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Medicaid insurers prodding Mass. on funds

Tie costly drug, surge in members to a need for high payments

Buckling from more than $140 million in losses since the start of the year, companies that insure Medicaid patients are pressing the Patrick administration to increase payments they receive from the state for serving low-income residents.

The health insurers say the deficits are the result of an expensive new hepatitis C drug and a surge of nearly 190,000 new members — many with serious medical issues — assigned to the companies by MassHealth, the state Medicaid program.

Insurers say the state did not budget enough money this year to cover the added costs.

“It’s had a destabilizing effect,” said Susan Coakley, interim chief executive of Boston Medical Center’s Health Net, the largest of the Medicaid managed care insurers that provide coverage to low-income residents under contracts with the state. “The program is in flux and in disarray.”


State health officials, who have been discussing the problem with the Medicaid insurers, say their data analysis does not corroborate all of the insurers’ claims. But they are expected this week to propose higher reimbursement rates to the insurers for the fiscal year starting Oct. 1 that will reflect updated data on medical and drug costs.

Deborah C. Enos, Neighborhood Health Plan president, whose organization accounted for more than half of the losses incurred by the Medicaid plans, said insurers believe the state understands the severity of the financial burden. “There is a recognition that something has happened that was different than anticipated,” she said.

There’s no indication the problems affecting insurers have compromised the health of patients. While thousands have been assigned new insurance coverage, most have kept their doctors, said Amy Whitcomb Slemmer, executive director of the Massachusetts nonprofit Health Care for All, which assists low-income residents.

“The marketplace feels very volatile, but the experience of patients and consumers and their access to care have been pretty seamless,” Whitcomb Slemmer said.


MassHealth provides Medicaid insurance, partly funded by the federal government, to more than 1 million low-income Massachusetts residents. The state agency insures some of those people directly, but about three-quarters are served by a half-dozen private Medicaid insurers. Insurance companies expected the hepatitis C drug Sovaldi — with a cure rate exceeding 90 percent — would go on the market this year. They also knew doctors would prescribe it for the disproportionate number of Medicaid patients with the liver-ravaging virus. But insurers say they were blindsided by the $1,000-a-pill price set by drug maker Gilead Sciences, which adds up to about $84,000 per patient for a full course of treatment.

Similarly, the health plans anticipated an influx of new members this year because of an expansion of Medicaid under the federal Affordable Care Act. The law increased reimbursements to the state, making more residents eligible for government insurance. It also required Massachusetts to discontinue some subsidized health insurance, start new programs, and reassign tens of thousand of people to different coverage. Much of the reshuffling was supposed to have been done through the updated Massachusetts Health Connector website. But when the site did not work, MassHealth officials had to assign members without the planned electronic interface to new federal eligibility guidelines. According to insurers, that has resulted in more patients with costly medical problems going to private companies while a higher number of healthier patients have been assigned to a temporary fee-for-service Medicaid program run by the state.


“Because the website was broken, the rest of the system got turned on its head,” said Christopher “Kit” Gorton, president of Network Health, a Medford-based Medicaid insurer owned by Tufts Health Plan that lost $16 million in the first half of the year.

By far, the biggest six-month operating loss — $99 million — was reported by Neighborhood Health Plan, a Boston-based Medicaid insurer acquired in 2012 by Partners HealthCare System, the state’s largest hospital and physicians network. Neighborhood Health officials said they were swamped with 60,600 new members between January and June — far more than they counted on — with many filing medical claims far beyond reimbursement rates they received from the state.

Neighborhood Health said the new members increased its medical costs by about $28 million in the most recent quarter. The insurer set up a reserve to cover another $26 million in projected losses in the current quarter. Neighborhood Health attributed $10 million in costs to Sovaldi claims, and another $4 million to the state website problems in the three months ending June 30. The added expenses caused parent Partners, which operates Massachusetts General and Brigham and Women’s hospitals, to show an operating deficit for the April-to-June period.

State officials said they are not convinced Partners’ analysis of the costs is accurate.

“We have been engaged with Partners’ Neighborhood Health Plan in a review of the issues raised by their organization and, thus far, have not been able to corroborate what they have identified as the cause of the questions they are facing,” said Alec Loftus, a spokesman for the state Executive Office of Health and Human Services. “We remain committed to continuing the conversation on this issue and will work with [Neighborhood Health] and the other managed care organizations to find solutions, where necessary.”


Losses are mounting at other Medicaid insurers as well. Health Net, a statewide Medicaid insurer owned by Boston Medical Center, posted $27 million in losses for the first six months of 2014. The much smaller Health New England in Springfield, owned by Baystate Health, registered a loss of $500,000. All blame underfunding from MassHealth.

“The state changed the Medicaid rating categories and expanded the eligibility,” said Thomas Ebert, chief medical officer of Health New England. “Their actuaries did as well as they could to try to determine what the eligibility was going to be, but they were off the mark.”

Each of the Medicaid insurers tells a different story about what accounted for its financial loss. While the largest part of the Neighborhood Health deficit was blamed on a surge in high-cost members, Network Health cited Sovaldi. Both were factors for Health Net and Health New England, with Health Net officials saying about half of its additional costs came from Sovaldi and half from new members.

And though Neighborhood Health and Network Health both say they received far more new members than expected, Health Net reported fewer new members. All of the Medicaid plans say their new members have had more medical needs than anticipated. They include many older patients, people with behavioral health issues, and pregnant women, they said.


Insurance executives were hesitant to predict how their appeals for more state money will be resolved, but they say underfunding by MassHealth threatens their long-term finances.

“The state is under a lot of pressure from a lot of people,” Ebert said. “But they have to understand the impact of these issues on the plans. And we have to hope for the best.”

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.