HMOs profit from provision

Lobbying efforts could result in insurers getting more state money for Medicaid patient care.

Published May 2, 2007

Helped by campaign contributions and last-minute lobbying by health maintenance organizations like Tampa-based WellCare Health Plans Inc., Florida's managed-care companies could get a sizable rate increase just as the amount those companies must spend on mental health care could get smaller.

State lawmakers over the weekend slipped a provision into the budget that would increase the amount of state money HMOs will be paid to care for Medicaid patients.

It would also repeal a state law that mandates how much HMOs must spend for treating mental health patients covered by Medicaid.

Last year, Florida awarded WellCare a 5.4 percent increase.

Democratic lawmakers are largely opposed to the provisions, but there may be little they can do. Both proposals are tucked into the state's $71.9-billion budget, and the part dealing with the repeal of the state law regarding mental health patients cannot be amended.

WellCare is far and away Florida's largest Medicaid HMO with about half the state's Medicaid managed-care enrollment, or about 450, 000 members.

Of the $1.7-billion the state paid HMOs last year, WellCare took in about half, or nearly $850-million.

All told, the company provides Medicare and Medicaid managed-care plans to more than 2.25-million people in eight states, including Florida.

WellCare recently reported net income of $25-million for the first quarter of 2007, up 48.9 percent from last year.

Todd Farha, chairman, president and CEO of WellCare, received $5.3-million in total compensation in 2006.

Another HMO that would be affected by the provision, Virginia-based Amerigroup, agreed last month to pay $5.3-million to the state after the Agency for Health Care Administration said the company was not spending at least 80 percent on direct care for mental health patients.

In a report issued in March, investment bank CIBC World Markets said WellCare's chief risk is that it, along with several other major Medicaid plans in Florida, generates a nearly double-digit margin.

The report also said WellCare can minimize its profits by shifting money to a subsidiary in the Cayman Islands in the form of reinsurance premiums, a practice that is legal.

"From an outsider's perspective, Florida appears to be overpaying its Medicaid plans, " the report reads, "and it would seem to be only a matter of time before the state figures this out."

Officials from WellCare and Amerigroup did not return calls for comment, but at least one lawmaker, Sen. Durell Peaden Jr., R-Crestview, reportedly defended the provisions, saying HMOs don't need to be told how they spend their money.

Bob Sharpe, president of the Florida Council for Community Mental Health, said he anticipated the move because the HMOs had made similar attempts in the past two years through committees and were unsuccessful.

"The HMOs may have realized that had the provision gone through normal committee process, it wouldn't have fared well, " Sharpe said.

"We are working now with the governor's office to see if they're willing to speak about this issue. But we may find out it's gone too far and we can't stop it."

Most troublesome to Sharpe is that Florida has already underfunded its mental health care system compared to other states, and because of that, he said, the Legislature has chosen to fund more prisons and jails.

"That's the fallout of not properly funding care, " Sharpe said. "Leaving things the way they were would have cost the state nothing."

During the 2006 election cycle, WellCare and its affiliates shelled out nearly $100, 000 to the Republican Party, $4, 000 to Peaden and $500 contributions to dozens of other, mostly Republican, lawmakers.

In that same cycle, Amerigroup gave $25, 000 to the Republican Party of Florida, $2, 500 to the Florida Democratic Party, and $500 donations to Peaden, Gov. Charlie Crist and several other Republican lawmakers.

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.