We spend a lot of time griping about the insidious power of corporate health insurance in our healthcare system here. But you would expect that taxpayer funded public programs for our most vulnerable friends and neighbors are free from profiteering right? 

Sadly, no. Medicaid – the public program that serves the lowest income Americans, plus some people with disabilities, and a lot of the country’s long-term care – has been extensively privatized in most states. Hoping to trim budgets, most states have outsourced Medicaid recipients to “Medicaid Managed Care Organizations,” which are actually private insurance companies. And with private insurance comes the barriers to care we know all too well, like prior authorizations, denial of claims, and narrow networks. These are all part of the private insurance/public programs business model: the more care they avoid paying for, the more money from those capitated payments they get to keep.

But today we have a rare ray of sunshine: a state showing there’s another way to provide care, not just coverage, to some of their most vulnerable residents. In 2012 Connecticut kicked the private insurance-run Managed Care Organizations out of their Medicaid program. They took on Big Insurance and won. Our guest today will walk us through how it went down.

Sheldon Toubman has been a litigation attorney for Disability Rights Connecticut since 2021, and a leader of the efforts to remove Managed Care Organizations from the state’s Medicaid program. Before that, he was a staff attorney with New Haven Legal Assistance Association (NHLAA), where he spent 30 years representing and working on behalf of Medicaid enrollees. He engages in a variety of strategies on behalf of people with disabilities, from litigation to legislative advocacy and public education through media, webinars and other means.

Sheldon tells us that before 2012, Connecticut’s Medicaid program was bifurcarted: eligible kids, pregnant people, and families were in a capitated Managed Care Organization (MCO) model and people with disabilities were in a fee-for-service program. (Medicaid is funded with federal dollars, but unlike Medicare, states design the programs and make all the decisions about plans.) With a fee-for-service model, the state takes on the risk. With the MCO model, the MCO receives a per-person/per-month fee (a “capitated payment”) from the state, and they have to provide the care; if the patient requires less care, the MCO keeps the money, but if the patient requires more care, the MCO has to pay for the amount above the per-person/per-month fee. MCOs had a financial incentive to deny care so they could recoup more money.

Beginning in the late 1990s, Medicaid advocates began a campaign of lawsuits and lobbying to remove Managed Care from their Medicaid program.

Hartford, Connecticut is known as the insurace capital of the US, so this was a tough fight. Insurance companies fought this campaign because public programs are a major profit center for insurers, often more profitable than private employer-sponsored insurance. The insurance industry claimed they provided excellent care for less money, and coordinated care in a way that’s not possible with the fee-for-service model. The insurance industry also ran ads about all the jobs they provide, and legislators were afraid to tangle with them. When the state asked for data about how the MCOs spent public dollars, they refused to provide it. So advocates only had anecdotal information, and it was hard to refute the claims the MCOs made about how well they served patients.

One of the anecdotal complaints they heard the most was the lack of access to providers. Advocates convinced the state to check the insurance company provider network lists, so the state instituted a Secret Shopper survey to analyze them. They found that patients could get an appointment with supposed in-network providers only 25% of the time, across all the MCOs Connecticut contracted with.

Around the same time, one of the lawsuits resulted in a decision that the MCOs were subject to the Freedom of Information Act (FOIA) forcing them to give their data to the state. The state and advocates learned not only that the MCOs put up barriers to deny care, but also that providers weren’t getting paid (despite the MCOs’ claims they paid better than Medicaid rates). Providers were fed up with the MCOs and thus had no incentive to take Medicaid patients.

During the 2010 gubernatorial race, Medicaid advocates shared all this information with the candidates. They were lucky that the winner, Dannell Malloy, didn’t have any allegiance to the insurance industry. Once he was in office, Gov. Malloy responded to the 12 year campaign by Medicaid advocates by directing the state to take the risk back by going back to fee-for-service. They put out a Request for Proposal (RFP) for companies to provide administrative services for medical, dental, behavioral health, and medical transportation on a non-risk basis. Thus, those entities wouldn’t have a financial stake in denying claims and narrowing networks. The Governor also instituted a Primary Care Case Management model to actually manage care.

After 2012 Connecticut saw a huge improvement in access to providers. Removing MCOs from the program was a huge incentive for them to sign up to care for Medicaid patients. The state has saved billions of dollars. The medical loss ratio is about 97%: that means 97% of the tax dollars are going to provide care to patients, with only 3% going to overhead, marketing, lobbying, and huge salaries and bonuses for insurance company executives. The Primary Care Case Management model is really coordinating care for about 50% of patients. Today’s Connecticut Medicaid program isn’t perfect; provider rates for specialists and behavioral health providers aren’t ideal. But thanks to the work done in 2012, they know what those rates are and can address them head on.

Sheldon notes that insurance companies that sell Medicare Advantage plans operate on the same MCO model with similar results: barriers to and denial of care, and profiteering. Connecticut’s model could be applied in other states and nationwide for a Medicare for All type system.

Sheldon’s advice to other states: conduct Secret Shopper surveys! Publicize that the state isn’t holding contractors accountable for how tax dollars are being spent. Toxify the industry so politicians won’t want to be on their side.

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