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Rauner keeping public in the dark about rates in Medicaid reboot

Monday, December 18, 2017
Crain's Chicago Business
by Kristen Schorsch

The key ingredients of Gov. Bruce Rauner's Medicaid managed care overhaul are outsourcing the bulk of the program to private insurers and paying them cheaper rates. By doing so, the state intends to save an estimated $1 billion over four years.

But the Rauner administration is keeping some crucial details secret. The Illinois Department of Healthcare and Family Services, which runs Medicaid, redacted reimbursement rates from the contracts for four of the seven insurers selected through a competitive bidding process. Crain's obtained the contracts through the Freedom of Information Act.

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Read more: Rauner's health care headache in 2018? Medicaid.

The lack of public disclosure comes amid intense scrutiny of Rauner's Medicaid managed care reboot, which begins Jan. 1. State lawmakers have held a series of public hearings about what they perceive is a lack of transparency around the cost of the program and Rauner's bidding process. A public hearing scheduled for today intends to focus on the state's reimbursement rates to insurers.

Lawmakers say they are concerned that drastically low rates could lead to financial losses and instability in the program.

But the insurers claim such disclosure would reveal trade secrets or harm them financially, according to letters the state provided to Crain's.

"Harmony treats its contractual compensation rates as confidential because disclosure would give Harmony's competitors an unfair competitive advantage when competing for the State's Medicaid managed care contract," the insurer wrote to the healthcare and family services department when requesting its reimbursement rates be redacted. "More specifically, it would give them inside information to help formulate their own future proposals when competing for the State's contract."

IlliniCare, NextLevel Health and Meridian also requested that their rates be hidden from public view. The state complied.

The three insurers that released rates are Blue Cross & Blue Shield of Illinois, CountyCare and Molina. They apparently did not make such a request. A spokesman for the healthcare and family services department deferred comment to a state FOIA officer, who referred to the letters from insurers.

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'Very' competitive bidding

In managed care, the state pays private insurers to administer benefits to Medicaid recipients, with a focus on preventive care. The idea is to coordinate a patient's treatment with a team of doctors, nurses and other providers to improve their overall health, thus reducing medical costs.

Rauner said earlier this year he is revamping Medicaid managed care to improve the program and rein in spending.

In an effort to win new contracts, insurers earlier this year bid on a range of reimbursement rates provided by the state—essentially agreeing to be paid less overall. The contracts were finalized in late October.

Reimbursements rates disclosed in the non-redacted contracts vary by the age of Medicaid recipients and where they live. For example, there's a rate for women who are 19 to 24 years old and joined Medicaid after the state expanded the program. There's another rate for special needs children, and another for disabled adults.

Take a 55- to 64-year old man living in Cook County who joined Medicaid when the program expanded. The state will pay Chicago-based Blue Cross, the largest carrier in Illinois, $588.80 a month to cover that person; Molina, $596.15; and CountyCare, $581.49. Molina is a part of the Long Beach, Calif.-based national carrier, while CountyCare is run by the Cook County Health & Hospitals System.

In a statement, Cook County Health CEO Dr. Jay Shannon said CountyCare bid "very competitively" for the state contract.

"We have been in the managed care space for a number of years now," Shannon said. "We know our members and their needs. We know the market. We have the tools, partnerships and care management structures in place to provide high-quality coverage cost effectively, and that's what we're going to do."

A Blue Cross spokeswoman said the insurer is proud to have won a bid to participate in the state's managed care program, but declined further comment. A Molina spokeswoman said the insurer is in ongoing discussions with the state to finalize rates.

Illinois Rep. Greg Harris, a Chicago Democrat who has called for many of the public hearings to shed more light on the Medicaid managed care reboot, said he believes in full transparency. That the state redacted how much they're paying some of the insurers "just doesn't really give me a lot of confidence that this is being handled well," Harris said.

Maryam Judar, an attorney and executive director of the Citizen Advocacy Center, an Elmhurst-based nonprofit, said if private insurers are doing business with a government body, "to a certain extent they can't protect what they wish to protect by law."

Dr. Joel Shalowitz, who teaches at Northwestern University's Feinberg School of Medicine and Kellogg School of Management, compared Illinois' lack of disclosure to Medicare, which typically makes rates public.

"My personal philosophy is that if it's a public contract, it should be open to public scrutiny," Shalowitz said.

Meanwhile, the state is considering giving insurers a 1.5 percent rate increase. That comes after The Menges Group, an Arlington, Virg.-based health care consultancy, provided analysis that shows how several Illinois carriers operated in the red for the past two years. The report warned that the combination of lowered rates and rising medical costs could be detrimental.

"An absence of adequate premium increases when the plans have already been continuously losing money invites an unraveling of Illinois' coordinated care program," the Menges report said.

In an interview, CEO Joel Menges said a "stakeholder in Illinois that wants to see the program get into financial balance" commissioned the report, declining to identify the stakeholder. Menges' clients across the United States include Medicaid insurers and state Medicaid agencies.



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