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70 cents on the dollar is no bargain for Florida taxpayers

For more than a decade, private managed care has dominated Medicaid's home-based services for the elderly.

It's been a tragic waste of money and lives.

As the managed care lobby portrayed it, the Nursing Home Diversion program sounded like a great bargain:

Give us Florida's frail, older people who are candidates for a nursing home. Pay us less than the nursing home rate and we will care for them in assisted living homes, or we will bring in aides, meals and other services so they can stay in their homes.

If clients eventually land in the nursing home, we will pay those bills too, which gives us a big incentive to keep people in cheaper settings.

The Legislature adores the idea. Over the last six years, managed care's funding has jumped tenfold.

But saving on nursing home bills misses the point.

What the Legislature seems to ignore is the likelihood that less expensive fee-for-service programs can do the job more efficiently.

A 2007 study by the University of South Florida found that managed care was costing Medicaid $600 to $900 more per client per month than two comparable fee-for-service programs.

It's like feeling smug that you just bought a pair of Levis for 20 percent off at Macy's when down at the end of the mall, Sears is selling them for 40 percent off.

For one thing, it turns out that managed care clients who eventually do need nursing homes often drop out of managed care and return to traditional Medicaid at taxpayer expense. That way, they can pick from a wide array of homes rather than limiting themselves to homes on a managed care network.

The managed care companies collect premiums for being "at risk'' of paying nursing home costs, but avoid paying some of those costs at crunch time.

Another windfall occurred in 2006 when Medicare took over paying for Medicaid's prescription drugs. That took a big expense that managed care companies once had to pay out of their monthly stipend and shifted those costs to Medicare.

It also reduced the cost of the traditional fee-for-service programs by about $300 a month, which made them even less expensive compared to managed care.

State officials have reduced managed care's monthly rates a few times, trying to bring them more in line with the costs of other programs. But a huge gap still remains between what the state shells out for Nursing Home Diversion and what clients receive in services.

In 2006, managed care companies spent only 66 cents on the dollar for client care, according to the state's actuarial reports. In the first quarter of 2008, that rose to 70 cents on the dollar.

That rest went to staff and executive salaries, overhead and profit.

Compare that to the traditional Aging and Disabled Adult (ADA) and Assisted Living for the Frail Elderly (ALE) programs. They are run by not-for-profit agencies and provide the same basic at-home and assisted living services that managed care does.

The ADA and ALE programs spend about 97 to 98 cents of every dollar on client care.

This is not a total apples-to-apples comparison. Managed care incurs some expenses the other programs don't. Managed care serves a somewhat frailer clientele.

But these differences cannot begin to explain managed care's high cost to Medicaid, compared to ADA and ALE. Keeping 30 cents on the dollar does explain it.

State officials hope to reduce managed care's take to more like 10 percent by moving to a cost-plus system of reimbursement. No more flat rates.

But if that's the case, legislators need to ask themselves: What's the point of managed care?

If all home-based programs are going to run on a cost-reimbursement basis, why should we funnel tax money through private companies who promised efficiency but turned out to be more costly for years?

Hundreds of Floridians were driven into nursing homes or their graves because the Legislature promoted the least efficient program.

Maybe further rate cuts, market forces and program tweaking will improve managed care's efficiency going forward.

But don't bet on it.

Political dynamics make social programs a bad fit for private enterprise. Managed care companies spend millions of dollars on lobbyists and campaign contributions to maintain their high rates of return.

The Legislature and the governor should grow a spine and say enough is enough.

Managed care has had 10 years to prove its worth and what we get is 70 cents on the dollar.

It's time to pull the plug.

Somebody has to be accountable for a decade of waste.

Stephen Nohlgren can be reached at (727) 893-8442 or

Private managed care gets the bulk of funding

Florida has three main programs to keep people out of nursing homes.

• The Nursing Home Diversion program is private managed care.

• The Aged and Disabled Adult and Assisted Living for the Frail Elderly programs are traditional fee-for-service programs run by not-for-profit agencies.

• Managed care, which is more expensive, has received a 10-fold boost in funding over six years, while funding for the traditional public programs stagnated.

70 cents on the dollar is no bargain for Florida taxpayers 02/26/09 [Last modified: Monday, March 2, 2009 4:21pm]
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