Three of the four insurers that are part of Centennial Care lost money through the first nine months of 2015 on their Medicaid business
BY DENNIS DOMRZALSKI
New Mexico’s Medicaid program is burning a hole though the balance sheets of three of the insurance companies that provide care to low-income New Mexicans.
Three of the four insurers that are part of Centennial Care – Molina Health Care of New Mexico, United Healthcare of New Mexico and Blue Cross and Blue Shield of New Mexico – lost money through the first nine months of 2015 on their Medicaid business. Only Presbyterian Health Plan made money on its Medicaid business.
With Medicaid rolls growing, those losses could continue into coming years. What it means in the long term for the joint federal-state healthcare program, its 842,568 recipients and the insurers isn’t clear.
The insurers are locked into five-year contracts signed in 2013. The three companies that lost money aren’t talking about it. Nor is the state’s Human Services Department, which administers the $5 billion-a-year program.
Some reasons for the losses appear to be higher drug prices and specialty drugs like the $84,000-a-therapy Sovaldi, which cures hepatitis C. Another significant factor behind the losses is the dramatic expansion of Medicaid, which allowed more adults into the program. Many of those new enrollees had never gotten preventive medical care previously, are sicker than the general population and need more care than anyone anticipated.
One thing is clear, that if the for-profit companies don’t, or can’t, make money on Medicaid, they’ll ask the state to pony up more than the almost $1 billion it already throws at Medicaid. Or, when their contracts are up, they’ll simply walk away from the program. Where that would leave the state, no one knows.
Losses for the companies in 2015 were substantial.
Molina, for example, is part of the larger Molina family of companies whose business in other states is almost exclusively in Medicaid. Although Molina is expert at handling Medicaid patients, the company’s operations in New Mexico lost $8 million through the first nine months of 2015. It lost nearly $25 million on the state’s Medicaid program in 2014, according to its financial reports with the New Mexico Office of the Superintendent of Insurance.
United Healthcare, which has 83,000 Medicaid members in New Mexico, lost $8.5 million through the first three quarters of 2015, a massive contrast to the $25.8 million in profit it showed for the same period in 2014.
And Blue Cross, which has 127,000 Medicaid members, also lost money on the program in 2015, a spokesperson for the company said while declining to say exactly what the loss was.
Presbyterian Health Plan, which had 211,866 Medicaid members at the end of September, was the only Medicaid insurer in New Mexico that made money on the program. Through the first three quarters it had a net profit of $27 million on its Medicaid business, said PHP CFO Brandon Fryar. But that money represented a 3.5 percent net profit margin, Fryar said.
Insurance Superintendent John Franchini said that because insurers are paid under a capitation model, they get a fixed amount of money to care for a certain number of people, and if their expenses exceed that amount, the insurers have to eat it.
When Medicaid began in 1965 it was designed to serve children from low-income families and adults who needed long-term care. But through expansion by the Legislature, low-income adults were also able to get healthcare through the program. Since the 2013 expansion, 236,000 adults have joined the rolls in New Mexico.
“All the carriers have capitation contracts with Health and Human Services which say, ‘We will give you this much money to handle this many policyholders for the year. You need to take care of them for this amount of money,’” Franchini said. “Maybe that’s what occurred, some costs going up. We are seeing it cost $65,000 to $90,000 to cure Hepatitis C patients, and there are many of those in Medicaid. So pharmaceutical costs have gone up. The utilization has probably gone up tremendously because these people need care they didn’t get before.”
The three insurers whose financial statements are available all spent more on prescription drugs through the first three quarters of 2015 than they had in the previous year. Molina’s drug payments totaled $79 million compared to $64.2 million during the same period in 2014. United’s prescription drug claims rose to $36.8 million from $24.6 million, and Presbyterian’s drug claims rose to $81.8 million from $64.3 million.
Presbyterian’s Fryar said the company doesn’t expect to make as much on Medicaid this year as it did in 2015, in part because of rising drug costs and falling overall revenue. “There is no question that drugs [costs] have been out of control,” Fryar said. “This is a national phenomenon. There is utilization spending, but we’re seeing double-digit increases in the unit costs. We are at the mercy of the drug companies.”
Fryar added that there are a number of so-called blockbuster drugs that have already hit the market or will do so soon, and that will raise expenses for insurers as well. Presbyterian was able to make money on Medicaid because it has served Medicaid patients since 1977 and has done a good job at keeping its administrative expenses low.
Dennis Domrzalski is an associate editor at ABQ Free Press. Reach him at firstname.lastname@example.org.
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