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Medicaid dental carve-out saga shows fundamentals still matter

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Amid the early skirmishes of the 2015 legislative session, an unexpected upset occurred last week when a bill died in its first committee of reference. The fact the bill died is not entirely surprising, especially in light of the policy in the bill. In fact, that the bill was even being considered is a testament to the incredible effort of its proponents.

This is the third year in a row the bill was being considered, and it had every political advantage going into session: favorable committee references, a highly respected lobbying team, and a backer who was a major donor to the Republican Party of Florida during the last election season.

HB 601, sponsored by state Rep. MaryLynn Magar, would have “carved out” a specialty  program to provide pediatric dental care to Medicaid recipients from the state’s recently reformed Medicaid program. In 2011, the state combined an uncoordinated mix of specialty services into a statewide, comprehensive managed-care system. Before the state reformed the system in 2011, Medicaid operated as a disjointed system of plans and specialty providers who charged fees for individual services based on variables like region, patient age, and medical specialties.

Below is a summary of the history of the policy, an explanaton of the politics, and how the process is operated.

The Policy

From the House bill’s staff report summary (with interspersed highlights and commentary):

“In 2011, Florida established the Statewide Medicaid Managed Care (SMMC) program. The SMMC program requires the Agency for Health Care Administration (AHCA) to create an integrated managed care program for Medicaid enrollees to provide all the mandatory and optional Medicaid benefits for primary and acute care, including pediatric dental services, in a Managed Medical Assistance (MMA) program.”

The reason the Legislature reformed the system in 2011 was that there were too many individual programs or providers segmented by multiple factors including geographic region, patient age group (like pediatrics or geriatrics), and medical specialty or sub-specialty (dentistry, diabetic care, etc.) It was literally impossible for AHCA to effectively manage and control the quality and costs of those specialty providers and programs, and there were huge inconsistencies in quality of care and cost. Not to mention there was abundant fraud and abuse, especially in Miami. The overall cost of Medicaid to the state was skyrocketing, and the rate of increase of the overall cost was in a hyperbolic ascending curve. Without major reform, Medicaid spending was poised to literally consume the entire discretionary spending budget of the Legislature within several years. In addition, Florida faced the prospect of Obamacare implementation in 2014, which would add even greater cost pressure, by adding more members to the system.

The House and Senate held multiple hearings in 2010 and more hearings were held in early 2011. Everyone was represented at those hearings: the patient advocates, the doctors, hospitals, specialty plans, etc. They all testified in about the same manner: “Yes the system is broken, yes you absolutely should reform it, but don’t take away my special situation/plan, or patients will suffer, the sky will fall, and terrible things will happen.”

Legislators looked at how other states had approached the problem using managed-care organizations. They decided the solution was to have the care coordinated and managed by professional MCOs. However, simply giving the entire state or regions to one (or even a few) MCOs without carefully limited constraints was not an ideal solution either, because that would potentially give the MCOs an unfair advantage over the providers (i.e. doctors and hospitals) and ultimately result in poor quality of care to patients.

The Legislature chose to divide the state into eleven geographic regions, to prevent MCOs from “cherry picking” the profitable urban areas and neglecting the rural areas, which are less profitable to serve. Within each region, there would be more than one MCO (to prevent a monopoly) but less than 10. (Too many providers within region would be inefficient and unmanageable.) This system also had the advantage of allowing patients to move among the plans within a region to keep competitive pressure on the MCOs to provide the best service and quality of care. Finally, the state gave AHCA the authority to contract with the MCOs at very tight financial restrictions to make sure the maximum dollars went to the patients, and prevent plans from having an incentive to diminish quality of care in order to increase profits.

Picking up now from the dental carve-out bill’s staff report: “In February 2014, AHCA executed 5-year contracts for the MMA program, and began implementation, which was completed August 1, 2014. As of February 2015, over 2.9 million Medicaid recipients enrolled in the MMA program receive their dental services through managed care plans that offer a full array of medical, behavioral, and dental health benefits.”

The procurement process AHCA conducted to select the MCOs was among the most rigorous ever done in the history of the agency. They heavily scrutinized and evaluated the applicants, to make sure they would be held closely accountable and responsive to the patient population. During the final negotiation and rate setting process, AHCA established a target profit margin for the MCOs of 1.5%. (In other words, if everything happened exactly as the actuaries predicted, and the managed-care plans did everything right, they would make a profit of only 1.5%.) To appreciate how narrow that margin is, the office of insurance regulation (“OIR”) normally requires health insurers to maintain a profit margin of at least 2%, in order to be considered financially sound. Since the Medicaid reform has begun, at least one MCO has had to respond to an inquiry from OIR, and explain that AHCA set the target profit margin at 1.5% via the rate-setting process.

Back to the staff report:

“HB 601 removes pediatric dental services from the otherwise integrated SMMC program by creating a new statewide prepaid dental program. Adult dental services will remain with the MMA plans. The bill directs AHCA to contract with at least two prepaid dental health plans on a statewide basis. The statewide prepaid dental program (PDHP) will begin no later than September 1, 2016, or when AHCA receives the necessary federal authority to implement the program.”

To “carve out” pediatric dental services would be a step toward turning Medicaid back into a patchwork quilt of individual services and plans based on age group, medical specialty, or other factors. It would literally be undoing what the state worked very hard to achieve in 2011. Significantly, since implementing the reform program, the state has begun realizing savings from Medicaid reform, while the quality of healthcare services has increased.

Staff report: “The bill gives AHCA authority to seek any state plan amendments or waiver authority necessary to implement the program. To remove dental services from the SMMC program, AHCA will have to apply for an amendment of the approved section 1115 waiver, and will likely also have to apply for a new 1915(b) waiver to have authority to use a PDHP model to deliver dental services. The federal government has no deadline for acting on a section 1115 waiver application.” 

So, in order to implement the bill, AHCA would have had to require contract amendments to the five-year contracts from all of the MCOs around the state. These contracts are less than two years old. In addition, AHCA would have to seek a new federal Medicaid waiver from Centers for Medicare & Medicaid Services in Washington, after the state went through the time-consuming process of seeking an 1115 waiver from CMS in order to create the reformed Medicaid managed-care system in 2011. That fact alone demonstrates the unusual nature of what the bill sought to do, and how it would have been an extraordinary course reversal in the state’s Medicaid policy if the bill had passed.

Final paragraph from the staff report summary: “The bill has a significant negative fiscal impact on the Medicaid program. The bill provides that the act will take effect upon becoming a law.”

In spite of the fact the bill would have a significant negative fiscal impact, it was not even referred to the Healthcare Appropriations Committee. It only received two committee references in the House. This is another indicator of how strong the lobby and public relations team and effort was on behalf of the bill.

The Politics

The concept of the bill was the brainchild of Dr. Jeffrey Feingold, whose company, Managed Care of North America (or MCNA), provides specialty dental services under Medicaid and other government and private plans in four states. According to its website, MCNA currently operates in Florida, Texas, Louisiana, and Kentucky. In Florida, MCNA operates a sub-provider to three current MCOs under Medicaid and is also a provider to the Florida Healthy Kids Program under CHIP. MCNA also operates three commercial dental insurance plans under its own name in Florida. MCNA operated in Florida as a specialty provider before the old Mediciad system was reformed in 2011. Dr. Feingold began pushing the idea of carving dental services out of Medicaid almost as soon as the ink was dry on the law reforming the system.

Dr. Feingold has been a significant donor politically in Florida and other states, giving more than $1 million in contributions to policy makers who influence healthcare in the states.

The idea of carving out dental was floated in 2013, but didn’t get much traction.

In 2014, MCNA led the effort, and was joined by a few other prepaid dental health plans. Their lobbying effort has been led internally by former House Appropriations Chairman Carlos Lacasa, a Republican from Miami, who serves as MCNA’s senior vice president and general counsel. In addition to LaCasa, MCNA has been represented by the powerhouse lobbying firm of Southern Strategy Group and its team of lobbyists, several of whom used to work for AHCA.

Before the 2014 session, MCNA amplified its political giving. The bill was given only two committee references and passed both committees in the House in 2014, but ultimately did not make it to the House floor. In the Senate, the bill received four committee references, and passed two committees before running out of time. Among the reasons the bill died in the Senate in 2014 was the fact that then-Senate President Don Gaetz believed it was inconsistent with the state’s recent success at reforming the Medicaid system into managed care.

Going into the 2015 session, the bill only got two references in the House, and wasn’t referred to Healthcare Approps. (In spite of the aforementioned fact that the staff report clearly indicated it had a substantial negative fiscal impact.) Speaker Will Weatherford had given the bill the same references in the prior year, again indicating strong lobbying by the bill’s proponents. Many Capitol insiders believe Speaker Steve Crisafulli gave the bill the exact same two committee references from the prior year so as to avoid claims that he either advantaged or disadvantaged the bill. However, any reasonable observer would say a bill with a negative fiscal impact to the state should go through Healthcare Appropriations, as the Senate version was.

During the weeks and months before session, it became apparent that the only entity advocating for the bill was MCNA, while everyone else — from AHCA, to the MCOs and to even other PDHPs — thought it was bad policy. No other PDHPs supported it, although in prior years they had favored the idea. Even the Florida Dental Association, which had previously indicated support last year, was no longer supportive.

The bill still had plenty of advantages. First, it had the support of its committee chairman, state Rep. Ken Roberson. Also on the committee was Speaker-to-be Jose Oliva, who actively supported the bill and encouraged his colleagues to do the same. The 2014 sponsor, state Rep. Jose “Pepe” Diaz, was aggressively encouraging members to vote for the bill. (It was sponsored by MaryLynn Magar, because Diaz is in leadership, and the speaker asked leadership members not to file bills.) Even the opponents were fairly certain the bill would pass at least its first committee of reference.

So why did the bill die before St. Patrick’s Day?

For starters, the idea of the bill was inconsistent with everything the state has done in Medicaid for the last four years. This was something that was fairly easy for the opponents to communicate and for members to understand.

Clearly, Dr. Feingold had done his work supporting many members.

His lobbying team did an outstanding job getting the bill positioned, but even they could not persuade a majority of the first committee that the idea was worth moving forward. In the end, three Republican members on the committee, state Reps. Doc Renuart, Jay Trumbull, and Chris Sprowls, voted “No” on the bill, as did every Democrat on the committee. This reflects that, although Speaker Crisafulli gave the bill good references, he did not make it a “leadership issue.” It could be that he had bigger fish to fry than an issue pushed by a single vendor under Medicaid, or he didn’t want to spend limited political capital on anything but major issues. Plus, Crisafulli has already identified water policy as his big goal, and this issue was exactly the kind of red herring that could distract from it.

Either way, it reflected a smart approach from the Speaker, because he let the process work.

Which is sort of the moral of the story. If campaign contributions and powerful lobbyists alone were enough to pass a bill, this bill would have passed. Frankly, so would casino gambling a few years ago, and other ideas that have gone down in flames. While those material things matter, in the big-picture sense, ideas really do matter in the Florida political process, and the defeat of the dental carve-out bill reflects that. And that’s coming from someone who previously advocated for this issue.

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Ryan Ray writes about campaigns and public policy in Tampa Bay and across the state. A contributor to FloridaPolitics.com and before that, The Florida Squeeze, he covers the Legislature as a member of the Florida Capitol Press Corps and has worked as a staffer on several campaigns. He can be reached at ryan@floridapolitics.com.

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