Bill to end Medicaid managed care advances in House

SPRINGFIELD - A House committee on Monday advanced a bill that would end the system of hiring private insurance companies to manage the state's Medicaid program at the end of their current contracts and replace it with a standard fee-for-service payment system.

The bill also calls for a three-year moratorium on any hospital closures or downsizing.

However, it is expected that further amendments to the bill are being drafted, and it was unclear Monday whether a final version could be approved by both chambers of the General Assembly before the special session ends, either Tuesday or early Wednesday.

That proposal is part of a health care reform package being pushed by the Illinois Legislative Black Caucus, an agenda aimed at addressing racial and ethnic disparities in the state's health care system.

Medicaid covers more than 3 million people in Illinois, according to the latest tally by the Department of Healthcare and Family Services, and the majority of them are enrolled in a managed care program. Nearly half of those enrollees, more than 1.4 million, are children in low-income families. Another 1.1 million are working-age adults, including more than 640,000 who became eligible with the federal expansion of Medicaid under the Affordable Care Act.

The idea behind managed care was to reduce costs and improve health outcomes by coordinating each person's health care - making sure they get regular checkups and follow-up visits and coordinating services between primary care providers and specialists.

But critics of the program have long argued that the insurance companies, known as managed care organizations, or MCOs, don't really save money by reducing costs but, rather, by denying claims.

"The MCOs are really managed claims organizations not managed care organizations," Tim Egan, president and CEO of Roseland Community Hospital in Chicago, said during a House Executive Committee hearing. "They deny health care claims and make money off the backs of Medicaid providers in Illinois, which is just outright wrong."

The bill, introduced as an amendment to Senate Bill 558, is sponsored by Rep. Camille Lilly, a Chicago Democrat and a member of the Black caucus.

"One of the things that I want to make sure I have the opportunity to ask the MCO organizations is, why do they think providers have signs outside of their facilities that say we accept most MCO plans and not all," Lilly said during the hearing. "And once that sign is displayed in the poor, the Black and brown community, which that's where those signs are, that means those individuals do not have access to health care within their community."

Samantha Olds Frey, CEO of the Illinois Association of Medicaid Health Plans, which represents MCOs, acknowledged that work needs to be done to address racial disparities in health care, but she said ending managed care itself would be disruptive and could result in a loss of some federal funding.

That's because the state currently levies an assessment on MCOs, which generates money that is then used to draw down additional federal dollars that are used to support reimbursement rates and help fund safety net hospitals.

"As drafted, we believe this will jeopardize billions of dollars in federal revenue, that it will destabilize the program and cause confusion during an already very confusing time for Medicaid members," she said. "And that'll eliminate the stable partnership that the health plans have been able to offer to the state throughout financial crises and that we continue to offer to the state."

David Gross, a senior vice president of the Illinois Health and Hospital Association, also spoke about the potential loss of federal dollars by ending managed care.

"There's over $3 billion that flows through the assessment program right now through the MCOs to our hospitals, including $1.4 billion over the next two years for our safety net hospitals, who I think, as everyone knows here, face very difficult financial challenges, and many times have only a few days of cash on hand," he said.

Gross also spoke against a provision of the bill calling for a three-year moratorium on hospital closures and capacity reductions.

"Hospitals need financial resources," he said. "They need appropriate staffing and they need patient volume to maintain service lines in order to move forward with a functioning hospital. And forcing the hospital to stay open when they cannot afford to do so, and do not have the appropriate staff or the patient volume to maintain competencies, puts the safety of patients at risk."

The committee voted 8-5 to advance the bill to the full House.