As States Consider Program Expansion, Focus Turns to Florida Medicaid Cure

Published November 28, 2012

In the wake of the presidential election, state governors must decide whether to take federal funding to expand their Medicaid programs. The U.S. Supreme Court decided in June states can reject the Medicaid expansion without losing access to their previously negotiated matching funds. According to Louisiana Gov. Bobby Jindal, incoming head of the Republican Governors Association, states are deciding whether to use the Court’s decision as political leverage to gain more flexibility to reform their programs.

“There are things you can do with premium support within the Medicaid program that can make it a lot more flexible, market-based and more efficient and conducive to the needs of individuals,” Jindal recently told reporters in Las Vegas.

Chief among reforms that have shown improved quality of care and cost savings is Florida’s pilot program, highlighted by the Foundation for Government Accountability (FGA) as the “Medicaid Cure.” A little more than six years ago, Florida Gov. Jeb Bush established a pilot program in five large counties in Florida with a total overhaul of Medicaid. Under the pilot program, more than 300,000 Medicaid recipients—bigger than the total programs in 17 states—were given the choice of a wide variety of plans created by multiple insurers.

“We never could estimate the costs of a fee for service Medicaid program,” Bush said. “All the incentives were aligned that would create a health insurance system that would not deliver the quality of care we wanted, didn’t create the consumer support that people would want, and always seemed to come in at a bigger number than what was budgeted.”

Premium Support for Medicaid

According to Bush, a Republican, the program resembled what is now referred to as a “premium support” model, in which Medicaid recipients were given a range of premiums and plans to choose from.

“In effect we created a range of premiums based on sound actuarial history for Medicaid patients,” Bush said. “They’d have choice counseling, so they had an array of choices to choose from, with rewards for preventative health [care]. We had Medicaid costs go down significantly. Our health care outcomes improved. Medicaid beneficiaries were more satisfied with the choices they had, and we had budgetary certainty on cost to fund other priorities of the state, such as education.”

Bush’s approach allowed the state to keep costs flat while giving the insurers an incentive to create more tailored plans depending on need.

“A lot of providers like the system the way it is. So if you move to a multi-tiered premium system, the incentives to deal with sicker people become higher, and the benefits of trying to attract healthier people to your plans becomes less,” Bush said. “We wanted to use an actuarially sound system of offering specialty plans to people in the Medicaid system instead of that one-size-fits-all approach.”

In the program, Medicaid recipients get to choose among a dozen different plans with different offerings. The plans compete on benefits, copays, and provider networks, and offer risk-adjusted capitated rates, allowing for better matching of payment to risk to prevent insurers from avoiding sick people.

Widespread Success

The pilot program showed a much higher level of engagement from Medicaid recipients, with more than 70 percent choosing a plan other than the default one. Patients also get access to seven extra services not covered by any other Medicaid program, such as over-the-counter medication, dental coverage, and vision coverage. And they have a cash incentive for healthy behavior, including quitting smoking, which 64 percent of people in the program utilize.

The program has achieved results. According to the Florida Agency for Health Care Administration, the health outcomes are 64 percent better than under a managed care system, with 83 percent higher satisfaction from those in the program. Florida is currently saving roughly $118 million a year on Medicaid in the five counties, with better outcomes for the people in it. The state has been approved to embark on a statewide expansion of the program under current Gov. Rick Scott (R), and according to FGA it expects to save almost a billion dollars per year.

“That’s the Florida story, and I hope other states embrace their version of a similar kind of approach that will yield a far better result than basically abdicating our responsibility at the state level to allow Washington to dictate how this works,” Bush said.

Internet Resources:

Foundation for Government Accountability: The Medicaid Cure