Title: The Medicaid MCO Drive for Cost Containment Solutions
1The Medicaid MCO Drive for Cost Containment
Solutions
Medicaid Health Plans of America
Presentation to the National TPL Conference
byThomas Johnson, Executive Director
September 29, 2008
2Increasing Pressure to Implement Cost Containment
Solutions
- Medicaid health plans are under strong pressure
to control costs and ensure correct payment of
claims - Three forms of pressure are converging
- Margin and fee pressure
- Contractual pressure from state clients
- CMS focus on program integrity
3Growth, Competition, and Financial Pressure
- GROWTH DYNAMICS
- Medicaid Managed care is growing substantially
faster than Medicaid overall
About half of Medicaid lives are in managed care,
yet only about 17 of Medicaid spending is
associated with Capitated premiums
4Competition and Financial Pressure
- Margins for Medicaid health plans are thin and at
risk of getting thinner - notable variances in
margins among the players creates competitive
risk - Average Operating Margins
- Private plans 0.6
- Publicly traded plans 4.0
- Medical Loss ratios
- Pure plan Medicaid plans 83.8
- Plans w/multi lines of business 86.9
- State fiscal pressure leading to increased rate
pressure among plans
5Competition and Financial Pressure
- Cost containment strategies are an increasing
area of focus to manage margins given pressure on
premiums - Comprehensive initiatives can substantially
enhance margins - Recent results for 2 large publicly traded
clients, just COB related
Impact on Bottom line
13 increase
22 increase
6Contractual Pressures
- States pressured by advocates for increased MCO
transparency and client services - Increased requirements on plans for benefits
expansion - Increased demand for public disclosure
- States are pressuring plans to fulfill
contractual requirements associated with cost
containment, especially coordination of benefits - Most States require plans to coordinate benefits
- GAO 13 of Medicaid recipients have other
coverage - HMS experience 5 to 7 of MCO members have
commercial coverage - Two strategies
- Deny claim direct provider to correct payor
- Recover payments made in error when other payor
exists - States are monitoring COB activity at the Plans
- Requiring increased reporting
- Implementing safety net processes to go behind
plans efforts to recover payments
7CMS Program Integrity Initiatives
MIP Statutory Requirements
- - 5-Year Comprehensive Medicaid Integrity Plan
(CMIP) - http//www.cms.hhs.gov/DeficitReductionAct/
- - Contracts for claims review, audits,
overpayment identification education - CMS targeting Medicaid Managed Care Plans
- - Effective support and assistance to States
- - Annual reports to Congress
8The Response Strategies for Containing Costs
- Plans are increasing investment in cost
containment strategies - Publicly traded companies are sending this
message to the investor community - The challenges are
- Plethora of methods
- Greater resistance by insurers
- Greater need for provider sensitivity
- Will be discussed in more detail in later
presentation
9The Response Operating Strategies
- Institution of executive level focus, not just a
sub-unit within operations - Establishment of internal units focusing on cost
containment - Expanded use of specialized contractors to
supplement internal efforts, including COB,
Payment Integrity, Fraud Abuse -
- Increased efforts to manage vendors, coordinate
their efforts, even to create competition among
them