Center for Studying Health System Change

PUBLIC POLICY

The primary focus of state policy has been on access, insurance and Medicaid, with little focus until recently on improving access to health care and regulating the health care industry. Historically, the state provided limited support to improve access to care. Important steps have been taken in recent years, however, including: enhancements of special programs and services like the Florida Healthy Start Program, and expansion of Medicaid and other policies designed to expand insurance coverage, particularly for children and persons working for small businesses. For example, the Florida legislature established the Healthy Kids Corporation in 1990 to provide comprehensive health care coverage to uninsured children in 11 school districts across the state, including Miami’s. The program now covers 20,000 children and will be expanded to include five additional sites covering 45,000 children by fall 1997. Fifty percent of the program is funded by state dollars; 33 percent by family premiums; and the remainder by school districts, hospital authorities, children’s services councils and community groups. Healthy Kids Corporation uses school districts to define the client base and relies on the income criteria of the National School Lunch Program to set sliding-scale premium rates.

To expand coverage for employees in small businesses, the state established Community Health Purchasing Alliances (CHPAs), state-chartered, not-for-profit entities designed to enable small employers to purchase insurance. Launched in 1994, the purchasing alliances were organized geographically into districts. The state provided some initial seed money and continues to support some of the district CHPAs, though not the local one in Dade County. CHPAs serve as liaisons between employers and health plans and do not purchase insurance directly. If an employer wants to purchase insurance through the CHPA, the employer contacts the CHPA, and the CHPA in turn refers the employer to an authorized agent. The intent is for each district to be self-supporting.

Another initiative, the Florida Health Security Plan, was proposed to expand insurance coverage for individuals who are not currently eligible for Medicaid to 250 percent of the poverty level. The Florida Health Security Plan also proposed expanding the use of managed care. The federal government approved this request for a statewide Medicaid waiver under the 1115 authority but the state did not implement it due to a lack of enabling state legislation. However, the state is actively expanding its managed care initiatives under existing but more limited Medicaid waivers that include amendments to permit mandatory enrollment of Medicaid recipients who choose not to participate in the state’s primary care case management program (PCCM).¹⁰ State Medicaid policies have significant impact in the Miami area because Dade County has the highest concentration of Medicaid eligibles in the state with approximately 27 percent of the 1.5 million Medicaid eligibles.¹¹

Eliminating persistent problems of fraud and abuse is the major focus of the state’s regulatory policy. The Miami market, in particular, has been the site of a number of Medicare and Medicaid fraud and abuse cases that have gained national attention. The 1980s’ charges of fraud and abuse and eventual convictions of principals in a major Medicare health plan, and similar charges regarding Medicaid plans during the last few years, have caused the state to step up its regulatory efforts. In fact, recent Medicaid regulations are designed to eliminate earlier regulations that permitted plans to participate in Medicaid managed care without meeting existing HMO licensure requirements. The new requirements impose stricter standards for marketing, financing and care delivery to reduce charges of unfair marketing practices and poor quality of care.

Extending commercial HMO requirements to Medicaid plans appears to be having some impact as evidenced by state intervention in the recent proposed merger between Physicians Corporation of America, the major Medicaid plan, and Sierra, Inc., of Nevada, which was halted due to the unacceptable background of one of the Sierra principals. Moreover, legislators set new, tougher standards to include restrictions on Medicaid enrollment practices and use of competitive bidding for 1997 Medicaid contracts, efforts designed to reduce costs and improve quality of care. A new statute was also passed establishing locally based ombudsman programs to address consumer and physician complaints about HMOs. Whether these legislative initiatives will improve the quality of health plans remains to be seen.

The history of fraud and abuse in public programs has drawn special attention from the federal Health Care Financing Administration (HCFA). A temporary field office was placed in Miami specifically to address fraud and abuse problems. Although originally planned as a time-limited effort, the office continues to operate. The current investigation of charges against Columbia/HCA related to its Medicare billing and other practices, including those in the Miami market, indicates that these problems have not yet been resolved.

PUBLIC AND PRIVATE PURCHASERS

Miami is on the one hand characterized by a large publicly insured population whose programs have paid relatively high rates relative to commercial plans and have a sizable number of lives under managed care arrangements, primarily HMOs. The area’s private purchasers, on the other hand, are represented by a primarily small-employer market (50 or fewer employees) that generally purchases health care through brokers and is most interested in premium costs. The large number of health plans and products in the market provides considerable choice for purchasers.

Public Purchasing

The public purchasers include Medicare and Medicaid and government agencies, which employ a large number of people. The largest employers in Dade County are the Metro Dade Public Schools, Metro Dade County Government, the federal government and the state of Florida. The first three of these together represent approximately 8 percent of the work force in the county.¹²

Relatively high payment rates, particularly for Medicare, have made both Medicare and Medicaid more attractive to managed care organizations than the commercial market. Medicare’s average adjusted per capita cost (AAPCC) rates established for all areas of the country are extremely high for Miami -- approximately 60 percent above the national average.¹³

Medicare and Medicaid account for a large number of the county’s population enrolled in HMOs. For Medicare, HMO enrollment is 30.5 percent compared with a national average of 12.6 percent as of December 1996.¹⁴ Medicare HMOs have operated in the market for a long time, compete actively for enrollment and generally use generous benefit packages and large networks as their basis for competition.

The Medicaid population is rapidly moving into managed care because of new requirements for mandatory enrollment of recipients who do not choose voluntarily among a number of prepaid plans, HMOs or primary care case management. Dade County has the highest Medicaid managed care penetration in the state of Florida at 29.5 percent.¹⁵ In 1996, approximately one-fourth of these beneficiaries were enrolled in Medicaid HMOs and other prepaid plans. The remaining beneficiaries participate in the state’s primary care case management program. Respondents expect that all of the county’s Medicaid population will be enrolled in HMOs and other prepaid plans in the future.

The 1997 Medicaid contracts change the rates the state will pay and the plans that can enroll Medicaid recipients. The state’s Notice of Intent for contract awards was announced in February, and protests of the award process may delay the planned July implementation. If implemented, the awarded 1997 contracts will reduce the capitation rates for Medicaid HMOs from 95 percent of the county’s fee schedule to between 87 percent and 92 percent. The announced awards include 12 plans, each with a specific allocation of enrollees, dividing up the potential county capacity of approximately 400,000 Medicaid recipients. If the July rollout is postponed or overturned, the speed with which the Medicaid population will be enrolled in HMOs is uncertain.¹⁶

Private Purchasing

Relatively little organized private sector purchasing activity is underway, due in part to the prevalence of small employers, but also to the low cost of insured products, as a result of heavy competition among health plans. Health plans compete for commercial lives to get at least 50 percent of their enrollees from the commercial section to meet requirements of the Medicare program.

Purchasers have had a declining interest in mobilizing around purchasing in this market since the 1980s, when they experienced large annual increases in premiums. At that time, purchasers organized to share information. The South Florida Business Coalition, formed in the 1980s, served as a vehicle for many of the large employers in the market to share price information about different products. However, the coalition never developed a collective purchasing effort and many of the large employers pulled out. As health plans in the area had to lower their rates to get business, many employers were able to obtain lower prices. Consequently, fewer employers saw the need to organize around purchasing, and membership in the coalition declined.

Although some employers still offer traditional indemnity products, most offer and have greater enrollment in HMO, PPO and point of service products. Some employers offer multiple choices among HMOs that often involve different employee contributions. Employers such as Jackson Memorial Hospital and the University of Miami offer incentives to encourage enrollment in their own plans. Many of the larger private employers in the market are self-insured.

Only a limited number of small employers seek insurance products available through the Community Health Purchasing Alliance (CHPA). Most small employers offering insurance work directly with brokers. Respondents reported that overall participation in the state has only reached 2 percent of the insured population.¹⁷ The District 11 CHPA includes Dade and Monroe counties and is supported by administrative fees, yearly employer memberships and some other private funds. The CHPA has increased the number of insured products available to small businesses but has not addressed the cost of those products adequately. Many small employers can obtain lower rates on their own for the same product. Approximately half of the plans offer the same rates to employers inside or outside the CHPAs (when membership and monthly fees are included), and in some instances the CHPA rates are higher.

The South Dade Chamber of Commerce developed another small-business effort that is reported to be more successful than the local CHPA in terms of participation by small businesses. By working with the John Alden Insurance Company to develop a PPO involving two hospitals, Baptist and South Miami, the Chamber is able to offer a PPO product with special pricing to its members.