Health Care and Insurance and Education & Workforce Development

State's Medicaid goal: better, cheaper care: FSSA says new approach will boost efficiency

August 21, 2006

Better care through better management.

That's the mantra behind the Indiana Family and Social Services Administration's push to limit Medicaid's cost growth to 5 percent annually.

The state entity announced this month that it awarded $4.4 billion in contracts to three managed care organizations to provide coverage for pregnant women and children under its Hoosier Healthwise program.

Next, Indiana wants to hire care managers to monitor the well-being of every Medicaid recipient in its aged, blind and disabled category. That initiative will start in 2007, and FSSA leaders expect both a cut in expenses and a boost in health for a category that costs more than $3 billion annually.

"Right now, the way we are allowing people to get services is totally unmanaged and inappropriate in many instances," said Jeanne Labrecque, FSSA's director of health policy and Medicaid.

However, these changes play to mixed reviews among health care providers, who worry that the push to cut costs will hurt care and that Medicaid's already skimpy reimbursement will be trimmed further.

"When they say they're going to [provide incentives] to deliver more efficient care, I think what they're saying is, the less care they deliver the better from a financial perspective," said Edmund Abel, director of health care services for the Indianapolis consulting firm Blue & Co. His company works with several Indiana hospitals and providers.

Medicaid is a state-federal program that helps pay for health care for the needy. In Indiana, it covered 835,000 people last year and spent $4.4 billion.

Earlier this month, FSSA proclaimed that it had strengthened the managed care program for Hoosier Healthwise by awarding four-year contracts to the three managed care organizations.

The Indiana-based organizations-Anthem Insurance Cos. Inc., Coordinated Care Corporation of Indiana Inc. and MDwise Inc.-will be paid a fixed monthly fee per patient. Each entity will form a provider network to serve patients.

Those patients will pick the network that fits them best with the help of an enrollment broker, FSSA spokesman Dennis Rosebrough said. Hoosier Healthwise's old format involved five managed care organizations covering certain portions of the state.

The new format gives patients more choices. It also debuts some behavioral health coverage and encourages healthybehavior education.

People in Hoosier Healthwise have been served by managed care since 1993. In fact, most Medicaid programs around the country offer some form of managed care to control costs, said Ice Miller health care attorney Gregory Pemberton.

FSSA chose a different path for its aged, blind and disabled category. Medicaid also covers residential or custodial care for this group, expenses that don't fit well in managed care's format, Labrecque said. FSSA will keep the current fee-for-service payment for these patients, but it will contract with care managers to monitor them.

These care managers will face a myriad of tasks, all fitting under the umbrella of providing patients "the right care at the right place at the right time," Labrecque said.

Their duties might include making sure a diabetic has the proper diet or knows how to use insulin. If, for instance, a developmentally disabled person has trouble swallowing, a care manager will arrange for swallowing exercises that prevent choking, which can lead to pneumonia and a lengthy hospital stay.

These preventive measures should create "less demand for more intense services," Labrecque said.

"We will be paying the care manager to do this, but we will be expecting savings," she said.

In fact, a savings guarantee will be part of the state's contract, although Labrecque doesn't know yet how much savings to expect or what the contract will cost.

FSSA plans to pick a care management contractor by next summer. The program is expected to start that fall.

This motivation to cut costs may translate into reduced care, Abel said. Some providers worry, for example, that prescriptions for some mental health medicines might be limited under the new format.

They're also nervous about possible reductions in Medicaid reimbursement that currently pays only 50 cents for every dollar of care delivered.

Abel also noted that state officials will "try to reduce their exposure for expenditures, and that means they're going to be paying less than they've been doing for some time," he said.

FSSA representatives said they plan no cuts in reimbursement and their focus is on efficiency.

"Philosophically, better managed care costs less," Rosebrough said. "There are inherent savings when you have good care management."
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