Article Highlights Managed Care Profits

VHCA (4/5/2007)

On Wednesday, April 4th, the Richmond Times-Dispatch published an article which focused on profits reported by insurance companies providing Medicaid managed care services through the Virginia Department of Medical Assistance Services (DMAS).

According to the article, DMAS paid five HMOs a total of more than $1.2 billion in 2006 to care for Medicaid recipients.  The five managed care companies reported a combined profit of more than $98 million, or about eight percent of revenue, according to an internal DMAS memo, a copy of which was obtained by the Times-Dispatch.  Two HMOs, Amerigroup and CareNet, are highlighted in the article for reporting double-digit profit rates of 16.9 percent and 12.2 percent, respectively.

Much of the article addresses plans now being implemented by DMAS to lower rates and cap profits for Medicaid managed care organizations and quotes DMAS Director Pat Finnerty stating, "It's not looking like we're going to see the kind of increases we had been seeing; it looks like that is flattening”.  Recently, the Department decided to cap future managed care profits – beginning this year, any earnings above eight percent of revenue must be repaid to the state.

DMAS has historically defended its arrangements with managed care organizations as cost-effective efforts to boost quality of care.  However, according to the Times-Dispatch, Terone Green, a member of the Board of Medical Assistance Services, said he's concerned that the eight percent may be too generous.  "I sit on the board and hear all these folks say, 'We don't have money for programs,'" Green said. "When you have a profit of $47 million [as one HMO did in 2005], it is perplexing. . . . It appears to me that Medicaid is too cozy with HMOs."

In an interesting response from Doug Gray, executive director of the Virginia Association of Health Plans, to a question from the reporter about Medicaid managed care profits he says, "We share risk and we do a good job, and when we do a good job, we ought to earn a profit."

At our request, VHCA is now participating in a series of meetings with senior DMAS leadership about our concerns over the announced introduction of Medicaid managed care for long term care services in the Commonwealth.