State faces risk in Medicaid managed care switch

The potential state move of all Medicaid patients into managed care comes with a multimillion-dollar catch.

Georgia could lose roughly $175 million to more than $220 million in federal funding annually for the program if it makes the managed care switch, based on figures for the last two fiscal years.

The state, though, could seek federal permission to hold on to those ‘‘upper payment limit’’ (UPL) dollars. Texas sought and got federal approval in December to bring Medicaid beneficiaries into managed care and keep the funding, but only after the Lone Star State promised significant reforms to improve community health care.

Georgia is pursuing a ‘‘redesign’’ of its Medicaid program to control costs, improve quality and ensure appropriate use of medical services.

A consulting firm’s report, commissioned by the state, recommended moving all people in Medicaid into managed care. That would include, for the first time, those in nursing homes and people with disabilities, who are currently in a traditional fee-for-service system.

The state already has managed care for children and for low-income pregnant women in Medicaid, and for all kids in the PeachCare program. When that managed care system was established in Georgia in 2006, under Gov. Sonny Perdue, the state lost millions of federal UPL dollars.

State Medicaid chief Jerry Dubberly said this week that he has talked with Texas about its waiver. California has a similar waiver, he said.

The Department of Community Health, which runs Medicaid and PeachCare, said it ‘‘is interested in protecting UPL in a similar manner’’ should the program be changed to ‘‘full-risk’’ managed care.

Upper payment limit is a complicated way to increase federal funding for the Medicaid program. Hospitals, nursing homes and physicians participate in UPL programs, according to Community Health.

During the last two fiscal years, nursing homes have received the largest portion of the UPL funding, state figures show. Community Health officials say the federal payout amounts change every year.

Basically, under UPL, the state is able to get a higher reimbursement rate -– at the Medicare level –- for delivering Medicaid services. The hospitals and other organizations put up the matching amount, and get more money in return.

Texas received a five-year waiver from the Centers for Medicare and Medicaid Services to move almost 1 million additional Medicaid enrollees into managed care plans, while still drawing down billions in these federal matching funds for hospitals.

But the waiver also contained new requirements for tapping those federal funds. It shifted money that had previously gone into hospitals’ coffers into new shared “pools’’ to care for people in community settings, Kaiser Health News reported. To tap into the pool money, hospitals have to partner with community clinics or do other things to show they’re increasing primary care access and health quality, KHN reported.

Tim Sweeney, director of health policy at the Georgia Budget and Policy Institute, said Wednesday that it’s likely that Georgia would have to promise health system improvements to retain those dollars. “The feds want to make sure the state is doing something ‘big picture’ with [the money] instead of just the status quo,’’ Sweeney said.

That promise could include improving health coverage, access or quality of services. “That could definitely be good,’’ Sweeney said. He added, though, that such a waiver program would mean short-term uncertainty for health care organizations that currently get the UPL money.

Medicaid and PeachCare together cover 1.7 million Georgians with a budget of more than $7 billion, most of it federal money.

The redesign process has drawn intense interest from stakeholders, policymakers and health insurers, who are seeking to take over the current managed care enrollees and the ‘‘aged, blind and disabled’’ population.

The deadline for a state decision on a plan has been pushed back, and it’s likely that none will be made till after the U.S. Supreme Court rules on states’ challenge to the federal health reform law. That ruling is expected in late June.