Florida’s Legislature received a surprise Medicaid bill this month: $433 million in unpaid insurance reimbursements, owed jointly with the federal government.

The $433 million is due to the 11 private companies that have managed the state’s public health insurance program for low-income and disabled people since 2014, when Florida privatized its Medicaid programs to save money. The insurers were underpaid over the past two years, state officials acknowledged on Monday.

The underpayments, attributed to an error by the state in the way it classified Medicaid beneficiaries, will have to be paid to the private insurance companies through a combination of federal and state dollars. Florida’s share of the shortfall is about $173 million for the two-year period from May 2014 through June, according to state documents obtained by the Miami Herald.

The federal government’s share is estimated at about $260 million for the same period, according to documents prepared by the Agency for Health Care Administration, which oversees Florida’s Medicaid program and produced the estimates.

AHCA Secretary Liz Dudek issued a written statement noting that the agency has taken “immediate action” to ensure the plans are properly reimbursed.

“This matter had no impact on the health care received by Medicaid recipients,” Dudek wrote, “and the agency stands committed to our continued partnership with the plans to ensure the best outcomes and customer service for Florida’s Medicaid recipients.”

It’s unclear how much each of the private insurers managing Florida’s Medicaid program were underpaid.

But Chris Paterson, chief executive of Sunshine State Health Plan, which covers 468,000 Florida Medicaid beneficiaries, issued a written statement — through AHCA — noting that the agency brought the error to light.

Paterson had not responded to the Herald’s repeated requests for comment before AHCA issued his statement.

He said the agency’s “immediate disclosure speaks to their integrity and the strong partnership between agency and the plan community.”

AHCA also issued a statement for Gregg MacDonald, president of WellCare of Florida, which operates the Medicaid insurer Staywell Health Plan, praising the agency’s “transparency” and noting its “commitment to working with the Florida Legislature to find long-term solutions.”

Staywell Health is Florida’s largest Medicaid insurer, covering about 677,000 Floridians.

Critics of Florida’s Medicaid program said the underpayments that stretched on for two years underscore a need for greater accountability and transparency.

Joan Alker, executive director of the Georgetown University Center for Children and Families, said the public needs a better understanding of how insurers are paid under Florida’s Medicaid program and how those payments affect service.

Alker authored a report released on Monday noting that Florida families with children receiving Medicaid were being reassigned to other plans and pediatricians without their knowledge and that physician specialists were difficult to find.

“We need more accountability, more transparency to understand how managed care is working, to understand how the plans are getting paid,” Alker said. “That is critically important.”

The underpayments are likely to be a priority for the Florida Legislature, too.

Lawmakers must figure out where to find the money to repay the insurers for prior years — and to account for higher-than-expected program costs in the future, said state economist Amy Baker, whose Office of Economic and Demographic Research develops annual estimates for the state’s Medicaid spending.

“We need to make adjustments going backwards to what the amount should have been,” Baker said, “so that we can project the right expenditure amounts going forward. … That’s a significant upward pressure as we look ahead.”

Baker wouldn’t say exactly how much is owed to insurers, or what the impacts will be on future budgets. She said the precise amount will be calculated during upcoming state budget conferences.

Two sources familiar with the underpayment said AHCA officials mistakenly paid insurers lower rates for Medicaid beneficiaries who qualified for higher reimbursements. The error in payment began in May 2014 and was discovered over the past six weeks.

Under Medicaid managed care, the state pays private insurers a fixed rate per member per month for each person the company insures. The insurers assume the financial risk of providing care for less than that sum.

To make that fair, the state pays the insurance companies different rates depending on the health of each member. Insurers are paid lower rates for covering healthy children, for instance, and higher rates for Medicaid beneficiaries who are disabled or aged 65 and older and meet low-income qualifications.

The Medicaid managed care program in Florida began in 2006, with pilot programs in Broward and Duval counties. Then-Gov. Jeb Bush had proposed the model as a private-sector solution to the Medicaid program’s “unsustainable” costs.

The program rolled out statewide in August 2014. In 2015, Medicaid spending in Florida totaled $22.5 billion, with the costs shared between the federal government ($12.5 billion) and the state ($10 billion).

Payments due to all Medicaid plans by fiscal year (July 1-June 30)

Source: Agency for Health Care Administration

A $433 million mistake: State, feds underpaid Florida Medicaid insurers for two years
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