Fiscal Fitness: How States Cope

Kentucky’s Passport Health Plan eliminates stigma and finds the state is saving money

Passport Health Plan of Louisville, a Medicaid-only plan in Kentucky created to save money, improve quality indicators, and satisfy its members, is succeeding primarily, its president says, because it was created by doctors and keeps doctors in charge. Passport president Joyce Hagen tells State Health Watch the 125,000-member plan was created in November 1997 as a three-way partnership with the Commonwealth of Kentucky and a group of long-time safety-net providers.

"The member satisfaction rate is very high," Ms. Hagen says, "because we offer a lot of support services to our members. We make the program feel as though it is a legitimate health insurance program. There’s no stigma in being a member of Passport. In addition, just about every quality measure has improved dramatically, and the savings also are very dramatic. Overall, we’re seeing the difference between managing and not managing a program."

According to Ms. Hagen, there are two principal reasons why Passport is successful. First, it’s owned and run by the providers. "We’re different from a for-profit company whose priorities are in a different place," she says. "The question we ask ourselves each month is how can we improve quality still more and also maintain the savings we’re providing the state."

The second key to success, she says, is that all Passport employees actually are employed by Harrisburg, PA-based AmeriHealth Mercy Health Plan, the unit that provides Medicaid services.

Serious health challenges

Passport’s members challenge its ability to improve quality and save money while satisfying the members. There are many dual eligibles, Ms. Hagen says, and "a lot of really sick people." What helps, she says, is that staff know people will be there for the duration of their eligibility, and thus there is an opportunity to have an impact. "We do a lot of education and follow-up," she says "Other than the acuity, there really isn’t much difference from other plans’ populations. We do a lot of case management and a lot of disease management."

Disease management programs that have been purchased and then adapted to Passport’s clientele include diabetes, congestive heart failure, and asthma.

Passport chairman Larry Cook, a neonatologist, stresses that the plan’s founders were historic safety-net providers whose practice was heavily composed of Medicaid patients under the previous system. "This is our business as a managed care plan," he says. "These patients need us and are important to our mission and our revenue. So we all decided to step up to the plate and be willing to take risks for a good purpose."

Mr. Cook’s "good purpose" is seen in some of the statistics Passport has compiled. According to Milliman USA’s consulting actuaries, the plan has saved the state $92.4 million. At the same time, members have gained access to services previously unavailable to them, such as 24-hour nurse lines, perinatal care programs, member orientation meetings, health and disease management programs, educational newsletters, and a web site.

Passport officials say the plan scores above the national mean in 87% of the categories measured by the Health Employer Data and Information Set and also report it has:

1. increased the rate of children receiving all six American Academy of Pediatrics well-child visits in the first 15 months of life by 85% from 1999 to 2002;

2. improved Early Periodic Screening Diagnosis and Treatment compliance for children birth to age 21 by 247% from 1997 to 2002;

3. improved access to preventive health care for children by enrolling 12,000 Kentucky Children’s Health Insurance Program members;

4. increased member satisfaction rates to nearly 80%.

Ms. Hagen’s assessment of Passport’s success is shared by those it serves. Coalition for the Homeless executive director Marlene Gordon tells State Health Watch that "Passport has been great. The staff at Passport have been wonderful about volunteering in the community. We’ve had a very positive collaboration with them." Ms. Gordon says she works with people as they leave homeless shelters and help them connect with Passport so they can get the health care services they need. "Passport has been a tremendous help to us," she says, "since many of our clients have bad credit because of health care services they’ve had in the past."

She says the reason Passport is so successful is a "resonance for any type of social service. We see that in Passport working with grass-roots people and taking part in community programming. There’s a trickle-up effect. We’re working in the trenches together so there’s no feeling of we and them. They’re one of the few government plans that really work with us. I don’t know why they do it and so many of the others don’t. The difference with Passport is that they’re there. We have to sell everyone else on why they need to be there for us, and it’s often not a welcome message," Ms. Gordon explains.

Even though members and advocacy groups are happy, does state government see the benefit in the type of operation Passport offers? Marcia Morgan, secretary for the Kentucky Cabinet for Health Services says it does. "They deliver a really good product to Medicaid recipients," she tells State Health Watch, "and work hard with their doctors on prevention. Their screening rates for children are excellent, and there are many innovative programs. And they score very well on customer satisfaction surveys. If there are any complaints, most have been resolved before they get to the level of an administrative appeal."

Realistically, Ms. Morgan’s greatest pleasure with Passport may be that it has saved money for the state government, although she recognizes that it is now much harder for a capitated plan to continue to save. But she says that Passport still is keeping pace with the state.

Medicaid sole source plan is rare

"They’re great partners," she says enthusiastically. "It’s a unique partnership. It’s not often that you have a sole source in Medicaid under a Section 1115 waiver. And provider-sponsored networks are pretty rare. They’ve worked hard to put together a plan that keeps pace." According to Ms. Morgan, there were problems as Passport ramped up its operation, but staff in the plan worked very hard to overcome the difficulties. "It took Passport about three years to get to a firm financial footing," she says.

Both Ms. Hagen and Ms. Morgan agree that finances are going to be the greatest challenge for Passport in the coming years. "We’re in a very delicate time with the state budget," Ms. Hagen explains. "There’s less revenue coming in and we’re trending 10% to 12% increase in costs. It worries me that the legislators need to be willing to fund that trend. States have gotten very draconian in the current budget crisis. They’ve been chopping off eligibility and benefits. Where does it end? The whole health care system is teetering right now."

Ms. Morgan agrees that cost cutting has become very difficult but praises Passport for being "more than willing to negotiate with us." She says that every Medicaid health plan is going to have difficulty achieving quality, but the long-term solution to our health care problems is higher quality if we can find a way to finance it. "If we can continue to improve quality, both the consumers and the payers end up winning," she says. "But short-term quality improvement is going to be very difficult to achieve. We have to think about not only access to services but also quality. I know Passport is going to be vigilant for quality and savings in a difficult environment."

Enthusiasm, commitment key

Ms. Morgan and Ms. Hagen say that the Passport model could be replicated elsewhere, although there are some necessary elements that would have to be found. "You have to have a very enthusiastic provider community," according to Ms. Morgan. "In capitated plans, the owners make all the difference." She says that for a Passport model to succeed elsewhere, planners would have to be able to duplicate its enthusiasm and commitment.

And Ms. Hagen says that in setting up a Passport-type plan, it’s necessary to identify the providers who have the biggest stake in Medicaid and in quality, and then link provider incentives to the state government’s incentives. "Put the key providers in charge," she advises. "They’re more credible and more effective."

[Contact Ms. Hagen at (502) 585-7900; Ms. Gordon at (502) 589-0190; and Ms. Morgan at (502) 564-7042. Information is on-line at]