What ‘Government Takeover’ Looks Like: Private Insurers To Enter Expanded Medicaid Market

managedcareThe new health care law will add approximately 16 million Americans to the public Medicaid program and private health insurers are positioning themselves to enter this expanded market. For all the talk about government involvement in health care, the state-federal Medicaid program is predominantly filtered through private companies which claim to lower costs by managing care and providing better access to primary doctors.

From the program’s beginnings in the mid-1960s, states have struggled with skyrocketing health care costs and diminishing provider participation (the program’s reimbursement rates are generally lower than private insurers or Medicare). By the 1990s, policy makers began to see managed care as a way to control spending and improve patients’ access to primary care physicians. Approximately 70% of Medicaid enrollees are already covered by some sort of managed-care plan “rather than by a fee-for-service model in which the states simply pay bills for care.”

Now, private insurers are hoping to expand that reach. Yesterday, UnitedHealth Group Inc. released a report “describing a variety of managed-care strategies it says will help cash-strapped states solve budget problems and doctor shortages that hobble the government health-care programs for the poor.” While cash strapped states are strongly considering partnering with private insurers — Florida has five counties that are are administered solely by managed-care companies and legislators are considering measures to bid out the rest of the state — evidence on the degree to which managed care actually accomplishes these goals varies. Medicaid patients in some states seem to have better access to doctors, while other surveys have found that overall improvements in access associated with managed care are minimal.

Ken Terry explains that the real attraction to states is not that manged care is able to significantly lower health care costs, but that it helps states “budget their Medicaid expenditures.” However, “If that budgeting was working so well — in other words, if it meant the states could drive hard bargains with private insurers — they wouldn’t be complaining that Medicaid is eating up more and more of their revenues. And insurance companies wouldn’t be seeing Medicaid as the goose that promises to lay golden eggs”:

The big golden egg, of course, is healthcare reform, which is expected to boost Medicaid rolls by 30 percent nationwide starting in 2014. That windfall isn’t evenly distributed: Texas and California are expected to add about 2 million new Medicaid enrollees each, while Florida anticipates adding 1 million new Medicaid recipients as a result of the federal law. Overall, ten states will increase their Medicaid populations by at least 50 percent.

United argues that moving most of these patients — as well as more of the current Medicaid recipients — into managed care will save about $90 billion. A larger share of the projected savings, United contends, will come from applying managed-care techniques to long-term care. Much of United’s argument rests on the theory that better care coordination reduces costs. Which is a fine argument so far as it goes. So far, however, commercial managed care plans mainly save money by paying doctors and hospitals less than they could earn from fee-for-service plans or Medicare.

It’s unclear how managed care plans will fare in reducing costs over the long term. What is clear, however, is that now that health reform is law and private insurers are positioning themselves to enter new markets, the plan seems a lot less government centered than both opponents and proponents envisioned.