OCTOBER 21, 2005 -- Opening the door to what could be a nationwide trend, Health and Human Services (HHS) this week approved a controversial Florida plan giving the state greater power to alter benefits and bring its yearly spending growth on Medicaid below the current rate of 13 percent.
Critics of the Florida plan called it a threat to health care for some of the nation's most vulnerable citizens. But Florida officials say they must overhaul the $15 billion program or it will consume nearly 60 percent of the state's budget by 2015. It now takes up 25 percent of the state's budget.
The plan, which would enroll an estimated 212,000 Medicaid beneficiaries in Florida's Broward and Duval counties in its first phase, must be approved by Florida's legislature to take effect. It would be phased in over five years to include most of the state's 2.2 million Medicaid beneficiaries.
How It Will Work
Authorized under the section of Medicaid law (1115) that allows demonstration programs, the Florida demo will calculate an annual amount to provide for each enrollee based on his or her health status and history of using health care services.
Beneficiaries would pick a managed care plan "with a benefit package that best suits their needs," HHS said in a news release, but every plan must cover benefits mandated by federal Medicaid law. Medicaid programs now offer a mix of mandatory and optional services; "optional" benefits include prescription drugs.
Plans can enhance benefits to attract enrollees, HHS noted. Beneficiaries also can opt out of Medicaid and instead receive subsidies for their share of payments for employer-sponsored insurance benefits.
"If a beneficiary chooses employer-sponsored coverage, they will be entitled only to the benefits covered by that plan as well as to any cost-sharing requirements, even if they exceed normal Medicaid limits," HHS added. "Beneficiaries considering switching to an available employer plan will be able to receive individualized counseling about its potential benefits and risks."
Beneficiaries who opt out can rejoin Medicaid within 90 days if they so choose.
The demo also establishes an "enhanced benefit account" program that rewards beneficiaries who take part in weight management, smoking cessation, and diabetes management programs with funds to buy non-covered health-related items such as over-the-counter drugs.
The demo also creates a $1 billion yearly fund to help the state pay safety net providers caring for the uninsured.
Joan Alker, a researcher at Georgetown University's Center for Children and Families, said HMOs and other providers will have "unprecedented flexibility" to alter benefits. She said adults will face "new annual maximum benefit limits." While all plans will have to offer mandatory benefits, "they will have flexibility to decide how much of a service to offer," subject to "a sufficiency test."
Alker added that "the situation is different for optional services. Plans will not be required to offer previously available optional services [such as prescription drugs, or durable medical equipment] and they will have flexibility with respect to the amount, duration and scope for the optional benefits HMOs and other plans do choose to offer."
An "actuarial equivalence" test is supposed to assure that benefits offered by private plans have the same dollar value as the previous combination of mandatory and optional benefits. But Alker said it's unclear how much the state would increase that dollar value each year.
She added that "linking the actuarial equivalence standard to the value of the package for the average member of the population raises questions about whether the package will be adequate for someone with above average needs in any given year."
Effects of the Plan?
Alker also said the demo, which relies on private health plans, could sharply reduce levels of care while raising out-of-pocket costs to the state's most vulnerable residents.
She called it "a radical and unprecedented restructuring," warning that "the chronically ill and disabled could have the most to lose under this approach."
But Florida's Republican Gov. Jeb Bush said the plan "empowers patients and expands access to best serve our most vulnerable citizens for years to come."
"Florida's reform plan modernizes an outdated program to better serve participants and bring predictability to state spending," said the state's Agency for Health Care Administration.
HHS officials acknowledged the potential influence of the plan in announcing its approval. "The Florida demonstration will be very valuable in informing the national dialogue about reforming Medicaid to better serve the people who count on it," said Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services.
McClellan said the program "provides a framework for improving care and making Medicaid more sustainable without eliminating services or restricting eligibility."
Backers of the plan say the efficiencies it generates through a system of competing health plans, coordinated care, and reduced fraud will mean no lessening of needed treatment.