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GOP lawmakers angered over federal request for profit cap in state Medicaid reform

During a committee hearing yesterday, GOP members expressed outrage with the federal government for its request that the state include a “medical loss ratio” in its Medicaid Reform Pilot.

The committee meeting was chaired by state Sen. Joe Negron, R-Palm City, the author of the state’s Medicaid overhaul plan, which expands the Reform Pilot statewide. Justin Senior, general counsel and acting Medicaid director for Florida’s Agency for Health Care Administration, told the committee that the federal government “is going to want a medical loss ratio for the managed care programs.”

A medical loss ratio is a measure in the health care industry that the federal government describes as “the percentage of your premium dollars that an insurance company spends on providing you with health care and improving the quality of your care, versus how much is spent on administrative and overhead costs and, in many cases, high salaries or bonuses.”

According to the Affordable Care Act website, “law requires that 80-to-85 percent of the money collected by insurance companies be spent on health care services and health care quality improvement.”

In this case, the federal government is asking that Florida’s plan include a ratio of 85 percent services to patients to 15 percent for administrative costs.

The lack of a medical loss ratio has been one of the major complaints about the existing Medicaid Reform Pilot programs, active in five Florida counties since 2006. During public forums a few months ago, the Agency for Health Care Administration heard numerous complaints from residents about the absence of the standard in the Legislature’s plans.

GOP members on the Budget Subcommittee on Health and Human Services Appropriations said they feel like the federal government is strong-arming the state on the issue.

Negron was particularly upset that Texas has not yet been required to have a medical loss ratio in its Medicaid overhaul plans.

Negron asked Senior, “If [the feds] are going to insist on the 85/15, are they then going to agree to continue the Texas model in Texas — because Texas has been allowed to have a shared savings model for several years.”

State Sen. Don Gaetz, R-Destin, said that there should should be “equal justice under the law.” He even chastised members of the Legislature that have asked the feds to turn down the state’s Medicaid plan in its entirety. He later jokingly referred to the “folks in Washington” as “North Koreans.”

Senior told the committee that the federal government would have the final say. Negron accused the federal government of “commandeering” the state’s budget.

“Essentially the way this works [is], we are beggars,” Negron said. “They are dictating unilateral terms of surrender. They are commandeering our budget. We are supposed to be business partners. We are paying a little less than half of the bill; they are paying a little more than half of the bill. So, there should be some parity under federalism, and there is not.”

Negron added that this is why he “still supports” having the state run its own Medicaid program.

However, Nan Rich, D-Sunrise, reminded the committee that “there is not a universal point of view” on the issue of the medical loss ratio.

“The Medicaid bill … did not pass unanimously,” she said. “Some of us feel very strongly that there should be a medical loss ratio. I would not want the federal government to think that everybody unanimously feels that it is a legitimate option for us to opt out of the Medicaid program.”

In the past, policy experts have insisted that a medical loss ratio requirement is not unreasonable.

When this issue came up a couple years ago, Gregg Mellowe of the Florida Center for Fiscal and Economic Policy said the standard was a good way to provide accountability, WFSU reported:

There have been concerns over the lack of accountability in the pilot project throughout its five years. And the concerns that they’ve had have not been resolved. I think that’s universally recognized. [The federal Centers for Medicare and Medicaid Services] has said look, you’re getting a waiver, all these federal rules relaxed, so in exchange for that we need some basic assurance that the power given to managed care plans is not going to be abused.

Besides GOP members of the state Legislature, health care companies prefer the alternative to a medical loss ratio, known as an “Achieved Savings rebate.”

WFSU described this option as “a revenue-sharing system allowing healthcare companies to keep up to five percent of whatever profit they turn”:

Anything above that has to be split with the state. Dr. Michael Garner Heads the Florida Association of Health Plans. He says healthcare companies prefer the Achieved Savings rebate.

“Minimum loss ratios don’t help contain healthcare spending growth, or ensure that healthcare services are appropriate or billed accurately. Or address directly the quality, efficiency of healthcare service delivery.”

The state is still waiting to hear more information from the federal government on both the extension of the existing Medicaid Reform Pilot and the statewide expansion.

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