Illinois may scrap 1115 Medicaid waiver. State could develop its own managed care plan under budget act.
IL 1115 Medicaid Waiver
October 31, 1997
Illinois may become one of the first states in the nation to withdraw plans to roll out a mandatory Medicaid managed care program approved under a Section 1115 waiver. A top state official said late last month that Illinois may take advantage of the recently enacted federal Balanced Budget Act giving states the flexibility to develop their own mandatory Medicaid managed care programs.
While states are required to meet national quality and consumer protection standards and to file state plan amendments with the Health Care Financing Administration (HCFA) under the Budget Act, they will be subject to substantially reduced federal oversight of program design and implementation.
It’s a strategy other states may follow, in the interest of maximizing flexibility and minimizing federal intervention in their Medicaid managed care programs, said Diane Rowland, executive director of the Washington, D.C.-based Kaiser Commission on Medicaid.
Seven states, including Illinois and New York, which run two of the largest Medicaid programs in the nation, have have not yet implemented their approved 1115 waivers. Another six states have pending 1115 waiver applications. To the extent these states have no plans to alter Medicaid eligibility and expand coverage—a feature of the first wave of 1115 waiver requests—they will probably find it easier to roll out mandatory Medicaid managed care programs under the Balanced Budget Act, Ms. Rowland said.
It’s little surprise that Illinois would jump at the opportunity to move ahead with a mandatory Medicaid managed care program under less federal oversight. State officials have spent the last three years in frustrating negotiations with HCFA over Illinois’ MediPlan Plus program, and Illinois Governor Jim Edgar has, for several years, argued that states should have more freedom to run their Medicaid programs.
HCFA held up approval for the program until 1996 and, even then, gave a tentative go-ahead with significant conditions attached. One of the most notable conditions was required approval of all program materials, which Illinois has not yet received.
A spokesman for the U.S. Health Care Financing Administration (HCFA) said the federal agency had suggested that the state try to go ahead with a mandatory Medicaid managed care program under the Balanced Budget Act.
In Illinois, news of state officials’ plans provoked an immediate outcry from state Democrats, who have criticized the Department of Public Aid for failing to implement MediPlan Plus. Any new program would need new authorizing legislation. A spokesman for Illinois House Speaker Michael Madigan promptly accused the Department of Public Aid of "bungling" and promised that no new program would be approved without proper oversight.
Public Aid director resigns
Already extremely wary of the Department of Public Aid’s track record in administering the $5 billion Illinois Medicaid program for about 1.3 million members, lawmakers were hardly reassured when Director Robert Wright unexpectedly resigned only a day after making his announcement about potential major changes to the Medicaid program.
His departure was being attributed to a high-profile bribery case involving mid-level Public Aid managers and a Medicaid claims contractor. Linda Renee Baker, his top deputy, has been named acting director. Despite the executive change, a department spokesman said plans to move ahead with the reformed Medicaid managed care program are on track.
If the program is to be rolled out in January, as state officials would like, legislation will have to be introduced during the veto session at the end of October.
Almost no one wants to re-enact the political battles that accompanied the creation of MediPlan Plus in 1994. That process resulted in many uncomfortable compromises, including numerous carve-outs and special exemptions.
Among MediPlan Plus’ more controversial features:
• Carve-outs were granted to community mental health agencies, alcohol and substance abuse providers, school based health clinics, Cook County Hospital, children’s hospitals, and providers of care to chronically ill children. Providers could continue to bill Medicaid on a fee-for-service basis for exempted services and beneficiaries could exercise free choice in selecting providers.
• Physicians and community health centers won an any-willing-provider clause allowing them to be included in any managed care plan’s network, so long as they were willing to accept the contract terms. Community health centers also won the right to be selected as a primary care provider for a Medicaid recipient.
• Provider-sponsored health plans, known as managed care community networks, were not required to set aside any capital reserves against future losses. This infuriated state-licensed HMOs, which are required to have capital reserves of $1.5 million.
Echoing a fairly widespread sentiment, Bob Berger, the executive director of the Illinois Association of HMOs, calls MediPlan Plus "the antithesis of managed care, as it should be practiced."
Some local health experts see a chance for Illinois to design a better, more rational program. "MediPlan Plus was totally unmanageable," said Michael Gelder, a health care consultant in Evanston, IL. who represented community health centers in negotiations over MediPlan Plus. "The question is, have the politics in Illinois changed sufficiently so that they can change the program design? Perhaps yes: Illinois now has a surplus, welfare rolls are shrinking, and Medicaid expenditures aren’t under the same kind of attack."
But, perhaps no. "There’s a political reality in what the state and the Department of Public Aid can do with Medicaid, and it’s reflected in the legislation that established MediPlan Plus," said Jeff Miller, former head of the Department of Public Aid and now executive associate dean for management at Northwestern University Medical School.
Rate reductions
"A lot more is known about how to do Medicaid managed care well now than three years ago," said Hank Webber, senior lecturer at the University of Chicago. "The question is whether Illinois can use the experience of other states in a positive way: it certainly would behoove them to do so."
Illinois also has some experience of its own to rely upon. The state’s growing voluntary Medicaid managed care program now serves nearly 190,000 poor women and children in Cook County. Negotiations have been underway since the beginning of the summer for a new round of two-year contracts, due to start in December. In June, the state asked for a 19% reduction in rates, to $91 per member per month from almost $113 previously. After howls of protest from HMOs, the state raised the monthly rate it’s willing to pay to $103.47 per member.
It’s a strategy other states may follow in the interest of maximizing flexibility and minimizing federal intervention in their Medicaid managed care programs.
—Rowland
According to former Public Aid director Wright, eight of the nine HMOs currently in the voluntary Medicaid managed care program have indicated a willingness to accept those terms.
One Medicaid HMO, American Health Care Providers, Inc., the second largest in the state, has not yet been approved to participate in the program, after an initial finding that its network was inadequate. Another new HMO has not yet received a state license but is expected to join the program.
Plans participating in the voluntary program have been anticipating a potential major boost in enrollment once the state implements a mandatory Medicaid managed care programs.
—Judy Graham
Illinois may scrap 1115 Medicaid waiver. State could develop its own managed care plan under budget act.
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