Reductions seen as causing providers to quit program; State seeks 7.5% cut in rates as of April; Medicaid


Cuts in payments to HMOs and doctors for Medicaid patients could cause some health care providers to drop out of the program, legislators were told at a hearing yesterday.

The hearing left members of two state Senate committees in a dilemma -- not wanting to pay rates that are too high, but not wanting to drive HMOs and other providers out of the program.

Dr. Martin P. Wasserman, the state health secretary, is seeking a 7.5 percent cut in rates beginning in April, after a consultant concluded that the state was paying too much for the roughly 300,000 Medicaid enrollees who were switched to managed care in 1997.

The state pays the HMOs a flat rate per person, and the HMOs then pay doctors and hospitals.

In addition to traditional HMOs, some hospitals and health clinics formed new organizations to participate in the Medicaid program.

"I don't know where we're going to go from here," said Sen. Thomas L. Bromwell, a Baltimore County Democrat who is chairman of the Senate Finance Committee. "I guess we'll sit down with the secretary and negotiate. We want to make sure our folks are covered and our providers are getting paid properly."

Ronald R. Peterson, president of the Johns Hopkins Health System, said a Hopkins-sponsored HMO created for the Medicaid program, Priority Partners, lost $5.5 million in the first year.

With the proposed cuts, Peterson said, those losses could reach $20 million and Hopkins might "reconsider" running the HMO. Hopkins Hospital would continue to treat all patients, he said.

Lorraine Doo, director of the Medicaid program for FreeState Health Plan, said the effect of a cut in rates paid to FreeState would be "a direct hit on the providers [such as doctors]. If we get 7 percent less, we are paying out that much less to providers."

If doctors drop out, she said, patients in some parts of the state might have trouble getting care.

The 7.5 percent rate cut was proposed in a study of rates by Segal Co., a Washington consultant. Segal was brought in after Wasserman said in July that rates were too high and the HMOs, in effect, asked for a second opinion.

Pegeen Townsend, senior vice president for legislative policy for the Maryland Hospital Association, told the senators that the Segal report was based not on actuarial studies of the cost of care delivered, but on assumptions that switching Medicaid patients to HMOs should save 7 percent of costs this year.

Wasserman said the proposed cuts were a level that the HMOs "can accommodate to and should accommodate to."

Pub Date: 2/19/99

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