Private Medicaid HMOs Increasingly Popular

"[M]any states are moving aggressively" to place more Medicaid beneficiaries in HMOs, and more than one in three beneficiaries now receives care through a private insurer, the Wall Street Journal reports. As a result, some companies that contract with Medicaid are growing rapidly.

For example, Centene reported nearly 1.2 million members from Medicaid and $1.5 billion in revenue in 2005, up from 142,000 members and $200 million in revenue in 1999. States that contract with HMOs to manage Medicaid "often calculate what they would spend on Medicaid patients directly and pay the HMOs a per-patient premium below that amount," giving HMOs an incentive "to keep their costs under the premium because they keep the difference as profit," the Journal reports.

Medicaid costs nationwide are not growing as quickly as they were several years ago, according to a recent report by the Kaiser Commission on Medicaid and the Uninsured, although it is "unclear how much HMOs have contributed" to the trend, the Journal reports.

Some doctors and patients say the insurers offer inadequate services. According to the Journal, Medicaid HMOs "restrict medical tests and use of prescription drugs" and also "spend the money they get from states on items that don't have an obvious connection to patients," such as executive compensation, entertainment, political contributions and profit for shareholders.

Jerry Flanagan, health care policy director for the Foundation for Taxpayer and Consumer Rights, said, "What's really happening is we're giving less money for far, far fewer services." However, executives maintain that "their profits are justly earned and don't come at patients' expense," the Journal reports.

Ruben Jose King-Shaw, a former WellCare's board in 2003, said HMOs "deliver a good-quality product at a reasonable price." King-Shaw said states often require HMOs to achieve quality standards such as high rates of vaccination that were not met by traditional Medicaid (Martinez, Wall Street Journal, 11/15).