This article was originally published by the Public Policy & Aging Report in 2021.
By Lori Gonzalez, Larry Polivka, and LuMarie Polivka-West
We, like many long-term care (LTC) researchers and policy analysts, are concerned about the chronic inadequacy, from a LTC recipient perspective, of the LTC regulatory framework at the federal and state levels. Our concern, however, grew in 2012 when the Centers for Medicare and Medicaid Services (CMS) approved the Florida request for a waiver permitting the state to convert its Medicaid LTC program from a broadly fee-for-service model of funding and administration, with the extensive involvement of nonprofit, community-embedded aging network agencies in the home and community-based services (HCBS) LTC sector, to a capitated, managed LTC model administered largely through for-profit insurance company Health Maintenance Organizations (HMOs). This move was made by the Florida Legislature and approved by CMS in 2012 even though multiple evaluations had decisively demonstrated that the nonprofit aging network−based Medicaid waiver−funded community LTC programs were more cost-effective than the for-profit alternative administered by insurance companies (Mitchell et al., 2006).
CMS approved the waiver without responding to critiques that neither the legislation creating the Medicaid managed LTC (MLTC) program nor the waiver request itself contained detailed and rigorous accountability provisions designed to measure program cost effectiveness (service costs and care recipient outcomes). In response, we decided to monitor the implementation of the MLTC program in Florida and other states to the extent that our resources permitted (Polivka & Luo, 2019; Polivka & Polivka-West, 2020). This article is based on the findings from this monitoring project, which we expanded in 2018 to include the Medicare Advantage (MA) program, the Medicare privatization initiative that now covers over one third of all beneficiaries. These findings support the perception that the steady privatization of the Medicaid program through contracts with corporate insurance companies and Medicare through the MA program has occurred in the absence of effective accountability through proper regulation and program evaluation. The longer these failures go unaddressed, the harder it will be to keep our public health-care programs from becoming completely captured by large corporate health and investment firms.
Medicaid Managed LTC
National Trends
The growth of managed care programs in several states’ Medicaid-funded LTC systems by large insurance companies has resulted in a widespread acceptance of the private, for-profit, administered model of care (with a rationale of “rebalancing” LTC systems by moving care into the community and away from nursing homes). The stated intent (Sparer, 2012) is to have better budget control and cost containment, as well as improved care for older Americans (Census Bureau, 2020). Medicaid is the primary payer for LTC services, with Medicare only covering brief stays in LTC hospitals and skilled nursing home facilities.
State and national advocates, as far back as the 2000s, stressed that the shift to a capitated system of care for a very frail, vulnerable population comes with many potential risks to persons in need of LTC services (Polivka & Zayac, 2008; Wiener, 2006). The possibility that incentivized payments could reduce community-based services and other services that support activities of daily living was a critical concern with the for-profit model.
The managed care approach to LTC was promoted with the Dual Eligible Demonstration Project, included in the 2010 Affordable Care Act to reduce duplication in administration and costs in both Medicare and Medicaid. Fifteen states responded, with most of the projects administered by for-profit HMOs for persons dually eligible. The evaluation and findings of the dually eligible programs by the Research Triangle Institute (RTI) were significantly hampered by the lack of Medicaid encounter data and were based primarily on data reported from Medicare, Medicaid, and interviews (RTI, 2019). More recently, a summary of the many gaps in research was reported by Medicaid and CHIP Payment and Access Commission (MACPAC) in an August 2020 issue brief for Congress. The brief notes that data might be available in the future when the CMS-promoted Transformed Medicaid Statistical Information System is implemented in the states (GAO-21-49).
The U.S. General Accounting Office (GAO) reported in 2017 that CMS should provide more oversight of states and set minimum standards for reporting and validating encounter data. The January 2017 and August 2017 reports to Congress found that states’ Medicaid expenditure and utilization data do not “ensure that payments are proper or that beneficiaries have access to covered services” (U.S. Government Accountability Office [GAO], 2017a). The GAO recommended that CMS identify and obtain data on access to services and quality, network adequacy, critical incidents, appeals, and grievances, as well as rate setting (GAO, 2017b).
The GAO continued their review of Medicaid Managed Long-Term Care (MMLTC) in November 2020, recommending that CMS develop a national monitoring strategy for MLTC and assess the access and quality of services across states. Unlike its responses to the 2017 GAO reports, CMS did not agree with the report findings or recommendations (GAO, 2020).
Managed Care in Texas and Florida
In 2018, the Dallas Morning News investigated the Texas MLTC system, the largest in the United States, with a focus on persons with developmental disabilities. The year-long investigation included a review of 30,000 foster care children and adults with disabilities. It was based on reviews of files and interviews with families and individuals who reported being shortchanged or denied services, as well as providers, policymakers, and legislators.
The Dallas Morning News published a series of eight articles in 2018, reporting that HMOs could make their own rules for assessing the needs of very sick children and adults and for managing their care with a network of providers who were subcontracted by the HMOs with minimal state oversight. The sickest patients, especially very fragile children, were the most profitable on a per patient basis. In 2015 and 2017, nurses in the state called for an immediate intervention for very ill patients not being appropriately served; however, the Texas Health Commission did not respond. The Dallas Morning News reported that state officials did not act out of the fear that the HMOs would stop doing business, leaving millions of Texans without health and LTC.
Like Texas, Florida has also experienced problems with managed care, especially regarding providing HCBS. An important consideration in this context is that nursing home care is an “entitlement,” while HCBS are optional. Florida, for instance, has maintained a cap on HCBS slots at 62,500 annually, approved by CMS. As a result, Florida has maintained a waitlist for community-based services in excess of 60,000. The growing waitlist has been a problem for supporters of the managed care model. Florida’s 2020 legislature directed the state agencies to reduce the waitlist to only those at “highest risk” of nursing home placement, estimated to be 1,562 persons by the state’s Department of Elder Affairs, removing the remaining thousands who requested assistance in the community and who are Medicaid eligible (Florida Senate Bill 1544 of 2020).
Florida has funded five evaluations of the Florida MMLTC program since 2015, conducted by the Florida State University’s College of Medicine. Similar to the 15-state RTI evaluation, the annual evaluations have been severely limited by the lack of Medicaid encounter data on services and clients—a fact that the evaluation team acknowledges—preventing any meaningful analysis of the cost-effectiveness, quality of services provided, and any geographic or plan differences. In sum, the very limited availability of information on the costs and outcomes of MMLTC services after many years of operation means that the long-standing concerns of aging advocates remain unaddressed, as managed care companies withhold cost and outcome data and CMS fails to require them to report it.
Medicare Advantage
MA is another example of the privatization of a public health insurance program authorized under the Medicare Modernization Act in 2003, allowing private insurers, primarily via HMOs, to provide Medicare using a fixed, risk-adjusted, per enrollee payment with the stated goals of improving quality and achieving cost savings relative to traditional Medicare. These goals, over a decade and a half later, have not been realized, largely because MA organizations, without the appropriate regulatory checks, can become incentivized to restrict access to care, to cherry-pick healthier enrollees, and to engage in diagnostic upcoding resulting in inappropriate payments: all without strong, quality encounter data to ensure that plans are honoring their contracts with CMS (the federal agency that regulates the MA program; MedPac, 2019; Office of Inspector General [OIG], 2018, 2020).
Restricting Access to Care
MA plans are paid a capitated rate, incentivizing cost savings strategies like limiting access to care and utilization, and the research literature indicates that this may be occurring. MA plans set a limited network of providers and have high out-of-pocket costs for out-of-network care, while traditional Medicare beneficiaries can receive care virtually anywhere. MA enrollees rely on private insurance networks that may set different rules, often subject to change from year to year, for obtaining care (e.g., requiring a referral from a primary care provider to receive specialist care). CMS stipulates that MA networks are adequate when they meet a certain minimum number of providers and a maximum travel time and distance to the providers (GAO, 2015). These criteria are not based on actual provider availability, but rather are county- and provider-type dependent. A 2015 GAO report found that CMS reviews about 1% of Medicare Advantage Organization (MAO) networks each year, and that most of those MAOs are new applicants to the MA program. The report also showed that 90% of plans’ requests to be exempt from network adequacy criteria are granted. The GAO concluded by recommending better CMS oversight of MA networks.
Other studies (Timbie et al., 2017) have found that traditional Medicare beneficiaries report better access to care compared to their MA counterparts. Recently, Park and colleagues (2020) found that MA enrollees, compared to traditional Medicare beneficiaries, had lower rates of health-care utilization, controlling for self-reported health status, across several settings, including inpatient hospital, skilled nursing facility, and primary care physicians, and that the difference was even more pronounced for those living with Alzheimer’s disease or related dementias.
Finally, almost 80% of MA enrollees are in plans that require pre-authorization for some services (Jacobson et al., 2019). A 2018 OIG report found very high, inappropriate levels (75%) of denials for care being overturned by MAOs raising questions about how often it occurs without appeal from providers or enrollees. Taken together, these findings indicate that MA networks may be inadequate, and that enrollees have lower health-care utilization and experience high rates of denials for care, compared to traditional Medicare beneficiaries.
Selective Enrollment and Inappropriate Payments
MA plans engage in favorable enrollment selection processes that are complex, targeting both healthy and sick individuals (Cabral et al., 2018). While regulation prohibits MA plans from directly engaging in enrollment selection based on health status, researchers have found that MA plans spend large sums of money on advertising in areas where healthier, younger, low-cost Medicare-eligible populations live (Aizawa & Kim, 2018). Findings from Miller and colleagues (2016)indicate that MA plans are successful in enrolling healthier individuals. Using National Health Interview Survey data, they compared MA enrollees to traditional Medicare beneficiaries between 2000 and 2005 to enrollees and beneficiaries in 2006 and 2009, and found that men and those with low morbidity made up most of the growth in MA enrollment over time. Several other studies have found that MA plans are incentivized to enroll certain individuals with complex medical needs, because the risk adjustment system rewards plans with payments that are larger than these individuals’ actual cost of care (Brown et al., 2014; McWilliams et al., 2012; Newhouse et al., 2012).
Additionally, MA plans have been found to engage in diagnostic and health upcoding that results in higher payments. A recent OIG report (2020) is instructive. The OIG analyzed MA encounter data and found that MAOs received $2.6 billion in risk-adjusted payments in 2017 based solely on diagnoses provided on Health Risk Assessments, not actual service records. The Health Risk Assessments are supposed to be used to improve quality (not generate inappropriate payments), and led the OIG to call into question CMS’s ability to provide proper oversight of MA. Finally, research shows that MA plans’ risk scores outpace Fee for Service, largely due to upcoding rather than higher morbidity (Kronick & Welch, 2014).
Improvements in MA Regulatory Oversight are Needed
The key issues in MA—access to care, selective enrollment, and inappropriate payments—could, in part, be mitigated by better CMS oversight. Collecting and analyzing data will be critical in understanding how MAOs provide care using a fixed, risk-adjusted per enrollee payment, all while generating a profit. CMS has collected encounter data from providers since 2012 and has used it primarily to calculate part of the risk adjustment score (Creighton et al., 2019). However, as noted by the GAO (2015), the encounter data submitted by MAOs are not in a standardized format, are susceptible to error, and would benefit from CMS implementing a data validation process. The MA program and CMS oversight of MAOs would greatly improve with data collection efforts similar to the Minimum Data Set 3.0 (MDS), which is used in the assessment of all residents living in certified nursing facilities upon their admission, during regular intervals after admission, and upon discharge. The MDS combines standardized information about residents’ functional capabilities, health status, and the types of services received (CMS, 2020). A similar system would improve transparency and accountability in the MA program.
Conclusion
For-profit privatization of public programs like Medicare and Medicaid without rigorous measures of costs and outcomes for care recipients is a recipe for undermining accountability and making the programs vulnerable to the pursuit of profits at the expense of ensuring access to needed, high-quality care, and protecting taxpayer investments.
For-profit privatization of public programs like Medicare and Medicaid without rigorous measures of costs and outcomes for care recipients is a recipe for undermining accountability and making the programs vulnerable to the pursuit of profits at the expense of ensuring access to needed, high-quality care, and protecting taxpayer investments.
President Joe Biden has committed to over 400 billion new dollars over 10 years for major improvements in LTC for the elderly, which could finally lead to comprehensive LTC reform. As part of the planning for this much-needed initiative, we recommend that the administration take a careful look at the regulatory concerns we have addressed here and consider changes in the current CMS regulatory frameworks for Medicaid LTC programs. We strongly recommend that the administration move as fast as feasible to implement the recommendations in the GAO reports on Medicaid-managed care. We also recommend that the administration strengthen the CMS LTC unit by expanding it and implementing uniform and rigorous cost and outcome data reporting requirements for all Medicaid-managed care programs and MA. This information should then be used to hold states and companies fully accountable for meeting clear, quantitative cost and outcome benchmarks. These initiatives could greatly increase the transparency and rigor that are now missing in both programs in terms of how the contracts with the participating insurance companies are formulated, monitored, and evaluated.