Opposition Surfaces to Medicaid HMO Plan

January 21, 2010

A plan by Governor Pat Quinn’s administration to enroll elderly and disabled Medicaid recipients in health maintenance organizations (HMOs) has run into opposition from advocates for the disabled and is moving ahead more slowly than expected.

As previously discussed in this blog, Governor Quinn hopes to enroll roughly 40,000 elderly and disabled beneficiaries in Northeastern Illinois—excluding Chicago—in HMOs beginning in July of 2010. The pilot plan would be the first time that Illinois’ Medicaid program has made HMO enrollment mandatory. State officials have said HMO managed care for the elderly and disabled could cut Medicaid costs in the long run and improve services.

Advocates for the disabled have expressed concern that HMOs are not familiar with the needs of the disabled and might improperly deny services, especially services provided in homes and community settings. The Arc of Illinois, an advocacy organization for the developmentally disabled, sent a letter to the Governor’s Chief of Staff Jerry Stermer on December 29, 2009, requesting that those with developmental disabilities be excluded from the pilot program.

In the letter, Tony Paulauski, the Arc’s executive director, asked for a “carve out” of services for the developmentally disabled from the plan. Mr. Paulauski said the State should focus instead on moving disabled individuals from nursing homes and state facilities to smaller community settings. The Arc has asked its members to contact state lawmakers about the Medicaid pilot.

The Illinois Department of Healthcare and Family Services (HFS), which administers the State’s Medicaid program, posted a notice on the State’s procurement website in October of 2009 informing vendors that it would be issuing a request for proposals (RFP) seeking two managed care organizations for the pilot. HFS officials said at a meeting with disability advocates in December of 2009 that the Governor’s office wanted the RFP to be issued by early January of 2010. However, the RFP had not yet been issued as of January 20.

On January 12, 2010, the Illinois House Medicaid Reform, Family & Children Services Committee held a hearing on the pilot plan in Springfield. Officials of disability advocacy groups, including the Arc, the Illinois Association of Rehabilitation Facilities and Avenues to Independence, were among those who testified.

The Illinois Hospital Association also testified at the hearing. In written testimony, the hospital group warned the State against trying “unproven, untested approaches” on “our most fragile and medically frail citizens.” The hospital association said it was concerned about “the extremely tight time frame” in which the State planned to implement the program. HMOs have a “poor track record” in Illinois, the hospital group said, and have traditionally “placed barriers to care” to boost their profits. Instead of HMOs, the hospital association said the State should consider expanding other managed care strategies already in use in the Medicaid program.

As in the rest of the country, the disabled and elderly population represents Illinois’ most expensive Medicaid recipients. State officials have said that savings would come from eliminating unnecessary hospitalizations and duplicative drug expenditures. HMOs restrict patients to a particular network of healthcare providers and are usually paid a fixed fee for each patient. State officials have said that HMOs would be required to provide all needed services and would be paid a bonus for good health outcomes.

Governor Quinn’s Taxpayer Action Board (TAB), which was charged with finding ways to reduce the Illinois budget, recommended in a report in June of 2009 that the State consider mandatory managed care for seniors and disabled adults. TAB said such a move could “enhance cost effectiveness, care coordination, wellness and quality of care.” The Board estimated that managed care could save $95 million in the first year and up to $850 million a year in the long term. Any savings to the State would be less because state Medicaid expenditures are partly reimbursed by the federal government.