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Health News Florida
Healthy State tells the stories you need to know to stay well, with a special focus on Florida.We'll bring you the latest fitness trends, new research on preventing and treating disease, and information about how health policy impacts your pocketbook.We report on health using all the tools at our disposal -- video, audio, photos and text -- to bring these stories to life.Healthy State is a project of WUSF Public Media in Tampa and is heard on public radio stations throughout Florida. It also is available online at wusfnews.org.

Medicaid HMOs Losing Money on Drugs

Kevin Kearns, president & CEO of Prestige Health Choice
Kevin Kearns, president & CEO of Prestige Health Choice

Florida Medicaid, which has been touting its "Managed Medical Assistance" program as a national model, may want to hold off.

The program, which shifts virtually all Medicaid recipients into managed-care plans, underestimated how much their care would cost.

Kevin Kearns, president & CEO of Prestige Health Choice
Credit Health Choices Network
Kevin Kearns, president & CEO of Prestige Health Choice

A spreadsheet the Agency for Health Care Administration prepared shows that nearly allHMOsand provider-service networks involved in the program are losing money.

The losses between May and December totaled more than $300 million, and some of the health plans said they could reach $700 million by June 30.

"The plans are struggling," said Kevin Kearns, CEO of Prestige Health Plans, a Miami-based provider-service network. "We're all hurting."

UnitedHealthcare was hurting most as of December, accounting for more than one-third of the total losses. It was $109 million in the red, 24 percent above break-even.

Others that were deep in the hole included Sunshine Health Plan, $72 million; Staywell, the plan name for WellCare Health Plans in Florida, $44 million; and Prestige, $23 million.

Both state and federal law require that these rates be actuarially sound. As a result, the Agency for Health Care Administration called the plans and its rate consultants, Seattle-based Milliman, to a meeting in late March and is expected to hold another in a few weeks.

One reason they're losing money is the spending on prescription drugs, according to a report by Wakely Consulting for the Florida Association of Health Plans. Patients are using more drugs than expected and the cost per prescription is higher than expected.

Elizabeth Dudek, secretary of Florida's Agency for Health Care Administration
Credit Agency for Health Care Administration
Liz Dudek, AHCA Secretary

The Wakely actuary who compiled the data, Brian Weible of Clearwater, said prescription-drug spending was above projections for both groups of low-income Medicaid recipients: the healthy group -- children and their mothers -- and the chronically ill elderly and disabled.

According to Weible's report, the actual expense for the younger group averaged more than $31 a month. The estimate that had gone into building the premiums was between $22 and $26.

Elderly and disabled Medicaid recipients were averaging about $247 a month between May and December, according to the report. The projection had been between $198 and $236.

Sen. Don Gaetz, R-Niceville, raised concern about the HMOs' losses on Wednesday while questioning AHCA Secretary Liz Dudek at her confirmation hearing before the Senate Ethics and Elections Commmittee.

Dudek said that AHCA is "very concerned about the viability of the plans. They are our partners; they've been great partners." But she told Gaetz not to worry, that the start-up phase carries extra costs and that the plans will do better as time goes on. She promised that AHCA won't have to come back to the Legislature asking for more money.

"The plans did bid" for the contracts, Dudek said. "They were the ones that set the rates."

While $300 million is a lot of money, Dudek said, "it's not a lot of money relative to $11 billion," the amount the state is spending on the program this year.

Audrey Brown
Credit Florida Association of Health Plans
Audrey Brown

Audrey Brown, president of FAHP, said that while it's true the plans submitted bids, they based the bids on a "databook" provided to them by Medicaid officials.   Another factor that led to losses, she said, is that the agency required the plans to use the state's preferred drug list and guidelines rather than their own pharmacy-management programs.

The state's guidelines allow the use of more brand-name drugs than the plans' drug lists typically do, she said. It’s a common practice for state Medicaid programs to receive rebates from drug companies in return for placing their products on the list. The amount that the state receives from any one company and the details of the deals are kept secret, considered competitive information.

"Utilization is up, which means Medicaid recipients are getting these drugs they needed," Brown said. "But there is also  a huge increase in the unit cost. Plans are not able to control or manage pharmacy."

Taken as a whole, the rebates can be substantial. According to the state's revenue estimating conference,  Florida Medicaid was originally projected to receive $980 million in rebates this year, but now it's expected to be at least $1.4 billion and could exceed $1.5 billion.

Dudek said at the hearing that AHCA decided to require plans to use the state formulary in order to ease Medicaid patients' transition from the traditional fee-for-service practice to managed care. 

Prestige CEO Kearns said telling doctors to use the state's formulary means they are forced to prescribe a brand-name drug for a Medicaid patient when they prescribe generics for private-pay patients.

He said his plan's generic drug rate fell from about 90 percent to about 80 percent because of the requirement.

"We're sending mixed messages to providers," Kearns said. "It's absurd."

Overall, the health plans' spending on medical services and drugs -- in industry lingo, the "medical-loss ratio" -- is eating up 97 percent of the premium dollar, the Wakely report said. The administrative expenses run about 10 percent, which leaves plans with a financial loss.  

The Statewide Medicaid Managed Care Program, created by a 2011 law, requires most Florida Medicaid beneficiaries -- including those in long-term care -- to enroll in a managed-care plan, either an HMO or a PSN.

An April 1 enrollment report shows that about 3 million of the state's 3.7 million current Medicaid recipients are part of the program. Most are in the Managed Medical Assistance program; 86,000 are in a Long Term Care division.

The rollout for those in long-term care began in fall of 2013, with the others enrolling between May and August last year.

The state's rationale in creating the statewide managed-care program was that health plans could be held responsible for the quality of care and prudent spending in a way that individual doctors could not. It is also easier for health plans to catch potential fraud than it is for the state.

More information on the Statewide Medicaid Managed Care Program is available on a state website.

Carol Gentry is a special correspondent with in Tampa. receives support from the Corporation for Public Broadcasting.

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