Reform

Payment reform seeks to align health care reimbursement structures with desired health outcomes, by introducing incentives to improve quality and to reduce the use of unnecessary or costly services.  New Hampshire has made payment reform a component of the Medicaid managed care contract, but appears to have left what will constitute payment reform and what efforts are sufficient with respect to implementing payment reform to the discretion of the MCOs.

In particular, the contract states that:

The MCO shall submit thirty days from the contract effective date or 90 days prior to start of each Agreement yr, whichever is later, its plan to engage its provider network in health care delivery and payment reform activities, subject to review and approval by DHHS.  These activities may include, but are not limited to, pay for performance programs, innovative provider reimbursement methodologies, risk sharing arrangements and sub-capitation agreements.  The payment reform plan shall contain information on the anticipated impact on member health outcomes of each specific activity, providers affected by the specific activity, an implementation plan for each activity, and an implementation milestone to be met by the end of each year of the Agreement for each activity.[xiv]

Thus, the contract mandates only that the MCOs “engage” their providers in payment reform plans, without defining engagement or specifying a minimum percentage of providers that MCOs must include in such efforts.  In addition, the contract does not appear to contain any specific baseline elements that each of the payment reform arrangements must include.  Under the current language, one MCO could, under payment reform, reimburse providers for preventable readmissions or for “never events” – which in general refer to shocking medical errors, such as leaving foreign objects in patients following a surgery – while another MCO would not.

In fact, under the current version of the contract, MCOs are permitted to establish both their own goals for payment reform and the milestones by which to judge whether they have achieved those goals.  This is especially surprising, since MCOs will earn a payout of withheld capitation amounts if they meet the implementation milestones they establish in their payment reform plans.[xv]

Encounter Data

In order to assess the effectiveness of managed care and to understand whether it is achieving the goals set out for it, state policymakers will have to rely upon data reported by the MCOs.  More specifically, they will require thorough and accurate encounter data – which record the health care services provided to each individual patient – and utilization data – which show the services provided to an entire population.  While the contract does include an extensive list of data elements to be reported, the full extent of the data MCOs will be required to provide – as well as the format in which they will provide it – is not finalized in the current contract.[xvi]

What’s more, the contract leaves unclear the outcomes towards which the state is managing.  In the first year, it may be establishing a care management plan and a utilization plan that meets some threshold goals of the state.  Does the state want to reduce length-of-stay in hospitals or hospital readmission rates?  Will the state generate the baseline and target data against which to compare the encounter data it receives?

The state should identify the minimum performance standards it expects of the MCOs and align its data reporting requirements with those standards.  The existing requirement for broad based reporting of encounter data will only be useful if the state has a clear expression of what its goals are and how it is going to measure those goals.

Conclusion

Managed care holds the promise both to improve the quality of care Medicaid members receive and to potentially reduce the costs New Hampshire incurs in administering the program.  However, numerous questions associated with the contract must be answered in order for New Hampshire to achieve those goals.  Ensuring access to care for Medicaid members and assessing the effectiveness of managed care over time are vital to the success of this undertaking.



[i] §18.1.1

[ii] §18.2.1

[iii] Granite Care Meridian Health Plan State of New Hampshire RFP #12 DHHS CM 01 response, pp.  54.

[iv] Boston Medical Center Health Net Plan Response to RFP:  Medicaid Care Management Services, #12 – DHHS – CM – 01, pp. 60-61 and pp. 47-49.

[v] Granite State Health Plan Response, pp. 152.

[vi] §10.2.1

[vii] §18.8.1

[viii] §18.1.2

[ix] New Hampshire Medicaid Annual Report, SFY 2010, Office of Medicaid Business and Policy, New Hampshire Department of Health and Human Services, April 20, 2011, Figure 12, pp. 13.

[x] §7.7

[xi]  Kaiser Commission on Medicaid and the Uninsured, “Examining Medicaid Managed Long-Term Service And Support Programs: Key Issues To Consider,” October 2011, Table 1, pp. 7.

[xii] See, for example, §10.1.1, §10.2.3, §10.8.1, §10.8.2, §18.3.3, §19.3.1, and §20.1.2

[xiv] §9.1.1-9.1.2

[xv] §9.1.4

[xvi] §23 indicates that the encounter data reporting manual is under development within the Department of Health and Human Services

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