In February officials from the New York State Department of Health summoned senior executives from WellCare Health Plans (WCG) to a private meeting in Albany. Attendance was not optional.
For the third straight year, WellCare, which covers 75,000 New York State Medicaid beneficiaries, had just received low marks for the quality of care it was delivering, a scorecard that includes doctor visits for children, diabetes treatment, and cancer screenings.
In most large states, that would be unremarkable: Many Medicaid managed-care plans, especially those run by for-profit insurers, report below-average access to medical services with few consequences, according to a study conducted by Bloomberg Government.
This time, things were different. The New York officials told WellCare that under a previously unused 2008 rule, the company’s weak performance had triggered a six-month probation period for its plan. After that, “If we have not seen an improvement, we will terminate their contract,” says Jason Helgerson, New York State’s Medicaid director. To date the state has yet to make a decision.
New York’s get-tough approach with WellCare is part of a package of measures—some sticks, some carrots—that are helping the state get improved results from its private Medicaid plans. In 2009, the latest year for which figures are available, New York’s Medicaid plans scored higher than those of California, Florida, and Illinois on a range of health-care indicators, including access to primary and ambulatory care, breast cancer screening, and cholesterol control among diabetics.
State governments, caught between stagnant tax revenue and rising medical costs, are turning increasingly to private health insurers to cover their beneficiaries in Medicaid, the program for the poor and disabled jointly financed by the federal and state governments. Of the $432 billion spent on Medicaid last year, about $90 billion went to managed-care organizations, according to a congressional advisory committee.
The challenge for states is finding ways to ensure that private Medicaid plans, especially for-profit plans, don’t sacrifice the care they provide to the poor in return for higher margins. Federal law requires states to issue annual report cards on their Medicaid plans, but their usefulness is questionable. The reporting criteria are sometimes chosen by the plans themselves; opaque grading techniques obscure comparisons between plans; and problems flagged in one year’s report often reappear, unresolved, the following year. Last year, Texas failed to issue its annual report card altogether.
While Texas and other large states, including Florida, have kicked out Medicaid plans on a case-by-case basis, New York has clear criteria for designating and, if necessary, removing the worst performers. If a plan doesn’t qualify for bonus payments for good performance for three years in a row, state officials have the authority to terminate its contract.
That difference reflects a series of subtler distinctions between New York and other states. According to numbers provided by the state, only four of New York’s 45 Medicaid plans are run by for-profit insurers. Most are small nonprofit plans run by local organizations. Helgerson says he’s seen “managed-care companies try to throw their weight around.” He adds, “the individual plans have a little less leverage over us.”
Another difference is the scale of New York’s payments for good performance—the carrot to its stick. The state offers Medicaid plans bonuses of as much as 3 percent of their total revenue, worth $100 million or more statewide. “We put more money at risk than I think virtually any other state,” Helgerson says.
Finally, New York issued a rule in January requiring its plans to spend at least 85 percent of their premium revenue on medical care by April 2015. Of the five largest states, only Illinois has a similar rule, requiring just 80 percent spending. (While the 2010 health-care law has a similar provision for commercial insurers, that law excludes Medicaid plans.)
Even WellCare may be coming around. The company “recognizes that continued improvement is needed,” spokesman Jack Maurer said in a statement, and has been “working diligently to meet the state’s performance standards.”