A hot issue in many states today is whether or not to
move more Medicaid beneficiaries,
and often very vulnerable beneficiaries, into managed care. Indeed, many
managed care companies are interested in getting or keeping a foot in the
Medicaid market given the expansion of Medicaid coming in 2014. And many, though not all, states are
looking to managed care to contain costs.
Evidence is not clear as to whether managed care actually
saves money. An often expressed concern (by me and others) is whether managed
care companies, particularly those who must provide a return to their
shareholders, will do so by skimping on needed care by erecting barriers rather
than rolling up their sleeves and doing the hard work of actually managing care
for better long term health outcomes. One tool that might help to address this
concern is the medical loss ratio (MLR).
The medical loss ratio idea has been around for a while
but got a big boost in the Affordable Care Act, which requires that insurers
spend at least 80 cents (in the individual and small group market) or 85 cents
(in the large group market) of every premium dollar on medical care or quality
improvement. Medicare Advantage
plans must also apply an 85/15 ratio to their premium dollars. Thus insurers
cannot spend more than 15 or 20 cents of every $1 on administrative costs
including executive salaries, profits, marketing expenses and other “overhead.”
Insurers must publicly report how they spend their premium dollars and,
starting in August 2012, must provide rebates to individual consumers if they
don’t meet their MLR requirement. HHS estimates that nine million people could
be eligible for $1.4 million in rebates in 2011 alone; some private analysts
estimate this rebate amount could be higher.
While the ACA’s MLR has gotten a lot of attention,
another noteworthy consumer MLR development has received less attention. CMS included an 85/15 MLR
provision in the recently approved (December 2011) Florida managed care pilot
waiver for both managed care companies and provider-sponsored networks that are
operating under capitation. The
terms and conditions of the waiver require the state to report quarterly on
whether plans are meeting the 85/15 ratio. The MLR requirement will take effect on July 1, 2012.
Details on how this provision will be enforced are not yet available.
This was the first time, I believe, that CMS has required
a state to do so as other federal MLR requirements do not extend to Medicaid.
Eleven states have their own MLR requirements for Medicaid MCOs (AZ, CA, DC,
HI, IL, IN, MD, NJ, NM, OH, VA, WA) according to a recent Kaiser report on
managed care in Medicaid.
Florida’s waiver applies only to plans in the five pilot
demonstration counties that have been in operation since 2007. Still pending is
a request from the state of Florida to go statewide with capitation for all
long-term care services as well as acute care for virtually all Medicaid
beneficiaries. It will be interesting to see if a similar MLR requirement is
included should this request be granted.