By: Dave Kingsley
Managed Care for Poor Peoples’ Medicine is a Chimera
According to a report released by the HHS OIG’s Office last week, the massive Medicaid program intended for poor Americans is beset with denial of authorization for care and weak state oversight. What that means is this: poor people who are hard scrabble poor enough to qualify for Medicaid and have the moxie and luck in navigating the bureaucracy to the point of approval for the program, are far too often denied the treatment physicians think they need. The gigantic insurance companies contracting with states to run their Medicaid programs are denying care at double the rate of Medicare denials under managed care (i.e., Medicare Advantage).
It is not difficult to understand why an undue administrative burden is placed on poor people for both qualifying for government health care in the first instance and then for receiving needed care once they are admitted to the program. Powerful insurance companies have a financial incentive to deny a large proportion of care medical professionals think Medicaid recipients need. Furthermore, a lobby for poor people is nonexistent; they are powerless; and they can be pushed around and/or ignored by state bureaucrats. Nevertheless, a puzzling and mistaken conventional wisdom proclaims that a corporatized and privatized system is a far more efficient and effective way to deliver taxpayer funded medical services. It is past time that the conventional wisdom undergoes strong pushback from medical professionals, academics, and the media.
During the 2000 aughts (starting about 2010), states relying on the concept of “managed care” in which insurance companies (known as MCOs) are paid a “capitation rate,” i.e., a specific amount per enrollee, turned over their Medicaid programs to insurance corporations. If the insurers keep their costs below the total dollars committed for enrollees, they make money. Patients are, however, required to utilize medical services within “network.” They must use a medical practice or hospital that is part of the contracting MCOs network of physicians and other medical providers. Furthermore, care must be authorized by the MCO.
The size of federal expenditures for Medicaid has resulted in mushrooming revenue for major healthcare insurers such as UnitedHealth, Elevance, Cigna, Centene, and Aetna. In the early 2000s, no health insurers were in the top 30 corporations listed on the Fortune 500. By 2022, nearly one-third of the top 30 Fortune 500 companies were related to healthcare insurance and managed care contracting.
The idea of managed care began with the concept of health maintenance organizations (HMO) such as Kaiser Permanente and Ross Loos. Individuals can join an HMO, pay the premium and expect low deductibles and co-pays. However, the HMO or MCO in the case of Medicaid managed care have a network of physicians and other providers. Enrollees must “stay within network” and receive authorization from an insurer (MCO) for a host of medical services their primary physician thinks they need. This opens the door to tremendous power of insurance behemoths over Americans’ healthcare needs.
Has Privatization & Corporatization Through the Managed Care Concept Been Beneficial to the Health of Americans?
As I mentioned, it is conventional wisdom that private, for-profit corporations can do a better job of administering taxpayer funded healthcare than government agencies. But managed care is not working out in accordance with the widespread belief the government will pay less for healthcare if the profit motive incentivizes better care at a lower price. Medicare Advantage costs fifteen percent more per enrollee than traditional Medicare. Medicaid MCOs are paying robust dividends, buying back billions of dollars worth of their stock, and rewarding executives with exorbitant compensation packages while well baby care, infant mortality, heart disease, diabetes, and access to addiction treatment are not significantly improving across the Medicaid eligible population.
Aetna, UnitedHealth, Centene, and other major insurance companies are reaping huge financial rewards by keeping per capita costs low. That would not in itself be a bad thing if outcomes were improving. Perhaps having some healthcare is better than nothing. No doubt, people receiving Medicaid benefits have better health outcomes than people with nothing. But that is not the point. Comparing poor people with no health insurance to poor people with Medicaid is illogical.
Medicaid is lower tier medicine. So those individuals lucky enough to qualify for it and actually receive it are treated as second class citizens. So, by virtue of carving out a form of medical care for poor people – which is seen as welfare or a “handout” – the system can exploit them for financial gain while denying them the quality of care every other citizen deserves even though every form of healthcare received by Americans is heavily subsidized in some way or other by government.
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 HHS OIG Report: “High Rates of Prior Authorization Denials by Some Plans and Limited State Oversight Raise Concern About Access to Care in Medicaid Managed Care.” https://www.oig.hhs.gov/oei/reports/OEI-09-19-00350.asp#:~:text=Overall%2C%20the%20MCOs%20included%20in%20our%20review%20denied,rates%20greater%20than%2025%20percent-twice%20the%20overall%20rate.