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Alabama shifts Medicaid to managed care plans run by providers

Faced with increased spending, the state's approach leaves out larger, for-profit insurers

After receiving federal approval last week, Alabama plans to provide Medicaid coverage through managed care plans with a unique twist: Instead of handing the program to for-profit insurers, the state is giving the keys to providers, according to Kaiser Health News.

Revenue from risk-based Medicaid managed care plans grew 57 percent from 2009 to 2013 as more states have been attracted to the quality, cost and accountability of managed care approach. However, Alabama is one of the first to turn the program over to providers by creating non-profit regional care organizations (RCOs) made up of hospitals within the state.

With federal approval of the program comes an additional $328 million that will go toward establishing the RCOs and helping hospitals establish IT systems to facilitate payments, according to KHN. Alabama could also qualify for an additional $420 million over the next five years.

Hospitals applauded the move, indicating the new value-based payment approach will lower costs and improve care for Medicaid beneficiaries. Provider organizations like the Alabama Hospital Association hoped this shift would lead to more discussions about Medicaid expansion, but Alabama Gov. Robert Bentley has said he won't consider expanding the program until the current reforms are in effect.

Although some insurers will provide support for the RCOs, industry officials said the funding will be wasted on establishing new systems for providers, instead of contracting with insurers that have experience with managed care plans.

"The state bought half a loaf," Jeff Myers, CEO of the Medicaid Health Plans of America, told KHN.

Medicaid plans have been a financial windfall for insurers amid losses tied to Affordable Care Act marketplace plans. Centene recently reported a 26 percent increase in managed care membership, while Molina Healthcare nearly doubled its net income in 2015 following a 35 percent increase in membership. Florida's Medicaid program realized substantial savings following its transition to managed care plans, but heath insurers asked for a $400 million in additional funding halfway through 2015.

However, reporting problems within Medicaid managed care plans have drawn the ire of the Office of Inspector General. The agency called for the Centers for Medicare & Medicaid Services to withhold federal funding to states that do not report encounter data to the Medicaid Statistical Information System, which helps identify fraud, waste and abuse.

To learn more:
- read the KHN article

Related Articles:
How states can craft the right Medicaid managed care contract
Medicaid business booms for some health insurers
States still fail to report managed care encounter data to prevent fraud
Florida insurers want more money from the state to cover Medicaid patients
AHIP experts weigh in on value of Medicaid managed care