After the midterm elections, Congress faces the uninsured and high costs

Significant changes in Congress, statehouses, and state legislatures from the November 2006 midterm elections may lead to a renewed interest in health care reform and new research from the Center for Health Care Strategies (CHCS) points to innovation that can be pursued in Medicaid managed care.

Commonwealth Fund President Karen Davis suggests the election results will bring health policy issues to the legislative front burner in 2007.

"Many candidates from both parties made health care a highlight of their campaigns and their subsequent acceptance speeches," she says. "They knew their constituents were interested. A recent Commonwealth Fund survey showed that three-quarters of all adults believe the U.S. health care system needs either fundamental change or complete rebuilding."

Ms. Davis says if the new Congress is willing to take a truly bipartisan approach to health care, the country could begin to attack the twin problems of increasing numbers of uninsured and higher health care costs. She says Democrats in key positions are likely to prioritize better coverage for children and working families and to lower prescription drug prices. They may find common ground with some Republicans, particularly from those representing states along the border with Canada. She says there is already some innovation occurring across states to address the needs of the middle- and lower-income adults and their families who find they can't afford to get sick, even when insured, due to rising out-of-pocket costs.

Possible starting points, according to Ms. Davis, include the pending reauthorization of the SCHIP program, Massachusetts' health insurance "connector" to help small businesses and the self-employed, Medicare drug price negotiations, legislation to increase adoption of health care information technology, and a Medicare pay-for-performance system.

Changes in states, too

"The landscape has changed in statehouses as well, and new governors may make their marks on local efforts to improve quality of care and coverage," Ms. Davis wrote in a post-election analysis. "State-specific efforts, such as those already under way in Maine, Massachusetts, Rhode Island, and Vermont, could be facilitated by bipartisan federal legislation to provide federal funds to cover the uninsured, create health information exchanges, invest in primary care, and improve quality."

She says that continuing on our current course is unacceptable and more progress is needed to follow the first steps toward significant federal and state support for a high- performing health system.

"The U.S. can learn from innovative examples — both within our borders and abroad — of effective policies and practices that lead to better health for everyone," she concluded. "If Democrats and Republicans are willing to commit to working together to achieve such reform, all Americans will benefit."

Highlighting efforts in several states to improve and expand Medicaid managed care, building on its years of success, is the focus of the new CHCS report, "Seeking Higher Value in Medicaid: A National Scan of State Purchasers," which was released in time to be of great interest to newly elected governors and state legislators, according to CHCS president Stephen Somers.

Mr. Somers tells State Health Watch CHCS has been encouraging states to look for long-term benefits in Medicaid reform rather than the short-term gains that might come through cuts in provider payments or restrictions on eligibility or benefits.

Mr. Somers and his colleagues went to Medicaid directors and staff in 14 states — California, Colorado, Florida, Georgia, Hawaii, Kentucky, Maryland, Michigan, Ohio, Oregon, Pennsylvania, Texas, Washington, and Wisconsin — for a nationwide scan of the current state of Medicaid managed care. He tells SHW that while we often hear about budget concerns and cutbacks in various states, he was not surprised to hear the positive stories of expansion and innovation that came from the 14 states.

"We work with these states regularly and know what's happening there," Mr. Somers explains. "And the states were not chosen randomly. We deliberately looked for bellwether states. Also, our interviews were with Medicaid directors, who may have a different perspective than legislators."

According to Mr. Somers' report, interviews in the 14 states yielded three cross-cutting themes:

1. States are generally happy with and continue to pursue full-risk managed care, and are also using managed care alternatives as a way to provide accountable medical homes and expand care management.

2. States want to expand and extend mechanisms for accountable medical homes and managed care into new areas (rural) and populations (aged, blind, disabled, and dual-eligibles).

3. States now realize that they can do much more with their purchasing power than merely secure financial predictability, and they are acting accordingly. Increasing quality, efficiency, and accountability are all important goals.

"Overall, we found that states are expanding the boundaries of traditional full-risk managed care and are using innovative models, including enhanced primary care case management and comprehensive care management, to find the best value in delivering care to Medicaid beneficiaries," Mr. Somers says.

When capitated managed care is not feasible, he says, states are experimenting with alternatives to introduce medical homes and care management to more Medicaid consumers. Enhanced primary care case management uses primary medical care providers to coordinate primary care and approve specialty referrals for Medicaid beneficiaries, and also incorporate features originally developed for capitated managed care programs such as care coordination and quality improvement. Disease management is a strategy of delivering health care services to improve the health outcomes of patients with specific diseases. It often uses telephone interventions, interdisciplinary clinical teams, and patient self-management education. And comprehensive care management is designed to ensure continuity and accessibility of services to overcome rigidly fragmented services, and the misutilization of facilities and resources. It also attempts to match the appropriate intensity of services with patients' changing needs over time.

He cites as an example a Pennsylvania pilot of Access Plus, an enhanced primary care case management program in rural areas that don't have Medicaid managed care. And he says the state is considering also bringing Access Plus to urban areas as an alternative to capitated managed care, creating opportunities to test how the models can function in the same region. Pennsylvania also is developing health initiatives for smoking and obesity that aim to prevent disease onset.

Several other states are experimenting with care and disease management programs as alternatives to full-risk managed care. Washington recently issued a request for proposals for care management of its high-risk Medicaid population that takes a consumer rather than a disease-focused approach. The new approach is to include predictive modeling to identify at-risk populations and contracts with regional community-based organizations, in addition to a statewide entity, that will work with consumers and primary care providers to manage chronic care needs.

Georgia is launching a new disease management program as a wraparound to its enhanced primary care case management program for the aged, blind, and disabled populations. A disease management vendor will be responsible for analyzing data to produce provider profiles and will be at risk for performance. All care management activities will be the responsibility of primary care providers.

Mr. Somers says states are striving to create medical homes for all Medicaid beneficiaries, noting the term generally refers to an ongoing connection between a beneficiary and the health care system that results in coordination and management of a patient's total health care needs.

Ideally, a medical home will replace the traditionally fragmented, uncoordinated care received under the fee-for-service system that tends to be more costly and less effective, particularly for people with complex or chronic conditions.

According to the survey report, a number of states are interested in increasing access to medical homes by extending some type of managed care delivery system to include populations such as the aged, blind, and disabled, additional benefits such as long-term care, and new regions of a state such as rural areas.

Can't always mandate enrollment

While states acknowledge the benefits of mandatory enrollment, such as higher enrollee participation, ability to reward high-performing plans with default enrollment, and less potential for adverse selection, they also recognize that mandatory enrollment may not always be feasible, at least not initially due to lack of plan capacity in rural areas and resistance from state legislators, providers, or beneficiaries in the newly-targeted populations. In such circumstances, state officials reportedly are considering mechanisms to increase participation in voluntary programs.

"After years of experience implementing managed care for relatively healthy families, states are increasingly realizing that they need to obtain the same level of increased access, quality, and financial predictability for their most complex and costly populations — ABD (aged, blind, and disabled) beneficiaries," the report says. "The ABD population itself is quite diverse and includes not only the elderly but also persons with physical disabilities and the developmentally disabled, many of whom may also be dually eligible for Medicare and Medicaid, and all of whom may require a range of medical and supportive/social services from multiple providers and in a variety of settings. The complex care needs of many ABD beneficiaries often require additional services that may not typically be included in traditional managed care programs. For example, adults with chronic conditions are more likely to report poor mental health; however, behavioral health services are often carved out of full-risk managed care programs.

"Although a number of states expressed interest in programs that combine behavioral and physical health, few had concrete plans for integrating these services in the near future. In part, this may be because, in many states, behavioral health services are provided through other state or community programs and agencies that are often reluctant to cede those services to a Medicaid agency or managed care plan, making behavioral and physical health integration difficult. Instead, most states seemed to focus on achieving better coordination between current acute care and behavioral health programs and/or other carveouts."

Mr. Somers says Ohio is developing a full-risk managed care program for select ABD beneficiaries to more cost-effectively manage health care services. The case management requirement for ABD health plans will be increased to focus not only on a single condition, but also on the complexities of multiple comorbid conditions. Also, the state's performance measurement set was expanded to better represent the population's unique needs. And the state will use plan-specific enrollment data to risk adjust the health plan capitation rates to ensure an equitable payment structure for plans serving beneficiaries with more complex needs.

Colorado is developing a small pilot managed care program for people with special needs fashioned after the Massachusetts Commonwealth Care Alliance program. Washington plans to transition the ABD population into managed care over the next three to five years. Wisconsin has a mandatory Medicaid managed care program for ABD recipients operating in five counties and plans to expand it into 37 additional counties over the next 18 months.

Mr. Somers points out, however, that not all states have succeeded in implementing managed care strategies for the ABD population. For the last two years, he says, California has attempted to implement enrollment of the ABD population in Medi-Cal managed care, including a scaled-down pilot program, but the state was not able to secure legislative approval or the support of key advocacy organizations.

Sophisticated purchasing

In line with the notion that states are realizing how much they can do with their purchasing power, Mr. Somers says they are becoming increasingly sophisticated in their use of data to improve purchasing strategies. Whether expanding capitated managed care programs or developing new care management approaches, states realize they need better data from their plans and providers, a more advanced data infrastructure, and stronger in-house expertise than was required before.

Whether attempting to increase reimbursement rates to build provider or plan participation, or managing the effects of stagnant rates, states remain concerned with reimbursement issues, the report says.

In an effort to enhance provider participation, especially in rural areas, Maryland hopes to increase provider rates until they are at least comparable to Medicare rates. And after a review of all Medicaid plans ordered by the governor, California obtained rate increases from the legislature for several plans. It also has engaged a consulting firm to make recommendations on its rate methodology that will allow development of rates that are more predictive of plan costs.

Mr. Somers says the researchers heard from state Medicaid directors that they recognize they may not be able to stop the cost increases or shrink their Medicaid budgets, but they can bend those trends by improving outcomes for beneficiaries who are likely to remain on Medicaid for a long time. "States realize," he tells SHW, "that 20% of the population accounts for 80% of the costs and only 16% of the costs are captured in managed care for healthy families. So they are progressing to managed care for more complex populations."

Business case for quality

Mr. Somers says states know they have to make a business case for quality, demonstrating that investing in preventing health problems from exacerbating will save money.

State officials look to what's happening in other states to learn what may work for them, Mr. Somers tells SHW. He says with 36 governors elected or re-elected in November, there is an opportunity for changes to be made. State budgets seem to be relatively OK, he says, and state officials are looking for the best way to spend the resources they have available.

"We would advise them to look at high-risk pregnancies that end up with expensive neonatal intensive care and high-risk asthma cases that have a lot of emergency room visits," he says. "There is a high proportion of costs in 1% to 5% of the most expensive people, and state officials should reflect on those people intensively."

Ms. Davis' views are on-line at E-mail her at or telephone (212) 606-3800. The Center for Health Care Strategies report is available at Contact Mr. Somers at (609) 528-8400.