Care Providers Concerned With New Missouri Medicaid Mandate for Hospitals

On July 1, Missouri transferred state-run health coverage for approximately 240,000 low-income adults and children to managed care plans run by 3 companies (Centene, UnitedHealthcare, and WellCare) as part of its privatization of Missouri’s Medicaid program.

The new rule imposes a 10% fee-for-service (FFS) cut on any provider who doesn’t opt into a managed-care network. Rural hospitals are especially concerned about the financial losses the change may cause.

According to the Missouri Hospitals Association (MHA), all hospitals in the state have contracts with at least 1 of the 3 managed care companies and all but 12 have a contract with all 3 companies. Truman Medical Center is one of the 12, and its CFO Allen Johnson said the organization could not absorb the 10% reduction. “Financially I think this will be a disaster for Truman,” Johnson said, noting that it is the county’s safety net hospital and 55% of its revenue comes from Medicaid.

The intent of the state’s change is to increase provider participation in managed care plans. Critics of the change say the transfer puts patient health at risk. Some providers have warned that it will discourage private practices from accepting Medicaid, which is typically reimbursed at low rates, and will reduce access to physicians who are currently willing to care for the Medicaid population, forcing more Medicaid patients to turn to emergency departments. State Senator Rob Schaaf, a family practice physician, warned, “Managed care companies’ jobs is to ration care, to keep people from getting the care that they need, and they make money doing that.”

Insurance companies counter that they save money by keeping patients healthy and can pass on those savings to the state and thus have no incentive to deny needed care. Payment rates were higher in Missouri than for similar business in other states, according to one insurer, and lowering the rates will mean cost savings for the state.

Providers fear there is no incentive for insurers to negotiate with them if the state has “tipped the scales” in favor of insurers, giving them greater bargaining power. MHA CEO Herb Kuhn pointed out that if a hospital doesn’t agree to accept whatever payment rate the Medicaid managed care plan offers, the plan can simply refuse to sign a contract, locking in the FFS level cut. Capital Region Medical Center in Jefferson City reported that one of the 3 managed care plans terminated its contract with his hospital without even attempting to negotiate, and other hospital leaders have reported similar plan terminations by insurance companies.

The managed care companies get a flat fee from the state to cover each patient through Medicaid and then pay the clinic directly for care. Previously the state paid the clinic directly (which is still in effect for seniors and people with disabilities). Providers note that contracts must now be negotiated with each managed care plan instead of payments being determined by the state, and they are concerned that managed care plans might require a patient to contact their insurer to preauthorize higher-level care.

While Medicaid’s transition into managed care is gaining ground across the country, some states, particularly rural ones, have had problems with the transition, especially if they did not expand Medicaid. For example, Iowa, which moved to managed care for Medicaid and underestimated the per-person cost, had to seek hundreds of millions in federal dollars to cover the costs of its program and keep the plans in contract.