Success story: Maryland HealthChoice has met goals

The first comprehensive evaluation of Maryland’s HealthChoice Medicaid managed care program finds the program meeting its goals. The report says there is no compelling evidence to recommend major changes in the way HealthChoice now operates, but there are areas where improvements can be made.

Debbie Chang, deputy secretary for health care financing for the Maryland Department of Health and Mental Hygiene in Baltimore, tells State Health Watch the key positive findings were that HealthChoice now serves more than 100,000 additional people, children (70% of the program) received more services and had greater access to care, dental service use is up, and emergency department use is down.

Implementation of HealthChoice began in July 1997 and represented a major change in Maryland’s approach to service delivery for most Medicaid recipients. The state replaced a mixed-model delivery system that included fee-for-service primary care case management, capitated HMO voluntary enrollment, and a mandatory system of enrollment in managed care organizations (MCOs).

Under HealthChoice, all eligible families and individuals are required to enroll in an MCO approved by the department.

The evaluation was structured around the original program goals to:

  • develop a patient-focused system featuring a medical home;
  • create comprehensive, prevention-oriented systems of care;
  • build on the strengths of Maryland’s existing health care delivery system;
  • hold MCOs accountable for delivering high-quality care;
  • achieve better value and predictability for state dollars.

The evaluation found that HealthChoice saved money relative to what would have been spent on the fee-for-service delivery system, and added value to the program for consumers and providers. HealthChoice met the two federal cost-effectiveness requirements — the federal upper-payment limit and the budget neutrality requirement of the Balanced Budget Act of 1997. Under HealthChoice, most MCOs have been able to generate profits each year, suggesting that rates in the past have been adequate. Not addressed are the losses suffered by some downstream risk providers.

The report says that higher administrative costs are associated with the benefits of the managed care organizations’ care management systems and establishment of medical homes for enrollees.

Risk-adjusted rate-setting methods contribute significantly to achieving purchaser value by more efficiently allocating funds among MCOs according to the health status of their enrollees.

Evaluators found that MCOs have enough primary care providers to serve their enrolled population, including the 100,000 additional HealthChoice participants, due at least partly to higher physician fees paid by MCOs.

Ms. Chang tells State Health Watch the evaluation also identified areas where improvements are possible, including services to children in foster care and an increase in provider fees.

The report document lists seven areas for improvement, with specific recommendations in each:

  • establish a long-term priority-setting process;
  • maintain the current MCO-based capitated program, but develop a backup managed care system;
  • improve provider networks;
  • promote increased quality of care as well as improved program performance;
  • improve the program for consumers;
  • improve the delivery of special services;
  • establish strategies to stabilize the managed care system.

Ms. Chang says the state recently made $25 million in general funds ($50 million total) available for physician-fee increases because the evaluation revealed that despite the program’s successes there also were signs of stress on the provider network and that an increase in physician fees was "absolutely critical."

She says the agency is looking for ways to implement a network adequacy plan and reduce the administrative burden for providers. It also wants to standardize the MCO credentialing process to cut the number of telephone calls coming into the agency regarding credentialing requirements.

Alice Burton, administration director for planning and development and the lead evaluator, tells State Health Watch that the number of recommendations involving providers could have been expected because of a historic problem of inadequate payments. Medicaid fee-for-service payments did not increase for 10 years, she says, and physicians had clearly communicated their threats to leave the program, especially in rural areas.

Although the evaluation report contains many recommendations in the seven areas of emphasis, both Ms. Chang and Ms. Burton say the department is committed to responding to them all as quickly as possible, rather than setting priorities that might force some to wait for several years.

The task is easier, Ms. Burton says, because the recommendations were developed through a process that included most active stakeholders and there has been buy-in on many items. In addition, she says, legislative leaders are supportive of the general direction the program is taking, but want details from specific work plans.

"We’re moving forward across the board," she says. "Some of the recommendations will be carried out over several years, while others are doable in the short term. Everyone who has been involved in the program over the past five years is exhausted by the pace of changes to date. We need to put more structure in place and then do what we can."

Is a backup managed care system really necessary? The recommendation calls for development of a backup care management program that includes linkage with a primary care provider, comprehensive care management and disease management programs, active quality assurance activities, and cost-containment efforts such as utilization control.

Ms. Burton says agency executives hope they never will need the backup since they keep pace by setting rates annually. There have been plan withdrawals, she says, and they can be difficult to manage, especially without viable alternatives. The recommendation to work to improve special services focuses particularly on dental care, substance abuse, and pregnant women in the Seventh Omnibus Budget Reconciliation Act program (women who gained Medicaid eligibility because they were pregnant).

She says they have been working aggressively to bring more dentists into the program. "We’ve made a lot of progress from the fee-for-service program, but still have not met our expectations. Some dentists have suggested that we carve out dental care, but that’s not something we want to do."

[Contact Ms. Chang at (410) 767-2984 and Ms. Burton at (410) 767-5806.]