Iowa DHS looks to move Medicaid to managed care to save money, improve outcomes

DES MOINES - With Medicaid expenses rising at double the rate of state revenue, Department of Human Services Director Chuck Palmer is looking at how to reduce costs while improving health care outcomes for the 550,000 low-income Iowans covered by the program.

Over 90 minutes Wednesday, Palmer outlined the department's plan to contract with managed care providers to oversee the $4.2 billion program.

'If we are going to be successful, we are going to be doing some things we haven't done before,” Palmer said in explaining to the Health and Human Services Appropriations Subcommittee that managed care will be a big change from the fee-for-service model for most Medicaid enrollees. 'This is about change. There is a certain fear, a certain resistance to change.”

The positive change will be in cost savings, according to Palmer. He projected the state should save $52 million in the first six months of managed care. Companies interested in providing the managed care estimate savings of 5 to 15 percent. Palmer thinks that might be 'too aggressive.”

Palmer calls Medicaid the 'Pac-Man” of state government 'eating up other budgets.”

Medicaid costs have grown 73 percent since 2003 and are projected to grow 21 percent in the next three years. The state contributes 45 percent of the cost now - roughly $1.9 billion of the $4.2 billion cost.

'We've hit the wall,” said Rep. Dave Heaton, R-Mount Pleasant, who chairs HHS Appropriations. 'We've got to get control.”

The reality is, Palmer told lawmakers, 'If the Medicaid budget continues to grow and overtake other parts of the budget we will see good things in other parts of the budget lost.”

In moving to managed care, Palmer said Medicaid will move from paying for 'episodes of care” to paying for outcomes. Now, he said, no single entity is responsible for a Medicaid enrollee's health care, outcomes are not connected to payments, and there are no incentive to prevent duplication of care.

For example, the top 5 percent of high-cost, high-risk enrollees account for 90 percent of the hospital readmissions within 30 days, 75 percent of total inpatient costs, 50 percent of prescription drug costs and have an average of 4.2 conditions, five physicians and 5.6 prescribers.

Thirty-nine states and Washington, D.C., use managed care to oversee Medicaid programs and more than half of all Medicaid enrollees are in comprehensive risk-based programs, Palmer said.

Legislators don't have to approve the change. Gov. Terry Branstad can make the change to managed care without legislative approval, but Heaton think there is legislative buy-in.

'The train's on the track. It's running,” he said.

What is Medicaid Modernization?

Medicaid Modernization is: the movement to a comprehensive risk-based approach for the majority of current populations and services in the Medicaid program.

The goals include: Improved quality and access; greater accountability for outcomes; and create a more predictable and sustainable Medicaid budget

How does Medicaid managed care work?

Medicaid agencies contract with managed care organizations (MCO) to provide and pay for health care services.

MCOs establish an organized network of providers.

MCOs establish utilization guidelines to assure appropriate services are provided at the right way, in the right time and in the right setting.

Shifts focus from volume to per member, per month payments and patient outcomes.