Indy Explains: Nevada moves to shift Medicaid services to statewide managed care

Through a budget committee vote in May, state lawmakers reversed Gov. Joe Lombardo's proposed cuts to the state-run public health insurance option popularly called the "public option" — a measure passed during the 2021 legislative session that Lombardo called "bullshit" on the campaign trail.

But as part of that meeting, in a move that went largely unnoticed, lawmakers approved funding for another part of the public option bill — establishing a statewide Medicaid managed care organization program for all geographic regions in the state.

As of last week, members of the joint budget subcommittee recommended the Legislature approve $3.8 million (including $1.9 million from the general fund) over the next two years to prepare for the implementation of the managed care organization program starting this summer. The program is expected to go live by January 2026.

Here are some things to know about the transition.

What is Medicaid and managed care?

One in three Nevadans are covered by Medicaid, a joint federal and state program that helps cover medical costs for people on low incomes and those with disabilities. Most of that population receives coverage through a managed care model, where the state contracts with health care insurance companies known as managed care organizations (MCOs) that accept a per-member, per-month payment set by the Legislature for health services, regardless of services used.

That's in contrast to a fee-for-service (FFS) model, through which the state pays Medicaid providers directly for each covered service.

Among the more than 857,000 Nevadans enrolled in Medicaid, approximately 75 percent are on a managed care plan and 25 percent are covered by fee-for-service plans. After the shift, the percentage of Medicaid beneficiaries on managed care would be nearly 90 percent.

Kaiser Family Foundation Associate Director Elizabeth Hinton said the most commonly used MCO is a comprehensive managed care organization where the organization provides services for beneficiaries and receives a capitation rate — that is, a fixed dollar amount per member per month — to cover a defined set of services. That type of arrangement is what state officials are hoping to move towards.

Forty-one states contract with MCOs to provide comprehensive acute care services, meaning most hospital and physician services are included in their contract. Medicaid-managed enrollees typically have a primary care provider assigned to them, and the MCOs are responsible for services such as care coordination and health education.

Why does the state want to expand its use of managed care?

Proponents leaning more on managed care organizations have noted that the model can provide savings on health care costs to the state and better care management for Medicaid beneficiaries. They've also said that through the managed care contracting process, the state will have more capacity to offer incentives for quality care and ensure providers are paid based on performance or outcomes. The managed care option also offers the ability to cover optional benefits such as housing and meal support.

The genesis of the expansion to statewide Medicaid managed care program dates back to at least 2015 with the passage of SB514, which required the state to study the potential of moving to managed care program implementation for Nevadans on Medicaid.

Nevada Medicaid officials say federal oversight is expanded under managed care through federal regulations that apply to the statewide managed care program, including extensive provider network adequacy standards and quality and access requirements.

Who is affected?

If the move to a statewide managed care coverage plan is approved, people in certain rural areas of Nevada who qualify for Medicaid coverage but are paid for under the fee-for-service model would be covered by managed care plans. State officials said the expansion to rural Nevada would only include low-income pregnant women, infants and children, parents, and adults without children, and exclude aged, blind, and disabled populations and children in foster care, welfare or juvenile justice systems, as well as people enrolled in home and community-based services waiver programs.

Representatives for Nevada Medicaid said the division anticipates about 70,000 to 80,000 individuals in rural Nevada would be eligible, depending on several factors, including the effects of the eligibility redeterminations over the coming year as the federal public health emergency unwinds.

What are the pros and cons of each Medicaid model?

There are benefits and drawbacks to both FFS and MCO plans, Hinton said. She added that some of the benefits associated with MCO plans are better care coordination or care management for enrollees and the potential for improved access or quality of care, and that managed care plans can choose to offer certain benefits or services beyond those required by the state.

Though managed care plans have created some budget predictability for states, Hinton said the evidence is mixed in terms of access and quality. She said when a plan is paid on a per-member, per-month basis, there is a natural incentive to contain costs that can lead to narrowed or inadequate provider networks.

Criticism of fee-for-service centers on potentially higher costs for patients and insurance companies, as well as the possibility that patients will receive unnecessary health care because providers have a greater incentive to provide more services. The potential pitfalls for both types of plans include restrictive policies that could lead to reduced access and knowledge gaps about how the systems work.

During a hearing in early March, officials with Medicaid indicated that the challenges related to the implementation of a statewide managed care program include creating new contracts and ensuring adequate services in rural areas. They noted that the expansion of telehealth services could assist managed care organizations in areas where providers may not exist.

Officials also noted that the federal Centers for Medicare and Medicaid Services requires the tracking of quality and network adequacy in managed care programs, but not for fee-for-service programs.

What's the financial effect of the transition?

Under Gov. Joe Lombardo's recommended budget, the most significant portion of funding, nearly 44 percent of the state budget, is allocated to the Department of Health and Human Services. Almost 29 percent of the budget is dedicated to Medicaid.

Almost 70 percent of the Medicaid budget is supported by federal funds.

As the state looks to expand to a statewide managed care system, questions remain about how rate increases will affect health care providers.

The proposed provider rate increases within the governor's recommended budget are geared solely toward providers covered by the fee-for-service plan because the state cannot stipulate what private corporations can pay providers.

What does this mean for rural Nevadans' health care access?

Nevada Medicaid Administrator Stacie Weeks said the move to statewide managed care should not negatively affect rural providers because state law requires Nevada Medicaid to implement a rate floor or minimum rate for rural providers through what is called a state-directed payment.

"In effect, this would mean that these rural providers should not be paid any less by managed care plans than what they are paid today by Medicaid fee-for-service," Weeks wrote in an email to The Nevada Independent. "The Division may expand this floor to other rural providers pending feedback from a request for information that the Division intends to release this summer."

She added that the intent of this request would be to gather public and stakeholder input and feedback on how to best expand managed care statewide so that state officials can address or mitigate concerns, including those from rural providers.

A Medicaid spokesperson indicated that the division will issue notifications and additional information to providers and members, using its website and all standard communication procedures, about the upcoming changes for rural regions of the state.

Federal law requires states to ensure at least two managed care plans are available to recipients. Nevada has four managed care plans and one Dental Benefits Administrator serving Nevada Medicaid in Washoe and Clark counties.

A Medicaid representative said care plans are required to meet certain access standards and ensure adequate coverage of all benefits covered by Medicaid. If a recipient determines that the plan they have chosen does not include a current provider, the recipient has a 90-day window to switch plans.

What does this mean for how much health care providers are paid?

The 2021 bill setting up the move to a statewide managed care organization program requires the use of directed payments through the organization to ensure the rates paid match the current fee-for-service rate schedule.

Hinton said the change likely means that fee-for-service providers that were expecting rate increases will receive payment from managed care organizations meeting or exceeding the minimum rate set by the state.

She added that one other piece of the puzzle in the move to a statewide managed care plan surrounds hospitals that receive fee-for-service-based payments and supplemental payments. Under a managed care model, rates have to be tied to utilization and services, so separate lump-sum supplemental payments to hospitals often go away.

Those supplemental payments are designed to address low fee-for-service rates, said President of Nevada Rural Hospital Partners Blayne Osborn, who noted that the integrity of the supplemental payments is a significant concern as the state moves to a statewide managed care model.

"Managed Care Organizations can provide a significant savings to the state and better care management for Medicaid beneficiaries, but those savings cannot be balanced on the backs of our Critical Access Hospitals," Osborn said in an email. "Properly vetting any statewide managed care model for impacts to the existing reimbursement and supplemental payment programs will be paramount for us."

He also said that as Nevada shifts away from fee-for-service, his biggest concern is keeping the critical access hospitals (a Centers for Medicare and Medicaid Services designation given to small rural hospitals with fewer than 25 beds) whole either through existing programs or through a new directed payment programs, which are special payment arrangements with MCOs used to establish minimum payment rates for certain types of providers.

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