Medicaid Managed Care: Learning from Ohio's Past, Looking Towards Ohio's Future
As a new year begins, budget issues have been largely resolved in the short term, but will inevitably continue to loom large in Ohio and across the country in coming years. Down the road, policymakers will face some tough decisions about cuts and taxes. Along with education, one of the biggest debates in Ohio centers on health care costs and Medicaid. But despite fears to the contrary, there may be a way to save on Medicaid spending while also improving the program's quality.
Reforming Medicaid in Ohio, a study by The Buckeye Institute, presents a proposal that attempts to do just that. By more fully involving the private sector and individuals in the process, both savings and choice become real possibilities. A patient power reform measure includes Medical Benefit Accounts for people to save towards their individual health care priorities, and opening the market to true competition can drive down costs. This can occur if Ohio applies for a federal waiver and allows private insurers access to the Medicaid market.
When considering a Medicaid reform proposal that seeks the assistance of private industry in reining in state-funded health care costs, many may say that history is doomed to repeat itself. This is because during the 1990s a number of private insurers entered the Medicaid market, only to depart soon after. The important lesson from this experience is not that it is unavoidable, but that Ohio needs to learn from the mistakes of the past to prevent them in the future.
The history of Medicaid Managed Care in Ohio is no mere case of insurers unable to compete and a government system that came to the rescue. The reality is a bit more complicated.
In 1996, OhioCare was introduced in the state. This plan sought to expand Medicaid eligibility while also expanding managed care for the Medicaid population. The concept involved an increase in spending to cover the higher enrollment and at the same time, an attempt to achieve cost savings through managed care. Managed care discouraged hospitalization and emergency room visits in favor of more cost-conscious alternatives such as outpatient care.
Private companies entered the scene to participate in this new program in part because of the large number of enrollees that existed and were expected to increase as eligibility rose. Unfortunately for these companies, welfare reform, combined with an economic expansion, led to a significantly lower Medicaid caseload than what was projected. The economies of scale that companies had hoped to achieve were no longer attainable.
At the same time, the potential savings expected from managed care was officially recognized by the Ohio Department of Jobs and Family Services in a discounted rate paid to managed care providers. Facing a squeeze, insurance companies turned to hospitals to find ways to save since. Hospital costs account for roughly 40 percent of Medicaid medical expenses.
Hospitals, though, were facing financial difficulties of their own and were trying to get higher reimbursement rates from managed care plans. The result was that many hospitals left plans and insurers were left with few Medicaid enrollees and few hospitals to send them to. The state, requiring a specific number of hospitals for a plan to be considered eligible, removed qualification from a number of managed care plans that didn't leave of their own accord.
Medicaid enrollment is currently at an all time high. Costs are seriously impairing the legislature's ability to maintain a balanced budget while exercising fiscal restraint, and the problem is only expected to grow worse. Reforming the system now to one where flexibility and competition play larger roles is critical. Allowing private insurers to enter the market once again on an expanded level is a necessary step in this direction. The health care market, like most others, is dynamic and not likely to remain frozen for any great length of time. Granting companies the freedom to innovate and adjust to changes as they occur will salvage the house of cards that is Ohio's Medicaid program. Putting citizens back in the driver's seat of their own health care decisions will improve choice and make Ohio a model for the rest of the country to follow.
