Ohio Budget Shenanigans:

Medicaid Managed Care Plans Try to Protect Themselves from Accountability for Quality; Will the Ohio General Assembly Go Along?

Periodically during the budget process, State House reporters have asked me why the managed care plans seem so happy with the budget. At least a part of the answer is found in language that first appeared in the Ohio FY 2012-2013 budget, as passed by the House of Representatives.

One of the bedrocks of health care reform is that we must change how we pay for health care. The current “fee-for-service” system pays for volume, instead of health outcomes, leading to the troubling estimate that 30-40% of current health spending provides either no value or negative value. Thus, the Kasich administration and consumer advocates agree with national experts that we must start rewarding better patient outcomes and population health – and reduce payments for lower than expected results.  

Thus, consumer advocates – and, apparently the administration – were surprised to discover a new provision in the budget bill (HB 153), as passed by the House, that would insulate the Medicaid managed care plans from financial incentives to improve their patients’ health outcomes.  

For several years, 1% of the premiums paid by the state to the Medicaid MCOs were at risk for performance benchmarks. In other words, if an MCO did not achieve those quality benchmarks, they didn’t receive that final 1%. 1% is an awfully small amount to have at risk for meeting quality standards. If we truly want to incentivize MCOs to improve patient outcomes, the state may want to put considerably more than 1% of premiums at risk.

However, the new language “clarifies [sic] that the sum of all withholdings for the Managed Care performance program shall equal no greater than 1% of total premiums.” In other words, the Medicaid Managed Care Plans – capably represented by the Ohio Association of Health Plans – have protected themselves from being held financially accountable for making their enrollees healthier or reducing avoidable health expenditures (such as avoidable emergency room visits or hospital admissions). This provision, which appears to have survived in the Senate, completely undercuts the administration’s ability to create incentives for the Medicaid Managed Care Plans to achieve better care at lower costs.

The challenge with efforts to provide better care at lower costs is that one person’s savings is another person’s revenues. As the Kasich administration rightly pointed out in their budget rollout, if we are going to reduce Medicaid spending, we have to look at where the big spending is. With Ohio paying $6 billion or more to the Medicaid MCOs, it’s time to hold them accountable for performance measures – just as we must do with hospitals and other providers. The 1% cap on MCOs’ pay for performance exposure is the wrong medicine for what’s ailing Medicaid.