Republican Gov. Bruce Rauner’s push to put more Medicaid patients in managed care programs is advancing, sparking concerns from critics who point to ballooning costs, a hurried timeline and negotiations that were shrouded in secrecy.
The state has finalized contracts with seven insurance companies worth about $15 billion a year, which were posted quietly to a state government website shortly before the Thanksgiving holiday.
Rauner has billed the plan as a money-saving initiative, a way to transition more patients to the managed care model in which the state pays a set amount to private insurers to administer health benefits, allowing them to derive profits from the savings they might create.
The new contracts commit the state to pay about $4.5 billion a year more for the managed care program — a more than 40 percent increase. Insurers, though, might have to absorb a smaller increase in patients. The Rauner administration offered only a wide range estimate for how many people would be added to the managed care program, with the potential increase ranging from 30 percent to 42 percent. The state’s Medicaid managed care program will be consolidated into the hands of fewer insurers while expanding its reach to serve all of Illinois’ 102 counties starting early next year.
Democratic lawmakers have called a series of hearings to look into the plan, with Department of Healthcare and Family Services Director Felicia Norwood scheduled to testify at the first hearing on Thursday.
The ability to predict and plan for Medicaid costs is important for the state because the state- and federally funded health insurance program for the poor and disabled is a huge part of Illinois’ yearly budget. Other reasons to switch to managed care include improving access, efficiency and overall health.
Rauner first announced the expansion in February, and the plan to shrink the number of insurers from the original 12 down to seven was controversial because many patients will have to switch companies. Critics also have questioned whether a smaller pool of insurers will hurt competition, but some health care providers say working with a dozen companies was an administrative burden.
Roughly two-thirds of Illinois’ 3 million Medicaid recipients are already in the state’s managed care program after state lawmakers required that half of the program be transitioned by 2015. Since then, the cost of the managed care portion of Illinois’ Medicaid program has hovered around $10.5 billion a year, according to the Rauner administration.
The governor’s administration estimates that the new program will save the state $200 million to $300 million each year over the course of the four-year contracts, but Department of Healthcare and Family Services spokesman John Hoffman did not provide details about how those savings would be reached, given the increase in contract costs.
Hoffman said the state was “confident of the savings range” and noted that “many of the new beneficiaries are in high-risk and special-needs populations and require costly care.”
Rauner said Tuesday that he expected the savings to come from “administrative cost reductions and overhead savings and enrolling many more of our Medicaid recipients into high-quality, more efficient managed care operations.”
Some observers say that’s an unrealistic hope.
“This won’t save the state money,” said Sara Rosenbaum, a professor of health law and policy at George Washington University, who recently published a study of Medicaid managed care programs in 10 states. “It will give it more predictable growth over time. But actuarially sound rates, which is what the state will have to pay … you can’t just make these assumptions that this is a money saver.”
Critics including top Democrats have complained that the Republican administration’s bidding process to choose insurers was opaque, pointing to guidelines for bids that were written in a way that excluded certain companies. And they say the winning bids were not subjected to the ordinary oversight process that the government uses when is buys regular goods like office supplies.
The Democrat-led General Assembly tried to halt the new bids earlier this year by passing legislation that would require the administration to start the bidding process over and follow stricter oversight rules. Rauner vetoed the bill, and his veto was upheld during the fall session after his Republican allies in the legislature stuck with him.
The governor’s administration contends that the process was the same one that’s been used for years in Medicaid contract negotiations, except that the bids for these contracts were competitive.
Hoffman said the bids were evaluated “using best practices from Illinois and other states,” and that “a multi-agency evaluation team of professionals thoroughly reviewed all aspects of the proposals.”
State Rep. Greg Harris, a Chicago Democrat who chairs a committee that oversees state spending on health care, said lawmakers tried to question the administration about its plan in the spring but ran into roadblocks because of confidentiality agreements between the state and the insurance companies. Now that the contracts have been finalized, Harris said, he’s hoping the administration will have more freedom to answer questions starting at Thursday’s hearing.
“Even though there were competitive bids, nobody knows if the criteria for those bids — who they helped, who they disadvantaged. We don’t know who did the evaluations, we don’t know who wrote the criteria,” Harris said.
The expansion also has providers concerned that it’s moving too quickly and could leave some vulnerable people without access to care.
Jordan Powell, a senior vice president at the Illinois Primary Health Care Association, which serves 1.3 million Illinoisans in underserved communities, many of whom are Medicaid beneficiaries, said the quick pace had caused his group “concern.”
“We think more time would have benefited all parties,” Powell said. “With that said, the state seems confident that this transition will be successful, and we hope they are right. Time will tell, but we still have a number of questions and outstanding issues that need to be resolved prior to Jan. 1.”