After taking losses of $40 million over three years, BlueCross BlueShield of Western New York is withdrawing from the Empire State's Medicaid managed care program in six of its eight counties of operations.
The insurer, a division of HealthNow New York, withdrew from the other two counties last year.
"The premium dollars we receive from the state continue to be insufficient to cover the medical and pharmacy claims we pay for our members' care," wrote Stephen Swift, executive vice president and chief financial officer of BlueCross BlueShield of Western New York.
"After considerable deliberation and due diligence, BlueCross BlueShield of Western New York has made the decision to no longer offer Medicaid programs in these six counties effective October 31, 2014," Swift wrote.
The withdrawal of BlueCross BlueShield of Western New York will affect 53,000 Medicaid beneficiaries in six counties surrounding greater Buffalo. They'll be transitioned to other Medicaid plans offered by other insurers in various counties, including Independent Health, Catholic Health Plan, UnitedHealthcare and WellCare.
Those other insurers, though, will still face the same financial pressures that factored large in BCBSWNY's decision to leave the program -- what CFO Swift called "chronic underfunding by New York state."
HealthNow New York's other insurer, BlueShield of Northeastern New York, stopped participating in Medicaid managed care back in 2007. Last fall Excellus BlueCross BlueShield decided to exit the Medicaid program in 25 counties, continuing in just four counties (four of the six that BCBSWNY is leaving), after posting a $100 million loss on the program in the 2013 fiscal year alone.
As BCBSWNY's Swift put it, the company was "faced with an unsustainable model that left us no choice but to proceed with a responsible exit," because "we cannot continue to incur losses of this magnitude, which ultimately must be funded by other lines of business."
While Excellus has continued participating in the Children's Health Insurance Program, BCBSWNY is exiting that program, as well. BCBSWNY intended to remain working in CHIP, "however the state did not permit this to occur," said HealthNow New York's corporate relations director Julie Snyder.
Medicaid evolving
New York's Medicaid program has long been plagued by fraud and abuse problems and has seen mixed financial results from managed care, for both insurers and taxpayers. While recent Medicaid reforms have brought down the cost curve, state health leaders have still been looking for long-term solutions -- which they think they've found in a new waiver program that may benefit insurers in the long-run, if not immediately.
The bulk of the $8 billion allocated in the waiver, $6.4 billion, will be used in the Delivery System Reform Incentive Payment program targeting a 25 percent reduction in avoidable hospitalizations over five years, with grants for public hospital systems and safety net providers to with primary care physicians, skilled nursing facilities, home care agencies and behavioral health centers.
Ultimately, the goal of the DSRIP program is a system of performance-based payments through Medicaid managed care plans, although managed care plans -- like Excellus and BCBSWNY -- may not have much opportunity for input.
"We did not see a way to participate in DSRIP that would significantly mitigate the losses," HealthNow's Snyder said. "The funding is directed at the provider network," and payers "don't get any significant funding directly, she noted. "Health carriers would see ancillary downstream benefits in quality of care and unit cost. However, that is 3-7 years down the road because DSRIP is just getting started and is a five year program."