Connecticut Bucks the Medicaid Managed Care Trend

This is the second installment in our occasional series on Medicaid programs. We profiled North Carolina’s program in the September 2022 issue.

For more than four decades, state Medicaid directors have paid private health insurers to manage the care of their Medicaid beneficiaries under comprehensive risk-based contracts. Today, Medicaid managed care, as it is called, is the rule, not the exception — with 40 states and the District of Columbia running their Medicaid programs this way.

But since 2012, Connecticut has gone against the grain of this trend. Late in 2011, the state ended the $800 million contracts it had with Aetna, UnitedHealthcare’s AmeriChoice division, and a nonprofit insurer, Community Health Network of Connecticut (CHNCT). It assumed the full financial risk of 529,000 people in the state’s Husky Health program, a group that
included adults and family members covered by Medicaid and children in the Children’s Health
Insurance Program (CHIP). Connecticut adopted a self-insured system similar to what large employers use and contracted with three companies to provide administrative services under administrative services only (ASO) contracts and approve payments for hospitals, physicians and other providers serving Medicaid and CHIP members. The three ASOs are Beacon Health Options Connecticut for behavioral health, Bene-Care for dental care and CHNCT for medical claims.

Related: North Carolina: Medicaid Leader, Medicaid Laggard

An ‘over-the-top yes’

The healthcare of people covered by Connecticut’s Medicaid program is still managed. But instead of depending on insurers with Medicaid managed care contracts, state officials introduced what they call a managed fee-for-service program in which physicians in primary care medical homes handle some management of patient care, explains Sheldon Toubman, an attorney with the New Haven Legal Assistance Association and patient advocate with Disability Rights Connecticut, a nonprofit agency for the disabled. Primary care medical home practices are tasked with — and paid for — this management, he says.

In addition to the medical homes, two of the ASOs, CHNCT and Beacon, took on intensive care management programs for patients with medical and behavioral health needs.

Are Connecticut and Husky members better off now? Ellen Andrews, Ph.D., executive director of the Connecticut Health Policy Project, answers, “Yes, and that’s an unqualified, over-the-top yes. We are better off, and I don’t think you’ll find too many people in Connecticut who disagree.” Andrews’ nonprofit organization is focused on the state’s health policies.

Soon after adopting the managed fee-for-service program, access to primary care, specialist physicians and other providers increased, Toubman says. Andrews agrees, saying, “In the first year after the state fired the MCOs (managed care organizations), the number of participating physicians went up 33%. That’s pretty clear evidence that it was managed care holding physicians back from participating in Medicaid.”

Another factor in the success of Connecticut’s move away from conventional Medicaid managed care contracts is that the Affordable Care Act required state Medicaid programs to match what Medicare was paying for primary care services in 2013 and 2014. The increased payment provided an incentive for more physicians to take care of people with Medicaid coverage, Toubman explains.

Under the new arrangement of ASO contracts and managed fee for service, the average per member, per month cost of Connecticut’s Medicaid dropped from $718 in 2012 to $646 in 2013 and then dropped again during the next two years to a low of $605 in 2015 before rising to $648 in 2020, according to a report issued last year by the state’s Department of Social Services. The administrative costs of running the state’s Medicaid program also declined so that by fiscal 2019 those costs totaled 2.8%, whereas the national average was 8.2%, the report showed.

The state report also noted that data from the federal Medicaid and CHIP Payment and Access Commission that used different criteria to measure costs showed the Husky program’s administrative costs for 2019 were 4.2%, which was lower than the national average of 4.7% and 17th lowest among the states.

In 2019, Connecticut’s annual spending per Medicaid and CHIP enrollee was $8,405, a sliver below the median annual Medicaid spending level of $8,436 for all states and territories, according to data from Medicaid.gov. That level of spending is impressive because Connecticut’s cost of living is among the highest in the U.S. States with a more expensive cost of living tend to have higher healthcare costs because labor and other expenses are greater.

However, the early declines in spending have reversed and Connecticut’s Medicaid costs have been rising since 2020. In 2019, state officials settled a lawsuit that the Connecticut Hospital Association and other hospitals filed in 2015, challenging the hospital fees that the state had established in 2012 to help pay for the Medicaid program, explains Andrews. As in most states, Connecticut’s Medicaid program spends more on hospital care than on home care, physician services and drugs; hospital costs in 2019 accounted for almost 30% of all Connecticut Medicaid spending.

Some of the hospitals had sought refunds from the state totaling more than $1.7 billion. Others appealed the Medicaid rates the state was paying, and some sought retroactive increases for multiple rate periods in effect since 2012. If the hospitals prevailed on all claims, state officials estimated the total liability would have been about $4 billion.

Under the settlement, the state agreed to reduce hospital user fees and increase payments to over seven years (2020 through 2026) totaling $871.5 million.

“Under the lawsuit settlement, the hospitals got a lot more money than they were getting and that means Medicaid costs have started going back up almost to where we were in 2012,” Andrews explains. “But Medicaid costs have gone up in every other state over the past 10 years.” The net result is that Connecticut’s Medicaid spending is lower than what it might have been without the changes made in 2012, she says.

Keys to success

In Toubman’s view, Connecticut’s switch from conventional Medicaid managed care to Husky Health’s unique combination of ASO contracts and other ways of managing care has meant improved care coordination and additional transparency. The Husky program improved care coordination by expanding a small pilot program that the state had used before 2012 to deliver primary care case management, he says. Patient advocates were successful in persuading state officials to add primary care medical homes to the Husky program from the start, according to Toubman. The medical homes attracted physicians, increasing access to care and improving care coordination.

Toubman says the Husky program also has meant that advocates and others have a clearer picture of state Medicaid spending and patient care. State officials disclose the program’s results in monthly and annual reports. Andrews says that insurers with Medicaid managed care contracts were slow to publish reports and when they did, each would report results in a different format: “It was like going into an orchard of fruit trees every time, because we knew we’d be getting apples and oranges.”

Toubman says increasing Medicaid payment to physicians has also been instrumental in the Husky program’s success. Higher payment for primary care has reduced the number of adults and children seeking expensive emergency department care, he says.

Joseph Burns is an independent journalist in Brewster, Massachusetts, who writes about health policy and health insurance.