August 8, 2013
The scheduled rollout of Medicaid managed care in Illinois has been delayed by six months so hospitals can set up their own healthcare networks for Medicaid patients.
The new networks, known as Accountable Care Entities (ACEs), are intended to cover children and families. The State’s Medicaid agency, the Illinois Department of Healthcare and Family Services (HFS), originally intended to enroll those recipients in managed care beginning in January 2014, but the date has been pushed back to July 2014.
The Illinois General Assembly required HFS to solicit proposals from ACEs as part of Public Act 98-0104, which was signed by Governor Quinn on July 22, 2013. As discussed here, the legislation permitted the State to expand its Medicaid program under the federal Affordable Care Act and created a new role for Institutions for Mental Diseases, nursing homes that specialize in treating the mentally ill.
Provisions of the law relating to the new managed care organizations have attracted less attention. However, this change could be important to hospitals. The Illinois Hospital Association, in a legislative update posted on its website in June 2013, noted that the creation of ACEs will allow the State to rely less on Health Maintenance Organizations (HMOs).
Legislation passed in 2011 requires Illinois to enroll half its Medicaid recipients in managed care, also known as coordinated care, by January 1, 2015. Despite the delay due to the new ACEs, HFS still has a goal of enrolling roughly 2 million recipients, or two-thirds of the total, by the 2015 deadline.
Illinois has historically lagged behind other states in the use of managed care for Medicaid enrollees. Only 213,417 Medicaid recipients in Illinois, or 7.7% of the total, were enrolled in comprehensive managed care in 2011, compared with a nationwide average of 51.0% , according to the Kaiser Family Foundation and the federal Centers for Medicare and Medicaid Services.
States are increasingly turning to managed care in an effort to control Medicaid costs and improve patient care. Doctors and hospitals have traditionally been paid on a fee-for-service basis, in which payment depends on the volume of services provided. In contrast, managed care is designed to reward healthcare organizations for keeping patients healthy and avoiding unnecessary tests and procedures. HMOs, for example, receive a fixed monthly fee, known as a capitation rate, for each Medicaid enrollee.
In many states, the move to Medicaid managed care has led to clashes between HMOs and hospitals. As more Medicaid patients enroll in HMOs, hospital payments are increasingly controlled by those organizations.
Hospitals are also concerned that increasing use of managed care will lead to a reduction in federal Medicaid reimbursements. Federal Medicaid payments to hospitals are capped at an Upper Payment Limit (UPL) that includes fee-for-service payments but not services paid through capitation rates. The Illinois Hospital Association had urged legislators to amend the 2011 law to limit HMO enrollment if it jeopardized federal funding for hospitals, but the law was not changed.
Under the 2011 law, entities providing managed care must be at financial risk from high patient costs. Most of those now covered by such plans in Illinois—244,171 as of July 2013—are voluntarily enrolled in HMOs. Another 39,164 recipients are enrolled in the State’s first mandatory Medicaid managed care program, which began in May 2011 and covers elderly and disabled recipients. Services are provided by HMOs and by two other types of managed care entities designated by HFS.
As required by the General Assembly, the solicitation for ACE proposals was issued on August 1. ACEs must include hospitals and providers of primary, specialty and behavioral healthcare. The organizations could serve as many as 1.5 million children and their families covered by Medicaid, as well as 237,000 adults who are expected to enroll in 2014 under the Affordable Care Act expansion. ACEs would be large organizations, required to serve at least 40,000 clients if they operate in Cook County, 20,000 clients in the collar counties and 10,000 outside of the Chicago area.
Over three years, ACEs would move to fully capitated payments. The State would pay care coordination fees and share any savings generated by care coordination in the first 18 months. During the next year and a half, an ACE would be paid a capitated fee, but the State would share in any losses. ACEs are designed to be integrated delivery systems, in which financial incentives to keep patients healthy apply not only to the organization as a whole but also to each doctor.
HFS expects the ACE model to be a component of its State Health Care Innovation Plan. In February 2013, Illinois was awarded a federal grant of up to $2.1 million to develop a plan by September 30 featuring new models of service delivery to enhance care management.