Managed care; in it for the long term: using managed care for Medicaid long-term care is once again getting states' attention.

Pamela Parker, director of Minnesota's managed long-term care programs, has reason to be proud. Provider-contractors under her program for people with disabilities got 21 percent of the those they serve out of nursing homes. And she notes that some contractors who use nurse practitioners to coordinate care for nursing home residents apparently have cut hospitalization rates in half.

But she is just as quick to warn that Minnesota's eight-year-old effort, which serves several specific rural and urban areas in the state, is unique to Minnesota. That state's good luck doesn't mean managed long-term care will work in states with different options, she says.

After a slow period of about a decade, there's now scattered new interest across the states in trying managed care for Medicaid long-term care for the elderly and for younger disabled people.

The idea is that contractors--nonprofit, commercial or governmental--will have the incentive to keep people out of nursing homes and in the least expensive appropriate level of care.

But despite some movement in the 1990s, the idea has not caught fire. There are probably several reasons, according to experts watching these trends. The backlash against managed care in general made the movement toward such arrangements politically unattractive. Many patient advocates and health care providers worry that a managed care organization's incentive to save money will result in fewer and worse services. Health care providers, including nursing homes, have resisted the idea of states contracting with managed care organizations that could then contract with only selected providers and also set the rates for services.

Other problems, according to observers, are a lack of providers to take on the managed care organization role, an absence of infrastructure in the states to implement and oversee the efforts, and the long planning time needed to get the work underway.

Currently, only about 2.3 percent of Medicaid long-term care beneficiaries are in managed care programs where there is risk to the provider for controlling costs, according to recent research from Medstat and the Muskie School of Public Service at tire University of Southern Maine. Most of those programs are in one of eight states scattered across tire United States, and most are relatively small.

Only Arizona has its entire Medicaid long-term care population, about 23,000 people, under a managed care plan. And, as of 2004, that state had more than twice the enrollees of any other, according to the Medstat/USM research.

But now, for example, Maryland is planning a pilot to contract with organizations to integrate acute and long-term care in two locations. The program will be mandatory for people who are dually eligible for Medicaid and Medicare as well as for Medicaid recipients who need the nursing facility level of care.

Washington has chosen a vendor for a pilot to serve 3,000 people who are elderly or have disabilities and integrate medical care, substance abuse treatment, mental health and long-term care services.

Texas has a proposal to expand its managed long-term care program, piloted over the last seven years in the Houston area, to several other metropolitan areas. Brian Burwell, a vice president at Medstat and one of the authors of the Medstat/USM research, estimates that the Texas expansion alone would double the number of people in managed long-term care nationally. The plan, however, has run into controversy in the legislature, including opposition from providers and advocates. It is still awaiting a decision.

New programs or expansions are also anticipated in Florida, Minnesota, Massachusetts and California.

IT'S THE BUDGET, STUPID

State legislators can recite by heart the basic motivator for the interest: Medicaid costs have increased by over 50 percent in just four years.

"One of the major cost drivers for Medicaid is long-term care and other services for the elderly and disabled population, so it is vital that our reforms address those areas experiencing the most growth in cost," says Texas Senator Jane Nelson, chair of the Health and Human Services Committee.

Medicaid pays for an estimated 43 percent of long-term care costs for the nation. One third of Medicaid expenditures go to long-term care. With the aging baby boomers, the growth is destined to accelerate.

"Everyone knows that long-term care expenditures will continue to increase, but managed long-term care holds the potential of holding those increases to a more predictable level," says Burwell.

But also sparking interest is a provision under the 2003 Medicare Modernization Act that supports creation of "Special Needs Plans." SNPs are envisioned as managed care plans targeted to specific groups, including those who are dually eligible for Medicaid and Medicare. The new Maryland program, for example, follows this configuration and its goal is to have a plan receive fixed payments from both Medicaid and Medicare, but to integrate the services provided under one company.

The federal Centers for Medicare and Medicaid Services already has several dozen applications for such plans, according to several observers. Some other states, as well as other entities, are taking an interest in developing such plans.

NO ONE MODEL

But whatever form it takes, the Medstat/USM research team feels that managed long-term care is likely to grow, despite frequent opposition, because it is popular in the states where it is established. A number of experts see it as an important complement to tire trend of pushing long-term care into home- or community-based arrangements.

Stephen Somers, president of the Center for Health Care Strategies, which studies managed care under Medicaid, feels the strategy is going to become more obviously necessary for controlling Medicaid costs.

Any discussion is complicated, however, by the fact that no one model has emerged for doing managed long-term care. The huge variation among current programs just demonstrates the layers of decisions a state must consider. For example, some programs enroll only older people, but others also include younger people with disabilities.

States differ in the people they cover according to the level of functional need. Some include those who are already in nursing homes and others concentrate on the home-based care enrollees. Some integrate capitated (fixed payment) Medicare benefits and some do not. They also vary in the range of benefits they put under the capitated plan.

Some states have instituted these programs through legislation and others have simply done it through the executive branch, according to Susan Reinhard, co-director of the Center for State Health Policy at Rutgers University.

The programs also differ in the organizations they contract with. The Medstat/USM research found that most provider organizations in long-term managed care are small nonprofit plans and most are affiliated with some type of health care provider. In some states, counties serve as the plans.

But conversely, most enrollees are in a program managed by a commercial entity.

The Medstat/USM researchers say this market is dominated by two large commercial plans, Evercare, which is a subsidiary of United Healthcare, and Amerigroup.

Burwell notes that Evercare in particular has made a business decision to develop and aggressively market these services across the country: "They are very interested in expanding their presence in this market and they specialize in this product."

THE HOT BUTTON

One of the hottest questions politically for any state considering this route is whether to make the program voluntary or mandatory.

"There are strong business and viability arguments to be made for mandatory, but it tends to be politically unpopular," Burwell says. Many consumers don't want to use managed care because they are afraid services will be constricted.

He explains that mandatory enrollment ensures larger enrollment, thus allowing states to focus energy and development on larger programs and get serious bidders for the contracts.

Of the current programs, only those in Arizona and Texas along with the Florida Diversion program are mandatory. However, those programs account for about half the enrollees in the country, according to the Medstat/USM research.

So, do these programs save money?

"There are definitely people still arguing about that and there is not enough information in the literature to say definitely one way or the other," Burwell says.

There are some findings that program managers are quick to point out. Marc Gold, director of Texas Medicaid long-term care policy, notes a 2003 independent study that found that people in the Houston area program (Star+Plus) rate their services highly at the same time hospital admissions were cut by 28 percent and emergency room visits were reduced by about 39 percent.

Gold says, "We are not cutting prices. And we are not doing this by cost-containment. We are doing this by managing care." Specifically, he says, the providers are avoiding high-cost services when lower-cost services, including prevention, are appropriate.

Parker of Minnesota says, "We feel we have seen some cost saving in the metro areas for the seniors in long-term care."

THE QUALITY QUESTION

But aside from controlling costs, do the programs give good care? The Medstat/USM research found, in general, reports of high patient satisfaction, lower institutional services and higher use of home- and community-based services.

"Particularly in long-term care, if you can help people remain in their homes and communities, satisfaction generally goes up," says Reinhard.

The state officials who talked to MedStat/USM were generally positive about the programs. Many believed the programs offered greater flexibility and more coordination of care, even through episodes of institutional care.

On the other hand, the researchers note that in the 1990s a number of state initiatives failed due to resistance from providers and consumer groups, a lack of willing providers, or retrenchment from managed care in general.

The researchers also warn that many states don't have the infrastructure to ensure that contractors are not reducing services inappropriately.

"You have to have high quality organizations doing this work, because there is substantial opportunity for underservice," says Somers.

And opposition to these types of efforts is alive and well. Senator Paula Hollinger, who chairs a key health committee in Maryland and actually sponsored the legislation to govern the state's new program, reflects the fears about poor care. "I don't have an awful lot of faith in the way managed care is delivering service," she says.

Pointing to Maryland's history with Medicare managed care plans that dropped seniors' coverage, she says that she sponsored the legislation only because the executive branch was going to start the program anyway and she wanted legislative oversight.

"It's delicate business," says Somers. One reason, he says, is that the population to he served has well-organized advocacy groups. "And until the state and health plans do a good job of communicating with the consumers, and convincing consumers that it is in their best interest to be in managed care, I think that it is going to be a slow process."

Kathryn Foxhall is a freelance writer from Washington, D.C., who specializes in health care.