The private health plans that cover Florida's poorest residents are seeking more money from the state.
The plans say they need a 12 percent rate increase to offset the rising cost of prescription drugs and an uptick in doctor's visits.
But state officials have been reluctant to approve the rate increase, which could wipe out any savings Florida stands to gain from privatizing Medicaid in 2014.
In a scathing letter to the health plans sent Friday, state Agency for Health Care Administration Secretary Elizabeth Dudek said some of the plans had been paying hospitals more than is legally allowed.
"By setting higher contracting rates for hospitals than what is allowed for in state law, plans are likely jeopardizing their profitability, which could cause them to come back to the agency for higher state rate payments — increasing the cost to taxpayers for providing the same services," Dudek wrote.
The two sides must reach consensus soon. The new rate year starts Sept. 1.
Florida's $23 billion Medicaid program serves about 3.5 million low-income residents. Most of the plans are operated by private insurance companies that receive a set amount from the state for each recipient. The amount is adjusted based on age and certain medical conditions.
The push to privatize Medicaid in Florida dates back to 2006, when then Gov. Jeb Bush launched a pilot program in Broward and Duval counties. It went statewide last year.
AHCA used a competitive bidding process to award five-year contracts to health plans across the state. Deputy Secretary for Medicaid Justin Senior said the plans were offering a broad array of services and had increased the number of physicians participating in the program. What's more, the revamped program was on track to reduce costs by 5.1 percent per member per month.
But earlier this year, the plans raised concerns that the rates were inadequate. They asked AHCA and the Legislature for a midyear adjustment — a request that was denied.
The Florida Association of Health Plans is asking for a 12 percent increase going into the 2015-16 rate year. President Audrey Brown said the increase is needed because prescription drug prices are increasing, and more people are accessing health care services than expected.
"The plans did not expect to make any money the first year of existence," Brown said. "What was not expected was the substantial losses that the Medicaid plans are seeing."
Senior said AHCA was surprised by the request, in part because the first-year rates were developed using the plans' own proposals.
"In a year where the costs are unexpectedly high, if you capitulate to giving more money, what happens when the costs come in significantly lower?" he said.
The state has offered to increase rates by 6.4 percent, but conversations are ongoing, Senior said.
AHCA is exploring other ways the plans can control costs.
In her letter last week, Dudek said "several plans" reported average hospital contracting rates greater than 120 percent of the posted Medicaid rate — a violation of state law.
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She has asked the Medicaid health plans and hospitals to certify that none of their contractual arrangements exceed the limit.
"Excessive reimbursement levels in hospital contracts are unsustainable and cannot be maintained," she wrote.
Contact Kathleen McGrory at email@example.com or (727) 893-8330. Follow @kmcgrory.