Hundreds of millions in Medicaid rate cuts coming for HMOs next year?

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Florida’s health maintenance organizations responsible for coordinating health care coverage to the poor, elderly and disabled have been targeted for $556 million in rate reductions under a proposal crafted by the state agency that oversees the Medicaid program.

The proposed cuts were outlined in budget documents submitted earlier this month by the Agency for Health Care Administration to the state Legislature.

The state’s HMOs are now the prime health care providers responsible for Medicaid under a shift to managed care that was approved by legislators and signed into law by Gov. Rick Scott back in 2011. AHCA suggested the reductions as part of its annual budget exercise.

Legislators have been asking for years for a list of potential areas to cut spending and agencies have obliged, usually identifying the cuts by priority. Many years the lists is not noticed because state legislators have enough money to work with. But that may not be the case in the fiscal year 2015-16, which begins July 1, 2015 and runs through June 30, 2016.

Florida is projected to have a $336 million budget surplus next year but the forecast could make it difficult for either Scott–or challenger Charlie Crist–to carry out some of the campaign promises they have made on the stump. Scott has pledged to cut taxes and boost school spending to historic levels.

Scott’s own budget director, Cynthia Kelly, put out a memo in September and called the projected surplus “understated” and said that there may be more money available. In that memo she said the surplus number was derived without any presumed savings from identifying efficiencies, when in fact agencies over the past three years have identified savings and will continue to do so.

In its proposed list of reductions AHCA has recommended that prepaid health plans have their capitation rates reduced by 4.19 percent. The majority of the reduction, or $424 million, will come from traditional prepaid health plan, or the HMOs that don’t  coordinate long term care.Traditional prepaid health plans would receive $362.47 per member per month for treating the 2.6 million Floridians enrolled in the plans, budget documents show.

HMOs that provide long-term care are targeted for the same 4.19 percent reduction. However, the plans that pay for long term care services are paid higher capitation rates than traditional plans, receiving–$3,445.42 per member per month.Under the proposed cut the plans would receive $3,300.95 per member per month, instead. While they are paid higher capitation rates fewer people are enrolled in the plans; there are 91,381 Floridians enrolled in managed long term care and the savings from reducing capitation rates for those plans equals $132 million.

The capitation reductions cannot be made, the agency notes in the budget documents, if the new rates aren’t deemed actuarially sound. Additionally, for the traditional plans the budget documents note that hospital inpatient and outpatient benefits as well as other service benefits would need to be adjusted in order to achieve this reduction.

The Florida Association of Health Plans — a statewide organization that represents may of the Medicaid HMOs that operate in Florida — did not return initial phone calls for this story.