Pittsburgh Business Times

Western Pennsylvania's Medicaid managed care providers are lobbying for increases in Gov. Ed Rendell's $6.2 billion welfare budget, which they say threatens access to medical care for poor people.

UPMC For You, Gateway Health Plan and Unison Health Plan are among those seeking the increase. They say state reimbursement is lagging behind the cost of health care, increasing just 2 percent for the current fiscal year and a proposed 4 percent for fiscal 2007 while medical costs are increasing around 8 percent.

"It's an absolute crisis," said Mike Blackwood, CEO of Gateway, which forecasts a loss of $10 million between Jan. 1 and the end of the fiscal year June 30. "It looks like they're trying to bleed us to death."

The state budget is supposed to be adopted before July 1, but deliberations can stretch into the new fiscal year. Until then, the insurers will continue pressing for more money. The three insurers contract with the state on a capitated basis to oversee medical care for nearly 600,000 poor Pennsylvanians, many in the western part of the state. Under capitation, the state pays insurers a flat rate for providing care to a group of people, regardless of actual costs.

"We don't manufacture money," said Mike Rosenstein, coordinator of Pennsylvania Coalition of Medical Assistance Managed Care Organizations, a Harrisburg trade group. "It could have a devastating effect on the health care system, especially in urban areas."

Although none of the insurers say they will leave the market if the reimbursement does not increase, the companies could shrink their networks of doctors and hospitals in order to cut costs, restricting member access to health care, Rosenstein said.

"It's a crisis right now," said Jennifer Kessler, president of Monroeville-based Unison Health Plan, which reported a loss of $201,373 for calendar year 2005. "Something has to give."

Unison declined to release anticipated losses for the current fiscal year, but UPMC is expected to finish $5 million to $6 million in the red.

Izanne Leonard-Haak, chief of staff in the state Department of Public Welfare, defended the 4 percent increase, saying it follows years when the reimbursement for Medicaid managed care providers had been more generous. Between fiscal 1999 and 2004, managed care organizations received reimbursement increases ranging between 5 percent and 9.3 percent, she said. Also, she said, 4 percent is the average increase providers will see; some will see increases of up to 7 percent.

In addition to the 4 percent increase, Rendell's budget delays the last payment due the companies until after the start of the new fiscal year, helping balance the state's budget at the expense of the insurers' income.

The state also plans to assume control of prescription drug purchases and benefit administration effective Jan. 1, 2007, taking away a key tool in improving care while hold down costs, the insurers say.

The changes and restrictions in the proposed budget are necessary, Leonard-Haak said. "The last several years have been particularly difficult for us. Costs are up, federal support is down. That has put tremendous pressure on us."