The administration of Gov. Bob McDonnell is considering a “Virginia way” for providing health insurance to the poorest Virginians that relies on private insurance instead of expanding the state’s Medicaid program.
Secretary of Health and Human Resources William A. Hazel Jr. outlined a possible “private option for low-income adults” on Monday that would use billions in federal funds under the Affordable Care Act to buy them health coverage under managed-care contracts with commercial insurers.
The private option follows a path outlined recently by Senate Finance Chairman Walter A. Stosch, R-Henrico, as an alternative to expanding the state’s Medicaid program for almost 400,000 uninsured Virginians who earn less than 133 percent of the federal poverty threshold — less than $16,000 a year, for an individual.
The approach would use private brokers to enroll uninsured adults — primarily parents and childless adults not covered by Medicaid now, no matter how poor they are — in private health plans with commercial benefits at per capita rates that shift the risk of managing their care to insurers.
“This is all doable in a fairly short order of time,” Hazel told the Medicaid Innovation and Reform Commission at the end of a more than four-hour meeting in Richmond.
The commission could meet again as early as next month — after the gubernatorial election — to determine whether the state has made sufficient progress in reforming its current Medicaid program to allow its expansion or another approach to extending health care coverage to the poor.
McDonnell and the General Assembly created the commission as part of a state budget compromise this year that requires three phases of reforms to be accomplished as a condition for expanding the program to take advantage of more than $23 billion in federal funding to the state over the next 10 years.
The first phase, involving reforms already underway or approved by federal health officials, is expected to save Virginia $118 million to $127 million in state general funds in the next two-year budget — and twice that amount including federal matching funds.
Most of the expected savings will come from the beginning of a managed-care contract in December to administer Medicaid benefits for community behavioral health programs that have been delivered through uncoordinated fee-for-service payments to providers. The behavioral health services administrative contract with Magellan Health Services will save the state alone $67 million over two years.
The full savings estimated in the first phase of reforms will depend on the level of enrollment in a new, federally approved program to coordinate the care of people who are eligible for both Medicaid and Medicare benefits — one of the biggest cost-drivers in a system that spends two-thirds of its money on the elderly and disabled.
Other reforms underway include moving foster care children into Medicaid managed care insurance — the process will begin in this region on Nov. 1 — bolstering protections against fraud and saving money on a new eligibility and enrollment system paid for primarily with federal funds.
The Department of Medical Assistance Services, the state’s Medicaid office, “if pushed today … could arguably say it has met all the requirements of the budget,” Hazel said.
The legislative commission could vote as early as December on whether to expand Medicaid or some variation of its coverage. Expansion would require approval by three of the five members from the Senate, who generally favor it, and the House of Delegates, who generally do not.
Hazel said the second phase of reforms — aimed primarily at requiring Medicaid recipients to share some of the cost of their care and to take responsibility for preventive care to avoid more costly medical treatment later — also are underway through changes in contracts with seven Medicaid managed care providers.
The final phase will take the longest because it will attempt to manage the care of elderly and disabled people, including those with intellectual and developmental disabilities who require expensive community services.
“For the purpose of the budget language, it said we have to have plans (for those reforms),” Hazel said. “It doesn’t say they have to be done.”
Opponents of Medicaid expansion insist on carrying out all of the reforms and measuring the results before even considering extending the program to poor parents, childless adults and some people with disabilities not covered now.
“I believe Virginia should not expand Medicaid no matter how perfect we can make the program,” said Christie Herrera, vice president of policy at the Foundation for Government Accountability, one of several groups that pushed Monday for alternatives for insuring the poor that don’t rely on federal dollars.
“You become more dependent on the federal government, and that is not an option to us,” said Craig DiSesa, representing a Mechanicsville-based advocacy group that held a news conference with other conservative policy organizations before the commission meeting on Monday.
But Hazel is concerned that Virginians would not benefit from $26 billion in new taxes under the Affordable Care Act without expanding Medicaid in addition to an estimated $6 billion in federal subsidies for insurance on the new marketplace. “Absent of Medicaid expansion, we have no way to get our money back,” he said.
Commission Vice Chairman R. Steven Landes, R-Augusta, and other opponents of expansion argued that the federal government cannot afford to keep its commitment under the law to full funding of expansion in Virginia for the next three years and no less than 90 percent of the cost thereafter.
Landes told a representative of private health plans that they also would stand to lose if the federal government backed off the commitment, along with hospitals and providers. “If the funds aren’t there, somebody’s ox is going to be gored,” he told Doug Gray, executive director of the Virginia Association of Health Plans.
Gray responded that insurers are not daunted by the possibility of having to disenroll participants in Medicaid managed care plans, as would be required under the budget language if the government reduces its share of funding.
“We win and lose enrollment on a daily basis,” he said. “To us, it’s not the end of the world to cut some people off.”
Politically, however, the prospect of rolling back benefits alarms lawmakers who fear they would take the blame.
“Who gives them the notice, the state or feds?” asked Del. Johnny S. Joannou, D-Portsmouth. “I’m sure it’s the state sending a letter saying, ‘I’m not insuring you anymore,’ and that’s not right.”
Stosch received an assurance from Gray that contracts between the state and Medicaid health plans would require them to drop coverage if the money isn’t there. “That’s absolutely possible,” Gray said.