Healthy Options, the capitated managed care plan for Medicaid clients in Washington State. started enrollment in July 1994. It now sponsors medical care for more than 375,000 clients, mostly women and children who qualify for the Aid to Families with Dependent Children Program. Healthy Options was a response to several problems affecting the previous fee-for-service reimbursement program. The Medicaid fee-for-service payment rates to providers were low. In many areas, few providers were willing to see Medicaid clients. This created severe access problems, especially for some specialist services. Clients were often stigmatized by private providers or relegated to certain publicly subsidized clinics or hospitals. Also, Medicaid clients were increasingly using emergency room settings. Such use led to discontinuity and lack of coordination in care, and excessive use of services.
Under the new program, clients were invited to choose managed care plans that had agreed to contract with the Medical Assistance Administration to provide comprehensive and continuous (24-hour) access to medical services through associated provider networks. Within each plan the client was invited to choose a primary provider through whom all medically necessary referrals would be obtained.
The switch to managed care created a new system of health care. Some providers and patients have found it confusing and difficult to understand relative to the familiar fee-for-service Medicaid program. This confusion contributes to administrative problems. Clients were sent material informing them of the change and inviting them to choose a managed care plan. This information was presented in an easy-to-read style and in numerous languages. Even so, many clients did not choose plans or providers, perhaps because of the paperwork required. Clients with questions frequently were frustrated by busy toll-free lines to Olympia. Mailings also failed to reach clients who had moved.
A major concern of clients was whether they could continue to use their current providers. Often clients were required to choose a program before their providers had completed negotiations with the plans. Some popular providers lacked vacancies for all the clients who wished to enroll with them. Some clients who valued the flexibility of using range of providers and hospital emergency rooms resented the restrictions and disruptions associated with use of a primary care coordination model ("gatekeeping"), especially if their multiple providers were not all covered by a single plan. The providers experienced problems and benefits. While they could anticipate predictable financial returns associated with providing continuous care to a specified number of Medicaid clients, the change created confusion through the proliferation of plans, formularies, and prior-authorization regulations. Many providers developed negative attitudes toward any patients who used services often. For providers with no previous experience with capitation, Healthy Options provided their first realization that the cost of care must be considered when making clinical decisions.
The nature and extent of risk- and cost-sharing and shifting have become a crucial feature of modern clinical care. The economics of use under the capitation system will concentrate the minds of primary care providers on the potential benefits of preventive clinical interventions in a way that the traditional fee-for-service system could not.
The Legislature responded to several concerns of clients and special interest groups by enacting legislation that limited the ability of plans to manage access to care. Hence, recent laws have required plans to offer services by all professions licensed by the state (including acupuncture, naturopathy and hypnotherapy) and to allow women access to female providers without referral. The plans are reviewing how and if they can adapt to these requirements and still succeed financially.
Washington's Medicaid program has already started to transfer chronically disabled persons who receive Supplemental Security Income benefits from unrestricted fee-for-service to a hybrid model. In this model the clients again choose a primary care case manager who is usually supervised by a plan. These providers are reimbursed on a fee-for-service basis and receive monthly management fee. This model has already been introduced in Clark County and will be implemented statewide by fall 1996. This model was created to allow plans and providers experience with the costs and sometimes substantial service needs of these chronically disabled clients. For the first time, some plans will have responsibilities for children who are ventilator-dependent and live at home, persons who need equipment such as specialized wheelchairs or beds, and those with complex chronic disorders such as AIDS, metabolic, and genetic diseases.
I predict that the transition of all patients to fully capitated systems will continue. I think likely that the need to provide care for these specialized groups will lead to the development of new patterns of care, and that plans and providers developing these services will need differential capitation (risk adjusted) and reimbursement contracts to compensate for their adverse actuarial burden. The new care systems may include use of specialized provider networks that may be restricted to persons with particular conditions. The use of "hybrid" primary care providers who have specialist interests or qualifications may increase. Such an arrangement may encourage an increasingly efficient use of specialists as care consultants rather than providers.
Differential capitation requires new information about identifiable, reliable indicators of future use. Very large insurance pools, such as might be obtained by merging Medicaid, state employee, and Basic Health populations, would be less vulnerable to adverse actuarial burdens. In markets with greater experience with managed care, such as Minneapolis, the effect of these changes has been the emergence of a few large plans and concomitant development of large or highly specialized, vertically integrated provider groups that not only represent crucial suppliers but may even offer purchasers service contracts that eliminate plans.
It would be an extremely complex task to estimate the cost, or cost savings of these programs or of an entire health care system. For the groups being cared for under Healthy Options, a measure such as quality adjusted life years (QALY) would be a more appropriate measure than the standard cost per year of potential life served. But even the QALY measure is highly controversial and difficult to calculate over a heterogeneous group of disabling conditions.
We can determine whether the new systems work through a combination of opinion, data, case examples, and rhetoric. Health policy change should be evaluated in a political and economic context, not just from a naive technological perspective. Some randomized allocation studies have been conducted, but their generalizability is disputed. If we value some outcomes (such as unlimited choice) over others (such as universal choice), then any change will appear adverse.
Comprehensive legislated health care reform, at present discounted, may re-emerge, especially if the managed market solutions are unsatisfactory to the public. If fully capitated programs for persons with chronic severe diseases are perceived as inappropriately restricting care, as some predict will happen, pressure for central intervention may mount. The Healthy Options program is a microcosm of all the forces affecting cost and quality in health care provision in 1996.
Recommended Reading
Mclntyre JL, Meseck Yeager,JL:Measuring Up: Spending Policy -- An Interstate Comparison of How Washington's Spending Policies Affect Low Income and Vulnerable Populations. Seattle: University of Washington Institute for Public Policy and Management, 1995.
Rationing or rationalizing children's medical care: A comparison of a Medicaid HMO with fee-for-service care. Am J Public Health 1994; 84:899-904.
Voices of Disability: Access to Health Care in Rural America. Seattle: University of Washington Center for Disability Policy and Research, 1995.
Acknowledgments
This article expresses my personal opinions, not necessarily those of the Medical Assistance Administration, but I thank Joan Bantz, acting director of the Office of Managed Care, and Michael Cooper, director of the Division of Quality Assurance, for their comments.
Author
Andrew Brunskill, M.B. B.S., M.PH., is,a pediatrician and a medical consultant to the Office of Managed Care at the Medical Assistance Administration in Olympia, which administers the Healthy Options Program.
Return to the Table
of Contents
Return
to Northwest Public Health