Problems in Medicaid Managed Care

Pitfalls Seen in a Turn to Privately Run Long-Term Care,” published in the New York Times March 6, 2014, is timely as Texas prepares to shift administration of Medicaid nursing home services from state government to private insurance companies as early as September, 2014.  

Across the county, Medicaid long-term care has been privatized rapidly by state leaders to curb rising Medicaid costs as the elderly population expands, life expectancy increases, and the incidence of chronic, disabling conditions grows.  On average, Medicaid spends five times more on long-term care for an aged and disabled beneficiary as it does on a beneficiary in children’s Medicaid; aged and disabled beneficiaries comprise 6% of the Medicaid population yet consume one-third of Medicaid spending, according to the New York Times.  At least 26 states have implemented programs in which publicly funded Medicaid long-term care is managed by private, for-profit insurance companies. 

In the managed care model, Medicaid pays a flat monthly rate per beneficiary to a private insurance plan to cover and coordinate the beneficiary’s care.  The goal is to provide the most appropriate care in the least restrictive setting at the most reasonable cost.  Managed care plans achieve cost-savings by substituting Medicaid home care services, where appropriate, for care in a high-priced nursing facility.  The savings achieved by expanded use of home care is intended to save taxpayer dollars and counterbalance the higher care costs of beneficiaries who require nursing facility services.

Previously, there was little Medicaid funding available to provide less expensive home and community-based care.  The Medicaid managed care model offers an opportunity to end the bias toward facility care in Medicaid, to make in-home care more accessible, and to enable elderly and disabled Medicaid beneficiaries to remain at home in the community for as long as possible. 

Insurance companies, however, must also deliver profits to investors.  As the New York Times documents, managed long-term care plans have denied care to Medicaid beneficiaries who required more expensive nursing home care or more intensive home care services.  Managed long-term care plans have cherry-picked healthier seniors, including hundreds of beneficiaries who were not impaired enough to be eligible, while denying access to the most impaired.  Furthermore, the involvement of private insurance companies may not result in cost-savings for taxpayers.  In Minnesota, a 2011 audit found the state had overpaid insurers $207 million for expenses that included high executive salaries and a luxury box at a sports stadium.