“A period of churning”: Illinois’s Medicaid Transformation

 /  Nov. 19, 2016, 9:28 p.m.


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January 25, 2017 will mark the sixth anniversary of Public Act 096-1501, the state law which began Illinois’s move away from fee-for-service and toward managed care for its state-sponsored insurance plans. This change, though it has affected over 1.9 million Illinois Medicaid recipients, has been largely unnoticed, unpublicized, and, according to some experts, underreported: in the words of Rob Paral, a public policy consultant who specializes in community development, “the state is in this transition period, and it is doing a poor job of reporting,” meaning “the citizens don’t know where their money is being spent.” While the full effects of Illinois’s Medicaid shift are still a topic of fierce debate, what is undeniable is that this transition represents a real change for real communities; and in areas like Chicago, where 61 percent of children below the age of eighteen are enrolled in a state-sponsored health plan, this change has the potential to dramatically alter the way individuals access care.

Managed care, like many terms in health policy, is loaded, confusing, and means many different things to many different people. It emerged as a concept almost a century ago, in farming communities scattered across the country. The premise was simple, yet radical: rather than operating under the traditional fee-for-service system, doctors banded together in area-wide cooperatives and provided care for a fixed monthly fee (i.e. a premium). Within the context of Medicaid, managed care was introduced after the Balanced Budget Act of 1997, when the federal government allowed states to enroll their Medicaid recipients in so-called “managed care organizations” (MCOs). Under the managed care system, rather than pay for Medicaid services themselves, the state pays private companies (i.e. MCOs) a flat fee in return for assuming the risk and responsibility of providing coverage and care for their Medicaid population. These MCOs in turn often pay doctors and hospitals in their network a monthly premium in return for Medicaid care, rather than a fee for services provided. As of 2016, thirty-nine states had contracted at least part of their Medicaid population over to comprehensive MCOs, and total enrollment in managed care plans had surpassed fifty-five million.

Illinois first adopted managed care in 2011, in response to state budget concerns. Between 2007 and 2010, Medicaid liabilities had increased at the alarming rate of five hundred million dollars per year, rising from 8.2 to 9.7 billion dollars annually. The state’s general assembly, in an attempt to “address the needs of both the state and individuals eligible for such services,” passed the aforementioned Public Act 096-1501, requiring that 50 percent of the state’s Medicaid population be enrolled in a managed care organization by January 2015. The state assigned this task to Illinois’s Department of Healthcare and Family Services (HFS), calling it the Care Coordination Program. In order to meet the state’s ambitious goal, HFS created five mandatory managed care regions in which all recipients were required to enroll in a managed care plan: Rockford, Central Illinois, Metro East, Quad Cities, and of course, the greater Chicago area.  

Beginning in 2012, care coordination has descended upon Illinois with mixed reviews from enrollees and doctors alike. Proponents of the system claim that MCOs are not only more cost-effective for the state, but provide better care for those enrolled. A 2012 article in the Chicago Tribune cited one particularly poignant example: an enrollee named Sherry Loveless who had been stuck in her Rockford bedroom for months because her wheelchair was too large to fit through the room’s door frame. Loveless’s MCO, Community Care Alliance of Illinois, paid to widen her door frame and build a wheelchair ramp, making it easier for her to get her medication, go to and from medical appointments, and “join her congregation on Sundays instead of speaking with church leaders by phone.” Supporters of the 2011 law cite examples like these as proof that MCOs’ alternative payment model for healthcare—monthly premiums for doctors and hospitals rather than fees for services provided—prioritizes quality of care over quantity of procedures. However, a 2015 investigation by the Tribune told a very different story, highlighting shortcomings that opponents claim are inherent in profit-oriented private companies. The article cited numerous complaints from Medicaid enrollees forced to make the managed care transition, including reports of “wrong information on websites for insurance plans and hospitals; hours on the phone with insurers … conflicting letters in the mail; changes to prescriptions, and other frustrations.”

Dr. George Weyer, a pediatrician at the University of Chicago Medical Center, has seen both sides of the managed care debate over the past five years. On the one hand, he says that MCOs “aren’t substantially different” from the fee-for-service system which preceded them in regards to the contracts and reimbursements they negotiate with hospitals and doctors.  However, he does believe that due to the “survival of the fittest” nature of the MCO market, “the consistency is not there.” Referring to the past five years as a “period of churning,” Weyer said he fears that competition between plans has “created significant instability” and “that instability creates a lot of confusion for providers and patients” with “lots of opportunities for patients to fall through the cracks.” He cited one particular example, a pediatric patient of his who was on an expensive pharmaceutical paid for by an MCO and switched plans midway through treatment, forcing Weyer to renegotiate a new contract with a new MCO in time to maintain the patient’s prescription.

Weyer’s concern about plan stability is a common one, and supported by HFS’s own publicly available data. Of the twenty-one MCO plans that were available in Chicago in September 2015, eleven have either gone out of business or been bought out by larger plans in the past year (including Community Care Alliance, the plan that paid for Loveless’s wheelchair ramp; it is now a subsidiary of the larger Family Health Network). These eleven plans covered over four hundred thousand enrollees last fall, and while many may still be covered under a similar arrangement, others were likely forced to find a new plan with a potentially different network, creating confusion for patients and providers alike.

Along with concerns about an unstable MCO market, many critics also raise questions about the network adequacy of MCOs. A 2014 study done by the Department of Health and Human Services revealed that Illinois was the only state to not enforce any time or distance standards on its managed care networks. This means that MCOs operating within the state are under no legal requirement to cover doctors within a reasonable distance of their enrollees. While the effects of this are minor in major cities like Chicago, for rural areas of the state this lack of regulation could seriously impede Medicaid enrollees’ access to care. Weyer noted that while he has not personally encountered network issues with Medicaid patients, his wife, a family medical physician at a community-based practice in Lake County, “often struggles to find places to refer her patients in Medicaid HMOs [health management organizations].”  

Since the 2014 HHS study, the national Center for Medicare and Medicaid Services has implemented its so-called final rule on MCOs, requiring that all states have time and distance standards for their networks by 2018. However, even with this federal law, it is unclear whether Illinois’s managed care companies will face significant regulations in the future. The state has yet to release any information on what its time and distance standards will be, and provided no specifics in response to a Gate request. Moreover, a follow-up study by HHS revealed that even states with time and distance standards often fail to enforce their standards effectively: researchers found that over 51 percent of doctors listed in-network for a given MCO were either not participating in the MCO’s plan or not at the listed location, attributing this misinformation in part to the failure of state regulators to verify MCO networks.  When asked how the Illinois HFS enforces its quality standards, department spokesman John Hoffman responded: “Managed care organizations are required by contract to adhere to a number of quality control standards that are set forth by the Department and CMS. These address complaint processes, integrity and fraud and levels of access. The Department is committed to ensuring quality care for Medicaid clients and enforces these standards through a variety of mechanisms.”

Five years into Illinois’s managed care initiative, perhaps the only thing that is clear is that the debate over its success is far from over. As the country turns its attention to the healthcare battles being fought on the national stage, the question of whether Illinois’s managed care organizations will fulfill their founding promise, to address the needs of the state and the individuals they serve, will be decided in the coming years; and the fate of over 1.9 million Illinois residents enrolled in these plans will depend on its answer.

The image featured in this article is licensed under Creative Commons. The original image can be found here.


Jacob Toner Gosselin

Jacob Gosselin is a third-year Math major with a specialization in Economics and a minor in Creative Writing. He is interested in health policy and education reform. This past summer, he interned at the Brookings Institution's Center for Health Policy, where he worked as a research assistant specializing in Medicaid and State Flexibility under the Affordable Care Act.  On campus, Jacob runs for the varsity Cross Country and Track Teams.  He enjoys reporting on local issues, running with his friends, and tutoring at Chavez Middle School with the Chicago Peace Corps.


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