The pandemic has not been good for children or their physicians. Well-child and other non-emergency visits are down, so children are missing important screening benchmarks as well as immunizations. Pediatric practitioners who are paid on a fee-for-service basis have seen their revenues fall and the financial stability of their practices imperiled. The situation has improved somewhat over the last few months compared to the dark days of March and April, but visits by children under 5 are still down significantly from the same time last year.
For many Medicaid managed care organizations (MCOs), the experience has been quite different . The monthly capitation rates they’ve received for enrolling a beneficiary were set assuming last year’s levels of utilization, but this year, the use of services is well below those levels. As a result, MCOs have been paying out less than projected to their network providers for services rendered, leaving them with a larger unspent portion of their capitation revenues. In addition, because Medicaid enrollment has increased in many managed care states, the MCOs are gaining more enrollees and more revenues, with capitation rates that assume pre-pandemic levels of utilization.
The results can be seen in this Kaiser Family Foundation Issue Brief, Health Insurer Financial Performance Through September 2020. By two different measures, Medicaid MCOs have done very well financially through the first three calendar quarters of this year. Average gross margins per member per month—that is, the amount by which income from premiums exceeds amounts paid to providers for claims submitted, per enrollee per month, on average—increased by 109% between the third quarter of 2019 ($34) to the third quarter of this year ($71). And simple medical loss ratios (MLRs)—the percentage of premium income that MCOs paid out in provider claims—fell from an average of 92% during the first three quarters of 2019 to 85% for the first three quarters of 2020. In other words, during the pandemic, the percentage of Medicaid capitation revenues paid to providers dropped, and gross margins per member per month increased.
These are averages; the financial performance of MCOs will vary depending on the public health situation in the state, the state’s Medicaid payment policies, how well the MCO is managed, etc. And, as the saying goes, past performance is no guarantee of future results. The path of the pandemic over the coming year is uncertain, as are the hospitalization rates for treatment, the utilization of routine non-emergency care, and the costs of vaccinations. All of these can affect MCO financial performance.
Nonetheless, it’s a fair assumption that many MCOs are doing far better financially than many pediatric and primary care practitioners in their networks. Some states, like Virginia, have already taken action to redirect excess MCO capitation revenues to primary care providers. Other states that contract with MCOs should consider taking steps to ensure the financial viability of the pediatric and primary care infrastructure that delivers needed services to all children in the state, including those enrolled in Medicaid. Focusing on this task will be particularly important during state budget deliberations beginning early next year, when policy decisions involving Medicaid managed care will have important implications for practitioners and their patients.
To inform this discussion, Georgetown University CCF has partnered with the American Academy of Pediatrics (AAP) to produce Medicaid Managed Care COVID-19 Advocacy Action Guide. The guide explains how practitioners and child health advocates can work with MCOs and state policymakers to increase financial support for pediatric and primary care practices serving children and families enrolled in Medicaid. The guide supplements “Medicaid Managed Care Payment Policies to Support Pediatric Providers,” a webinar presented on December 7, 2020 by Manatt Health, the AAP, Family Voices, and Georgetown CCF.
It has often been observed: if you’ve seen one state’s Medicaid program, you’ve seen one state’s Medicaid program. The same can be said about individual MCOs, a state’s economic and budgetary situations, and the status of the coronavirus public health emergency. The advocacy guide does not solve for all of these state- and MCO-specific differences. But hopefully it will help guide practitioners and advocates as they champion policy solutions that will work in their states.