Centene’s takeover of WellCare: What would it mean for kids and families covered by Medicaid?

On March 27, the Centene Corporation announced it would acquire WellCare Health Plans, Inc. in a cash and stock transaction valued at $17.3 billion.  The transaction is subject to approval by the shareholders of both companies as well as state regulators.  The companies “expect to complete the transaction in the first half of 2020.” For the Medicaid program and millions of its beneficiaries, this is a big deal.  It raises the question of whether the concentration of ownership of Medicaid managed care organizations (MCOs) is a net positive for the children and families enrolled in MCOs and, more fundamentally, how the public would even have the information to answer that question.

Let’s start at the beginning.

Nationally, MCOs are the dominant form of delivery of services to Medicaid beneficiaries; in 35 states, the majority of Medicaid beneficiaries are enrolled in MCOs.  Children in particular are likely to be enrolled in MCOs.  Under contracts with state Medicaid agencies, MCOs are responsible for assembling and maintaining the networks of providers to furnish covered services to Medicaid enrollees; ensuring that those providers deliver quality care; determining when services are medically necessary; resolving enrollee complaints about denials of care; and paying providers for services rendered.  In short, MCOs matter hugely to whether Medicaid beneficiaries receive the services they need.

Centene, a for-profit managed care company with a market capitalization of $22 billion (as of April 15), operates Medicaid managed care organizations (MCOs) in 20 states (AZ, CA, FL, GA, IL, IN, KS, LA, MA, MS, MO, NB, NV, NH, OH, OR, SC, TX, WA, WI).  As of September 2018, the Centene MCOs in these 20 states enrolled over 6.1 million Medicaid beneficiaries.

WellCare, a for-profit managed care company with a market capitalization of $13.6 billion (as of April 15) operates Medicaid MCOs in 12 states (AZ, FL, GA, HI, IL, KY, MI, MO, NB, NJ, NY, and SC).  As of September 2018, WellCare MCOs in those 12 states enrolled over 3.2 million Medicaid beneficiaries.  WellCare is also one of the MCOs selected by the North Carolina Medicaid program to begin enrolling beneficiaries this fall.

If it goes through, this transaction would have major implications for the Medicaid program and millions of its beneficiaries.  (Both Centene and WellCare offer products in the Marketplaces and in the Medicare Advantage market; this blog focuses just on their Medicaid products).

First, the transaction would increase the consolidation of ownership of Medicaid MCOs.  According to the invaluable Kaiser Family Foundation’s (KFF) Medicaid Managed Care Market Tracker, as of September 2018, six companies were operating Medicaid MCOs in more than 10 states:  United Health Group (25), Centene (20), Anthem (18), Molina (12), WellCare (12), and Aetna (11).  The transaction would decrease that number to five. Because seven of the states in which WellCare operates MCOs are also states in which Centene operates MCOs, Centene’s total will increase to 25, putting it on a par with United Health Group on this particular metric.  (The Medicaid MCO marketplace is dynamic, so these numbers are subject to change).

Second, the transaction would increase the number of Medicaid beneficiaries enrolled in Centene MCOs in seven states: AZ, FL, GA, IL, MO, NB, and SC.  On the ground, this might be difficult to see.  None of Centene’s MCOs use the parent company’s name; for example, the Centene MCO in Florida is the Sunshine State Health Plan, Inc.  This is also the case for some WellCare MCOs; in FL, the WellCare MCO is the Staywell Health Plan.  As of September 2018, Sunshine State’s Medicaid enrollment was over 513,000; Staywell’s was about 631,000.  The transaction would give Centene a Medicaid enrollment of 1.1 million or over a third (37%) of the 3,070,190 total Medicaid MCO enrollment in Florida.

Finally, the transaction would give Centene ownership of WellCare MCOs in five states in which Centene currently does not operate MCOs (HI, KY, MI, NJ, and NY).  The WellCare MCO in Kentucky is the largest of the five MCOs in the state with an enrollment of 441,085, or more than a third of the total MCO enrollment in the state in September 2018.

Would the transaction be a good thing, a bad thing, or make no difference at all for Medicaid beneficiaries in the states in which Centene now operates and would be taking over WellCare MCOs?  What about in the states where Centene is not now operating but would acquire WellCare plans?  Is the ongoing consolidation of Medicaid MCO ownership at the national and state level a positive or a negative development for the Medicaid program and its beneficiaries?  Does larger corporate ownership promise greater efficiency and better service or will it mean less accountability for MCOs that grow to become “too big to fail”?

The short answer is, no one knows.  And, as things now stand, no one can know, largely because there is so little transparency into the performance of Medicaid MCOs.  The only national, publicly-accessible database with some performance data on individual MCOs is the KFF Medicaid Market Tracker, which posts NCQA overall quality ratings.  CMS, which administers Medicaid at the federal level, posts a scorecard for state performance (which has its own issues) but not a scorecard for individual MCOs.  Similarly, MACPAC, which advises the Congress on Medicaid, presents data on MCO enrollment and spending, but not MCO-specific performance data.

At the state level, 31 states made comparison data about MCOs publicly available in 2018; Georgia, Indiana, Mississippi, and Oregon, where Centene currently operates MCOs, were not among them.  Whether the data that the 31 states collect and make publicly available are useful in evaluating the performance of individual MCOs is a separate question.  For example, California’s Medicaid agency has a dashboard that ranks its MCOs based on a HEDIS Aggregated Quality Factor Score, but this tells you nothing about how effectively MCOs are delivering EPSDT services to enrolled children.  Instead, you would need to go to the recent report by the California State Auditor to learn that millions of children enrolled in MCOs are not receiving the EPSDT preventive services to which they are entitled, but that analysis focuses on the performance of the state Medicaid agency and does not assess how individual MCOs are performing.

In some states, investigative journalists have stepped up to fill in the performance data black hole.  Reporters at the Dallas Morning News recently won an award from the Nieman Foundation for Journalism at Harvard for their series on Medicaid MCOs in Texas, “Pain & Profit,” which, among other things, examines the performance of  Superior Health Plan, a Centene subsidiary.  Reporters at the Des Moines Register have closely tracked the implementation of Medicaid managed care in Iowa; reporters at Kaiser Health News have followed developments in California.  The Dallas Morning News series prompted a recent request by Senator Bob Casey (D-PA) to the HHS Office of Inspector General (OIG) for an investigation of the Medicaid MCO industry “to determine whether these companies are meeting their obligations to serve children, older adults, people with disabilities and their families.”

It’s time for others to join investigative journalists and some Members of Congress to start asking questions about the performance of Medicaid MCOs.  Centene and WellCare are not the only national Medicaid MCO companies whose performance needs to be scrutinized.  But Centene’s acquisition of WellCare calls into question of how well individual MCOs—whether or not owned by Centene or WellCare—are managing the health care of millions of Medicaid beneficiaries, and how, given the lack of transparency, anyone would know.

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