Medicaid has weak HMOs
Red ink troubles Ohio plan

Wednesday, December 16, 1998

BY TIM BONFIELD
The Cincinnati Enquirer

A puddle of red ink at a Medicaid HMO has thousands of Hamilton County residents facing a dive into red tape.

State insurance officials will hold a hearing Jan. 21 in Columbus to consider an order to suspend or shut down Health Power HMO Inc., a Columbus-based Medicaid health plan facing financial troubles. If Health Power's Medicaid service closes, it would create an immediate problem for nearly 14,000 people covered by the plan. Long term, the situation raises deeper questions about the future of Ohio's Medicaid managed care program.

More than 35,000 people have joined Medicaid HMOs in Hamilton County, most of whom were required to do so as a condition of getting welfare checks. But now, the HMOs are fleeing the county.

The HMOs claim they cannot profit under low state payment rates and aggressive welfare reform efforts that have slashed the number of Medicaid-eligible adults in Hamilton County.

"We're taking a step backward here," said Cincinnati Health Commissioner Dr. Malcolm Adcock. "It would be a real loss if we lost Medicaid managed care in Hamilton County. Somebody needs to be looking at this very quickly."

Gov. George Voinovich's administration launched the mandatory Medicaid HMO program several years ago in hopes of stemming years of rising Medicaid costs. Supporters also predicted that Medicaid HMOs would increase coverage for uninsured people and increase the number of Ohio doctors willing to see Medicaid patients.

Now, incoming Gov. Bob Taft's administration has a problem. So many health plans have dumped Hamilton County, it could become the first of Ohio's 10 counties with mandatory managed care programs that cannot be mandatory anymore.

Since 1995, all Hamilton County welfare recipients have been required to join a Medicaid HMO. When the program started, enrollees had six HMO choices. By this year, that had dropped to three: Health Power, Cincinnati Area Health Plan and HMO Health Ohio.

Next year, the number could drop to just one. In addition to Health Power's possible liquidation, HMO Health Ohio announced last month that it will drop Hamilton County effective Jan. 31. That's 10,000 more people who have to switch health plans.

Patients can choose to join the Cincinnati Area Health Plan, but the state cannot force them to join. That's because state law requires giving at least two choices to people in mandatory Medicaid HMO programs.

Nobody will lose their Medicaid coverage as part of all this, state officials say. But the Medicaid program faces paying higher patient health bills while losing much of its ability to track the quality of care provided to patients.

"We are certainly aware of the movement, and we are watching the situation," said Jon Allen, spokesman for the Ohio Department of Human Services. "But we cannot require HMOs to do business with us."

The Health Power problem is the latest in a long-running money dispute between state officials and private health insurers. ChoiceCare dropped out of the Medicaid HMO

business in 1996, when the Department of Human Services cut payment rates in Hamilton County by more than 15 percent. Others followed.

While the HMOs claim they cannot make a fair profit under the existing system, Mr. Allen said the 1996 rate cut was made because the state was paying the HMOs too much. The human services department sets Medicaid HMO rates according to a formula that varies by the sex, age and location of Medicaid enrollees, Mr. Allen said. On average, the state pays HMOs about 6 percent less than what it pays for the same types of patients in a traditional fee-for-service arrangement.

Health Power has been under supervision from the Ohio Department of Insurance since July for failing to meet solvency requirements. It had been in a similar situation in 1996.

In September this year, Health Power reported $11.9 million in liabilities against $11.3 million in assets, a shortfall of nearly $600,000. That prompted the insurance regulators to issue a Dec. 2 notice.

Health Power President Dr. Bernard Masters could not be reached for comment Tuesday.

Unless the company finds a buyer or some other way to fix its finances, the state can revoke or suspend its operating license, Mr. Allen said.

If Health Power drops out of Hamilton County, enrollees could sign up with the sole remaining HMO or get traditional fee-for-service coverage.

The concern about the fee-for-service option is whether local doctors will accept Medicaid patients at Ohio's payment rates. That was a growing problem before Medicaid HMOs started up, Dr. Adcock said.

In part, the instability among Medicaid HMOs reflects industrywide problems and shake-ups for managed care. Big health insurers are buying each other and trying to charge higher rates to employers next year. Medicare HMOs are pulling back all over the country, including Ohio.

Some sort of shakeout was expected for the Ohio Medicaid HMO program, said Randall Garland, executive director of the Cincinnati Health Network, a group of independent health clinics in Hamilton County.

"But it happened too fast, especially in this area," he said.



Local Headlines For Wednesday, December 16, 1998

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