Amy Keller | 5/1/2010

Craig Smith, AHCA’s former general counsel, has appeared this year before a number of state legislatures seeking to reform their state Medicaid programs. [Photo: Ray Stanyard]

The Problem

Medicaid: A Big Chunk of Florida’s Budget
Year	Medicaid Spending in Florida (billions)	% of State Budget
2000-01	$8.90	20.3%
2001-02	10.22	21.7
2002-03	11.44	23.1
2003-04	13.05	24.3
2004-05	13.89	23.6
2005-06	13.88	21.1
2006-07	14.37	19.5
2007-08	14.80	20.1
2008-09	15.74	24.0
2009-10	15.59	23.4
Source: Florida Agency for Health Care Administration

» Medicaid, which pays for healthcare for extremely low-income people, is funded by a combination of federal and state funds. In nine of the past 10 years, the total spent on Medicaid in Florida by the state and federal governments has amounted to more than 20% of the state’s entire budget. According to the Florida Agency for Health Care Administration, Washington’s healthcare overhaul will add about 708,000 to Florida’s Medicaid rolls by 2014 and add nearly $150 million a year to the state’s tab. By 2019, an additional 1.77 million people will be covered by Medicaid, costing the state an additional $1 billion.

Cost Drivers

» No restraints on demand: Since Medicaid recipients have little or no cost-sharing responsibilities such as co-pays or deductibles, “there’s no financial limitation on deciding when to access the system,” says Craig Smith, a partner at Hogan and Hartson in Tallahassee who previously served as general counsel for the Florida Agency for Health Care Administration.

» Unemployment: “We’ve gone from 2.3 million Medicaid beneficiaries a year and a half ago to close to 3 million now,” he says.

» Fraud: The state loses more than $3 billion to fraud in Miami alone. Many who’ve been involved in organized crime or drug cartels have switched to healthcare fraud. Why? In part because healthcare fraud is safe compared to other kinds of crime. And convicted criminals whose names would show up in background checks need only a “front” person with no record to become the certified billing person for a phony clinic or home health agency, Smith says.

» Healthcare reform: In addition to adding people to the Medicaid rolls, requirements in the new federal healthcare legislation mandate that Medicaid rates paid to primary care doctors be brought in line with Medicare reimbursement rates.

The Policy Options

» Expand a pilot program begun during Jeb Bush’s administration. Medicaid recipients in five counties (Broward, Duval, Baker, Nassau and Clay) are required to choose among several managed care plans that help control costs. If the patients don’t choose, they’re assigned to a plan. The bad news: Results have been inconclusive in terms of whether the approach saves money. The good news: Nearly eight out of 10 Medicaid-eligible people in the five counties are making their own choices. “That suggests they are taking some role to determine which plans offer the benefits that are most suited for them and making an educated decision. That’s obviously a good step if you can get this population to be more personally involved and responsible in their healthcare decisions. That’s one way to eventually affect costs,” says Smith.

» Implement so-called “medical home” plans that hold down costs by assigning each Medicaid recipient a lead physician/case manager to coordinate all aspects of the patient’s care. According to a report by the Florida Agency for Health Care Administration, the approach shows promise for holding down costs long-term, but in the short run the state — already facing a $3-billion-plus deficit — would see costs go up because it would have to increase reimbursement rates to induce physicians to use the approach.

» Fight fraud. The state, which reimburses Medicaid at lower rates than Medicare, has tried to compensate by paying Medicaid claims more quickly. Ironically, the state’s good intentions have facilitated fraud by lessening its ability to monitor claims. “Criminals can run up hundreds of thousands of dollars in reimbursement, get paid relatively quickly and then the moment that the Medicaid program detects a problem, those individuals can shut down and shift to a new operation,” Smith says. The state has fewer than 100 fraud inspectors. Healthcare entrepreneur Mike Fernandez says it could save $500 million to $1 billion a year by using an accredited medical utilization management company to ensure that government insurance is being spent on medically necessary work.

Tags: Politics & Law, Government/Politics & Law, Healthcare