A Step to Manage Health Costs

Massachusetts’ managed care organizations lead the nation in quality of care and consumer satisfaction. So it is no surprise that the percentage of people in the Commonwealth’s private health insurance market who use managed care is the highest in the nation.

But 325,000 of the 750,000 Massachusetts residents receiving full benefits under the federal Medicaid program are not enrolled in managed care plans. These individuals are enrolled in a fee-for-service plan, called the Primary Care Clinician plan. Moving enrollees from the Primary Care Clinician plan into managed care plans would achieve two important outcomes: improve their care and, according to three recent studies, save the Commonwealth anywhere from $600 million to $1 billion over five years, easing the fiscal pressures of paying for health care reform.

Medicaid will cost the Commonwealth $8.6 billion this year, and the costs are increasing much faster than either economic or overall budget growth. Between 2001 and 2006, costs grew at an average of 8 percent annually. The result was that 35 cents of every new tax dollar went to pay for Medicaid. Clearly, the status quo is unsustainable.

With a deep recession making new revenue a pipe dream, Massachusetts faces a clear choice. We must either find a way to make Medicaid more efficient, or choose from among a slate of unappealing options like eliminating coverage for some, limiting services or cutting provider reimbursements.

Under the Commonwealth’s landmark 2006 health care reform law, almost 240,000 formerly uninsured residents have signed up for state-subsidized health insurance, either through Medicaid or the Commonwealth Care program. Finding a way to pay for that coverage makes the need to improve the efficiency of Medicaid service delivery even more urgent.

Managed care provides efficient, high-quality care by aligning financial incentives with clinical outcomes. It combines prevention and wellness services with programs to help individuals address specific conditions like obesity, diabetes, asthma and smoking that drive up health care costs. Patient outcomes are carefully tracked.

Massachusetts organizations have proven adept at combining access to quality care and cost control. Their quality outcomes are among the best in the nation as measured by prevention data, patient satisfaction and outcomes. In 2007 and 2008, Fallon Community Health Plan was rated the country’s top Medicaid health plan by the National Committee for Quality Assurance.

Despite high quality and the overall acceptance of managed care, Massachusetts has lower managed care penetration among Medicaid recipients than most other states do.

Eliminating the Medicaid PCC plan would yield an additional $40 million in savings over two years by foregoing the cost of infrastructure and program enhancements needed to bring the plan up to par with existing managed care programs. It suffers from limited accountability and lacks a reliable mechanism for ensuring coordination among various providers. It also would appear to support the efforts of the Commonwealth’s Payment Reform Commission to move away from fee-for-service reimbursement arrangements.

Savings wouldn’t come at the cost of patient care, as the Commonwealth’s Medicaid Managed Care providers consistently outperform the fee for service plan on many quality of care measures.

Massachusetts’ goal of universal coverage requires that we maximize the efficiency of services offered under Medicaid. Dismantling the Commonwealth’s fee-for-service Primary Care Clinician plan and moving all recipients of full Medicaid benefits to a managed care model would do just that. Even more importantly, it would improve the quality of care for some of our most vulnerable citizens.

Eric Schultz is president and chief executive officer of Fallon Community Health Plan. Jim Stergios is executive director of Pioneer Institute.

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