HHSC Receives Approval to Raise Medicaid Premiums

Updated, May 1:

The Health and Human Services Commission received approval Wednesday to raise Medicaid premiums — the amount paid to managed care companies to provide health services for Medicaid recipients. The commission got the go-ahead from the state’s budget leaders, including Gov. Rick Perry, House Speaker Joe Straus, Lt. Gov. David Dewhurst and the chairmen of the House and Senate budget-writing committees.

Original story, April 10:

The Health and Human Services Commission has requested that state lawmakers increase Medicaid premium rates — the amount paid to managed care companies to provide health services for Medicaid recipients. The state’s budget leaders are currently evaluating the proposal, which could have a significant impact on the 2014-15 budget. 

“Our goal is to keep the rates on target — enough to cover costs without having the managed care organization see too much profit or experience a loss that could ultimately hurt client care,” Stephanie Goodman, spokeswoman for HHSC, wrote in an email. 

HHSC has requested to raise regular Medicaid managed care premiums by 2.6 percent, long-term and acute care service premiums by 0.8 percent and children’s health plan premiums by 1.8 percent. The premium increases would cost an additional $59.2 million, which includes $23.7 million in state general revenue, for the last three months of fiscal year 2013.

As Medicaid enrollment is projected to increase in the coming biennium, the additional cost of premiums could stack up quickly and have a significant impact on the 2014-15 budget, which currently includes more than $70 billion to finance Medicaid. 

The House and Senate have both approved proposals for the 2014-15 budget, and representatives from the two chambers are currently conferencing to reach a final agreement. The Legislative Budget Board has sent estimates on the impact of the premium rate increases to the speaker, lieutenant governor and the chairs of the House and Senate budget-writing committees. The state’s budget leaders and Gov. Rick Perry have 15 days after receiving the proposal to provide written opposition to the premium rate increase, after which the state can implement the change, according to state statute.

To contain growing Medicaid costs, Texas expanded Medicaid managed care statewide in March. HHSC estimates the premium rate increases would reduce the cost savings achieved by managed care over the previous fee-for-service model from 13.2 percent to 9.7 percent.

“This mid-year increase is largely the result of now having more data and experience in the areas where managed care is new,” said Goodman, adding that the rate increase is based on costs the managed care organizations are already experiencing. “It’s up to the MCOs to set their rates with providers, but I think some of the plans were experiencing losses under the current rate.”

In response to the premium hike proposal, Dr. Michael Speer, president of the Texas Medical Association, said a number of the managed care plans have failed to keep their promise to save money and better coordinate care for Medicaid recipients. 

“At a time when physicians are forced to leave the Medicaid program in droves, it is critical that any new money be dedicated to improving patient care and the availability of that care,” he said in a statement. He suggested the state should raise Medicaid reimbursement rates to the same level as Medicare rates and reduce the paperwork and red tape that discourages medical providers from participating in the program. “Requiring Medicaid HMOs to spend any new money on patient care would further our prescription to mend our broken system.”

Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.