Managed Care - April 2008 - (Page 47) Point or UnitedHealthcare are capturing an increasing share of the business, and they have the majority of members in several states,” says Hurley. The strong interest of commercial plans in Medicaid marks a reversal of the 1997 exit of commercial plans from this line of business because of federal regulations that limited the ability of states to assign recipients to managed care and limitations on payments to the plans. Hurley and the Center for Health Care Strategies (CHCS), a think tank that focuses on Medicaid and is largely funded by the Robert Wood Johnson Foundation, have issued several reports that look at the performance of for-profit Medicaid plans. A 2006 CHCS report based on 2004 data found that Medicaid plans operated by the publicly traded companies such as the pure plays or by national in- surers had significantly lower medical loss ratios and higher administrative costs than plans operated by non-publicly traded plans such as hospitals or not-for-profit community health plans. The report found that the “lower medical benefit ratios contributed to their higher profitability.” The profits of the pure plays were more than twice those of the non-publicly traded plans. However, the study did not appear to account for the provider-owned plans in the non-public group, where there is a tendency to distribute profits to the owners through higher rates and a higher medical loss ratio. Greg Nersessian, a research analyst at Credit Suisse, has followed the pure plays for years. In his report for the third quarter of 2007, he cited improved profit margins for three of the four companies, Molina, Centene, and AmeriGroup, as the result of normalization of new business start-up expenses, and in the report he asserts that Wall Street underestimates them. The CHCS study also reported on nonfinancial performance with HEDIS and the Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures, but with limited data because many plans do not report publicly. The study said there were no clear quality differences between publicly traded and non-publicly traded health plans. Although there may be an implicit concern among consumers and physicians about the motives of the for-profit companies that dominate the Medicaid managed care business, Hurley, other experts, including Stephen Somers, PhD, CEO of CHCS, and even state Medicaid directors say these programs are working. PHOTOGRAPH BY MARK MITCHELL The states like managed Medicaid because “capitation guarantees price predictability,” says Robert Hurley, PhD, of Virginia Commonwealth University. Most states contract with several plans because it gives them flexibility. APRIL 2008 / MANAGED CARE 47
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