ANALYSIS & OPINION

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Medicaid Reform reduces fraud, improves care

Newly public revelations last week about the alleged fraudulent conduct of former leaders of Wellcare Health Plans properly resulted in a request by Tom Arnold, the top administrator of Florida Medicaid, for a criminal probe, which the Attorney General’s office has said is being conducted.
 
The alleged misconduct of those individuals is serious and, if proven true, should result in severe punishment of the people involved. It is important, however, to point out that the new management team of Wellcare were not participants in the alleged schemes, nor can it be assumed that all health plans behave this way.

Fraud in government programs is, however, pervasive, and is a serious threat to the viability of these safety net programs. Programs, like Medicaid, that are designed to pay the bills first and ask questions later are magnets for bad actors who will find ways to work around the rules and steal from the system. This was what I found during my tenure as Secretary of Florida’s Agency for Health Care Administration, and it’s the reason then Governor Bush, then Medicaid Director Tom Arnold and I cracked down on fraud in Medicaid, and we became determined to fundamentally change the program.

By making fighting fraud a priority, we saw results. A 600 percent increase in the number of providers terminated from the program, a 60 percent increase in prevention and recoveries in just two years, and more than 1,200 annual provider audits ultimately led to a Davis Productivity Award and exemplary achievement recognition by Florida Tax Watch. Indeed, the news headlines proclaimed on February 28, 2006 that “Florida’s efforts to crack down on Medicaid fraud paying off.”

But those results were no victory, and there was no cause for celebration. There are more than 80,000 providers in Medicaid generating more than 100 million claims per year. Supervising the activities of that many providers and transactions to prevent bad behavior is nearly impossible, and indeed, the bad guys know this. By the time the government, using all of our technology and investigative resources, figures out the scheme used by the thieves, millions of dollars is already stolen. 

Often, this money is not recovered. It takes years to prosecute. And the risk rests 100 percent on the shoulders of the taxpayers. This system is flawed, and no marginal tinkering will change it. Medicaid is the bank, and there is a run on the bank. The only way to succeed is to transform the system to something that works better and is designed to minimize the opportunity for fraud.

Governor Bush led the biggest reform of Medicaid in the program’s 45 year history. Scrapping the antiquated pay and chase system, where the government tries to act like an insurance company, pays claims, and asks questions later, the new model was designed to integrate care, increase accountability, and reduce the risk of fraud using a dramatically different managed care model. The perverse incentives built into the old Medicaid managed care model, a system in place for more than 20 years, needed reform, too. 

For instance, if you pay every insurer the same premium whether someone is sick or healthy, the incentive will be for the insurer to only insure the healthy and drop people with chronic illness, leaving the old, fraud-ridden fee-for service system to care for these high-cost patients. That’s why we imposed a risk-adjusted premium – to discourage the prospect of “adverse selection”. 

We eliminated the “pay and chase” fee-for-service system, thus eliminating the opportunity for managed care plans to “dump” patients into that system. We required health plans to report data on all patient encounters, so the state can monitor the claims for payment to ensure services were being provided. And we made quality of care data available publicly so the state could measure whether the plans were improving care.

The allegations against Wellcare and its former management occurred in the old system of Medicaid – not in the areas of Florida where the reforms were implemented. In fact, Wellcare pulled out of the counties where Governor Bush’s reforms were implemented because their former business practice – insure the healthy and dump the sick – would not work in the areas where we implemented the reforms. Because the reforms were designed to pay more for caring for people with chronic illness, and pay less to plans that only try to treat the healthy, any plan with a business practice that only serves the healthy could not succeed.

Wellcare’s former leadership did not like this plan, and in fact tried to change the law to permit them to continue “cherry picking”. We fought those proposed changes, and the Legislature, to its credit, refused to pass their bill.

Fast forward to today. According to the University of Florida, the reforms have reduced costs to taxpayers while patient satisfaction has remained high. Independent quality measures show more kids are getting checkups, people with diabetes are being managed better, and care for chronic patients has improved. A health plan specifically for people with HIV/AIDS is now available in the reform counties, with the sole mission to improve the lives of people with this chronic illness. Why? Because we changed the model to reward plans that care for people who are sick, rather than rewarding them for dropping people who are sick. Because we took the incentives away for the behaviors that got Wellcare into the jam they found themselves in.

These health plans that provide coordination of care, technology and care management do, indeed, provide value to the taxpayers. But the system must be changed to eliminate the incentives for cheating, and we seem to have found a way. The new management of Wellcare seems to be cooperating responsibly with authorities, has changed the business practice of the company, and seems to recognize the value of the reforms. 

The House of Representatives and the Senate this year agreed that the reforms, with new ideas and improvements, need to be expanded. The Senate proposal would expand existing reforms to 19 additional counties. The House proposal would end the old fee-for-service system statewide and impose risk-adjusted premiums to eliminate patient dumping. The House bill would also increase health plan financial reporting for better oversight, and reward plans that spend a greater proportion of the premium on patient care while preventing costly bad outcomes.

In my opinion, the legislature cannot act soon enough on these improvements. New federal mandates will increase the number of people in Medicaid by 50 percent. If changes are not made, the taxpayers will be saddled with a runaway train that cannot be stopped.

--Alan Levine
Secretary, Louisiana Department of Health and Hospitals 
Former Secretary, Florida Agency for Health Care Administration
Former CEO of several Florida hospitals and health systems






Alan Levine
Secretary, Louisiana Department of Health and Hospitals= No virus found in this incoming message.
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