Analysis: Managed care model could cut N.H.’s costs in half for some health plans

Monitor staff
Published: 10/26/2017 12:13:33 AM

One system change could save New Hampshire 50 percent or more for some Medicaid recipients’ health insurance. But making that change, critics point out, would give the state a projected drop in tax revenue and shift more health care costs onto providers.

A new analysis of New Hampshire’s individual health care market projects that if the state moved Medicaid expansion recipients off the market and into a managed care program run by the state, the costs to insure those patients could be cut in half.

According to the projections – commissioned by the actuarial firm Milliman on behalf of the Department of Health and Human Services – moving to a managed care system by 2018 would bring the average cost to New Hampshire from $47 per month per member down to $20.

Under that system, New Hampshire would pay $10 million to help insure those patients in its first year, compared with $22.7 million without it, the firm found.

The exercise is firmly hypothetical; it doesn’t account for additional administrative costs and a potential dip in premium taxes. But for some members of a commission tasked with stabilizing New Hampshire’s teetering insurance market, the potential savings appeared to strike a chord.

“I have to say, I’m favorably disposed to (the idea) in general,” said Senate Majority Leader Jeb Bradley, chairman of the commission. “Like anything else you do in this building, it’s not all black, it’s not all white; it’s often gray.”

The cross-industry commission, which has met regularly in recent months, has a daunting mandate. Projections have indicated that a flurry of factors, including a flood of high-cost patients and uncertainty of subsidies, will likely push up insurance costs for some in New Hampshire by 2018. A September report by Gorman Actuarial found that those on the individual market who don’t receive subsidized insurance – about 25,000 – could see an average premium spike of 50 percent in 2018, which the firm found could drive thousands out of the market.

New Hampshire has chosen a relatively unusual Medicaid expansion model – joining Arkansas as one of only two states that decided to allow recipients to enroll in plans on the state’s individual insurance markets using premium subsidies. Now, legislators are wondering whether New Hampshire should join other states in running its expansion program through managed care.

Under the system, the state would provide care to Medicaid expansion populations through managed care organizations, which provide basic services mandated under the Affordable Care Act. Some MCOs are already in place to serve the state’s traditional Medicaid populations; the new program would expand to address the roughly 50,000 people on the individual market.

In its analysis, Milliman found that most of the vast savings can be explained by a common factor: reimbursement rates. Under the present system, those with premium assistance subsidies are covered by private insurers on the individual market, which reimburse hospitals for the care they provide according to negotiated rates. Under managed care, those payments would be pegged to New Hampshire’s Medicaid reimbursement rates, which rank among the lowest in the country. 

Lowering the pricing schemes to Medicaid levels of reimbursement would bring the cost of inpatient services down by 64 percent, the cost of outpatient services down by 48 percent, and the cost of community mental health centers down by 26 percent, the firm found.

To Bradley and some others on the commission, it’s a satisfactory fix to an ailing system.

“I feel there will be benefits to the state if we went to an MCO product,” Bradley said. “Clearly, it would have a major beneficial impact on the individual market. I think that goes without saying.”

But others pointed to pitfalls. Facing such low rates, some said high-cost medical procedures would fall on hospitals, raising the specter of uncompensated care. And with fewer insured through the individual market, New Hampshire’s 1 percent premium tax could take a hit, straining the state’s fiscal revenues, others warned.

“It’s a real challenge – by (moving to managed care) it will increase the losses that providers have by taking care of those patients, said Stephen Ahnen, president of the New Hampshire Hospital Association, in an interview after the meeting.

He added: “It’s really going to be a challenge to help stand up some of the services that we know we need to provide, whether it’s behavior health, substance use or any of the other services that are provided. Those losses are significant.”

The commission, which discussed the managed care model for two hours Monday, is charged with producing a report by Nov. 1 with a legislative recommendation on the future of the program, which could entail a transition to managed care. Due to scheduling conflicts, Bradley said he would file a placeholder bill to be extended later. The commission will next meet Nov. 8 to discuss its decisions, Bradley said.

Ahnen, though wary of a managed care model, said that he’s open to exploring the options.

“I think we’re looking to try and find a way to strengthen the program to make it work as best as it can, and we’ll see how it plays out over the coming weeks and months,” he said.

(Ethan DeWitt can be reached at, or on Twitter at @edewittNH.)

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