Is Maryland Following in TennCare’s Wake?

Published May 31, 2016

Soaring administrative costs, rich benefits, ineligible enrollees, general health care inflation, and underfunding have combined to create a $150 million pool of red ink around HealthChoice, Maryland’s Medicaid program. Substantial cutbacks in state-run medical care for 500,000 state residents are anticipated.

The same scenario has crippled TennCare, the Tennessee Medicaid program. In late September, Tennessee Governor Don Sundquist unveiled plans to completely overhaul the program. (See “High-Risk HIP Will Return to Tennessee,” Health Care News, October 2001).

Maryland’s funding shortfall, detailed in a legislative report released in October, is straining a range of state-run health programs. The troubles coincide with financial problems in the state’s mental health system, which analysts agree is heading toward a major crisis.

State Senator Christopher Van Hollen Jr. (D-Montgomery), vice chairman of the Senate budget committee, told the Washington Post, “We saw this as a major concern last year, and this year we’re looking at something even more serious. It’s fair to say the situation is dire.”

Underestimates Cause Underfunding

A convergence of factors is being blamed for the state’s Medicaid debt. The money crunch was to be the subject of a report originally scheduled for release in September.

According to David Romans, a legislative budget analyst, the report finds Governor Parris N. Glendening (D) underestimated both the number of people who would enroll in the state-run HealthChoice program and the amount those patients would spend for treatment and medication.

Calls to Glendening’s media office seeking comments for this story were not returned. One question Health Care News would like to ask: How much of the state’s tobacco settlement had been directed to health care issues, and how much was instead re-directed to other budget items?

Glendening has not yet signaled how he would resolve the debt, but lawmakers said it will not be an easy fix.”We don’t have a lot of money just laying around,” said House Speaker Casper R. Taylor Jr. (D- Allegany). Several states, including Tennessee and its beleaguered TennCare program, are experiencing shortfalls in Medicaid funding.

Unintended Consequences

As one of the architects of Maryland’s public health care system, Taylor has favored far-reaching coverage. He helped create a system designed to direct impoverished Marylanders into special managed care programs. Those programs are then reimbursed at capitated rates set by the state, with a matching contribution from the federal government.

A key question is whether the state will be forced to make cuts that would directly affect medical care. While some believe painful cuts are inevitable, the Glendening administration has argued targeted cuts can gradually pay off the debt without depriving patients. Taylor, by contrast, thinks the state has only two choices: Either find more money for health care programs, or make painful program cuts.

Low-Balling the Numbers

The governor included only enough money in the current budget to cover 428,000 enrollees. The actual number is now closer to 458,000. In a downturning economy, expectations are for further increases in demand.

As the cost of health services has increased, so has the level of complaints from managed care companies, who claim the reimbursement payments they receive from the state are well below actual costs. Delegate John A. Hurson (D-Montgomery) worries the five-year-old program is about to collapse because it has not been adequately funded.

After holding a hearing for the managed care companies last week, Hurson and Senator Thomas L. Bromwell (D-Baltimore County) wrote the governor, urging him to increase reimbursement rates or risk seeing companies withdraw from the program. If enough plans drop out, Hurson said, it could mean “chaos” for Medicaid patients, who would have to find doctors willing to accept direct payment from the state, often at very low rates.

The state’s reimbursement schedules are so outdated that a cardiac surgeon would receive only $80 for a heart catheterization. A review of heart disease-related costs suggests no doctor on the East Coast would take $80 for that procedure. According to the American College of Cardiology, the average cost for treating heart disease is a little over $4,000.

Mental Health and Long-Term Care

In Montgomery County, the largest mental health provider, CPC Health Inc., recently went bankrupt and closed its 91-year-old Chestnut Lodge Hospital. Other clinics are now straining to meet their payrolls. Clinic operators told county officials last week an emergency infusion of $870,000 is needed to keep facilities open.

Baltimore County health officials met with owners of a dozen area treatment centers last week to plea for help in treating 1,600 patients who will be abandoned by Granite House Inc. The financially strapped company lost money on most patients and will shut down two of its largest clinics.

Legislative analysts estimate mental health facilities are carrying more than $30 million in debt, despite a last-minute, $30 million infusion of cash in the spring.

Similar worries recently struck the state’s nursing homes, which have cost the state at least $33 million more than was budgeted. Fifty of the state’s 250 nursing care facilities are in bankruptcy proceedings.