Procurement for Managed Care in Publicly Funded Health Care Programs: A Primer

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1 Procurement for Managed Care in Publicly Funded Health Care Programs: A Primer PREPARED FOR MICHIGAN ASSOCIATION OF HEALTH PLANS

2 Introduction The State of Michigan has long relied upon a Medicaid delivery system that makes aggressive use of contracted managed care organizations (MCOs). Since the state s transition to statewide full risk managed care in 1996, the State of Michigan, through the Department of Community Health (DCH) has continually expanded the role of contracted MCOs in the state s program. During the next year Michigan will implement the process of re procuring MCOs to serve Medicaid enrollees. This will be the first significant procurement for Medicaid managed care in Michigan since This paper is intended to provide interested parties an overview of a number of topics related to Medicaid managed care procurement around the country and in Michigan. Specifically the paper will detail: National Trends: Information on currently observed trends in Medicaid managed care procurement around the country with summary data on the status of procurements in other states. State and Federal Regulatory Environment: A detailed review of Federal and State regulatory requirements surrounding Medicaid managed care procurements. Summary of Current Medicaid Marketplace in Michigan: Information on Michigan s Medicaid managed care market at this point. History of Managed Care Procurement in Michigan: A review of prior managed care procurements in Michigan in 1996, 2004 and Options Available to Michigan: A detailed discussion of options available to Michigan under the current regulatory environment. The paper will conclude with some discussions of the major considerations facing the DCH in structuring the 2015 managed care procurement and some recommendations of what factors should be weighed when designing the next procurement process. Part I Introduction to Procurement Practices in Medicaid Managed Care 1. Medicaid Managed Care Contracting Practices Nationally a. Experiences and Trends Nationally As compared with 2012, Medicaid managed care procurement activity was somewhat slower in 2013, outside of the dual eligible financial alignment demonstration RFPs and application processes completed during the year, with approximately nine states announcing competitive bid awards between late 2012 and early Within these awards, and looking ahead at known RFPs for 2014 and beyond, three noticeable trends are emerging. First, states are expanding Medicaid managed care programs geographically both into new metropolitan and suburban regions, as well as rural regions previously excluded from Medicaid managed care. Second, states are consolidating their Medicaid managed care Health Management Associates 1

3 programs in two ways: reducing the number of contracted MCOs through a rebid process, and consolidating several managed care programs under a single program, typically through an 1115 Waiver. The final trend of note is the inclusion of long term supports and services (LTSS) into managed care, both through the duals demonstrations and through standalone Medicaid managed LTSS (MLTSS) programs. Overall Trends In reviewing Medicaid managed care procurement trends over the last 18 months, several observations can be made: Contract rebids offer limited opportunities for new market entrants. Only Arizona awarded a contract to a new MCO under a contract rebid. Incumbents are generally awarded new contracts. Out of seven state procurements reviewed, only four incumbent plans did not retain contracts (two in Arizona, two in New Mexico). Medicaid managed care is continuing to expand. California, Florida, and Texas all expanded the geographic scope of their managed care programs. Illinois is set to transition the majority of its largely FFS Medicaid population into managed care. (This change did not involve a procurement). Some states are looking at 1115 Waivers to consolidate acute care, long term supports and services, behavioral, and other managed care programs under a single contract. MLTSS is expanding significantly. Between dual eligible financial alignment demonstrations, LTSS benefit carve ins, and standalone MLTSS programs, movement to managed long term care may drive RFP activity in coming years. Geographic Expansion The three states below undertook noteworthy expansions of their Medicaid managed care program, with California and Texas expanding into previously unserved rural areas, and Florida expanding the managed care program statewide. In 2013, Florida awarded contracts to 14 MCOs (excluding specialty MCOs targeting specific populations such as HIV/AIDS patients) in the Statewide Managed Medicaid Assistance (MMA) program. Florida had previously operated mandatory managed care programs in much of the state, as well as a pilot expansion program in other regions. The MMA procurement rebid the state s existing 1.2 million Medicaid managed care lives, while bringing an additional 1.6 million under the MMA program. Florida had previously procured MCOs for a separate statewide MLTC program. Also in 2013, California awarded three contracts to MCOs to serve the Medi Cal population in 18 rural counties previously unserved by the Medi Cal managed care program. The California rural expansion is estimated to add 280,000 Medicaid lives to the Medi Cal managed care program. In early 2014, Texas awarded contracts to four MCOs to serve the STAR+PLUS managed care program, serving the Medicaid ABD population in the rural service areas of the state. The rural Health Management Associates 2

4 STAR+PLUS expansion is estimated to add 110,000 Medicaid ABD lives to the STAR+PLUS managed care program. Managed Care Program Consolidation Two states, New Mexico and Hawaii have consolidated various Medicaid managed care programs, such as acute care, LTSS, and behavioral health, under single contracts through 1115 demonstration Waivers. In 2013, New Mexico awarded contracts to four health plans (all previously serving the state s various managed care programs) to provide fully integrated managed care benefits under the statewide Centennial Care program, authorized under an 1115 Waiver. Centennial Care combined the state s existing acute care managed care program, the state s MLTSS program, and the state s managed behavioral health program. Centennial Care is estimated to cover around 510,000 Medicaid lives. In early 2014, Hawaii awarded contracts to its five existing QUEST (Medicaid managed care) and QExA (Medicaid managed care for the aged, blind and disabled (ABD)) programs under the combined QUEST Integration program, also authorized under an 1115 Waiver. QUEST Integration is scheduled to launch January 1, 2015, and is expected to serve 292,000 beneficiaries. MLTSS Expansion The expansion of MLTSS in state Medicaid programs is significant due to the high costs associated with LTSS recipients. States are increasingly transitioning LTSS benefits to a capitated model, both through duals demonstrations and through standalone MLTSS programs or carve ins to existing programs. Six states (IL, OH, MI, SC, VA, and WA) have completed capitated duals demonstration RFPs in the past 18 months. Additionally, California awarded contracts through an application process to several MCOs that will also provide MLTSS to the non dual Medi Cal populations in the demonstration regions. Other states have implemented or expanded MLTSS programs in the past year. The Texas rural STAR+PLUS RFP expanded the geographic scope of the MLTSS program, with plans to carve in nursing home benefits statewide in Illinois expanded its non dual ABD managed care program (the Integrated Care Program) to five regions covering the majority of the state s population centers, awarding contracts to select plans procured in the duals demonstration. Looking forward, Truven Health Analytics projects the number of LTSS users in MLTSS to top 1.1 million across 24 states. This is up from 554,000 across 19 states in Additionally, states such as Louisiana and Nebraska have plans for MLTSS procurements in the coming years. b. Rationale for Regular Procurements There are several reasons that states will elect to conduct competitive procurements for Medicaid managed care services even with existing contractors. Health Management Associates 3

5 Innovation and change Procurements provide states with an opportunity to test new business models, for example, serving a new population under managed care, adding or removing services from managed care, changing the service area, introducing new quality incentives, payment methods, measurement tools, and so forth. Procurements also incentivize incumbents and new bidders to introduce new strategies for solving longstanding challenges under the program. In addition, procurements can attract new business partners that may bring experience from their work in other states to advance the state s Medicaid managed care program in new ways. Manage contract compliance Procurements establish time limits to contractual relationships. Contractors remain motivated to follow contract terms, and build a good reputation for meeting performance expectations, which may have a positive impact on future procurements. Long standing contractors with evergreen contracts, and in particular, contractors with large enrollments may assume a more controlling approach to the relationship, and make it more difficult for the state to monitor and/or enforce compliance. Budgetary control Procurements with competitive rate bidding help states reduce their costs for running the Medicaid program, and offer the opportunity for program savings during times of fiscal distress. However, the requirements for actuarial soundness in Medicaid managed care and the development by the states of administratively established rates have limited the use of this option. Maintain viability of the managed care market Procurements make it easier for a Medicaid agency to set or change the total number of contractors, and in so doing, improve contractor opportunities to establish financially viable enrollment levels and case mix within a defined service area. Quality Procurements can allow states to establish new contractual mechanisms for measuring and incenting improvements in member satisfaction and quality. States can identify and contract with new MCOs with expertise in achieving desired quality goals and discontinue contracts with MCOs that are not meeting quality standards. c. Federal Guidance to States on Medicaid Managed Care Contracting and Procurements States have ultimate authority over their approach to selecting Medicaid managed care contractors. This includes for example, the number of contractors, length of engagement, means for selection (competitive procurement, open application state), type of contract (risk based, non risk), services included in the contract (comprehensive or service specific), and limitations by eligibility group, or regions of the state. While the majority of states conduct competitive procurements, a few states maintain an open application process and will contract with any qualified and willing provider. CMS regional offices work closely with states to monitor new managed care contracts through the following functions: 1. Reviewing and approving the new contract, Health Management Associates 4

6 2. Reviewing and approving the state s completed contract checklist for managed care contract approval 1 3. Reviewing and approving the provider network, 4. Reviewing and approving actuarial documentation and certification for the rates under the contract, 5. Confirming the MCO has received a Certificate of Authority from the state s insurance department, and 6. Reviewing the MCO s member handbook. Federal sources for granting authority and providing guidance for Medicaid managed care contracting are based on a series of laws and regulations. These include the Social Security Act and related state plan amendments and waiver authorities, managed care regulations, and the State Medicaid Manual. State Plan Authority Section 1932(a) of the Social Security Act is the State Option to Use Managed Care. Section 1932(a) grants authority via a CMS approved state plan amendment for states to use a managed care delivery system. The state plan preprint includes information such as the types of entities that will be used and what groups of people will be enrolled. Once a state plan amendment is approved, the state can run its managed care program without any need to get CMS approval again. State plan authority is limited, however, in that it does not allow states to require dual eligibles, American Indians, or children with special health care needs to enroll in a managed care program. They may enroll voluntarily. There are currently 21 states operating 28 managed care programs using 1932(a) authority. Waiver Authority Sections 1915(a) and (b) waiver of Section 1902(a) the Social Security Act State Plans for Medical Assistance Section 1915(a) Waiver Authority: Permits States to implement a voluntary managed care program by executing a contract with companies that the state has procured using a competitive procurement process. However, the state is not required to use a competitive procurement process to enter into these contracts. The process for procurement is determined by the state. CMS must approve the state s application for a 1915(a) waiver in order to make payments under a voluntary managed care program. According to the Medicaid.gov website, 13 states and Puerto Rico use 1915(a) contracts to administer 24 voluntary managed care programs. Section 1915(b) Waiver Authority: Permits States to implement a mandatory managed care delivery system, and require dual eligible, American Indians and children with special health care needs to enroll in managed care. States must demonstrate that the managed care delivery 1 the checklist contains statutory references and contract requirements collected from the Code of Federal Regulations (CFR), the State Medicaid Manual (SMM), State Medicaid Director (SMD) letters, and the Social Security Act (SSA) which contain provisions enacted by the Federal Balanced Budget Act of 1997 Health Management Associates 5

7 system is cost effective, efficient and consistent with the principles of the Medicaid program. Also, a 1915(b) waiver can run for up to five years, at which time CMS must re approve the program. CMS currently has 48 approved 1915(b) waivers operating in 28 states, including Michigan. Code of Federal Regulations (CFR) 438 Managed Care Managed Care regulations promulgated by CMS (which are slated for revision in 2014) are silent on the role of the federal government in states managed care contracting procurement methods. However, Section , Conflict of interest safeguards, sets forth that as a condition for contracting with MCOs a State must have in effect safeguards against conflict of interest on the part of State and local officers and employees and agents of the State who have responsibilities relating to the MCO contracts or the default enrollment process specified in (f). States that select MCO contractors without a procurement process must still comply with conflict of interest safeguards. Actuarial Soundness Medicaid health plans are paid by states on a prepaid, monthly capitation basis for providing Medicaid benefits. The Social Security Act 1903(m)(2)(A)(iii) requires states to pay Medicaid health plans rates that are actuarially sound. The Centers for Medicare and Medicaid Services (CMS) has defined actuarial soundness through regulation [42 CFR 438.6] as (1) developed in accordance with generally accepted actuarial principles and practices; (2) appropriate for the populations to be covered and the services to be furnished; and (3) certified as meeting applicable regulatory requirements by qualified actuaries. 2 Further, in 2003, CMS developed a detailed checklist for states to use in the rate setting process to ensure that payments to health plans are appropriate to cover the cost of medical care and support services, administrative costs, taxes and fees. This actuarial soundness requirement is an important safeguard to ensure low income beneficiaries have access to care but also to ensure that health plans are not overpaid, nor underpaid based on the contractual requirements. The State Medicaid Manual This is an official CMS reference of mandatory, advisory, and optional Medicaid policies and procedures to the Medicaid State agencies, and includes chapters and sections pertinent to contracting. It is worth noting that this resource has not been updated in many years; however the content remains relevant to program operations and serves as an important resource for CMS regional and central office staff. The guidance in the State Medicaid Manual uses terms (underlined) that give states singular flexibility in and control over their managed care contracting methods: Section Provide That All Contracts Are In Writing. The regulations give you a great deal of latitude regarding the scope and form of contracts with the designated types of contractors. However, a written instrument is required. Section Specify the Contract Period. Contracts should be for a defined length of time. The cost of contracting for both the bidders and you suggests that the contract should serve both parties for more than a single year. Conversely, contracts should not be permitted to continue 2 CMS is expected to develop procedures for additional review of the actuarial soundness of Medicaid MCO rates later this year. Health Management Associates 6

8 indefinitely without being recompeted. In [fiscal agent] service type contracts, [CMS] HCFA recommends that, where possible, you consider entering into contracts with an initial duration of up to five (5) years but contracts should not exceed eight (8) years including separate optional renewals. HCFA recognizes that procurement requirements in some States prohibit contracting for more than a specified period for varied reasons, including State budgetary limitations. You are encouraged to enter into contracts for periods consistent with your State requirements and the Federal competitive procurement requirement The State Medicaid Manual provides extensive guidance to states on procurement procedures for a fiscal agent (FA), Medicaid management information system (MMIS), and Automatic Data Processing (ADP) services and equipment. While this information is not specifically directed at managed care contractors, the Manual provides detailed advice that could be useful in structuring a Medicaid managed care procurement in Section , Suggested Procurement, Review and Contracting Procedures. This section outlines specific pre procurement and procurement steps including Request for Proposals and Proposed Contract checklists. Implications to Michigan s 2015 Procurement The State of Michigan faces few Federal constraints around how they construct their Medicaid managed care program and in how they administer procurement. Michigan has the freedom to design a procurement to address identified goals about the number and type of MCOs they prefer to serve their members. Specifically in this procurement the State will need to ensure that the structure of their Medicaid managed care program conforms to the approved elements of their 1915(b) waiver. Additional steps will need to be taken to ensure that Michigan meets the conflict of interest safeguards detailed in CFR 438, that the rates are actuarially sound, and that CMS reviews and approves the contracts ultimately signed between Michigan and contracted MCOs. d. State Regulatory Requirements Surrounding Procurement of Medicaid Managed Care HMA s review of state statutory provisions that would impact Michigan s MCO procurement identified few major constraints upon MDCH in how a procurement could be structured. A summary of our review is provided below. Requirements in Current Medicaid Managed Care Contract The contract between the State of Michigan and contracted health plans explicitly states that the contract term will be for three years (October 1, 2009 through September 30, 2012) and can be extended (by mutual agreement of both the state and contracting health plan) for three additional one year periods (through September 30, 2013; September 30, 2014 and September 30, 2015). The State of Michigan would no longer be permitted to contract with health plans for Medicaid covered services absent a new contract as of October 1, State of Michigan Department of Technology, Management and Budget: Contract Number 071B Section and Health Management Associates 7

9 Michigan s 1915(b) Waiver Michigan s Medicaid managed care program is authorized by the Federal government through the state s 1915(b) waiver. The waiver details the structure of Michigan s Medicaid managed care program. Specifically identifying the Medicaid Managed Care Organizations contracted with the state for the provision of services, specifying that contracts with these organizations will be fully capitated and that the contractor is fully at risk for all mandatory physical health State plan service. The waiver further describes the manner of procurement through Michigan s managed care program. Specifically contracted managed care organizations are identified through a competitive procurement process administered through a formal Request for Proposal. The effective dates of Michigan s current 1915(b) waiver were approved to be operative between October 1, 2013 and October 1, Budget Boilerplate Language in the annual appropriation provided to the Department of Community Health gives additional guidance to the Department in how its Medicaid managed care program is structured, administered and procured. Relevant language in the current year appropriation is provided below: SUMMARY OF MAJOR BUDGET BOILERPLATE SECTIONS RELATED TO MEDICAID MANAGED CARE PROGRAM SECTION # BOILERPLATE LANGUAGE IMPACT TO MCO PROCUREMENT No state department or agency shall issue a request for proposal (RFP) for a contract in excess of $5,000,000.00, unless the department or agency has first considered issuing a request for information (RFI) or a request for qualification (RFQ) relative to that contract to better enable the department or agency to learn more about the market for the products or services that are the subject of the RFP. The department or agency shall notify the department of technology, management, and budget of the evaluation process used to determine if an RFI or RFQ was not necessary prior to issuing the RFP. Section 299 does not require MDCH to issue a Request for Information (RFI) or Request for Quotation (RFQ) prior to release of a formal RFP for Medicaid managed care. The Department is required to provide notice to the DTMB of its reasoning for why collecting data through a formal RFI or RFQ was not necessary. Statutory Requirements State statutory requirements for formal procurements administered through the Michigan Department of Technology, Management and Budget, like the upcoming formal Medicaid managed care procurement, are detailed in Michigan s Management and Budget Act. Section of this act provides a detailed summary of when a formal procurement for goods and services provided to or on behalf of Michigan state government is necessary, and when it can be avoided. The relevant statute requires the DTMB to use a competitive bid process whenever practical. A competitive bid process may be avoided if one of the following conditions is met: 1. The procurement is necessary for the imminent protection of public health or safety. 4 There were 14 Medicaid Health Plans at the time of the procurement. Due to consolidation there are now There were 14 Medicaid Health Plans at the time of the procurement. Due to consolidation there are now _1915_b_Approved_432493_7.pdf /billconferencereport/Senate/pdf/2014 SB 0763 CR 1.pdf Health Management Associates 8

10 2. The procurement is necessary for emergency repair or construction to protect life or property in response to an unforeseen event. 3. The procurement is in response to a formally declared state of emergency. 4. The procurement is within a state agency s authority as delegated by the Michigan DTMB. Implications to Michigan s 2015 Procurement The restrictions identified in the Management and Budget Act along with the language in the current Medicaid MCO contract makes it necessary that Michigan administer a new competitive procurement for its Medicaid MCO program. There are few, if any, statutory restrictions upon the state in how the Medicaid MCO contract can be structured or how a procurement can be designed. 2. Methods of Procurement and Re Procurement States use a number of different methods in identifying appropriate contracts. A summary of the major methods available to a state is provided below: Request for Information A process whereby a state allows interested parties to provide written information about their capabilities to provide an identified service. An RFI is typically used by state agencies as part of a planning process prior to a formal procurement where interested bidders can provide information about their financial status, provider network, technical capabilities and other relevant factors. Request for Proposals A process whereby a state agency makes it known that funding is available for a vendor provided service, like managed care in a Medicaid program. Vendors are typically asked to provide specific information about their capabilities to meet the requirements of the program. In many, but not all, instances a vendor will be further required to provide a financial bid or price proposal for the work being procured. Request for Applications A public notice whereby a state agency publicly announces that funding is available for a specified function and allows interested organizations to present a formal bid on how the funding could be best used to meet stated goals. An RFA will typically specify which organizations are eligible for the funding and provide constraints on how the funding can be used. Invitation to Bid / Request for Quotation An invitation to possible contractors to provide a formal proposal on how to meet specified statedefined objectives within a given program. Typically the ITB/RFQ provides information on how services must be provided and a format about how a cost proposal must be structured. Typically the most costeffective bid, as defined by the state agency, will be awarded a contract. 3. Recent Medicaid Procurements Attached is a summary of recent (previous 18 months) procurements for Medicaid MCO services provided to those who are not dually eligible for Medicare and Medicaid. Health Management Associates 9

11 YEAR STATE STATUS POPULATION SIZE SCOPE INCUMBENTS AWARDED AWARDED INCUMBENTS 2012 OH Rebid TANF/ABD 1,650,000 STATEWIDE DC Rebid TANF 165,000 DISTRICTWIDE FL Expansion ACUTE CARE 2,800,000 STATEWIDE FL New MLTSS 90,000 STATEWIDE N/A 3 N/A 2013 CA New TANF/ABD 280,000 REGIONAL N/A 7 N/A 2013 AZ Rebid ACUTE CARE 1,100,000 STATEWIDE NM Consolidation TANF/ABD 510,000 STATEWIDE NV Rebid TANF 188,000 REGIONAL HI Consolidation TANF/ABD 292,000 STATEWIDE TX New ABD 110,000 REGIONAL N/A 4 N/A 2014 TN Rebid TANF/ABD 1,200,000 STATEWIDE Part II Managed Care in Michigan 1. History of Michigan Medicaid Managed Care Procurement The Michigan Medicaid program has a long standing history of offering managed care enrollment to its beneficiaries. As early as the 1970s, beneficiaries residing in southeast Michigan were afforded the option to enroll in Health Maintenance Organizations (HMOs) operating in the region. Managed Care in Michigan in the 1980s and Early 1990s In the early 1980s, the program expanded managed care options available in Wayne County by establishing the Physician Primary Sponsor Plan (later called the Physician Sponsor Plan, or PSP), one of the first primary care case management models in the country, and by working with health systems to establish and reimburse on a shared risk basis Clinic Plans serving the region. Clinic Plans operated much like HMOs but without a license; Medicaid program staff assured their compliance with appropriate standards of operation. Managed care enrollment through the three models began as a voluntary option for children and families with Medicaid coverage in Wayne County and then became mandatory after a period of time. Aged, blind and disabled Medicaid beneficiaries in the county, including those beneficiaries dually eligible for Medicare ( duals ), were similarly given the option to voluntarily enroll, with mandatory enrollment following after a time for beneficiaries other than the duals. 8 By the late 1980s, and continuing through the 1990s, the Michigan Medicaid program gradually expanded these managed care options throughout the state and enrollment continued to grow. By the end of 1995, more than 800,000 beneficiaries out of the 1.1 million people with Medicaid coverage in the state were enrolled in managed care. As this expansion occurred new HMOs formed and others expanded their service areas. By 1995, the PSP model was available statewide and a total of 12 HMOs and five Clinic Plans served many of the counties across the state. Throughout this period, the Medicaid program offered managed care contracts to any licensed HMO or appropriately qualified Clinic Plan willing to participate and serve Medicaid enrollees. 8 Note: Duals were given the option to voluntarily enroll in managed care until October 2000 when they were all returned to fee for service based on an unacceptable directive from the federal government. This group was excluded from managed care enrollment until November 2011 when federal guidelines again permitted them to voluntarily enroll in the health plans.) Health Management Associates 10

12 Managed Care in Michigan Since 1996 In 1996, under Governor John Engler, the Michigan Department of Community Health (MDCH) was formed a consolidation of the former Departments of Mental Health and Public Health and the Medical Services Administration from the Department of Social Services (now the Department of Human Services). With this new organizational structure came changes in the Medicaid program, one of which was to phase out the PSP model of managed care and the shared risk reimbursement methodology for Clinic Plans. The PSP plan was ended in early Clinic Plans were required to become licensed HMOs and receive full risk reimbursement in There have been four large procurements for Medicaid managed care since 1996, using full risk reimbursement. This section provides a high level summary of each of the four procurements with some discussion about how the procurement was structured and how this structure furthered MDCH s stated policy goals Procurement The MDCH administered its first statewide formal procurement for full risk managed care services between the fall of 1996 and the summer of The process was administered through two independent Requests for Proposal (RFP) processes; one process for large urban counties (Wayne, Oakland, Macomb, Washtenaw and Genesee Counties) and a separate process for the remaining 78 Michigan counties. The Michigan procurement was unique for the time in that it required full risk managed care for Medicaid beneficiaries in both the low income children and families categories as well as the aged, blind and disabled categories. The procurement excluded Medicaid beneficiaries dually eligible for Medicare, beneficiaries receiving care in institutional settings such as nursing homes or participating in home and community based services programs, and selected other groups of beneficiaries. 9 Five Urban County Procurement The RFP for Medicaid managed care in Michigan s urban counties was issued in November of Interested parties were required to submit an Intent to Bid (ITB) Form to the State by December of 1996 with proposals due in January 1997 (later extended to March 1997). Interested bidders were required to submit a single Per Member Per Month (PMPM) rate for each county they bid upon; the State would then apply ratios of the various rate cells to the standardized rate bid. HMO bids could be provided at the county level. The MDCH made clear that while at least two HMOs would receive an award in each bid county, not all HMOs (even those with a bid rate acceptable to the State) would receive a contract. In April of 1997 eligible bidders were required to submit a Best and Final Offer (BAFO) to the State. After initial review and award by the MDCH, additional awards were made in response to appeals filed by several plans in all five of the counties included in the procurement and the disposition of a legal challenges filed by plans unable to achieve an award in any of the procured counties. Medicaid managed 9 Although not discussed further in this document, MDCH also administered an RFP process for health plans to serve children dually eligible for Medicaid and the CSHCS program during this time period. There were two contracts awarded through that process and the health plans were required to coordinate the complex care needs of their enrollees in a family centered manner; however the contracts were discontinued after a few years. Health Management Associates 11

13 care was fully implemented in the targeted counties in January of The ultimate list of winning HMOs appears in the table below. WINNING PLANS IN MICHIGAN S URBAN PROCUREMENT HEALTH PLAN AWARDED COUNTIES Care Choice Macomb, Oakland, Washtenaw Community Choice MI Genesee, Macomb Great Lakes Health Plan Macomb, Oakland, Washtenaw Health Alliance Plan Macomb, Oakland, Washtenaw Health Plus Genesee M Care Washtenaw OmniCare Oakland SelectCare Macomb, Oakland, Washtenaw The Wellness Plan Genesee, Macomb, Oakland Total Health Plan Genesee, Macomb, Oakland Ultimed Oakland Outstate County Procurement The RFP for Medicaid managed care in Michigan s 78 outstate counties was released in July of The State established six separate multi county regions. Interested bidders were initially required to bid on at least one multi county region, to participate in the program. As the process unfolded bidders were provided permission to bid on contiguous counties as well, as long as at least one entire region was bid. A major difference in the evaluation process for the Outstate procurement related to the bidder s ability to meet the financial, provider network and administrative and organizational criteria by the end of the readiness review process. In the Urban procurement, this had been a 70 point pass/fail step; in the Outstate procurement, a more lenient assessment of the bidder s ability to be ready at a future point in time was employed. Responses to the RFP were submitted in January of Interested bidders were required to bid rates above a pre established rate floor defined by MDCH. After a BAFO and readiness review process, as well as the settlement of a few protests, the following health plans were awarded a contract to provide managed care services as of July 1, WINNING PLANS IN MICHIGAN S OUTSTATE PROCUREMENT HEALTH PLAN AWARDED COUNTIES Blue Care Network Kalamazoo, Saginaw Care Choices Kent, Livingston, Macomb, Muskegon, St. Clair Alcona, Allegan, Alpena, Barry, Bay, Berrien, Calhoun, Genesee, Gladwin, Community Choice MI Iosco, Kalamazoo, Kent, Lake, Lenawee, Manistee, Mason, Monroe, Montmorency, Newaygo, Ogemaw, Saginaw, St. Clair, Van Buren Family Health Plan of MI Lenawee, Monroe Alger, Arenac, Baraga, Berrien, Calhoun, Cass, Chippewa, Delta, Dickinson, Great Lakes Health Plan Gogebic, Hillsdale, Houghton, Huron, Iron, Jackson, Kalamazoo, Keweenaw, Lapeer, Lenawee, Livingston, Luce, Mackinac, Marquette, Menominee, Ontonagon, Saginaw, Sanilac, Schoolcraft, Tuscola, Van Buren Health Plus Bay, Saginaw, Shiawassee, Tuscola M Care Barry, Jackson, Kalamazoo, Livingston Physicians Health Plan of Mid Michigan Clinton, Eaton, Ingham, Ionia, Montcalm, Shiawassee Health Management Associates 12

14 WINNING PLANS IN MICHIGAN S OUTSTATE PROCUREMENT HEALTH PLAN AWARDED COUNTIES Physicians Health Plan of South Michigan Jackson Physicians Health Plan of SW Michigan Allegan, Berrien, Branch, Calhoun, Cass, Kalamazoo, St. Joseph, Van Buren Physicians Health Plan of West Michigan Muskegon, Oceana Priority Health Plan Allegan, Ionia, Kent, Lake, Mecosta, Montcalm, Newaygo, Osceola, Ottawa The Wellness Plan Clinton, Eaton, Ingham, Muskegon, Oceana 2000 Procurement Between 1997 and the end of 1999 there was a flurry of activity by Clinic Plans. MDCH had indicated that a new procurement would occur in 2000 and the State would only award contracts to HMOs licensed by the RFP proposal due date. MDCH also indicated that the new RFP would cover all counties in the state, thus merging the previously awarded Urban and Outstate contracts. An RFP was released in March of 2000, and proposals were due in May of Bidders were advised to submit two prices, one for the contract year beginning October 1, 2000 and another for the following year. Scoring was a mix of price, network capacity in the region(s) being bid, quality measures (from both HEDIS and EQRO reviews), and administrative performance measures. Bidders offering to serve hard to bid counties were given preference in scoring. A BAFO occurred in June and awards were announced in July of There were 23 bids submitted timely and 19 bidders were awarded at least one county. Proposals from four bidders Health Alliance Plan, Physicians Health Plan of South Michigan, SelectCare, and Ultimed were not awarded contracts, some for price and others for different reasons. Blue Care Network chose not to bid reportedly due to internal reorganization issues. One other bidder, Pro Care Health Plan, did not submit a timely proposal. The successful plans, and their awarded counties, are listed in the table below. HEALTH PLAN Botsford Health Plan Cape Health Plan Care Choices Community Care Plan Community Choice MI Great Lakes Health Plan Health Plan of MI Health Plus of MI WINNING PLANS IN MICHIGAN S PROCUREMENT 2000 AWARDED COUNTIES Wayne Oakland, Wayne Kent, Livingston, Washtenaw Allegan, Barry, Ionia, Isabella, Kent, Mecosta, Montcalm, Muskegon, Newaygo, Oceana, Ottawa Alcona, Allegan, Alpena, Antrim, Arenac, Barry, Bay, Berrien, Calhoun, Cass, Charlevoix, Cheboygan, Emmet, Genesee, Gladwin, Grand Traverse, Iosco, Kalamazoo, Kalkaska, Kent, Lake, Lenawee, Manistee, Mason, Missaukee, Monroe, Montmorency, Muskegon, Newaygo, Oceana, Ogemaw, Osceola, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, St. Joseph, Van Buren, Wexford Alger, Arenac, Baraga, Berrien, Calhoun, Cass, Chippewa, Delta, Dickinson, Gogebic, Hillsdale, Houghton, Huron, Iron, Jackson, Lapeer, Lenawee, Livingston, Mackinac, Macomb, Marquette, Menominee, Oakland, Ontonagon, Saginaw, Sanilac, St. Clair, Tuscola, Van Buren, Wayne Berrien, Branch, Calhoun, Cass, Hillsdale, Jackson, Kalamazoo, Lenawee, Livingston, Monroe, Oakland, St. Clair, St. Joseph, Van Buren Bay, Clare, Genesee, Gladwin, Gratiot, Isabella, Lapeer, Midland, Health Management Associates 13

15 HEALTH PLAN M Care McLaren Health Plan Midwest Health Plan Molina Healthcare of MI (formerly American Family Care) OmniCare Physicians Health Plan of Mid Michigan Physicians Health Plan of SW Michigan Priority Health Plan Total Health Care Upper Peninsula Health Plan Wellness Plan WINNING PLANS IN MICHIGAN S PROCUREMENT 2000 AWARDED COUNTIES Roscommon, Saginaw, Shiawassee, Tuscola Livingston, Washtenaw, Wayne Clinton, Eaton, Genesee, Ingham, Lapeer, Ogemaw, Oscoda, Shiawassee Macomb, Washtenaw, Wayne Alpena, Arenac, Bay, Crawford, Gladwin, Gratiot, Huron, Ionia, Iosco, Kent, Lake, Macomb, Manistee, Mason, Mecosta, Midland, Montcalm, Montmorency, Muskegon, Newaygo, Oakland, Oceana, Ogemaw, Oscoda, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, Sanilac Tuscola, Wayne, Wexford Oakland, Wayne Clare, Clinton, Eaton, Ingham, Isabella Berrien, Branch, Calhoun, Cass, Kalamazoo, St. Joseph, Van Buren Allegan, Antrim, Benzie, Charlevoix, Emmet, Grand Traverse, Ionia, Kalkaska, Kent, Lake, Leelanau, Manistee, Mecosta, Montcalm, Osceola, Otsego, Ottawa Genesee, Macomb, Oakland, Wayne Alger, Baraga, Chippewa, Delta, Dickinson, Gogebic, Houghton, Iron, Keweenaw, Luce, Mackinac, Marquette, Menominee, Ontonagon, Schoolcraft Genesee, Lapeer, Macomb, Muskegon, Oakland, Oceana, Shiawassee, St. Clair, Wayne 2004 Procurement The MDCH used a different process for identifying Medicaid managed care plans in the 2004 procurement. In March of 2004 the State released an Invitation to Bid (ITB) that did not require any bidder to provide a price proposal. Rates paid to contracted MCOs were established by the state s actuary and consistent across all contracted health plans 10. The State set prices for this procurement in part because two of the HMOs that set prices for the previous procurement OmniCare and Wellness Plan subsequently had financial issues, were placed under Supervision and Rehabilitation by the State Insurance Commissioner, and ultimately were liquidated with members moving to other HMOs. Bidders were primarily scored on their ability to demonstrate sufficient network capacity (with specific emphasis on primary care providers), financial solvency and accreditation. In public forums state staff administering the procurement stated that the ITB was designed to advantage out of state health plans investing in Michigan based HMOs. This was intended to improve the financial stability of Michigan s Medicaid MCOs, a few of which had experienced financial and organizational difficulties in recent years. Additional consideration would be provided to contracted health plans that consolidated for the new procurement. This was intended to reduce the number of contracted health plans in Michigan s Medicaid program. Changes in the administration and ownership of existing health plans in response to the ITB included: 10 In addition to adjustment for county, age and gender, rates for the ABD population included a risk adjustment, based on the historical disease and disability experience of the ABD members of each MCO. Health Management Associates 14

16 Coventry Health Care: Purchased OmniCare Health Plan. Cape Health Plan: An incumbent Medicaid MCO purchased Botsford Health Plan. The Wellness Plan: Purchased in part by McLaren Health Plan and in part by Molina Healthcare of Michigan after the AMERIGROUP Corporation withdrew its approved purchase offer. Responses to the ITB were submitted to the State of Michigan in May of The following plans were awarded a contract through the 2004 ITB. WINNING PLANS IN MICHIGAN S PROCUREMENT 2004 HEALTH PLAN AWARDED COUNTIES Cape Health Plan Macomb, Monroe, Oakland, St. Clair, Wayne Alcona, Allegan, Alpena, Antrim, Arenac, Benzie, Berrien, Calhoun, Cass, Charlevoix, Cheboygan, Crawford, Genesee, Gladwin, Grand Traverse, Iosco, Kalamazoo, Kalkaska, Kent, Lake, Leelanau, Manistee, Mason, Community Choice MI Mecosta, Missaukee, Montmorency, Newaygo, Oceana, Ogemaw, Osceola, Oscoda, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, St. Joseph, Van Buren, Wexford Berrien, Calhoun, Cass, Hillsdale, Huron, Jackson, Lenawee, Livingston, Great Lakes Health Plan Macomb, Oakland, Saginaw, Sanilac, St. Clair, Tuscola, Van Buren, Wayne Allegan, Barry, Berrien, Branch, Calhoun, Cass, Eaton, Genesee, Hillsdale, Huron, Jackson, Kalamazoo, Kent, Lenawee, Livingston, Macomb, Manistee, Health Plan of Michigan Monroe, Montcalm, Muskegon, Newaygo, Oakland, Oceana, Ogemaw, Oscoda, Ottawa, Roscommon, Sanilac, St. Clair, St. Joseph, Tuscola, Van Buren HealthPlus Partners Bay, Genesee, Lapeer, Saginaw, Shiawassee, Tuscola M Caid HMO Livingston, Washtenaw, Wayne Arenac, Bay, Clinton, Crawford, Eaton, Genesee, Gratiot, Ingham, Lapeer, McLaren Health Plan Ogemaw, Oscoda, Roscommon, Saginaw, Shiawassee, Tuscola Midwest Health Plan Livingston, Macomb, St. Clair, Washtenaw, Wayne Alcona, Allegan, Alpena, Arenac, Bay, Benzie, Crawford, Genesee, Gladwin, Gratiot, Huron, Ionia, Iosco, Kent, Lake, Macomb, Manistee, Mason, Molina Healthcare of MI Mecosta, Midland, Missaukee, Montcalm, Montmorency, Muskegon, Newaygo, Oakland, Oceana, Ogemaw, Osceola, Oscoda, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, Sanilac, Tuscola, Wayne, Wexford OmniCare Health Plan Wayne PHP of Mid Michigan Family Care Clinton, Eaton, Ingham Physicians Health Plan of SW Berrien, Branch, Calhoun, Cass, Kalamazoo, St. Joseph, Van Buren Michigan Allegan, Antrim, Benzie, Charlevoix, Emmet, Grand Traverse, Kalkaska, Priority Health Government Kent, Lake, Leelanau, Manistee, Mecosta, Montcalm, Muskegon, Oceana, Programs Osceola, Otsego, Ottawa Pro Care Health Plan Wayne Total Health Care Genesee, Macomb, Wayne Alger, Baraga, Chippewa, Delta, Dickinson, Gogebic, Houghton, Iron, Upper Peninsula Keweenaw, Luce, Mackinac, Marquette, Menominee, Ontonagon, Schoolcraft 2009 Procurement In March of 2009 the State issued an RFP for Medicaid managed care services for a base contract period of October 2010 through September 2013 with three additional option years. The RFP, in many ways, Health Management Associates 15

17 was structured similarly to the 2004 procurement. Bidders were not required to provide a price or rate proposal as rates would be determined by the State. Bidders were judged primarily on measures of financial stability, provider network and quality. In the 2009 procurement, greater emphasis was placed on Healthcare Effectiveness Data and Information Set (HEDIS) scores, a measure of plan quality. A significant difference between the 2004 and the 2009 procurement structure was on demonstrated quality in Michigan s Medicaid program in that higher scoring points were available for Michigan Medicaid HEDIS scores than for non Medicaid HEDIS scores or for Medicaid HEDIS scores from other states. This emphasis greatly advantaged incumbent health plans and discouraged new managed care plans from entering the Michigan Medicaid market. This signaled a preference by MDCH for maintaining the status quo and avoiding significant changes in Michigan s Medicaid program. The results of the procurement reveal this as all 14 incumbent health plans received new Medicaid contracts from the State. However, the results of this procurement did alter the services areas of each health plan. The winning health plans and their initially assigned counties are detailed below. * HEALTH PLAN BlueCaid of MI CareSource Michigan Great Lakes Health Plan Health Plan of Michigan HealthPlus Partners McLaren Health Plan Midwest Health Plan Molina Healthcare of MI WINNING PLANS IN MICHIGAN S PROCUREMENT 2009 AWARDED COUNTIES Livingston, Washtenaw, Wayne, Alcona, Allegan, Alpena, Arenac, Benzie, Berrien, Branch, Calhoun, Cass, Charlevoix, Cheboygan, Crawford, Emmet, Genesee, Gladwin, Grand Traverse, Hillsdale, Ionia, Iosco, Kalamazoo, Kalkaska, Kent, Lake, Leelanau, Manistee, Mason, Mecosta, Missaukee, Monroe, Montmorency, Muskegon, Newago, Oceana, Ogemaw, Osceola, Oscoda, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, Sanilac, St. Joseph, Van Buren, Allegan, Berrien, Branch, Calhoun, Cass, Hillsdale, Huron, Jackson, Kalamazoo, Kent, Lenawee, Livingston, Macomb, Monroe, Muskegon, Oakland, Oceana, Ottawa, Saginaw, St. Clair, St. Joseph, Tuscola, Van Buren, Wayne, Alcona, Allegan, Alpena, Arenac, Barry, Bay, Benzie, Berrien, Branch, Calhoun, Cass, Clare, Clinton, Crawford, Eaton, Genesee, Gladwin, Grand Traverse, Gratiot, Hillsdale, Huron, Ingham, Ionia, Iosco, Isabella, Jackson, Kalamazoo, Kalkaska, Kent, Lake, Lapeer, Lenawee, Livingston, Macomb, Manistee, Mason, Midland, Missaukee, Monroe, Montcalm, Montmorency, Muskegon, Newago, Oakland, Oceana, Ogemaw, Osceola, Oscoda, Otsego, Ottawa, Presque Isle, Roscommon, Saginaw, Sanilac, Shiawassee, St. Clair, St. Joseph, Tuscola, Van Buren, Washtenaw, Wayne, Wexford Bay, Genesee, Lapeer, Saginaw, Shiawassee, Tuscola, Arenac, Bay, Clare, Clinton, Crawford, Eaton, Genesee, Gladwin, Gratiot, Huron, Ingham, Ionia, Iosco, Isabella, Lapeer, Macomb, Midland, Montcalm, Newago, Oakland, Ogemaw, Oscoda, Roscommon, Saginaw, Sanilac, Shiawassee, St. Clair, Tuscola, Livingston, Macomb, Oakland, St. Clair, Washtenaw, Wayne, Alcona, Allegan, Alpena, Arenac, Bay, Benzie, Clare, Crawford, Genesee, Gladwin, Grand Traverse, Gratiot, Huron, Ionia, Iosco, Isabella, Kalkaska, Kent, Lake, Lapeer, Macomb, Manistee, Mason, Midland, Missaukee, Monroe, Montcalm, * Note that since 2009, CareSource Michigan was purchased by McLaren Health Plan; Great Lakes Health Plan was purchased by UnitedHealthcare Community Plan; OmniCare Health Plan changed its name to CoventryCares of Michigan; and Pro Care Health Plan changed its name to Harbor Health Plan. Health Management Associates 16

18 HEALTH PLAN OmniCare Health Plan PHP of Mid Michigan Family Care Priority Health Government Programs Pro Care Health Plan Total Health Care Upper Peninsula WINNING PLANS IN MICHIGAN S PROCUREMENT 2009 AWARDED COUNTIES Montmorency, Muskegon, Oakland, Oceana, Ogemaw, Osceola, Oscoda, Ottawa, Presque Isle, Roscommon, Saginaw, Sanilac, St. Clair, Tuscola, Washtenaw, Wayne, Wexford Macomb, Oakland, Wayne Clinton, Eaton, Ingham, Ionia, Montcalm, Shiawassee, Allegan, Kent, Lake, Manistee, Montcalm, Muskegon, Oceana, Osceola, Ottawa, Wayne Genesee, Macomb, Oakland, Wayne Alger, Baraga, Chippewa, Delta, Dickinson, Gogebic, Houghton, Iron, Keweenaw, Luce, Mackinac, Marquette, Menominee, Ontonagon, Schoolcraft, 2. Current Medicaid Managed Care Marketplace Description As the previous text reflects, the Michigan Medicaid program has been aggressive in providing services to Medicaid beneficiaries through managed care for many years. Michigan s 13 currently contracted Medicaid health plans have long served those who accessed Medicaid through income based requirements (largely low income children and families) and those who met Michigan s aged, blind and disabled standards for Medicaid eligibility. Michigan has continued to push for broader expansion of the state s Medicaid managed care program in recent years through initiatives to include pregnant women, foster children and those enrolled in the Children s Special Health Care Services (CSHCS) program into Michigan s managed care system. The recent implementation of the Healthy Michigan Plan, authorized through the federal Affordable Care Act and Michigan legislation, has made health care coverage available to thousands of low income individuals not previously eligible for Medicaid benefits. These newly eligible individuals, numbering more than 320,000 since enrollment began on April 1, 2014, are also being enrolled in the contracted Medicaid health plans. Michigan has also encouraged its contracted health plans to enroll and provide services to children eligible through the state s MIChild program, a health care program for non Medicaid eligible children up to age 19 in families with income up to 200 percent of the federal poverty level. The MIChild program is authorized and funded through the federal Children s Health Insurance Program, Title XXI of the Social Security Act. Detailed in the table below, you can see the distribution of Medicaid enrollees across Medicaid managed care plans in the State of Michigan (as of June 2014). HEALTH PLAN MEDICAID / HMP MICHILD Blue Cross Blue Shield of MI/Blue Cross Complete 63,900 3,000 CoventryCares of MI 43,200 1,500 Grand Valley Health Plan Harbor Health Plan, Inc. 5, HealthPlus Partners, Inc. 80,900 5,600 McLaren Health Plan 154,600 3,300 Meridian Health Plan of MI 361,800 0 Health Management Associates 17

19 HEALTH PLAN MEDICAID / HMP MICHILD Midwest Health Plan 89,500 1,900 Molina Healthcare of Michigan 226,500 4,200 PHP Mid Michigan Family Care 19, Priority Health 91,300 4,700 Total Health Care 66,100 2,000 UnitedHealthcare Comm. Plan 260,100 3,900 Upper Peninsula Health Plan 38,600 1,100 Total 1.501,000 31, Future Procurement Considerations for Michigan Plans Our review of state and federal statutory and regulatory requirements along with prior State of Michigan procurements for Medicaid MCO services reveals that the state has a great deal of flexibility in structuring a procurement to address policy goals related to the structure of the State s Medicaid MCO system. With this flexibility, the State of Michigan will have the opportunity to address several fundamental questions about which types of MCOs can best serve Medicaid enrollees in the years ahead. These questions include: Should Michigan Design an RFP that Would Provide Incumbent MCOs Advantage in Scoring? As previously noted, the structure of the 2009 RFP provided scoring advantages to incumbent plans. The effect of this RFP design was that all 14 of the previously contracted plans maintained contracts with Michigan s Medicaid program although as noted earlier, there were regional adjustments based on capacity stipulated by MDCH in the ITB. If DCH is satisfied with the performance of the plans currently participating in Michigan s Medicaid program, the RFP could be structured in a similar manner. Arguments in favor of this approach include: Existing plans have specific knowledge and experience serving Michigan Medicaid enrollees Many current Medicaid MCOs have been contracted with the State since the initial 1996 procurement. Over this time these plans have developed mature processes meeting the healthcare needs of enrollees, established financial stability in the Michigan Medicaid market, built provider networks and addressed the specific regulatory requirements and policy goals of Michigan s Medicaid program. Maintaining the Current Array of Contracted Health Plans Would Reduce Disruption Maintaining the plans available to enrollees in each market would limit disruption to enrollees, who may otherwise be required to select a new plan. Reducing turnover of contracted plans would also limit administrative burden to DCH which would not be required to complete a comprehensive readiness review for plans already under contract. This may be an important advantage when you consider the significant changes in Michigan s private and public insurance market over the past 12 months. There are currently more than 320,000 new enrollees in Michigan s Medicaid program through the Healthy Michigan Plan and many who were previously uninsured or enrolled in public health coverage programs have now Health Management Associates 18

20 purchased coverage through Michigan s Health Exchange. Large scale changes in the array of available Medicaid MCOs could create further complexity for enrollees and could disrupt current patient/provider relationships. Michigan s Current Medicaid MCOs Have Been Largely Effective in Meeting Michigan s Policy Goals Michigan s Medicaid program has placed strong emphasis on having its contracted health plans demonstrate quality in services provided to enrollees. The contracted MCOs have largely been successful in meeting this objective, with 10 of Michigan s 13 health plans ranked among the NCQA top 60 Medicaid MCOs nationally in quality. Recent experience in the roll out of Healthy Michigan Plan further demonstrates the capacity of the currently contracted MCOs. More than 320,000 new enrollees are currently being transferred to Michigan s MCOs without major difficulty. Further, many of the current MCOs have also been selected to implement the MDCH Demonstration project for Integrated Care for Duals. There are disadvantages of an approach that favors incumbent plans as well. They include: New Plans Could Provide an Opportunity for Additional Innovation in Michigan s Medicaid Program It is possible that Medicaid MCOs outside of the State of Michigan may bring with them new and innovative processes for serving Medicaid enrollees. There Is Likely Significant Interest from New Plans in Michigan s Medicaid Market A review of recent procurements in other states reveals a high degree of interest from a number of national Medicaid plans in most large procurements. It is likely that Michigan s 2015 procurement will draw interest from a number of plans and could present an opportunity for DCH to add additional high functioning plans to the state s Medicaid program. Should DCH Reduce the Number of Participating Medicaid MCOs? Another option available to Michigan is a reduction in the number of Medicaid MCOs contracted with the State and/or a reduction in the number of Medicaid MCOs serving each county. Michigan currently contracts with 13 health plans and hold contracts with a high number of plans in several large urban counties (8 in Wayne County, 7 in Oakland County, 5 in Genesee and Kent Counties). Advantages of reducing contracted health plans include: It is Easier to Provide Enough Membership to a Plan to Ensure Financial Viability Membership would be divided over fewer plans making their risk pool more financially stable. While the financial viability of contracted health plans has not been a serious problem in Michigan for some time, this would be a hedge against future problems. Simplification of Some State Oversight Functions The DCH would have to interact with fewer MCOs in monitoring and oversight functions. This could result in some administrative efficiency gains for the State, including reducing state FTEs currently involved in oversight. Health Management Associates 19

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