New York’s Proposed Managed Care Procurement Takes Shape: Takeaways from DOH Testimony
This post was jointly written by Jason Helgerson, Founder & CEO, and Kalin Scott, Chief Innovation Officer
New York’s health budget hearing is underway today, and we’re learning more about Governor Kathy Hochul administration’s intentions in moving forward with a proposal to competitively procure the state’s Medicaid Managed Care (MMC) program.
Until today, little has been shared on the problems the state hopes to solve and vision for what a re-procurement could achieve. During today’s question and answer period following Commissioner Mary Bassett’s prepared testimony, the procurement was a hot topic. The state’s Medicaid Director, Brett Friedman, answered questions on the proposal and outlined more of the state’s concerns about the current contracting framework with managed care plans as well as the goals for the procurement.
Here are our big takeaways from today’s testimony:
The Department of Health doesn’t view this as a cost-saving initiative, but as an opportunity to improve Medicaid member experience from start to finish. Medicaid Managed Care covers more than 6 million Medicaid members and spends upward of $60B annually. The fact that saving money isn’t a primary priority is a very good thing. A procurement that puts too much weight on price can lead to a race to the bottom, which could lead directly to instability and bad managed care practices. While the Medicaid Director was clear on this point, the proposal as presented in the budget assumes $450 million in gross savings to the Medicaid Program at full implementation. If lowering costs isn’t a priority, why are the budgeteers banking so much in savings?
The proposal will be structured to encourage plans to expand both geographically and expand plan product offerings. The rationale stated for the re-procurement was to allow for more continuity of care as people age or move geographically. While laudable, this goal could have a detrimental impact on regional plans that offer high quality of care but are geographically locked. Could this provision benefit large national plans such as United and Centene at the expense of local brands such as CDPHP and MVP? As for diversity of product offering, we think the hope here is better dual integration – which makes a ton of sense. Other states, such as Pennsylvania, have required their Managed Long Term Care plans to offer a Medicare plan option as a way to increase the number of people in fully-integrated plans.
The competitive procurement will solve for network issues. This is perhaps the most interesting point raised by the Medicaid Director during the hearing. We haven’t heard the Department raise concerns about network adequacy in the past, but he is absolutely correct in that the RFP can be structured to reward plans for going beyond the minimum requirements and building out more robust networks. Could the procurement be used to force plans to expand their networks making access to services easier for members? Absolutely. Could the RFP require plans to include specialized providers such as Memorial Sloan Kettering (one of the nation’s premier cancer centers) be included in- network? Absolutely. That said, there is another side to this coin. Forcing plans to add providers to its network could hand tremendous leverage to providers–especially hospital systems–who can then use that leverage to drive up prices. Could the procurement have the reverse effect and increase costs, as opposed to the traditional goal of lowering or at least maintaining costs? Also, more doesn’t always equal better providers–plans regularly kick out providers over fraud, abuse, or an unwillingness to engage in quality improvement efforts or value based payment. The department will need to be careful in the way it structures this aspect of the procurement.
Health Plans are not doing a good job at cooperating with the State on the overarching Medicaid strategy & direction. The Medicaid Director also criticized currently-operating health plans by saying they haven’t done enough to support the state’s overall Medicaid strategy. He specifically pointed to the adoption of value-based payment arrangements, investments in Social Determinant of Health (SDOH) interventions, and the creative use of in lieu of services (ILOS) strategies to improve outcomes for members. He suggested that the Department has had a hard time getting plans to support these initiatives. If structured well, the procurement could reward plans that propose the most robust investment strategies in this area. This could serve as jet fuel to launch New York State’s Medicaid program into more innovative and aggressive VBP and SDOH models, which ultimately benefit all New Yorkers with lower costs and better outcomes.
Too many options is a bad thing? According to the Medicaid Director, it is. He specifically pointed to the fact that New York has 26 Managed Long Term Care plans which creates too many choices and higher administration costs–hard to argue with him there. The State has hoped for years the market would consolidate on its own, but a well structured procurement could make this happen much more quickly. However, consolidation requires members to transition to new plans which opens the door to confusion, failed continuity of care, and overall disruption. Can the Department successfully manage this process? Will it create chaos for members and providers? Will provider cashflow be disrupted? To ensure chaos doesn’t happen, the department will need to be adequately resourced and have enough time to implement. If this procurement is rushed or under-resourced, it could be an absolute disaster. The Medicaid program deserves a ton of credit for being willing to propose something this big–what’s needed now is infrastructure & support to make the procurement a real success.
DOH expects the procurement to have a positive impact on communities of color, through a community reinvestment strategy that requires plans to compete on local investment. Critics of the proposal are raising the concern that the procurement will have a negative impact on intentionally marginalized communities, including communities of color–the Medicaid Director disagreed. The truth comes down to design and implementation–if designed and implemented well, it could be a historic investment in communities of color. If the procurement is rushed, poorly planned, under-resourced, or poorly managed it could lead to major disruption that could fall heaviest on communities who have already borne the greatest cost of disinvestment.
Lots more to come as the New York State budget process unfolds, but we hope that stakeholders across the board find this initial take helpful. We at HSG remain excited about the potential of the RFP, but also fear that potential negative consequences if it isn’t successfully implemented.
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.