As Gov. Rod Blagojevich prepares to sell lawmakers on his ambitious plan to offer health insurance to all Illinois children, experts are unsure whether the sweeping expansion is financially sustainable in the long run.
The state already is more than $1 billion behind in its payments to Medicaid providers, with some doctors waiting months for the strained system to come up with the money to pay them.
And though Blagojevich administration officials insist that they have a trusty mechanism to pay for expansion for at least five years, some question whether it will cover the costs indefinitely.
That leaves lawmakers with a difficult question to consider: whether the governor’s All Kids program is so important to the well-being of Illinois children that they should endorse it even if it might be a drain on state funds later.
The plan “doesn’t in any way address the long-term sustainability of Medicaid,” said Robert Kaestner, a professor at the University of Illinois’ Institute of Government and Public Affairs and moderator of a recent legislative workshop on the topic. “The fundamental problem is that Medicaid is taking up an increasingly large share of the state budget.”
The governor’s plan is bold. If lawmakers approve it, his All Kids proposal would make Illinois the first state to offer comprehensive coverage to all uninsured children, the administration says.
To pay for it, Blagojevich proposes shifting the state’s 1.7 million Medicaid patients into managed health care, a cost-savings move that other states have used for years. At a time when most people with private insurance are in some type of managed care, all but a few Illinois patients in state-subsidized health care are not.
State public aid officials estimate that the change to a system called “primary care case management” would save $57 million next year, more than enough to cover the $45 million they think it would cost to expand health-care coverage for uninsured children during the same period.
Under primary care case management, most Medicaid members in Illinois would be assigned a doctor who would oversee their care for a small monthly fee, in addition to customary fees for each service they provide. By contrast, in an HMO-style system, doctors typically are paid only a flat monthly sum.
Blagojevich, who has made health care his top issue, is leading an all-out campaign to promote All Kids in advance of the legislature’s veto session, which begins Tuesday. With Senate President Emil Jones and House Speaker Michael Madigan–fellow Chicago Democrats–squarely behind the effort, Blagojevich has high hopes of legislative approval.
The chief architects of All Kids predict the yearly cost of the plan would catch up with the yearly savings after five years, when the program would cost the full $97 million it saves.
The savings are expected to continue to cover costs, but the administration does not have an economic forecast beyond the five-year mark, said Abby Ottenhoff, a spokeswoman for Blagojevich.
Anne Marie Murphy, the governor’s Medicaid chief, argues that the plan furthers two important goals. “A key component is to ensure that every family has their own family doctor,” Murphy said. “The great thing is that that just so happens to save money.”
Other states have reported savings from using a primary care case management model along the lines of what Blagojevich proposes. North Carolina, Alabama and Indiana have saved money through provisions similar to the ones on the table in Illinois, officials said.
In Indiana, savings from a primary care case management program for Medicaid were around 3 to 4 percent, said John Barth, senior program officer of the Center for Health Care Strategies. The savings resulted because Medicaid members were assigned to primary doctors, got more routine care and were hospitalized less often, he said. Illinois estimates savings in the same range.
Joel Menges, vice president of the Lewin Group, which wrote a report on managed care for Illinois earlier this year, said the state’s estimated savings seem “reasonable and achievable.”
But some analysts aren’t so sure about the administration’s projections.
Savings would come primarily from preventing Medicaid patients from seeking unneeded medical services. But because physicians are still paid for every service delivered, “their incentive to actually control the use of medical services is not that strong,” said Stephen Zuckerman, principal research associate with the Urban Institute.
By contrast, Medicaid HMOs pay a monthly sum to physicians and ask them to figure out how to spend it on patients’ medical care.
In an urban area such as Chicago, an HMO-style managed care system that puts physicians at risk financially “would yield much more robust savings,” Zuckerman said.
Another problem is that Illinois’ costs could rise sharply if private insurance companies drop children, sending them into the public system for insurance coverage, Kaestner said.
In any case, Kaestner said, the managed care mechanism “just pays for the expansion”–if all the projections prove correct. It doesn’t address the problem of runaway Medicaid costs due to the rising price of health care in general, he said.
That’s why some experts consider the case management model to be a throwback. Robert Hurley, associate professor at Virginia Commonwealth University, has studied managed care systems for 20 years.
For the most part, primary care case management models in urban areas have “been overtaken by more rigorous managed care models” like HMOs, Hurley said. Primary care case management is “portrayed as a looser, kinder, gentler managed care model, but they’re almost an anachronism.”
Some business leaders and Republican lawmakers are skeptical of the fundamental premise of the proposal. The Medicaid system is already hobbled, said state Sen. Dale Righter (R-Mattoon), a caucus expert on the topic.
The weight of a possible failure would fall on the most vulnerable, he said. “The people who are in the system now … the children of the parents who are just getting by, they’re the ones who get squeezed by this if it doesn’t work,” Righter said
Those people are precisely who Blagojevich is worried about, his staff members said. The primary care case management system is better for patients than an HMO because doctors aren’t under such budgetary pressures when they make medical decisions, Murphy said.
In primary care case management, “the doctor is directing care,” Murphy said. “It’s based on medical criteria. It’s not like in the HMO. They aren’t decisions made on cost alone.”
As for concerns about families dropping private insurance to cash in on All Kids, Ottenhoff said the plan would prevent that. To be eligible for coverage, a child would have to have been uninsured for at least a year at the time of application.
“Parents who can afford insurance aren’t going to want their children to go uninsured for a year,” she said.
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