Wham Bam


Back in what we’ll call the honeymoon period, managed-care companies saw the earth, moon, and stars in medicaid patients. Signing up poor people who qualified for the state’s health program meant lucrative reimbursements, which the companies loved. So the eager health plans wooed patients with free mugs, toys, and cheerful balloons in waiting rooms across the city. For years, the trinkets flowed and patient after hopeful patient signed on the dotted line.

Alas, the “medicaid market,” as it’s lovingly known in the world of managed care, turned out to be a fleeting— if passionate— fling. These days, the same for-profit companies that were tripping over themselves to get to patients are running in the other direction. Just last week Oxford Health Plans, the latest for-profit company to abandon medicaid, sent “Dear John”— or rather, “Dear Oxford member”— letters to its 34,000 medicaid patients in Brooklyn, informing them with “regret” that it would no longer be their managed-care provider as of January 1.

While the company has been pondering such a move for some time, the ditched members have a mere month to figure out what to do next. If they haven’t chosen another managed-care plan by December 16, they’ll be automatically assigned to Managed Healthcare Systems (known as MHS), the company to which Oxford has in effect sold them— or at least contracts with their doctors.

There’s been plenty of public fretting as many managed-care companies have quit the medicare market, cutting loose elderly recipients who proved more expensive to serve than the numbers crunchers had bargained for. Far less remarked upon is a similar exodus that seems to be quietly taking place among companies that serve the poor. Several for-profit health plans, including Aetna/U.S. Health Care, Cigna, and NYLCare, have recently deserted the medicaid ship. And Oxford has already done so in the other states where it took on medicaid patients, including New Jersey and Connecticut.

All of which could lead patients to wonder if the health plans ever really cared about them in the first place. Indeed, the message barely hidden between the lines of Oxford’s letter is that, without the money that once had health plans drooling, medicaid patients have lost their special something.

When they were first set by the state at an average of roughly $150 per patient per month in 1994, the premiums paid to managed-care plans meant big bucks. But since then, rates have plunged, hitting an all-time low of $110 in ’96. While a revised rate-setting process is expected to increase reimbursement somewhat in the coming year, plans also complain they have to meet costly and burdensome state and local regulations to serve medicaid members.

And there is a darker reason behind the for-profit plans’ disaffection: the prospective medicaid patients left to be signed up are actually sicker— and more expensive— than those already enrolled.

When it comes to picking managed-care members, the strongest and healthiest are the most desirable. And, though discriminating against the sick is illegal, critics say managed-care companies successfully targeted relatively healthy medicaid recipients in their enrollment processes. (Health-plan marketers could do so by not approaching obviously sick people, for instance, or not developing or advertising a network of specialists who treat diseases such as AIDS.)

As plan directors know, the mandatory enrollment of medicaid patients due to begin in February will bring thousands more of these relatively high-maintenance people into the plan. And, even with a small rate increase planned by the state, this could bring further financial strain to companies, who are already crying poverty.

According to Deborah Bachrach, counsel for the New York State Coalition of Prepaid Health Services Plans, only one of the 21 managed-care companies serving medicaid patients made a profit last year. How profit is calculated in the industry is a matter of some dispute, however. A source who worked in the mayor’s office of medicaid managed care until recently says plans are still making money, though not “hand over fist” as they once were.

Regardless of whether managed-care companies are actually in the red, everyone seems to agree that the overall appeal of participating in medicaid managed care is waning from a corporate point of view. Certainly Oxford, which has racked up $900 million in losses over the past five quarters, doesn’t see it as a way out of its financial troubles. The company says it would be willing to break even “as a way to give back to the community,” according to spokesperson Madeline Hardart. But claiming it is unable to do so, Hardart says Oxford is instead focusing on its core (nonmedicaid) market.

There are no legal ramifications for companies that make such decisions. But while Oxford and MHS are predicting a smooth transition, the huge transfer of patients from one corporation to another will affect the patients themselves. “Switching plans can be very disruptive,” says Susan Dooha, chair of the New York State task force on medicaid managed care. “Patients have to get new literature and find out what they have to do to navigate the new system.”

Dooha also says the latest patient dump attests to the wrongheadedness of for-profit health care. “If patients are going to be musical chairs and switched around from plan to plan, it certainly makes the case for having a system that is driven by motives related to health care instead of the market.”

Indeed, within the market, companies don’t share a point of view with patients— or, for that matter, with one another. After all, MHS is hoping to make a profit on the same population that Oxford sees as money-losers. According to MHS, this isn’t because it plans to offer a lower level of service, but because the company, which already serves some 32,000 medicaid patients in New York, has more expertise in the area.

“We have a better understanding of what the population needs and how to reach them,” says MHS vice president Steven Matthews. “That enables us to direct resources more effectively and efficiently.” Matthews says MHS has been turning a profit since it began serving medicaid patients in New York in ’94, and he expects it will continue to do so after the company inherits the tens of thousands of Oxford members.

So now MHS is making the promises, though no one involved is talking about forever. Meanwhile, long after packing up the glossy booklets it once used to promote its services, Oxford says it would still like to be friends. To quote from the company’s parting letter, “The Oxford healthy start family would like to wish you and your family the best of luck in the future.” Yeah, yeah.