Saddled with gaping budget deficits, the Florida Legislature plans to turn almost the entire Medicaid program over to managed care.
Health care for the poor consumes a big chunk of the state budget. Managed care companies promise less waste and fraud — an understandable concept when providers falsify bills and parents use emergency rooms to treat sniffling children.
"Medicaid is irretrievably broken and we need to start over,'' says state Sen. Joe Negron, R-Stuart, who is spearheading Medicaid reform. "We need to insert market forces into the process.''
But swept along in this broad transformation is one slice of Medicaid that is remarkably free of waste and fraud. It has trounced managed care for years in side-by-side cost comparisons.
Nevertheless, the Legislature intends to eliminate these efficient programs — a move that could easily cost Florida hundreds of millions of dollars.
At stake is long-term care for old and disabled people too frail to live alone. It currently costs a little over $3 billion or about one-sixth of Medicaid's budget.
Negron and others think private managed care can save money by diverting people from nursing homes into assisted living or home care with aides.
It seems logical. Assisted living and home-based care cost Medicaid between $1,500 to $2,000 a month, compared to $5,000 or more for a nursing home.
Under the new system, everyone eligible for Medicaid would enroll in a managed care company, which might be a for-profit HMO or not-for-profit consortia of local care providers. The managed care company would receive a fixed stipend per client, then hire aides to give baths, workers to do light housework — anything to keep people out of expensive nursing homes.
"After five years of diverting people from going in, we will see tremendous drops in enrollment in nursing homes,'' says Michael Garner, of the Florida Association of Health Plans. "Instead of 65 percent (of Medicaid clients) in nursing homes, we expect to see 35 percent.''
On closer examination, the plan has two big pitfalls:
• It's based on the erroneous assumption that frail people usually end up in nursing homes if they don't get assisted living or care at home. In fact, few do.
Compared to most other states, Florida Medicaid spends very little per capita on community-based services by capping spending — and gets away with it. Lack of help does drive a few people into nursing homes, but most die at home or do anything to stay out of an institution.
The new system would bring community services to everyone eligible for Medicaid. This could easily boomerang if nursing home usage fails to drop enough to cover the added cost.
• Even if expanding community-based services does work, even if nursing home use does drop enough, Florida doesn't need managed care to pull off that trick. The state could simply beef up its current array of services at much less cost.
"I've seen what we do in Florida. It's efficient and it works,'' says Nan Rich, the Senate's Democratic minority leader. "Why would we switch to something when we know that a certain percentage of our money will go to the bottom line of managed care companies?''
Florida Medicaid has three main programs that deliver assisted living and home-based care to old and disabled clients.
Two fee-for-service programs have been run for decades by a hodgepodge network of not-for-profit agencies like Hillsborough County's Aging Services department, Gulf Coast Jewish Family Services and Pasco's CARES.
Case managers dole out services sparingly and keep bills low.
A 2010 study by the Legislature's office of policy analysis showed that clients in one fee-for-service program cost Medicaid $1,260 a month for all expenses, including doctors and hospitals. The other fee-for-service program cost $1,452.
Meanwhile, a managed care alternative called Nursing Home Diversion cost Medicaid $1,947 per client — 35 to 54 percent more.
Earlier studies by the University of South Florida found similar disparities.
To save money, the policy analysts said, Florida should beef up the two fee-for-service programs, the same ones the Legislature now proposes to eliminate.
Nursing Home Diversion stumbled in part because long-term care lacks the inefficiencies that managed care can rectify in other Medicaid arenas. Long-term care clients and providers don't determine care and costs; case managers do.
Unable to shave fat, managed care couldn't save the state money while also making a profit.
Another failing was managed care's high reimbursement. The insurance lobby proved adept at persuading the Legislature to maintain generous stipends, keeping at least 20 percent for overhead and profit.
Both House and Senate bills contain provisions that would bring those profit margins down significantly, but rising caseloads could swamp a total managed care system.
Nursing home care is usually a Medicaid "entitlement.'' If you meet financial and physical qualifications, the state must pay.
Not so with community-based programs, which are capped by the budget. When money runs out, enrollment stops.
In February, the three main community-based programs served 31,000 people, with 6,000 on waiting lists.
The proposed system would put everyone eligible for Medicaid on a managed care plan. That would immediately bring assisted living or home-based services to those 6,000 people now on waiting lists, plus others who could quickly follow.
Unlike other Medicaid clients, the long-term care population need not be poor. Married people can qualify with incomes of $25,000 or more, a house, a new car and over $100,000 in the bank. That's to prevent nursing home bills from impoverishing a healthy spouse at home.
Budgetary caps and waiting lists now discourage the middle class from seeking help. By accepting all eligibles, however, the managed care system would open Florida's purse strings to thousands of new clients.
The Senate bill addresses caseload creep by mandating that the new managed care system must save Florida at least 7 percent a year. That is compared to existing spending, Negron said.
If that target is not met, waiting lists could resume for community-based services. But then, Florida would be worse off than it is now. Nursing homes would still be the default venue for long-term care. Home-based services would still be capped. But the more efficient fee-for-service network would be gone.
"The bill simply mandates levels of savings in a population where most people don't believe that level of savings exist,'' says Tony Marshall, a nursing home lobbyist. "It's difficult to see how you get there.''
Maybe you get there through Phoenix.
Until 1987, Arizona provided no long-term care. County health departments warehoused poor people in nursing homes.
Then Arizona started a Medicaid system from scratch, using managed care to create assisted living and home-based programs where few had previously existed. Now, only 35 percent of Arizona's long-term care clients live in nursing homes — a success story Florida managed care advocates are fond of quoting.
But drawing conclusions from other states can be tricky. Medicaid eligibility, demographics and infrastructure varies too much.
Legislators don't talk much about New Mexico, where managed care costs have risen more quickly in three years than anyone expected. Or about Oregon, where Medicaid's fee-for-service system spends the lowest percentage of dollars on nursing homes in the country.
In Florida, nursing home usage is already low — 2.3 percent of residents over 65, compared to the national average of 3.7. Among other things, Florida long ago capped its nursing home bed count with dramatic results. The over-65 population grew 18 percent over the last decade, but Medicaid's nursing home population dropped from 49,000 to 42,000.
Low usage leaves Florida nursing homes with the sickest of the sick. They may not be safe elsewhere, even in assisted living homes, many of which lack 24-hour monitoring.
But the Legislature is proposing a system that won't work unless it can squeeze that nursing home lemon a lot tighter.
Most important, Florida isn't starting from scratch like Arizona. Florida has a long track record of providing community-based services, and in this state, managed care has never matched the efficiency of its traditional, fee-for-service competitors.
"For 20 years, we have been quite good at identifying people who need services with the lowest cost system you can feasibly imagine, says Larry Polivka, direct of the Claude Pepper Center, a Tallahassee think tank on aging. "Not-for-profit agencies have been doing that all along.''