In January 2018, The Office of the Auditor General for the State of Illinois published its Performance Audit (“Audit Report”) of Medicaid Managed Care Organizations (“Medicaid MCOs”) for Fiscal Year 2016. What was unleashed was a startling review of the Medicaid MCOs’ performance over FY 2016 in administering the Medicaid Program for what was then called the Integrated Care Program (“ICP”) or Medicare/Medicaid Alignment Initiative (“MMAI”) Programs. You may recall these ICP and MMAI Medicaid MCO programs in Illinois involved almost a dozen Medicaid MCOs that covered about 70% of the State of Illinois Medicaid recipients.

The Audit Report played into health care providers’ deepest fears in Illinois: showing that Medicaid Managed Care may not be working as it was intended; namely, to reduce costs and improve quality of care in the Medicaid Program in Illinois. For example, long term care providers in Illinois had to fight tooth and nail with Medicaid MCOs under the ICP and MMAI programs, experiencing cumbersome Medicaid contracts, denied claims, delayed claims, and worse yet, a prior authorization administration problem (administrative MCO delay) which in some instances prevented residents from receiving care timely. Most, but not all, of those issues are still being resolved, but providers had hoped that there was a good reason for this madness involving Medicaid MCOs: better and lower cost care for Medicaid beneficiaries.Now, the ICP program has been replaced by the new Illinois HealthChoice Program effective January 1, 2018. But many fear the problems experienced with Medicaid MCOs will continue under the HealthChoice Program.

Here is what the Auditor General stated in the Audit Report about Illinois Medicaid MCO performance in FY2016:

  • The Illinois Department of Healthcare and Family Services (“HFS”) failed to adequately monitor $7.11 billion that flowed to and from private insurers in Medicaid managed care.
  • HFS could not account for all claims that private insurers paid to medical providers in fiscal year 2016.
  • HFS could not account for claims that insurers denied or how much they spent on administration and coordinating patients’ care.
  • HFS has not reconciled $14.2 billion in payments to the insurers since 2016.
  • The last time HFS squared payments with insurers was six years ago and Illinois recovered nearly $22 million at that time.
  • The new MCO contracts the State forged a few months ago are worth an estimated $60 billion over four years (believed to be the State’s largest procurement ever).
  • In fiscal year 2016, HFS spent $7.11 billion on managed care, about half of all Medicaid spending.
  • HFS did not use data that captured how often Medicaid recipients received medical care.
  • HFS did not have complete data from insurers to know how often Medicaid recipients received medical care.
  • HFS did not track medical services that insurers paid physicians, hospitals and other providers so there was no way to calculate the average payout ratio which is the key to understanding their costs.
  • HFS could not provide the Office of the Auditor General’s auditors data on claims submitted by medical providers that were denied, to insure that the denials were appropriate.
  • “Currently, the denial data is simply not valid nor reliable,” HFS told the auditors.

Whatever your view of Medicaid Managed Care is at the State level, this does not paint a rosy picture on whether this program has worked, is working, or will work in the future.