New York’s Proposed Managed Care Shakeup: Opportunity or Cause for Concern?
Post Written by Jason Helgerson, Founder & CEO
New York State’s health care delivery system might be in for one of the biggest shake-ups it has seen in a generation. Buried deep in Governor Hochul’s executive budget proposal is a plan to re-procure New York’s Medicaid managed care program–which is the heart and soul of the state’s signature $90 billion health care program.
While it may not sound like much, reprocuring Medicaid managed care is one of the most complex and challenging procurement efforts undertaken by state governments. While the effort can be challenging, they also create an exciting new opportunity to breathe new life into an essential government program.
First and foremost, the Medicaid program serves over 7 million New York residents—nearly a third of the state’s population—and this procurement will impact health care choices both at the plan and provider level. Fewer or different health plan choices could be good or bad for individuals on Medicaid, but no matter what, it will require adept management to ensure continuity of care for millions of people.
Second, a procurement process that leads to a radical reduction in the number of Medicaid managed care organizations in the state would send shock waves across other insurance markets. An under-appreciated fact is that Medicaid managed care is very important business component for many New York health insurance companies and if they were to lose this business, their very survival will be at risk. The reverse is also true, because a big win could also serve as jet fuel for growth and expansion that would transcend a company’s Medicaid line of business. The future of more than one insurance company will hang in the balance if this procurement goes ahead as proposed.
Lastly, this procurement has national implications. New York State hasn’t done a managed care procurement in living memory and has never been on the list of any national health insurance company that competes in this space. Historically, entry into New York State either required a strategic acquisition or a long, slow process of entry and organic growth. When it comes to acquisition, the price tag is often very steep. Centene—the nation’s largest Medicaid managed care plan—recently bought New York’s largest Medicaid managed care plan (Fidelis) for $3.75 billion in 2019. That entire investment could be wiped away if Centene/Fidelis fails to win the procurement in New York.
On the national front, a New York procurement process would be occurring at roughly the same time one of the other large Medicaid managed care states (Texas) will be conducting its own process. As a result, millions of health insurance lives will be up for grabs as plans compete for these contracts. These two states alone are likely enough to introduce significant uncertainty into the future of large health care companies such as Centene and United Healthcare.
Currently, details are sparse when it comes to the procurement proposed in the Executive’s budget. It appears that all Medicaid managed care programs will be impacted and that the goal is cost savings. By full implementation, the State estimates savings will be over $400 million in gross expenditures. The budget language does identify specific requirements as part of the competitive bidding process. These include:
Accessibility and geographic distribution of network providers, taking into account the needs of persons with disabilities and the differences between rural, suburban, and urban settings;
The extent to which major public hospitals are included in the submitted provider network;
Demonstrated cultural and language competencies specific to the population of participants;
The corporate organization and status of the bidder as a charitable corporation under the not-for-profit corporation law;
The ability of the bidder to offer plans in multiple regions;
The type of number of products the bidder proposes to operate;
Whether the bidder participates in products for integrated care for participants who are duly eligible for Medicaid and Medicare;
Whether the bidder participates in value-based payment arrangements;
The bidder’s commitment to participation in managed care in the State;
The bidder’s commitment to quality improvement;
The bidder’s commitment to community reinvestment spending, as will be defined by the Commissioner;
For current or previously authorized plans, past performance in meeting managed care contract or federal or State requirements, and if the Commissioner issued any statements of findings, statements of deficiency, intermediate sanctions or enforcement actions to a bidder for non-compliance with such requirements, whether the bidder addressed such issues in a timely manner; and
"Other" criteria as the Commissioner of Health might develop in the RFP.
Key in this list is the “other” category which gives the NYSDOH Commissioner of Health tremendous flexibility in terms of how the procurement is constructed. Also, the state is clearly signaling a preference for non-profit plans and for current market players. How many points will each of those categories get? Will the state forbid for-profit plans all together? We will have to wait and see.
Reflections
I have often said that managed care can be a tool for good or ill; determined by design and implementation. New York has used managed care for decades and over that time has added many patient protections, aggressively implemented value based payment, and expanded managed care to new services and populations. Throughout this evolution, the program has remained stable in that there haven’t been any major market exits by insurance companies and little disruption in access to care for Medicaid members. Will the procurement protect and build upon these achievements? I hope so, but the devil will certainly be in the details.
I led the development and implementation of managed care procurement when I was the Medicaid Director in Wisconsin, so I have seen the pros and cons firsthand. Here’s my list of potential Pros and Cons of this ambitious proposal:
Pros
VBP Jet Fuel: The released procurement criteria point to value based payment (VBP) as a key state priority. The procurement could force applicants to expand their VBP contracting efforts and work hard with their providers to move even more aggressively into a value-based future.
Innovative New Care Models: Procurements are a great opportunity for the state to get managed care plans to implement new care models. I suspect this is a key motivation for the state.
Cost Savings: Forcing plans to compete can lead to lower costs. Clearly the state is banking on it.
Less Complexity: The more plans, the more complexity—especially for providers who are interested in VBP. If you shrink from 7 plans to 3 in any region, it will be easier for plans to manage VBP contracts and track outcomes.
New Entrants: The procurement opens the door to new health insurance companies entering the market. As mentioned, entering a non-procurement state like New York with a mature program is expensive. This change could open the door to other insurers such as Oscar, Humana, or CVS/Aetna to compete.
New Member Benefits: The process also opens the door to new services and benefits being offered to members. We will have to see if New York goes in this direction.
Overall Better Managed Care: New York could also use the procurement to increase its requirements around how plans actually manage care. Plans typically actively manage less than 1% of total membership at any given time (for mainstream plans). The state could create new standards which would require the hiring of additional care managers or even Community Health Workers who could be tasked with helping to engage Medicaid members.
Cons
Problematic Procurement Process: This type of process is hard to manage; every result is appealed and can often end up in the courts. States are often forced to re-procure which is expensive, time-consuming, and soul crushing for state agency staff.
Implementation is Complex: Assuming you survive the RFP process, implementation is no walk in the park. Millions of members need to be notified, new plans chosen, continuity of care plans developed and implemented, and new member cards mailed. In addition, hundreds of thousands of new provider contracts must be negotiated and signed across the entire state. That is no small task for the state, plans, or providers.
Race to the Bottom: States that put too much emphasis on price can create a race to the bottom in which plans under-bid to win. The result is poor quality managed care and instability. New York will need to avoid this trap.
Lost Alignment: New York’s current Medicaid managed care program is highly aligned with its Affordable Care Act marketplace exchange. Many plans that operate in one program operate in the other programs, which means that as incomes rise, families can stay with the same insurer. Shrinking the number of Medicaid plans will reduce the level of overlap and could create a two-tier system with Medicaid being one set of plans and commercial insurance being an entirely different set of insurers.
Massive Distraction: The procurements are a huge drain on Medicaid agency resources. Virtually every aspect of the agency must be involved for the procurement to be successful. This means that other efforts need to be put aside. NYS DOH is hollowed out now and will need to staff up and be ready to ensure this procurement is successful.
Major Disruption of Health Insurance: As already mentioned, Medicaid is essential business for most New York health insurers. If any of those companies were to lose this business line, it could be catastrophic. In turn, this could be catastrophic for Upstate New York communities where some of these insurers are based. If I were the Mayor of Upstate City, New York where a health plan’s operation is based, I’m more than a little worried about what this procurement could mean for one of my community’s biggest employers.
Overall, I’m impressed that Governor Hochul’s administration would include such a massive initiative amongst its many other budget and policy initiatives. They should be applauded for their willingness to take on a big challenge that could – if done well – improve the Medicaid program in very fundamental ways. That said, I do fear that if this initiative isn’t implemented with adequate resources, it could have profound negative consequence for many years to come.
I’m an optimist by nature so I look forward to hearing more on this important and exciting new effort to improve outcomes and lower costs in New York’s Medicaid program.
About the Author: Jason Helgerson is Founder and CEO of Helgerson Solutions Group. Prior, Jason served as the Medicaid Director in New York State for over seven years and the Medicaid Director in Wisconsin. Follow him on Twitter and connect with him on LinkedIn.