HHS Approves Plan To Shift Florida’s Medicaid Program to Managed Care System

HHS Secretary Mike Leavitt on Wednesday approved a waiver for a plan proposed by Florida Gov. Jeb Bush (R) that would shift the 2.2 million Medicaid beneficiaries in the state to managed care and cap per-beneficiary state expenditures to help reduce costs, the South Florida Sun-Sentinel reports (Hollis, South Florida Sun-Sentinel, 10/20). Bush proposed the five-year plan in January over concerns about the sustainability of annual cost increases to the $15 billion state Medicaid program (Fineout, Miami Herald, 10/20).

The waiver will allow Florida to implement the plan as a demonstration project (Pear, New York Times, 10/20). The plan requires final approval by the state Legislature, which will hold a special session in December to address the issue. According to the Sun-Sentinel, support from the state Legislature likely will "come easily," and the plan likely will begin in July 2006 with 210,000 beneficiaries in Broward and Duval counties (South Florida Sun-Sentinel, 10/20).

Under the plan, Florida would "largely be a buyer rather than a manager of health care," as the state would pay monthly premiums to private health insurers rather than fee-for-service payments to health care providers, the New York Times reports. The waiver authorizes private health insurers to limit "the amount, duration and scope" of services provided to Medicaid beneficiaries and allows the state to establish a "maximum per-year benefit" cap for each beneficiary (New York Times, 10/20).

The state would pay health insurers a "risk-based" premium based on the health of Medicaid beneficiaries (South Florida Sun-Sentinel, 10/20). In addition, the waiver authorizes the state to establish a pool to provide as much as $1 billion annually to hospitals and other health care providers that treat a large number of uninsured patients (New York Times, 10/20).

Under the plan, Florida Medicaid beneficiaries will select from a number of managed care plans, "most likely HMOs, although state officials predicted that physician networks and hospitals could also band together to offer services," the Miami Herald reports (Miami Herald, 10/20). The state will automatically enroll Medicaid beneficiaries in managed care plans in the event that they do not make a selection.

In addition, the plan will allow Medicaid beneficiaries with access to employer-sponsored health insurance to "opt out" of the program and receive subsidies to pay premiums for the employer-sponsored coverage. Under the opt-out option, Medicaid beneficiaries would pay all copayments and deductibles required by the employer-sponsored health insurance. Under the plan, the state also would deposit funds into individual accounts for Medicaid beneficiaries who participate in weight loss, smoking cessation and other programs to improve their health.

The plan states that Florida "will set aside a specific amount of money for each" beneficiary based on their health and past use of medical services. Alan Levine, secretary of the state Agency for Health Care Administration, estimated that at most 5% of Medicaid beneficiaries would reach the annual cap.

After Medicaid beneficiaries reach the cap, "the health plan will still be responsible for providing services to the consumer, but the state's reimbursement would be limited to that amount," Levine said. The plan would exempt Medicaid beneficiaries younger than age 21 and pregnant women from the cap.

According to the New York Times, the Florida plan likely will "be a model for many other states" to shift from the traditional Medicaid "defined benefit" program to a "defined contribution" program. Leavitt said, "Today will be remembered as a day of transformation for the Florida Medicaid program," adding, "Florida's framework will be helpful to other states" (New York Times, 10/20). Bush said that the plan "will be part of national debate about how to create a more sustainable Medicaid program" (South Florida Sun-Sentinel, 10/20). According to the St. Petersburg Times, Bush likely will call the special session of the state Legislature for the week of Dec. 5.

State Senate President Tom Lee (R) in a statement praised the plan, adding, "I will be conferring with my Senate colleagues and House Speaker Allan Bense (R) on where we go from here."

However, Karen Woodall, a lobbyist for the National Organization for Women and groups that represent Medicaid beneficiaries, said, "I'm not sure what the rush is. I believe there are still a number of unanticipated changes that should lead the Legislature to put the brakes on this" (Bousquet, St. Petersburg Times, 10/20).

Joan Alker, a senior researcher at the Health Policy Institute at Georgetown University, called the Florida plan "one of the most far-reaching and radical proposals we've seen to restructure Medicaid." Alker added, "The federal government and the states now decide which benefits people get. Under the Florida plan, many of those decisions will be made by private health plans, out of public view."

Vernon Smith, a Medicaid consultant for several states, said, "Every other state will be watching Florida's experience." Smith said that South Carolina has a similar plan and "Georgia and Kentucky are waiting in the wings" (New York Times, 10/20).

However, Bentley Lipscomb, Florida director of AARP, said, "Someone needs to ask the hard questions about how Florida's least fortunate will fare. How does this proposal change our ability to get Medicaid patients through the eligibility bottleneck? What happens when a private HMO won't cover a ... patient's expenses? Where's the proof this will actually save state tax dollars?" (South Florida Sun-Sentinel, 10/20).