Medicare HMO leaves Virginia market, jeopardizing Medicare/Medicaid integration site

The newest participant in a national demonstration project to integrate Medicare and Medicaid has hit a familiar problem: Medicare HMO partners leaving the market because of low reimbursement.

Architects of Virginia Cardinal Care are exploring how best to deal with the late May departure of Sentara Health care’s Medicare HMO from Virginia’s Tidewater market. While the health system says it will stay on as a "consultant" and "provi der," it’s a far cry from the role state officials hoped Sentara would play in the two-year, $450,000 Robert Wood Johnson Foundation project. Of that, $150,000 is provided by the Virginia Department of Medical Assistance Services (DMAS).

The loss of Sentara doesn’t automatically kill the effort, but it has forced state officials and the foundation to re-evaluate if and how to go forward.

"It’s certainly very unfortunate because they were an interested and appealing partner and an important reason why we felt good about being involved in Virginia," says Mark Meiners, PhD, director of the foundation’s Medicare/Medicaid Integration Project. "So where we go from here is an open question."

Mr. Meiners says problems with Medicare reimbursement are "not uncommon," but were not expected in the 12-site demonstration project.

"The world in which we got started was one in which the biggest barrier was the waiver process. What’s happened since then is that the Balanced Budget Act came into effect and basically took dollars off the table, changed the rate-setting system, changed the rules in a lot of ways that are fundamental or at least uncertain," he says.

The future of the project will depend upon how Virginia copes with "upheavals" in the Medicare market, as well as Health Care Financing Administration priorities that treat these kinds of new programs as being less important than implementing the Balanced Budget Act (BBA) and anticipating Y2K problems.

"Virginia is an example that raises these questions in a more fundamental way than perhaps some other states, but it comes down to—what is the state commitment? If there is a firm commitment on people’s part to it, then that’s what we want. And I think the jury’s out in Virginia," he says.

State remains committed’

Virginia "remains committed to improving the health care delivery system for dually eligible beneficiaries," says a statement from DMAS director Dennis Smith. The first phase of the project, which involved Sentara, had projected 2,500 enrollees in the Tide water area. The second phase anticipated expansion with another provider in northern Virginia, DMAS project manager Regina Anderson-Cloud says.

States in the integration demonstration sites generally seek to contract with Medicare HMOs to create a single organization that, in coordination with the Medicaid program, provides a full continuum of care for residents eligible for both programs. Enrollees can’t be forced to join a Medicare HMO, but state officials hope that a Medicare HMO responsible for community-based services, nursing home care, and acute care can coordinate care most effectively for dual-eligible residents. Integration projects typically pay for Medicaid nursing home and community-based services through a single capitation amount.

Among the options left to Virginia officials is partnering with the Medicare fee-for-service delivery system, similar to what Massachusetts did in its Senior Care Options program. (See related story in State Health Watch, December 1998, p. 4.)

"I think that’s what we need to be more open-minded to than we were when we got this off the ground," says Mr. Meiners. "What clients really still need is something that is better than what’s generally out there. You could think in terms of two fee-for-service worlds and imagine introducing more effective care management that works better with the client."

At the same time, he says he doesn’t think the ultimate answer is a system that relies on fee-for-service Medicare and leaves Medicare and Medicaid separate but equal.

"That’s not the goal we had in mind, I think. We feel like it’s only when you get the systems of care and the money pooled that you’re really going to be able to have some flexibility and creativity and expansion of benefit package that you’re really going for here."

Sentara decided to give up its Medi care+Choice product effective Dec. 31 after looking at the $377 risk-adjusted, per-member per-month reimbursement it could expect to receive in the upcoming year, says Colleen Grimes, Sentara’s director of Medicare products. The reimbursement paled in comparison to the $700 to $800 calculated for more urban areas, she said.

Sentara’s product, the only Medi care HMO in the Hampton Roads area, serves about 14,000 beneficiaries.

As the largest Medicaid contractor to the state and the owner of five hospitals in the Tidewater area, Sentara undoubtedly will continue to play a part in the state’s efforts to retool services for the dually eligible, but not in the role of financing partner.

Contact Ms. Anderson-Cloud at (804) 371-6448, Ms. Grimes at (757) 552-7393, and Mr. Meiners at (301) 405-1077.