Florida's statewide privatization of Medicaid has barely reached its first anniversary and already the rate-setting bait and switch has shifted into high gear. Private managed care companies that now control health care for 3.5 million Floridians have asked for a 12 percent payment increase for the 2015-16 fiscal year, which would more than wipe out savings that insurance companies promised when they lobbied to take over Medicaid. With Florida health officials wisely resisting the increase so far, taxpayers can only hope that Gov. Rick Scott and lawmakers will remain firm when the Legislature meets in regular session in January and the lobbying pressure for higher rates intensifies.
The theory behind privately run Medicaid sounds plausible and plays well to conservatives who believe the private sector always can be more efficient than government. And, in fact, the state's previous fee-for-service Medicaid approach did create some waste when poor people used emergency rooms to treat minor ailments or otherwise over-used services. Insurance companies argued that they could save the state money and still make a profit by managing client care for a flat monthly stipend. In reality, Medicaid managed care in Florida has largely left a trail of empty promises propped up by naked political muscle.
A five-county pilot project that covered poor adults and children was plagued by persistent complaints of inadequate care and suspect savings. Worse, a long-running pilot program for frail elderly people, called Nursing Home Diversion, proved to be manifestly more costly than similar fee-for-service programs administered by the state. At one point, diversion managed care companies spent only 72 cents on the dollar on client care, even as they requested rate increase after rate increase. When officials at the Agency for Health Care Administration tried to reject the rate increases as unjustified, insurance industry lobbyists went over the agency's head to the Legislature to keep the high payments flowing. Despite the dubious results of the pilot projects, Scott and the Republican-controlled Legislature plowed ahead last year and turned almost the entire Medicaid program over to private manage care.
Now, after promising savings, the insurance companies are coming back to the well for a 12 percent rate increase in only the second year of privatized Medicaid, blaming high prescription drug expenses and more people accessing medical services than the industry expected. AHCA officials are offering a 6.4 percent increase. As deputy AHCA administrator Justin Senior noted, expenses may turn out to be higher than expected in some years and lower in others. If companies don't offer refunds in good years, then they should shoulder the risk of bad years. If the past is any guide, however, managed care rates may shift to the political arena, where campaign contributions can outweigh objective economic analysis. So the very Republican lawmakers who transformed Medicaid into a privately run managed care system, who then criticize Medicaid as a failure to justify refusing federal Medicaid expansion money, now will face the prospect of spending more money on the system they created and then berate.
The state created this situation, so the Scott administration and Legislature should stick by the stated principles of the privatized Medicaid system they embraced. If the system really is more efficient than its government-run predecessor, let the insurance companies prove it.