Medicaid HMO Idea a Bust State Pulls Plug on Plan

By Williams, Dave | The Florida Times Union, October 3, 1999 | Go to article overview

Medicaid HMO Idea a Bust State Pulls Plug on Plan


Williams, Dave, The Florida Times Union


ATLANTA -- Just five years ago, both of Georgia's candidates for governor were touting managed care as the solution to the state's soaring Medicaid budget.

The next year, re-elected Gov. Zell Miller launched his bid to enroll the poor and disabled in health-maintenance organizations to begin cutting Medicaid costs that had doubled during the previous five years.

Yet, last week's vote to close the Medicaid HMO at Atlanta's Grady Memorial Hospital at the end of this year put the last health-maintenance organization serving Georgia Medicaid recipients out of business.

Depending on whom you ask, what happened between 1995 and 1999 either was an opportunity for major savings squandered because of mismanagement or an unavoidable failure to graft managed care onto an incompatible system.

HMOs save money by negotiating group discount fees with health care providers. Medicaid HMOs get flat monthly fees from the state for each recipient enrolled.

But at the program's height, only about 54,000 Georgians out of a Medicaid population of 1.2 million were enrolled in one of the state's three Medicaid HMOs -- FamilyPlus, AmeriCan Medical Plans of Georgia and the Grady HMO.

Then, the companies started pulling out. FamilyPlus, the only one of the three that served recipients outside of Atlanta, left the program in July 1998, citing $3.6 million in losses during 1997. At the same time, AmeriCan went into receivership.

That left the Grady HMO alone in the program, until last week's vote by its board to pull the plug.

More than anything, the program was doomed by the low reimbursement rates set by the state, said Charlie Harman, a spokesman for Blue Cross and Blue Shield, one of several major health insurers that considered getting into the Medicaid HMO business in Georgia but decided to pass.

"The reimbursement rates . . . were simply below where managed-care companies could enter the marketplace and do business," he said.

Brent Layton, an Atlanta-area health consultant, said Georgia's fledgling Medicaid HMOs also were hampered from the start by the state's decision to hire a private company to enroll recipients in the program, instead of letting the HMOs do their own marketing. The company was not aggressive in its recruiting efforts, he said.

"For HMOs to be successful, they need to have large memberships," he said.

By the end of 1997, the state had agreed to let HMOs sign up recipients. But by then, it was too late to recover lost ground, Layton said.

"By the time the state began to make changes, word had spread that this was a tough state to do Medicaid HMO business in," he said. "Many HMOs had lost interest."

But Bob Lanier, an Atlanta physician and past president of the Georgia Medical Association, said the Medicaid system inherently is difficult recruiting ground for HMOs. He said Medicaid recipients, who don't pay for their health care, have little incentive to enroll in premiumcutting managed-care plans if given an alternative.

In Georgia, that alternative is Georgia Better Health Care, a state-run program that has achieved moderate savings in a more than $3 billion annual Medicaid budget by assigning patients to a gate-keeping primary care doctor. As of last May, 612,200 Medicaid recipients had enrolled in the program in all 159 Georgia counties. …

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