Connecticut drops insurers from Medicaid

By Phil Galewitz, Kaiser Health News
USA Today, Dec. 29, 2011

HARTFORD, Conn. – In the past decade, most states have turned Medicaid over to private insurance plans, hoping they could control costs and improve care. Nearly half of the 60 million people in the government program for the poor are in managed-care plans run by insurance giants such as UnitedHealthcare and Aetna.

Connecticut, the "insurance capital of the world," is bucking the trend.

Beginning Sunday, Connecticut will jettison its private health plans from Medicaid, the state-federal health insurance program. Instead of paying the companies a set monthly fee to cover the health costs of more than 400,000 children and parents, the state will assume financial responsibility.

State officials say the companies, including Hartford-based Aetna, did not fulfill their promise of lower costs and better care.

"Connecticut has a 15-year history with managed-care organizations, and there has been a diminishing confidence in the value of what they are providing," says Mark Schaefer, the state's Medicaid director.

Nationally, managed-care plans oversee care for 27 million people enrolled in Medicaid and control $150 billion of the $400 billion in Medicaid spending — numbers likely to increase partly because of the influx of an additional 16 million people expected to be covered by the program beginning in 2014 under the national health care law.

Connecticut's decision stands out at a time when a growing number of states are requiring more people in Medicaid to join managed-care plans. Florida, Texas and California are among nearly two dozen states planning expansions in 2012.

Whether Connecticut's move turns out to be a blip in the industry's growing control of Medicaid or the beginning of a backlash, officials in other states are watching closely. In any case, the reversal of the trend in the insurance industry's home base has given managed care critics a rare, if mostly symbolic, victory.

"There is a cadre of people who hate for-profit health care, and this is another point of ammunition for them to point to and say that if they came to this determination in the insurance capital of the world, how can it be such great shakes?" says Joel Menges, a health care consultant who has worked with the state.

Connecticut has more of its residents employed in the insurance industry than any other — 2.1%, or more than 71,000 people, according to the U.S. Census.

Now, the state is betting that its employees, working with a private, non-profit company, can ensure that Medicaid patients get better care at lower cost.

Connecticut is only the second state in a decade to drop its for-profit managed-care plan. Oklahoma moved away from private plans in 2005, and officials there say they have no regrets. "While achieving very encouraging marks in both member satisfaction and quality, the cost per member has grown at a very low average annual rate of 1.2% over the last five years," says Mike Fogarty, Oklahoma's Medicaid director.

The Connecticut Medicaid managed-care business was worth more than $800 million this year to Aetna, UnitedHealthcare of Minnetonka, Minn., and Community Health Network of Connecticut Inc., a non-profit.

Aetna officials defended their record, saying they held down costs while ensuring patients' access to care. "We continue to see strong interest in managed Medicaid from states that are looking to meet the health needs of this vulnerable population without crippling their state budgets," spokesman Matthew Wiggin says.

"We do not see this as a trend," says Tyler Mason, a spokesman for UnitedHealthcare, which covers more than 3 million Medicaid recipients in 19 states.

Critics of managed care hope Connecticut's reversal will spur other states to look at alternatives. New Haven Legal Assistance Association, an advocacy group for the poor, had complained for years that managed care erected barriers to care and diverted too many resources to administration and profits. It pointed to a 2009 state-commissioned report showing Connecticut was overpaying insurers by nearly $50 million a year — about 6% of total expenses.

Other state reports found the plans were spending too little on health services and published networks of doctors that were misleading because many doctors refused to accept Medicaid patients when "secret shoppers" called for appointments.

Many doctors are happy to see the state's experiment with managed- care plans end. Many had been frustrated with having to follow different rules for different plans. They also complained about payment delays and problems referring patients to some specialists.

Elsa Stone, a North Haven pediatrician who had refused to contract with the state's two for-profit Medicaid plans owned by UnitedHealthcare and Aetna, cheered the decision.

"I don't think there should be a profit motive in health care," she says. "I think all the health care dollars should go to care."

Heather Greene, 36, of Waterbury, Conn., has been on Medicaid for seven years, along with her husband and two children. She says her Aetna plan did not make it easy for her to find a urologist or for her daughter to find an ear, nose and throat specialist. She is cautiously optimistic: "I trust the state a little more than the plans, which are looking to make a profit and cut corners wherever they can."