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Hawaii should end Medicaid managed-care model

By Stephen Kemble, M.D.
Honolulu Star-Advertiser, April 21, 2013

Hawaii was recently awarded a $937,691 State Innovation Model grant to plan health care reform for Medicare and Medicaid.

However, no reforms can be effective without good physician participation and good access to care for patients, and we have serious problems with both in our Medicaid managed care program. If we don’t fix these problems, Hawaii will waste almost a million dollars and several years on ineffective reforms.

Hawaii converted our state-run, fee-for-service Medicaid program to managed care via competing private plans, in stages, in 1994 and 2009. This conversion has demonstrably increased the cost of the Medicaid program while reducing patient access to care and quality of care.

Hawaii’s Medicaid costs have been rising around 3 percent faster than the national average since Medicaid managed care was introduced here in the mid-1990s, according to Kaiser Family Foundation State Health Facts. Regardless of what the managed care companies will tell the state, privatization of Medicaid has led to increased cost and declining access and quality of care wherever it has been studied.

The managed-care model relies on restriction and denial of care. Escalating administrative burdens imposed by managed care plans are literally driving doctors out of treating Medicaid patients, and it has become almost impossible to find a private-sector doctor who will accept new Medicaid patients. Access to outpatient care is getting worse, undoubtedly leading to increased preventable hospitalizations.

Competing managed-care plans add substantially higher administrative costs, much of which are misleadingly counted as “health care” for reporting purposes, adding to the total cost that the state must pay for Medicaid.

Failures in care coordination are largely due to fragmentation of Medicaid and excessive managed-care restrictions. Each plan has its own restricted network of doctors and its own formulary and prior authorization policies. This means increased administrative hassles for doctors, fragmentation of the data needed for health information technology and care coordination, declining physician participation, and disruption in care when patients switch plans.

The Medicaid managed-care plans talk about “integrated, coordinated care,” but in practice this is true only for Kaiser, where Medicaid patients have the same access to care as any other Kaiser member, and to some degree for HMSA, which has better acceptance among doctors than the other Medicaid plans.

Payment and delivery system reforms cannot be effective without access to cost-effective care. There is nothing in the governor’s Health Transformation Initiative that addresses the reasons doctors are refusing Medicaid patients. The managed-care policies that obstruct and deter care and associated administrative hassles for doctors are being left in place. Doctors may complain about low fees, but that is not the reason they have been fleeing Medicaid. Medicaid fees relative to commercial rates have not changed significantly in the past 20-30 years, but physician acceptance of Medicaid patients declined only after Medicaid was broken into competing private plans.

The state actually ran Medicaid much more cost-effectively than the private plans do now, but a consolidated Medicaid program could use a single third-party administrator to run the program in lieu of re-creating the administrative structures that were in place before conversion to Medicaid managed care.

Hawaii could markedly reduce Medicaid administrative costs while increasing physician participation and access to care simply by terminating our Medicaid managed-care program when the contracts expire at the end of this year, and go back to fee-for-service Medicaid. Then we could add care coordination programs funded with the State Innovation Model planning grant, including patient-centered medical homes and community care teams, and see if they help improve the cost-effectiveness of care.

Dr. Stephen Kemble is president of the Hawaii Medical Association; he also serves on the Hawaii Health Authority and was on the executive committee of the Hawaii Health Project.