Illinois Moving 2.2 Million Medicaid Patients to Managed Care

Published May 4, 2015

Illinois is sending 2.2 million of its 3.1 million Medicaid patients to managed care, a system where the state pays a fixed amount for each patient instead of reimbursing providers for each test and treatment.

Some patients are reporting difficulties keeping their doctors and confusion navigating plans under the new payment structure.

Naomi Lopez Bauman, director of health policy at the Illinois Policy Institute, says the key to success for Illinois will be for the program to let market forces work unimpeded.

“Competition for patients among insurance carriers is vital,” Bauman said. “Where you’re seeing more success and a better approach to Medicaid managed care is where you have multiple competitors in each geographic area, not where it’s just one provider. This will be a big key for Illinois. Is there robust competition amongst these plans, or is it going to be the worst example of managed care?”

More Reform Needed

When there are too few companies competing, Medicaid managed care can devolve into a source of political favors and insider deals for territory, Bauman says.

“We always have to watch out for this, especially here in Illinois,” Bauman said.

Bauman says some of the legitimate complaints against managed care are that it often leads to too much rationing, undermines care, and does not actually save much money.

“You can look at this as a possible half-measure to solve some of the problems in Medicaid, but it falls far short of what would be needed to fundamentally reform health services for the needy in our state,” said Bauman.

Ohio vs. Illinois

Bauman says a lot of states offer better managed care systems than the one offered by Illinois. One of those states is Ohio, which has more robust competition among plans.

“Ohio has a fairly smooth managed care market now, but [it] experienced some bumps. Illinois will experience similar bumps, especially during the rollout phase,” said Rea S. Hederman, Jr., executive vice president and chief operating officer of the Buckeye Institute.

Hederman says even the best-run Medicaid managed care program is like a well-maintained bicycle with square wheels.

“The design of this bicycle and Medicaid is flawed, and you will never have a smooth ride,” Hederman said. “Managed care works best if there are competitors in the Medicaid market to help control costs, or in the case of the bicycle, round the wheels.”

Problems with Eligibility

Medicaid is plagued by fluctuating incomes among those likely to be served by the program, Hederman says. Providers and insurers often can’t tell whether a person should be on the program or not.

“It is no surprise that plans will be unable to determine eligibility,” Hederman said. “The churning process in Medicaid has long been a concern for policy experts. Medicaid and Obamacare anticipate that people have perfect future knowledge of their income and job status. An unexpected raise or layoff will of course affect eligibility.” 

Cost-Reduction Factor

Hederman says managed care is seen as a better form of administering health care because organizations have an economic incentive to provide only the most effective care. A fee-for-service plan can reward too much medical care and lead to growing health care costs. Competition between plans should help reduce costs and improve quality.

“Managed care is superior to fee-for-service because of this. However, Medicaid managed care is not the end solution but a Band-Aid for the overall problem of Medicaid’s rapidly rising budgetary costs, which are squeezing out other programs,” said Hederman.

Loren Heal ([email protected]) writes from Neoga, Illinois.