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Legislation would force elderly into managed care to trim Medicaid costs

Elderly Floridians who want to stay out of nursing homes would be forced into managed care under two bills passed this week by the House in an effort to pare Medicaid costs.

But the Legislature's own policy analysts suggest that managed care may actually be more expensive for frail older people, based on the current track record of HMOs.

A recent report examined a managed care program that provides home health care, housekeeping and many other at-home services, as well as assisted living when necessary. It did keep people out of nursing homes but was more expensive than two traditional programs, run by not for profit agencies, that cover the same services.

The state could save money by beefing up the traditional programs, the analysts said. The House bills would do just the opposite -- wiping out the traditional programs and putting elderly clients into managed care.

``It makes no sense,'' says Margaret Lynn Duggar, director of the Florida Council on Aging, which lobbies for the not-for-profit agencies that run the traditional programs. ``Legislative leaders have been convinced that managed care will save them money when the facts do not prove that out.''

The bills surfaced just a few weeks ago, said Sen. Nan Rich, D-Sunrise, and have not been well thought out.

``It actually will have the opposite effect of what we want to happen'' in the way of savings, Rich said, ``and that's what this (analysts) report is showing.''

The bills are a product of the House Select Policy Council on Strategic and Economic Planning, chaired by incoming House Speaker Dean Cannon. He could not be reached Monday for comment. Nor could vice chair Denise Grimsley, R-Sebring.

The House bills have no companion bill in the Senate but could be passed during budget negotiations. Incoming Senate Mike Haridopolos, R-Melbourne, has made Medicaid reform ``an urgent priority'' for budget cutting. He could not be reached for comment.

Medicaid -- which provides health care to the poor -- is a huge, expanding chunk of the state budget. When it comes to younger adults and children, pilot projects have indicated that managed care might save money.

That's because those Medicaid clients go directly to their doctors and hospitals, who bill the state -- a system that sometimes results in excess services and outright fraud. Managed care companies receive a monthly stipend for each client, negotiate rates with health care providers and decide which services are really necessary.

Keeping frail, older people out of nursing homes works differently.

Clients wanting Medicaid to pay for home care or assisted living cannot pick their own services and are not entitled to care. A case manager always decides what services they need and how much it will cost.

Roughly 33,000 aged and disabled Floridians now receive these services from one of three Medicaid programs included in the analysis released in March by the Legislature's Office of Public Program Analysis and Government Responsibility.

It examined clients that entered those programs between 2005 and 2008 and calculated their total cost to Medicaid. The results for the two traditional, fee-for-service programs were:

The Aged and Disabled Adult program, which provides at-home services like chores, respite care and home health care, cost $15,120 per client during that period, compared to $50,000 or more for a nursing home.

The Assisted Living for the Elderly program, which pays for assisted living, cost $17,424.

The managed care program, Nursing Home Diversion, provides both at-home and assisted living services in 30 counties cost $23,364 per client.

Average payment rates for the 16 companies that provide managed care to 14,000 clients have dropped a few thousand dollars a year since the period studied by Legislature's analysts, so these disparities would presumably be narrower today.

Still, Florida could save tens of millions of dollars a year by retaining and expanding the traditional programs instead of managed care, said Larry Polivka, a Pepper Foundation scholar in residence. He conducted similar studies of the three programs, with similar cost disparities, while running an aging research center at the University of South Florida.

``I have been in policy analysis for 25 years,'' Polivka said, ``and I have never seen clearer evidence for clear cost effectiveness of one approach over another.''

Among other things, he said, the not-for-profit agencies that run the traditional programs charge the state a few cents on the dollar for administrative overhead and benefit from volunteers.

By contrast, the state's most recent actuarial report projects that managed care companies will an average of 78 cents on the dollar on care this fiscal year, retaining 22 cents for overhead and profit.

The legislative analysis did note that the managed care program was more effective at delaying nursing home entry than the traditional programs.

But that had little fiscal impact. That's because most clients on all three programs usually live their lives out at home or in assisted living. Those few who do require a skilled nursing home are generally so incapacitated they live only a few months, so delaying their entry into the home by a few weeks does not save much money.

Stephen Nohlgren may be reached at