A plan by Kansas state officials to move virtually all of the state's Medicaid recipients into managed care organizations offers a glimpse at a national trend, with potential rewards and risks for insurers mulling MCO contracts in growing Medicaid markets.
In early August, after incorporating an opt-out exemption for Native American tribal governments, the Kansas Department of Health and Environment (KDHE) re-submitted a 1115 Medicaid waiver application to the Centers for Medicare & Medicaid Services.
Republican Gov. Sam Brownback's administration first unveiled the plan, called KanCare, last November and, amid the politics of the Affordable Care Act, has been touting it as a strategy to reduce rising costs to taxpayers while improving care.
"The current Medicaid program is financially unsustainable and provides fragmented services to our most vulnerable Kansans who deserve far better care," KDHE Secretary and State Health Officer Robert Moser, MD, said in a press release.
"KanCare will facilitate improved care coordination and allow us to offer additional services while also slowing the cost growth over time," said Moser, a family physician.
KanCare will place nearly all of the state's roughly 350,000 Medicaid and CHIP recipients in MCOs with three companies, Amerigroup Kansas, Sunflower State Health Plan and United Healthcare of the Midwest.
If approved, KanCare will cover medical, behavioral health and long-term care for all Medicaid recipients starting January 2013. Long-term services and supports for individuals with developmental disabilities will launch in January 2014.
[See also: Florida pushes forward with plan to shift Medicaid to managed care]
The three healthplans will have to cover all currently-available Medicaid services, paying providers at least current rates, and also offer preventative dental benefits for adults, heart and lung transplants and bariatric surgery -- services not currently available under Kansas Medicaid.
In the first year of the contract, the MCOs must meet six performance standards to receive the full payments. According to an analysis by the Kansas Health Institute, the per-person, per-month rate that the state negotiates with each company will be less than the historical cost of Medicaid, and the state will withhold 3 percent of the payments for performance incentives.
Scott Brunner, a Kansas Health Institute analyst, said Kansas' 1115 Medicaid waiver application isn't unique. Nor is the use of MCOs. About 85 percent of Kansas Medicaid recipients are receiving managed care services, and by CMS's last count in 2009 72 percent of Medicaid recipients nationally were receiving some form of managed care.
But Kansas' application "is the only one that proposes putting all Medicaid populations and all services into capitated managed care," Brunner said. "The concept itself isn't new, but the extent of adoption of managed care and care coordination is unique."
"Kansas is embarking on arguably one of the more comprehensive approaches," said Maureen McDonnell, Amerigroup's VP of external communications.
And McDonnell added, "It's certainly a trend we're seeing in a lot of existing markets and across the country."
With 2.7 million members in Medicaid and CHIP in 13 states, Amerigroup is one of the largest insurers of publicly-funded managed care plans. Earlier this summer, WellPoint announced plans to acquire the company for about $4.9 billion. When the acquisition is complete early next year, WellPoint will have more Medicaid members than any other private insurer, with approximately 4.5 million members, and will operate in 19 states.
[See also: Major Medicaid move]
As more states consider transitioning Medicaid into managed care programs, the Medicaid-Medicare dual eligible population is getting more attention from insurers.
"The dual-eligible expansion opportunity is tremendous and was a driving force for this transaction," said Angela Braly, chair, president and CEO of WellPoint, in a conference call announcing the Amerigroup acquisition.