Facing Losses, Florida Medicaid HMO's Ask For Rate Hikes

Jul 31, 2015

A map representing the 13 regions for Medicaid Managed Care
Credit Agency For Healthcare Administration

Florida’s plan to privatize the state’s Medicaid program for low-income residents, was billed as a cost saver. And last year, Florida healthcare officials started steering people out of the old fee-for-service model, and into private health plans.  Now the insurance companies say they’re running more than $500 million in the red.

In 2011 the federal government agreed to let Florida steer more than three million low-income people into privately managed health plans. The move privatized the state’s Medicaid system. To get to a cost savings, the state cut five percent of the $22 billion program, and divvied up the rest among health insurers. The state finished rolling out Medicaid Managed care last year. But  Sen. Don Gaetz, R-Niceville, noted in April that the HMO’s were reporting financial losses.

“One large plan with many lives, is facing a 24 percent operating loss, or $100 million, and collectively all plans reported losses of $300 million as of last December," he said.

At the time Agency for Healthcare Administration Secretary Liz Dudek attributed the deficits to cost the high prices of prescription medications.

“On those negotiations, they [health plans]  set the rates," she told Gaetz. " They set the rates we negotiated with them were the rates they provided us.”

But the plans now say their deficits are even worse.

“We are struggling financially," Molina health care CEO David Pollack recently told Governor Rick Scott's hospital funding group. "I don’t think there’s anything we could say that says we are not. These are real numbers.”

The insurers in Florida’s Medicaid Managed Care system want the state to raise rates by an average of 12 percent. The state is considering giving them half that.  The HMO’s also requested a $400 million mid-year increase, something the state says would undo the savings it sought in the original cut.  Meanwhile, financial problems initially attributed to pharmacy costs earlier this year—are now being attributed to hospital contracts.

“We were very surprised when we found out we had plans who were contracting with hospitals for between between 120-200 percent of Medicaid," AHCA Secretary Liz Dudek told the hospital commission.

Dudek says before Medicaid Managed Care, hospitals were paid about 104 percent of Medicaid costs. She suggests many of the contracts between the HMOs and hospitals are illegal since high reimbursement rates may not have been approved. Stepping into the fray is Greg Mellowe, health policy analyst with the Florida Center for Fiscal and Economic Policy. He says what Medicaid pays for certain services under managed care is now a secret, and believes consumers, and advocates need to ask questions.

“Is the state unable to achieve the cost savings it would have under Medicaid Managed Care, or are health plans just saying we really don’t want to do what we said and we need more money than we agreed to take before.”

Mellowe says the health plans bid for the contracts, and claimed they could serve the population and be financially healthy with the funding provided by the state. And a worst-case scenario is if a company pulls out of the market and drops its customers.

“This model warrants considerable scrutiny as we proceed.”

Mellowe says he’s not sure the HMO deficits are a failure of Florida’s privatized Medicaid system to control costs, or an attempt by the insurers to get more money because the system is working.