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Pitfalls for managed Medicaid Somes states say they’re not receiving the care they’re paying for


by Alec MacGillis


milwaukee — The day after the House passed the landmark health-care bill in March, St. Lou- is-based insurer Centene saw its stock jump 11 percent. That was perhaps the first signal that the major changes ahead would be a boon to one subset of the health- care industry: companies that manage Medicaid for the states. Now businesses are rushing to


get a foothold in states that out- source Medicaid, knowing the law could add 16 million people to the federal-state program for the poor and the disabled. In Texas, where Medicaid rolls are expected to grow by 1.8 million people, Centene is scrambling to win additional contracts, having laid the groundwork by contrib- uting $250,000 to state legisla- tors’ campaigns since 2008. “We . . . believe we are extreme- ly well-positioned to benefit in this new era,” Centene chief exec- utive Michael Neidorff told mar- ket analysts during a recent con- ference call. But the experience in some


states suggests pitfalls ahead. A recent report found that 2.7mil- lion children on Medicaid in nine states, most of them states that outsource Medicaid, are not re- ceiving required screenings and immunizations. In Milwaukee, the two biggest provider networks in the city broke ties with Centene, and the state is overhauling its Medicaid contracts for southeast Wiscon- sin, dropping Centene from the mix. The complaint was that the insurer was creating profits at the expense of patient care, a charge the company denies. “We came to the conclusion about a year ago that we were un- satisfied with the quality of care we were getting, given the amount of money we were pay- ing,” said Jason Helgerson, Wis- consin’s Medicaid director. With an expanded Medicaid absorbing at least half of those newly covered under the health- care law, Medicaid HMOs will play an outsize role in managing costs. Some studies suggest that managed Medicaid has, in certain states, slowed the increase in costs without harming care and has even improved care for some conditions. The theory is that in- surers can save states money by reducing avoidable treatments — by monitoring diabetics to keep them from needing dialysis, for example.


But managed Medicaid has also produced a steady stream of controversies. Last year, insurer WellCare agreed to pay Florida $40 million in restitution after it admitted shortchanging children on Medicaid by setting up a sub- sidiary to make it look like Well- Care was spending more on med- ical care than it was. Today, 70 percent of the 48 mil-


lion Medicaid enrollees are in a managed plan. States typically pay insurers a per-person rate, and the insurers, or HMOs, nego- tiate rates with doctors and hos- pitals.


Managed care Most economists agree that


managed care is more efficient than paying doctors and hospi- tals separately for each treat- ment. But it can be hard to find the right balance in Medicaid — enrollees are less likely to push back when needed treatments are withheld, and states are conflict- ed in monitoring insurers they hired to keep costs down. Jane Perkins, legal director of


the National Health Law Pro- gram, said the potential expan- sion of Medicaid HMOs under the new law “is not necessarily a bad


U.S. health secretary Tommy G. Thompson, a Republican who pi- oneered Medicaid HMOs as Wis- consin governor and works for the lobbying firm Akin Gump. For years, Centene had such steady profits in Wisconsin that in 2008, Neidorff compared it to turning on a “milking machine.” But that year, Aurora Health Care, the state’s biggest provider network, cut its contract with Centene after objecting to its re- imbursement rates. Milwaukee’s other big provider network, Wheaton Franciscan, also severed ties with Centene. Simonetti described this as


KATIE DERKSEN FOR THE WASHINGTON POST


Perry Margoles runs the Milwaukee Immediate Care Center, a small clinic providing care that aims to prevent emergency room visits.


The coming Medicaid expansion Under the new healthcare law, Medicaid will expand by at least 16 million people as eligibility is raised in 2014 to a new nation- wide standard of 133 percent of the poverty level. The surge in enrollment will be highest in states in the South and West, where eligibility standards have been stringent.


Percentage increase in Medicaid enrollment 20% or less


21 to 30% WA MT OR NV CA UT AZ CO NM TX AK HI 950,000


Expected enrollment increases in selected states


633,000 647,000


306,000 372,000 NY VA NC GA FL


SOURCE: Kaiser Family Foundation TX THE WASHINGTON POST


“We were unsatisfied with the quality of care we were getting, given the amount of money we were


paying.” — Jason Helgerson, Wisconsin’s Medicaid director


thing.” But, she added, “what gets bad is when they’re taking their per-month, per-member pay- ments and using it for profit, not patient care.”


Although some states manage the program on their own, the majority — among them Virginia, Maryland and the District — con- tract out most of their Medicaid. And now insurers are vigorously lobbying state legislators for more outsourcing, using states’ budget woes as a goad. In Florida, where 950,000 peo- ple are expected to join Medicaid, insurers are pushing for the ex- pansion of a managed-care pilot program despite mixed evidence about its early results. In Texas, they are pushing to expand man- aged care into the Rio Grande Valley, where there are 350,000 Medicaid enrollees even before the new law takes effect. New insurers are moving into the market now dominated by gi- ants such as WellPoint and Uni- tedHealth and companies spe- cializing in Medicaid, such as Centene, Molina and Ameri- group. Centene has swelled to $4 billion in revenue, cracking the Fortune 500 last year, with


more than 1million Medicaid en- rollees in nine states. Neidorff, its chief executive, earned $6 mil- lion last year. The company attributes its suc- cess to shrewd selection of mar- kets and a sophisticated system for managing care. It holds up as an example the care it provides to high-risk pregnant women, mak- ing sure they receive a weekly steroid injection to reduce the rate of premature births. “Years ago, the formula was to


deny care, but that’s not what managed care is about now,” said Centene spokeswoman Toni Si- monetti. “It’s about trying to pro- vide healthier outcomes. . . . Bet- ter health outcomes are the least- costly outcome.” The company has worked hard to encourage lawmakers to ex- pand Medicaid, spending $1.53 million on lobbying in Washington since 2007. Most of the $1 million raised by its politi- cal action committee since 2004 has gone to state-level candi- dates. Its corporate board in- cludes former House speaker Richard A. Gephardt (Mo.), a Democrat who runs a Washing- ton lobbying firm, and former


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SC FL 1.8 million NY 31-40% More than 40%


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MD DC


part of the “naturally occurring tensions” with providers. But Au- rora President Nick Turkal point- ed to a broader issue: Managed care in Wisconsin is falling far short of the ideal, with too little done to get enrollees the primary care they need and keep them out of the emergency room. “The problem with this con- cept of managed care in Wiscon- sin is that it hasn’t really been managed,” he said. The state rebid the contract for southeast Wisconsin with stricter standards on diabetes manage- ment and other care. It selected four insurers that included Uni- tedHealth but left out Centene, which is appealing in court.


One clinic’s situation Whatever the outcome, the


shift toward Medicaid managed care may have helped create at least one casualty, a small clinic on the Near North Side of Mil- waukee. The Milwaukee Immedi- ate Care Center prides itself on providing a level of enhanced pri- mary care that clinic administra- tor Perry Margoles says prevents countless emergency room visits — offering free blood pressure screenings, taking the time with patients coming in with a single complaint to provide a more com- prehensive assessment, with an EKG machine on hand if needed. But Centene long resisted pay- ing the extra $25 fee the clinic charges for patients not assigned to its doctors. And after the clinic closed in 2007 for flood repairs, Centene declined to renew its contract. The clinic had better re- lations with UnitedHealth, but the insurer dropped its urgent- care contract in 2007 and has, Margoles said, been late in paying many claims. Simonetti declined to discuss the situation in detail, saying only that the clinic “did not meet our standards.” A UnitedHealth spokesman did not respond to a request for comment.


Business has fallen by half from three dozen patients a day. Margoles has shifted his three doctors to part time and cut weekly hours of operation from 125 to 55. One recent weekday, several people trickled in, includ- ing Latonya Fortson, a home health aide who is covered by Centene but still comes to the clinic even though it means pay- ing cash — in this case, $20 for a tuberculosis test. “It’s right here in the communi-


ty,” she said. “I like the service.” With the clinic in tax arrears,


Margoles said he is on the verge of closing. He worries about the “collapsing health infrastructure” in the community. And he worries what expansion of managed Med- icaid will mean for other states where regulators are considered less capable than the ones that he has found lacking in Wisconsin. “The Medicaid HMOs are max- imizing their profits at the ex- pense of an underfunded system,” he said. “If they’re pulling this [stuff] in Wisconsin, can you imagine what’s going to happen in other states?” macgillisa@washpost.com


10-YEAR TREASURY DOWN $4.40 PER $1,000, 2.98% YIELD


CURRENCIES $1 = 87.66 YEN; EURO = $1.265


DIGEST EUROPEAN UNION


Lawmakers vote to cap bankers’ bonuses European Union lawmakers


have voted overwhelmingly to cap bankers’ short-term cash bo- nuses from next year, a move that European leaders hope other parts of the world will follow. Members of the European Par- liament voted 625 to 28 in favor of the new rules, which will be- come final when approved as ex- pected next week by E.U. finance ministers. Bankers will be able to get only


BANKING


part of their yearly bonuses from 2011 in cash upfront. The other 70 percent will be held back and paid out if the company performs well. The caps come after an outcry over payments to executives of banks that received huge state bailouts during the financial cri- sis. Some say bonuses encour- aged bankers to take massive risks at the expense of their busi- nesses’ long-term futures. — Associated Press


ABA president to retire at end of year Edward Yingling, president of the American Bankers Associa- tion and one of the industry’s top lobbyists, announced Wednesday that he will retire from his post at the end of the year. “It’s been an emotional day,” Yingling, 61, said. “I’ve been in the hot seat here for 25 years . . . I’ve worked on every major [banking] bill, literally, since the early ’70s.”


Banking was in Yingling’s blood. His father was staff direc-


TECHNOLOGY


tor of the Senate Banking Com- mittee and, eventually, a bank lobbyist. Before joining the ABA, Yingling himself worked on Capi- tol Hill and later at a law firm rep- resenting banks.


Yingling said he plans to con- tinue working on banking issues in some capacity, possibly return- ing to practice law. ABA officials, meanwhile, have created a com- mittee to search for his replace- ment.


— Brady Dennis


THURSDAY, JULY 8, 2010


ERIC THAYER/REUTERS


AT&T is working on fix for iPhone 4


In the latest snag for Apple’s iPhone 4, AT&T said Wednesday


ALSO IN BUSINESS:


 Carlyle Group sued by liquidator over losses: Carlyle Group, the world’s second-largest private- equity firm, was sued by liq- uidators of the buyout company’s defunct mortgage bond fund, saying executives lost $945 mil- lion in overly risky investments. Liquidators for Carlyle Capital Corp. Ltd., a hedge fund based in


Guernsey, Channel Islands, that collapsed in March 2008, con- tend that Carlyle directors turned a blind eye to questionable in- vestments in residential mort- gage-backed securities and failed to stop the loss of all the com- pany’s capital, according to the lawsuit filed Wednesday. — From news services


Post Tech CECILIA KANG Excerpt from voices.washingtonpost.com/posttech


Cellphones help minorities bridge the digital divide African Americans and Hispanics continue to be among the most


avid users of the Internet over their cellphones, according to a report released Wednesday by the Pew Research Center. And low-income groups are the fastest adopters of the mobile Web, showing that wireless technology could help bridge a digital divide that has brought the Internet disproportionately to wealthier communities. According to the Pew Internet & American Life Project, 64 percent of African Americans surveyed in May said they access the Internet over their laptop computer or mobile phone, an increase from 57 percent in 2009. That compares with 59 percent of all adults who said they accessed the Web wirelessly through laptops or cellphones, up from 51 percent last year. Hispanics were the biggest users of data applications on cellphones and laptops, with about 83 percent sending or receiving text messages, compared with 79 percent of all Americans and 68 percent of whites. And 47 percent of Hispanics said they send or receive e-mail on mobile devices, compared with 41 percent of blacks and 30 percent of whites. The survey also found that poorer households increasingly see wireless devices as their gateway to the Internet. Forty-six percent of households earning less than $30,000 a year said they used data services on wireless devices, up 11 percentage points from 2009.


that a software defect in its net- work is limiting data uploads from the phone in some areas, slowing the transmission of con- tent. AT&T said a fix is coming.


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