Lamont exploring Medicaid managed care, but many push back

Gov. Ned Lamont is exploring the possibility of returning the state’s Medicaid program to a model known as managed care, which has garnered a reputation among some Connecticut legislators and advocates for increasing costs and reducing access.

Connecticut currently uses what’s known as a managed fee-for-service model for its Medicaid program, where the state pays providers directly for services delivered to Medicaid beneficiaries. In a traditional “ capitated managed care ” model, the state instead pays a set monthly fee per member to insurance companies to manage the Medicaid program, and the insurance companies pay providers, offering states an increased level of budget predictability.

At a July meeting of the Medical Assistance Program Oversight Council, known as MAPOC, the Department of Social Services announced that it’s launching a search for a consultant to conduct a “landscape analysis” of different Medicaid models, including managed care. The announcement, as well as previous discussions about exploring managed care, drew fierce criticism from several committee members.

David Bednarz, a spokesperson for Lamont, said that policymakers have an obligation to regularly assess current systems that are in place.

“Policymakers have an obligation to the people they represent to regularly conduct reviews that determine whether currently enacted policies are working to their greatest extent and delivering the best value to residents,” wrote Bednarz in an emailed statement. “Gov. Lamont believes state government should be doing everything it can to ensure that Medicaid members are receiving access to high quality, equitable care.”

But the legislators, advocates and health care industry leaders serving on MAPOC overwhelmingly fear that managed care models will not lead to better care for the state’s Medicaid beneficiaries.

Connecticut used managed care until 2010 but then transitioned to managed fee for service because of “a loss of confidence” in the managed care organizations running the program, including uncertain cost effectiveness and a lack of transparency. Some also see the governor’s interest in managed care as a distraction from increasing Medicaid reimbursement rates, which is widely acknowledged as a critical flaw of the current program.

Mark Schaefer, a vice president at the Connecticut Hospital Association, served as director of Medicaid for the state during its transition from capitated managed care to managed fee-for-service. He acknowledged that it’s reasonable for the governor to ask why Connecticut is only one of a handful of states that doesn’t use a managed care model, but he said he’ll be interested if the downsides that led the state to transition away from it have changed.

“It’s now more than a dozen years later, right? Has anything changed in the national landscape that would make this a better proposition for the Medicaid program than it was when we made the decision to cut away?” said Schaefer.

Today, 45 states use some form of managed care for at least part of their Medicaid programs, but Connecticut is one of five states that do not. States often turn to managed care for increased budget predictability and improvements to quality and access , but according to KFF Health News , its impact on both access and costs is “limited and mixed.”

Sen. Saud Anwar, D-South Windsor and co-chair of MAPOC, said access is a major issue in the current Medicaid program, and he’s open to the landscape analysis exploring how different models could help address that issue. But, he said, any major changes need to go through the legislature.

“We want it to be a legislative process because we cannot have a seismic shift in how we are going to provide care and how we are going to be able to sustain those health care systems with a new model without people having a say in it,” said Anwar.

Bednarz, Lamont’s spokesperson, confirmed that any major policy changes resulting from this review would be done collectively with legislators and other stakeholders.

Concerns

Most people on MAPOC expressed concerns about Connecticut returning to managed care, pointing to demonstrated downsides in access, cost and transparency.

Susan Halpin, the executive director of the Connecticut Association of Health Plans, did not immediately respond to a request for comment.

Sheldon Toubman, an attorney with Disability Rights CT, said managed care organizations restrict care by having fewer providers in-network and denying prior authorization requests.

“It was completely arbitrary. They could get away with denying so they denied it,” said Toubman of the prior authorization requests. Toubman fought prior authorization denials by the managed care organizations on behalf of individuals. “They have incentives to deny care, because every dollar of health care comes out of their bottom line.”

A July 2023 analysis by the Department of Health and Human Services found that Medicaid managed care organizations denied 12.5% of prior authorization requests, compared to a 5.7% denial rate among plans that offer Medicare managed care, known as Medicare Advantage.

But Toubman said that the primary concern for policymakers and taxpayers should be the higher cost of managed care.

“I’ve been in the [insurance] industry for 30 years, and managed care is the most expensive form of insurance,” said Rep. Tammy Nuccio, R-Tolland, during the July MAPOC meeting. “I know the state of Connecticut used to have managed care for Medicaid, and the prices were exorbitant.”

Nuccio could not be reached for additional comment, but Toubman said that, even in a perfect world where managed care organizations do achieve lower costs for health care, they must charge above and beyond the cost of care to earn a profit and cover administrative costs.

“A good hunk of [the money] never goes to health care for poor people as was intended,” Toubman said.

Schaefer added that even though most states use managed care, most large employers, including Walmart and Amazon, use a managed fee-for-service model like Connecticut, known as a self-insured plan, where the companies bear the cost risk, pay providers directly and contract with a company to run the administrative side of the program.

“If big business doesn’t find economies in doing capitated managed care, why would we switch?” asked Schaefer. “Will it actually be more cost effective?”

A few MAPOC members also raised concerns about managed care organizations’ lack of transparency. Toubman recalled how difficult it was to get access to basic data, like rates paid to providers, under a managed care model.

“We can actually get data,” said Toubman of the situation now. “We can find out, for example, how many kids are getting health screens every year. That was not possible with the [managed care organizations].”

‘An unnecessary distraction’

Rep. Jillian Gilchrest, co-chair of MAPOC, said that the exploration of managed care just distracts from addressing what many agree is a critical flaw in the state’s current Medicaid program: low reimbursement rates to providers .

[Report: CT Medicaid underpays many health care providers]

“The governor is creating an unnecessary distraction from where our focus really should be, which is Medicaid rates,” said Gilchrest.

Toubman and Schaefer agree. But, despite bipartisan consensus and pleas from physicians on the need to increase rates, the Lamont administration has demonstrated a reluctance to act.

At the end of the 2023 legislative session, Office of Policy and Management Secretary Jeffrey Beckham acknowledged that the rates were low.

“We’re well aware that the rates need to be updated, and we have a plan to do that next year,” said Beckham last June, explaining that the state was looking to a planned study to provide direction on how to make those increases.

The first of that two-part rate study, released in February 2024 , showed that Connecticut’s Medicaid program paid providers less for specialist physician and behavioral health services compared to peer states.

But the governor’s proposed budget that year did not include any additional increases to specialist reimbursement rates over the previous year and actually recommended suspending rate hikes already approved for ambulance and methadone maintenance providers. Beckham said that officials were now waiting to see the results of the full study before deciding where to prioritize increases. The second part of the study is slated for release in early 2025.

“We recognize that the Medicaid program isn’t working for people, and what we’ve uncovered is that the rates are woefully low,” said Gilchrest. “It feels as though the governor doesn’t like that. He doesn’t like what is being found out in this study of Medicaid rates. And so he’s decided to go in a different direction without solving the underlying problem.”