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Health Policy for Low-Income People in Florida

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Document date: December 01, 1997
Released online: December 01, 1997

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.


About the Series

Assessing the New Federalism is a multi-year Urban Institute project designed to analyze the devolution of responsibility from the federal government to the states for health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments, along with changes in family well-being. The project aims to provide timely nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site. This paper is one in a series of reports on the case studies conducted in the 13 states, home to half of the nation's population. The 13 states are Alabama, California, Colorado, Florida, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, Texas, Washington, and Wisconsin. Two case studies were conducted in each state, one focusing on income support and social services, including employment and training programs, and the other on health programs. These 26 reports describe the policies and programs in place in the base year of this project, 1996. A second set of case studies to be prepared in 1998 or 1999 will describe how states reshape programs and policies in response to increased freedom to design social welfare and health programs to fit the needs of their low-income populations.

The income support and social services studies look at three broad areas. Basic income support for low-income families, which includes cash and near-cash programs such as Aid to Families with Dependent Children and Food Stamps, is one. The second area includes programs designed to lessen the dependence of families on government-funded income support, such as education and training programs, child care, and child support enforcement. Finally, the reports describe what might be called the last-recourse safety net, which includes child welfare, homeless programs, and other emergency services.

The health reports describe the entire context of health care provision for the low-income population. They cover Medicaid and similar programs, state policies regarding insurance, and the role of public hospitals and public health programs.

In a study of the effects of shifting responsibilities from the federal to state governments, one must start with an understanding of where states stand. States have made highly varied decisions about how to structure their programs. In addition, each state is working within its own context of private-sector choices and political attitudes toward the role of government. Future components of Assessing the New Federalism will include studies of the variation in policy choices made by different states.


Contents

Highlights of the Report

Overview of Florida

    Sociodemographic
    Economic
    Political
    Roadmap to the Rest of the Report

Setting the Policy Context

    Overview of the State's Health Care Agenda
    State Health and Health Care Indicators
    Health Care Spending and Coverage

Organizational Structure of State Health Programs

Assessing the New Federalism: Potential State Responses to Additional Flexibility and Reduced Funding

    General State Philosophy toward the Poor
    Medicaid-Specific Issues

Providing Health Coverage for Low-Income People

    Medicaid Eligibility
    Other Public Financing Programs
    Insurance Reforms

Financing and Delivery System

    Commercial Managed Care
    Hospital Market and Regulatory Issues
    Mergers and For-Profit Conversions
    Medicaid Provider Reimbursement (including DSH Payments)
    Medicaid Managed Care

Delivering Health Care to the Uninsured Population

    State and County Public Health Programs
    Impact of Government Policies and Market Changes on Safety Net Providers in Dade and Hillsborough Counties

Long-Term Care for the Elderly and Persons with Disabilities

    Supply, Expenditures, and Utilization
    Long-Term Care for the Elderly
    Younger People with Disabilities

Challenges for the Future

Notes

Appendix: List of People Interviewed

About the Authors


Highlights of the Report

Health policy issues have been a priority for Florida under the leadership of Governor Lawton Chiles. The Florida Health Security Plan, which Governor Chiles proposed in 1992 and which was ultimately rejected by the state legislature, represented an expansion of insurance coverage together with a managed competition approach to controlling health costs. Governor Chiles was successful in winning passage of insurance reforms in the private insurance market. In 1997, the governor made expansion of coverage to children through Medicaid and the state's Healthy Kids Program his top health priority. He also brought suit against the U.S. government to seek relief from changes in welfare laws that affected many legal noncitizens in Florida and opposed the formula for distributing federal block grant funds in 1995 because of its likely negative impact on the state of Florida.

Florida has a number of health care problems. It has one of the highest uninsured rates in the country, 19.2 percent (vs. 15.5 percent for the nation). Per capita spending on Medicaid ranks as one of the lowest in the country (46th nationally) despite having the fourth largest Medicaid enrollment, about 2.2 million. The state ranks near the bottom (i.e., worst) on a number of measures of health status, including the number of premature deaths per capita, prevalence of cancer, number of AIDS cases, and rate of violent crime.

Medicaid enrollment and expenditure growth accelerated in the 1990s. Between 1990 and 1995, enrollment grew by 12.7 percent annually, expenditures, by 18.7 percent. Spending grew by 27.2 percent between 1990 and 1992, and by 13.4 percent per year between 1992 and 1995. Florida's eligibility standards remain low by national standards. In 1994, 39.6 percent of the low-income population below 150 percent of the federal poverty level (FPL) had Medicaid coverage compared with 51 percent nationally. The state has a somewhat restrictive benefit package and spends less per enrollee than the national average for all eligibility groups except children. Expenditures on long-term care are low despite a large elderly population. The number of nursing home beds per elderly person is well below the national average, and there is minimal coverage of home and community-based services.

Managed care is the cornerstone of the state's efforts to control Medicaid acute care expenditures. Florida now contracts with 19 health maintenance organizations (HMOs) and has implemented a primary care case management program (MediPass) throughout the state. The state now requires mandatory enrollment in managed care for most recipients—two-thirds of Medicaid beneficiaries are in either MediPass or capitated managed care plans. Florida has had a history of marketing and enrollment abuses and problems with quality of care in managed care programs. Recently, the state prohibited direct marketing, increased resources for beneficiary education, and added staff to monitor quality of care. It has also enacted a competitive bidding system to drive down capitation rates, hoping to reduce rates to 92 percent of fee-for-service rates.

The state also faces problems resulting from the impact of recent welfare reform legislation on future legal immigrants. At the time of the site visit, it was estimated that 54,000 current Supplemental Security Income (SSI) recipients in Florida would lose their SSI and Medicaid benefits, and another 3,062 immigrants who were receiving Medicaid were also expected to lose coverage. The state filed suit asking the federal court to declare that denying SSI and food stamp benefits to otherwise eligible, lawful, permanent resident aliens is unconstitutional. Legislation was introduced by the Dade County delegation to maintain coverage for these individuals at state or local expense. The cost to the state (or to local areas) was estimated at $222 million. While the Balanced Budget Act of 1997 ensures that most of these individuals will retain their benefits, future immigrants will not be covered.

To reduce the number of uninsured children, the governor has proposed expanding Medicaid to cover children ages 0 to 3 old years in households with income up to 185 percent of the FPL. The state is also expanding its Healthy Kids Program. The Healthy Kids Program is a school enrollment-based insurance program that currently provides comprehensive health insurance coverage to 26,400 children. Additional funding has been granted to increase the number of children in the program to 60,000. The legislature recently granted the Agency for Health Care Administration the authority to seek a Section 1115 waiver to cover children in households with income up to 185 percent of the FPL through the Healthy Kids Program. The cost of the program averages about $600 per child. The program is able to keep the costs below Medicaid because of limits on the number of plans, because of some restrictions on benefits, and because the population served is relatively healthy.

Florida has enacted a series of insurance reforms. The reforms require insurers offering policies in the small-group market to guarantee issue of policies without regard for health status or preexisting conditions, provide for portability of plans between employers, and require the use of modified community rating. The legislation does not affect the individual insurance market. Florida also created 11 regional Community Health Purchasing Alliances (CHPAs) in an attempt to reduce the costs of health insurance in the small-group market. Currently 18,000 small businesses representing 76,000 individuals receive coverage through the CHPAs. It appears the state is experiencing a certain amount of adverse selection in the CHPAs. The CHPAs are also prohibited from negotiating rates with insurers, limiting their ability to take advantage of their market power. As a result, premiums for CHPA-sponsored insurance plans are reportedly only about 6 percent less than premiums for the same plans offered outside of the CHPAs.

Managed care has been growing rapidly in the private market in Florida. As of 1995, 25 percent of the state's population was enrolled in an HMO. Much of the growth has been among for-profit HMOs. Although the largest HMOs remain profitable, many of the smaller HMOs have experienced losses. As a result, mergers and acquisitions are now occurring frequently in the commercial HMO market. State policy has generally been supportive of the growth of managed care. A number of bills to regulate managed care have been introduced in the legislature, but to date few have been enacted. The 1997 legislative session is expected to include increased efforts to enact legislation to set standards for HMO practices.

The hospital market has a considerable amount of excess capacity. As a result, HMOs and other managed care plans have successfully negotiated deep discounts. There has also been considerable growth in for-profit hospital systems, although some nonprofit hospital systems are also developing rapidly. However, to date there has been little impact on the number of hospitals and number of beds. While there is concern over the implications of the growing number of for-profit hospital beds on the provision of charity care, no action has been taken. In fact, Columbia/HCA and the South Florida Hospital Association have challenged the tax-exempt status of nonprofit hospitals, arguing that many nonprofits provide little charity care but still receive tax benefits not available to for-profit hospitals.

Safety net hospitals face significant competitive pressures as the growth in Medicaid managed care increases the interest of private hospitals in the Medicaid market. Nonetheless, they appear to be doing reasonably well in general. One reason is an increase in local funding for indigent care. In both Dade and Hillsborough Counties, local funding for indigent care has risen considerably as a result of increases in sales taxes. In addition, hospitals are either developing their own HMOs or prepaid health plans, joining with other HMOs or prepaid health plans, or developing networks with other health care providers to achieve greater efficiencies.

Although the infusion of funds and their continuance are important to the safety net's success, the manner in which the funds are distributed is also important. Hillsborough County has used the new tax revenues to fund an insurance program that distributes funds across several types of providers. Nonetheless, Tampa General Hospital, the major public hospital, is losing its Medicaid patient base and is increasingly reliant on state financial support. Dade County's new revenues are largely targeted to Jackson Memorial Hospital, the county's major public hospital. These revenues are permitting the hospital to survive the loss of Medicaid revenues. Community clinics did not receive any of these new funds and are facing serious problems. The big question is whether local revenues will remain adequate and continue to support care for the indigent in these counties, as well as in other sites throughout the state.

Despite its large elderly population, Florida has relatively low expenditures on long-term care. Long-term care is 28 percent of the state's Medicaid budget, compared with the national average of 34 percent. Long-term care spending is low in Florida because its nursing home bed supply (30 beds per 1,000 people over age 65) is one of the lowest in the country and because it has been slow to expand home and community-based services. The state now has a few home and community-based waiver programs and is experimenting with increases in the provision of these services. Increases in expenditures for long-term care seem inevitable but could place added pressures on Medicaid spending for other groups.


Overview of Florida

Sociodemographic

Florida has one of the country's biggest and most diverse state populations. In 1995, Florida had a population of 14.1 million, which had increased 9.5 percent since 1990, or 1.7 times faster than the growth rate of the U.S. population (table 1). One in six people (16.2 percent) in the state had income below the federal poverty level (FPL) in 1994, compared with about one in seven people (14.3 percent) nationwide. Compared with the United States as a whole, Florida has a higher proportion of Hispanics (16.5 percent vs. 10.7 percent in 1995). The Miami area is notable for its large concentration of Cubans. Overall, 15.1 percent of the state's population in 1995 were immigrants, compared with 9.3 percent for the nation.

In 1995, 2.7 million people, or 16.7 percent of the state's population, were over the age of 65, substantially higher than the national average of 12.1 percent and higher than in any other state. Its elderly population is also one of the fastest growing in the country; the state projects a 35 percent growth in the age-80-and-older population in the next 10 years. The majority of the state's population resides in a half dozen major urban centers (e.g., Miami/Fort Lauderdale, Tampa/St. Petersburg, Orlando, and Jacksonville). Although the state has large rural areas, there are very few places located more than an hour from a medium-sized city.

Economic

Florida's economy is healthy and growing at a faster rate than the U.S. economy as a whole. Job growth during FY 97-98 is projected to be 2.9 percent, more than double the U.S. rate of 1.3 percent. 1 Beyond that, Florida's state budget assumes a slight deceleration of output and spending, which will result in somewhat slower growth in its economy. The unemployment rate was slightly less than that for the United States as a whole in 1996 (5.1 percent versus 5.4 percent). Per capita income ($23,061) is about on a par with the national average ($23,208) as was the increase in per capita income from 1990 to 1995—20.7 percent in the state versus 21.2 percent in the nation (table 1). In part because of the strong economy, Aid to Families with Dependent Children (AFDC) caseloads have declined in each of the last three fiscal years, dropping from about 220,500 families in October 1995 to 186,600 families in December 1996. These declines have continued since the implementation of the state's welfare reform program.

Political

Governor Lawton Chiles, a Democrat, has been in office since 1991 and won reelection in 1994; his current term expires in 1998, and Florida law prohibits him from running for a third consecutive term. Florida's legislature has historically been led by Democrats, but that has changed recently. The Florida Senate was evenly split prior to the 1994 election, when Republicans gained a majority of the seats. In 1996, Republicans also gained majority control of the House, with a two-seat lead (61 to 59). Republicans retained control over the Senate in 1996 and now have a six-seat margin over Democrats (23 to 17).

Between 1994 and 1996, Governor Chiles's relations with the split-control legislature were marked by some tension. While there has been bipartisan support for spending on corrections and education throughout the 1990s, the legislature has recently opposed some of the governor's health initiatives. The legislative agenda was dominated by a debate over funding priorities, cast largely as a trade-off between social and health services versus education and corrections. The legislature took funds proposed for Medicaid and transferred them to corrections and education. With a change in legislative leadership and a takeover of the House by Republicans, it was a matter of some speculation whether the governor would be able to have any of his health initiatives approved.

Health policy issues have been a particularly high priority of the governor. He sought passage of two pieces of legislation (the Health Care Reform Act of 1992 [Chapter 92-33] and the Health Care and Insurance Reform Act of 1993 [Ch. 93-129]), which together promised to ensure for all Floridians "access to a basic health care benefit package . . . by December 31, 1994." The Health Care Reform Act of 1992 created the Agency for Health Care Administration (AHCA) to help ensure that that goal was reached. The Health Care and Insurance Reform Act of 1993 provided the authority to create Community Health Purchasing Alliances (CHPAs), fund rural health network initiatives, and seek federal waivers to expand Medicaid eligibility to those with incomes up to 250 percent of the FPL. Both acts included insurance market reforms. The CHPAs were established in 1994, a number of rural health networks have been certified by AHCA, and there has been significant reform in the small-group insurance market. However, the Florida Health Security Act, the state's Section 1115 waiver that emerged from the 1993 act, never received funding from the legislature.

The governor, although an ally of the Clinton administration, has not hesitated to challenge federal policies that adversely affect Florida. For example, in April 1997 he filed suit against the U.S. government, seeking relief from changes in federal welfare laws that restrict essential federal benefits for many legal noncitizens in Florida. He was a supporter of federal welfare reform, but he expressed great concern about the spending caps in the 1995 Medicaid block grant proposal. He believed the caps would be unfair to Florida and other high population-growth states or those that had low per capita expenditures, because those states would have a harder time finding savings.

Although it is often thought that Cubans and other Latin Americans constitute the largest source of immigrants to the state, "immigrants from the North" (the snowbelt states) constitute a much larger proportion of the state's growing population. Nonetheless, the delegates from the Miami area are considered a powerful group in the legislature.

About 72 percent of the state's general revenue ($15.6 billion in FY 96-97) comes from sales tax collections. 2 The state does not have an income tax, and only counties can impose ad valorem (property) taxes. For FY 97-98, the Florida Consensus Estimating Conference projects the state's general revenue growth at 4.7 percent, or $757 million more in recurring general revenue, and projects an overall revenue growth of 5 percent. This is down, however, from the average annual rate of 8 percent in the last 10 years, when the introduction of the Florida lottery and an infusion of federal funds because of rising Medicaid and AFDC caseloads contributed to a higher growth rate.

Roadmap to the Rest of the Report

The remainder of this report lays out the major issues, initiatives, and challenges in health care facing the state policymakers in the spring of 1997. It describes the state's current health care agenda and recent spending trends, describes the organizational structure of state health programs, and gives some sense of prevailing state and local attitudes toward meeting the health care needs of the poor. It then delves into the details of Medicaid eligibility, managed care programs, provider reimbursement, and long-term care policy. The report describes how state policies are affecting the health care delivery system for poor people in two communities—Dade County, home to Miami, and Hillsborough County, which includes Tampa. It concludes with a discussion of the major challenges facing the state.


Setting the Policy Context

Overview of the State's Health Care Agenda

Three significant health care issues consumed the attention of state officials and advocates at the time of the site visit: (1) awards of new Medicaid capitated managed care contracts and attempts to shift MediPass program participants into capitated plans; (2) a number of children's health initiatives, including an expansion of the Healthy Kids Program, which subsidizes insurance premiums for low-income, school-aged children, and expansion of Medicaid eligibility to children ages 1 through 3 in families earning up to 185 percent of the FPL; and (3) concerns about the impact of federal welfare reform and immigration laws on Medicaid eligibility for legal immigrants.

Florida's Medicaid managed care program experienced significant problems two years ago when contracting plans' marketing abuses, quality of care problems, and charges of excess profit-taking were the focus of a series of articles in the Fort Lauderdale Sun Sentinel. The publicity led to several legislative changes in 1995, including prohibitions on direct marketing, rate rollbacks of between 8 and 18 percent, and the addition of Medicaid staff to monitor health plans' quality of care. In 1996, the legislature mandated assignment into either MediPass, the primary care case management program, or a health maintenance organization (HMO) or prepaid health plan (PHP) (previously recipients were required to enroll only in MediPass). The legislature also mandated a competitive bidding process for HMOs, setting a maximum capitation rate of 92 percent of fee-for-service (FFS) rates, and it authorized more enrollee education regarding managed care choices. Both the administration and the legislature have focused on implementing these changes, addressing, in particular, problems with the schedule and outcome of the bidding process.

In his FY 97-98 budget, the governor's biggest priority was a set of children's initiatives that included 22 separate programs. 3 The most important was the expansion of the Healthy Kids Program and Medicaid for young children, consistent with the governor's previous attempts to expand insurance coverage. Despite his focus on children, who generally garner more support across the aisle, the governor faced some roadblocks. Republican leaders in the legislature expressed their strong opposition to creating any new "middle-class entitlements," and they seemed more interested in further Medicaid budget cuts than in anything that would increase Medicaid spending.

Federal welfare reform legislation (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996—PRWORA) restricted immigrants' eligibility for a wide range of benefits, including Medicaid. Prior to welfare reform, legal noncitizens were eligible for Medicaid on the same basis as citizens. The new law bars immigrants arriving after passage of the law (August 22, 1996) from receiving Medicaid for their first five years in the country. It also gives states the option of providing Medicaid to immigrants already in the United States.

At the time of the site visit, the state had made clear its intent to continue Medicaid coverage for legal immigrants residing in the state who qualify for Supplemental Security Income (SSI) or AFDC/Temporary Assistance to Needy Families (TANF) or who meet other Medicaid eligibility requirements. Nonetheless, the state estimated that about 3,062 current Medicaid recipients (not including SSI recipients) would likely be ineligible for Medicaid (66 percent of whom reside in Dade County) under the federal welfare reform law, even after accounting for those who would remain eligible because of exceptions, naturalization, or state options. About 54,000 people would have lost SSI benefits, with approximately 74 percent living in Dade County. 4 However, the passage of the Balanced Budget Act of 1997 grandfathered SSI recipients present in the United States as of August 22, 1996. As a result, most of the estimated 54,000 will not lose their benefits. Nonetheless, future immigrants will not be covered by Medicaid for their first five years in the country, which will put pressure on the state and local areas.

Observers were very concerned that many of those people who would have lost coverage under the old rules would end up in nursing homes because they could not afford rent or food to stay in the community. A legislative staffer estimated that changes in Medicaid rules for legal immigrants before the enactment of the Balanced Budget Act would have cost the state around $243 million; if a quarter of the people losing SSI coverage moved into a nursing home, state expenditures could have increased by about $432 million. Some believed Miami nursing home representatives would successfully lobby the legislature for such funds; others said it would depend on the state budget situation and the way in which the media covered the issue. Similar uncertainties regarding coverage of immigrants can be expected in the future under the new rules.

State Health and Health Care Indicators

Florida's nonelderly uninsured rate of 19.2 percent is among the highest state rates in the nation, exceeding the national average of 15.5 percent (table 1). This may be attributable to the state's service-dominated and small employer- based economy. The rate has not decreased very much in the last few years, despite the state's overall strong economy. According to one source, Florida ranks 38th lowest out of the 50 states with respect to an aggregation of health indicators. Florida performs poorly on a number of health status measures: It ranks in the bottom fifth of the country in the prevalence of infectious diseases, motor vehicle deaths, and premature death rate and is ranked lowest (i.e., worst) with respect to the prevalence of cancer. The state has twice the rate of AIDS cases as the national average and a 56 percent higher rate of violent crime. Florida is closer to the U.S. average for such measures as low-birth-weight births, infant mortality rates, and smoking among the adult population.

Health Care Spending and Coverage

Between FY 90-91 and FY 96-97, total average monthly caseloads under the Medicaid program grew from 992,038 to 1,526,823—a 54 percent increase. 5 Most of the growth, however, occurred between FY 90-91 and FY 92-93, because of recession-induced increases in AFDC caseloads and large increases in the expanded eligibility groups—for instance, AFDC-Unemployed Parent (UP), the medically needy program, poverty-related pregnant women and infants (with income up to 185 percent of the FPL) and children, optional coverage of elderly and disabled populations, and qualified Medicare beneficiaries. Despite its eligibility expansions, Florida's Medicaid program is still in the bottom 10 states in percent of total low-income population covered.

The state has restricted benefits in order to limit acute and long-term care costs; inpatient days are limited to 45, except for children, and the state does not cover nursing home services for the medically needy. The state also does not cover five optional services for the medically needy that it does cover for the categorically needy: inpatient hospital services for persons over age 65 in institutions for mental disease, Intermediate Care Facility for the Developmentally Disabled (ICF/DD) services, nursing facility services for individuals under age 21, case management services, and tuberculosis-related health services.

Florida's Medicaid spending has increased as a share of all state expenditures throughout the 1990s. Out of a total state 1995 budget of approximately $35.9 billion, Medicaid's share was $5.9 billion, or 16.5 percent, an increase from 10.7 percent in 1990 (table 2). Medicaid's share of state spending (excluding federal funds) also increased over this same period, from $812 million (7.0 percent of state-only spending) to $1.9 billion (13.1 percent of state-only spending). During the same period, state expenditures on elementary and secondary education and higher education fell as a share of all state expenditures.

Medicaid annual growth rates declined from over 20 percent in the late 1980s and early 1990s to an estimated 3.8 percent between FY 94-95 and FY 95-96, "due in large part to the economic recovery." 6 During the next four years, the average growth per year was estimated by administration officials to be about 6.7 percent.

In 1995, state general revenues made up 70.5 percent of the nonfederal share of Medicaid expenditures; the remainder came from a variety of sources, primarily the Public Medical Assistance Trust Fund (PMATF) (17 percent of the nonfederal share). 7 The PMATF was created in 1984 to provide an ongoing funding source for indigent health care programs. It raises funds from a 1.5 percent assessment on each hospital's net operating revenue and from other selected health care providers, in addition to a portion of the cigarette tax. PMATF funds have been used to finance Medicaid eligibility expansions, disproportionate share hospital (DSH) payments, and county primary care programs.

Increases in Florida's Medicaid expenditures, both federal and state, in the early 1990s were similar to those at the national level—27 percent average annual growth rates between 1990 and 1992 (table 3). These increases were caused largely by growth in AFDC and Medicaid enrollment, in part due to the economic recession of the early 1990s, and by the expansion of Medicaid eligibility to additional groups. Average annual growth rates in the state's Medicaid spending between 1992 and 1995 dropped significantly—to 13.4 percent on average—but were still in excess of the national average of 9.9 percent during that period. This higher-than-average spending was primarily due to much greater spending increases in long-term care, primarily for the elderly. As a percent of total 1995 expenditures, Florida spent more on acute care than the national average (64 percent versus 50 percent), less on long-term care (28 percent versus 34 percent), and less than half as much on DSH payments—5 percent versus 12 percent.

The average growth in Medicaid expenditures per beneficiary in Florida from 1992 to 1995 was 7.0 percent versus 5.5 percent for the United States as a whole, and the excess rate of growth appeared to be concentrated on the elderly and children (table 4). Nonetheless, the level of Medicaid expenditures per enrollee was 16.1 percent below the national average in 1995. Largely because of low levels of long-term care spending, expenditures per enrollee for the elderly and disabled were 20.0 percent and 28.1 percent below the national average, respectively. Average expenditures per child enrollee were 15.4 percent above the national average.


Organizational Structure of State Health Programs

The state has undergone several reorganizations of its health and human services programs during this decade. Prior to 1992, the Department of Health and Rehabilitative Services (DHRS) housed all health programs, including Medicaid, public health, and mental health, as well as welfare and a range of other social service programs. In the Health Care Reform Act of 1992, the state removed Medicaid from this enormous umbrella department and placed it in the newly created Agency for Health Care Administration, which reports to the governor. AHCA also has authority over a number of health regulatory functions, including hospital budget review, licensing and regulation of health facilities (including certificate of need), and health care-related professional licensure. Furthermore, it oversees health care purchasing for state employees and the newly created CHPAs for small firms and self-employed individuals seeking coverage. DHRS retained authority over public health and mental health in addition to other health-related programs such as Children's Medical Services, which operates clinics and coordinates services for 80,000 children with disabilities throughout the state. 8

By 1996, the arrangement of health and social services was once more found to be unsatisfactory. DHRS was still an immense human services bureaucracy, and many believed that public health was being shortchanged. Thus, the state created a separate Department of Health, which was given responsibility for the divisions of family health, environmental health, and disease control, as well as Children's Medical Services from the former DHRS. At the same time, DHRS was given a new name: the Department of Children and Family Services. It still has control over Medicaid eligibility rules, as well as the mental health, substance abuse, and developmental disability programs.

Florida's 67 counties are responsible for administering health services programs. Each county operates a county public health unit, which is an administrative and delivery unit of the state Department of Health. While local health department directors report to the county commissioners, county health departments are essentially state franchises; in fact, all staff are employed by the state. Nonetheless, decisions regarding the types of services to be provided and how to provide them are determined by each county public health unit. Nearly all of the state's 67 counties supplement the funds received from the state to support their county public health department, though the amount varies tremendously by county. Counties also share in the financing of Medicaid; they pay $55 per month for each nursing home resident and 35 percent of the nonfederal share for inpatient days 13 through 45. 9


Assessing the New Federalism:
Potential State Responses
to Additional Flexibility
and Reduced Funding

General State Philosophy toward the Poor

Governor Chiles has made a concerted effort to expand health insurance coverage for low-income people. But in a state that has built-in limits on tax revenues, a tax expenditure cap, and a fiscally conservative legislature, he has had to settle for less than his ambitions. The legislative agenda in 1996 was dominated by a debate over funding priorities, which was cast as a trade-off between social and health services on the one hand and education and corrections on the other. As in the previous year, the legislature explicitly took funds proposed for Medicaid and transferred them to corrections and education. There is concern in the legislature over Medicaid spending growth and its impact on expenditures for education, job creation, economic development, and criminal justice. In recent years, policymakers have resisted expanding entitlements and have made regular attempts to constrain growth in the Medicaid program. Perhaps because Medicaid eligibility and benefits are lower than the national average, there has been little concern about attracting out-of-state low-income residents.

It was surprising not to find greater support for long-term care spending, which seems inconsistent with the large number of elderly who make up the state's electorate. Interviewees attributed this apparent contradiction to the fact that many elderly have higher incomes or assets that shield them from reliance on publicly supported services. The predominance of Latinos, whose culture expects families to take care of their elderly parents, may also be a factor.

Medicaid-Specific Issues

According to a spokesperson for the governor, the per capita Medicaid spending cap proposed by President Clinton earlier in 1997 would be acceptable if it gave the state some additional flexibility to run its Medicaid program. In particular, the state would like to be less subject to the federal courts, which are "acting as legislators." The spokesperson also indicated that the state has applied for a number of waivers, some of which have been under consideration by the Health Care Financing Administration (HCFA) for a long time. If the state had not had to obtain approval for these waivers, it might have been able to implement some innovative and potentially cost-saving programs more quickly.

Some sources said the state wanted to have the Boren amendment 10 repealed, as some of the Boren-related suits have forced the state to pay more than it would have liked on a number of occasions. Others agreed that a repeal of the Boren amendment would help the state most by relieving it from having to fight provider lawsuits, though rates would probably not change significantly.

Florida has not been as aggressive as some other states in maximizing federal funds. The state has not "abused" provider taxes and DSH spending as much as other states have done, according to many sources. However, the state continues to lobby extensively at the federal level to ensure "that Florida receives a more equitable share of available federal assistance." 11


Providing Health Coverage for Low-Income People

Medicaid Eligibility

Florida is less generous in its eligibility standards for Medicaid than the average state; in 1994, 39.6 percent of the low-income population below 150 percent of the FPL had Medicaid coverage, compared with 51 percent nationally. 12 Under Florida's Medicaid program, families with children receiving AFDC, intact families with children, and families with unemployed parents are eligible for coverage if their family income is below 28 percent of the FPL; the national average for eligibility is 41.9 percent of the FPL. Florida has taken advantage of the option to cover pregnant women and infants up to 185 percent of the FPL, and it has a medically needy program that covers individuals whose medical expenses bring their income down to 28 percent of the FPL (though the state could have extended this to 37 percent of the FPL but did not). In addition, Florida Medicaid covers aged and disabled individuals with incomes up to 90 percent of the FPL and has an institutional care program that provides nursing home and ICF/DD services to individuals with incomes up to 300 percent of the SSI standard.

Table 5 shows that Medicaid enrollment increased from 1.2 million in 1990 to 1.8 million in 1992 (a 23.3 percent increase per year) and to 2.2 million by 1995 (another 6.2 percent increase per year). Increases in Medicaid-AFDC enrollment averaged 24.9 percent per year between 1990 and 1992; it slowed dramatically thereafter, averaging only 2.9 percent per year between 1992 and 1995. Medicaid-SSI enrollment grew by 8.4 percent per year from 1990 through 1995. By far the greatest increases in enrollment occurred as a result of expanded eligibility groups—AFDC-UP, the medically needy program, poverty-related pregnant women and infants (up to 185 percent of the FPL) and children, optional coverage of elderly and disabled populations, qualified Medicare beneficiaries, and specified low-income Medicare beneficiaries, which combined to account for 44 percent of the increase in the total Medicaid caseload. Among these groups, the largest increase, both in percentage terms and actual numbers, was for poverty-related children. State data indicate that average monthly caseloads for this group grew from 65,277 in FY 90-91 to 220,918 in FY 96-97—an increase of 238 percent, accounting for more than 58 percent of the growth in expanded eligibility groups. 13

The improved economy appears to have contributed to declines in average monthly caseloads over the past three years. Average monthly Medicaid cases dropped from a high of 1.6 million in FY 93-94 to 1.5 million in FY 96-97. The improved economy has also been reflected in declines in Medicaid-related AFDC caseloads, which went from a high of 832,942 people in FY 93-94 to 738,955 in FY 95-96, and was projected to fall below 650,000 in FY 97-98.

The state received approval of its Section 1115 waiver application in 1994. That program, had the legislature authorized it, would have subsidized private health insurance to uninsured people earning up to 250 percent of the FPL who were without coverage for the previous 12 months or had just left Medicaid. Health insurance would have been available through the CHPAs. The state proposed to finance this expansion in eligibility through savings from enrolling more people in Medicaid managed care plans and from phasing out the medically needy program, decreasing institutional provider rates, and reducing DSH payments. An estimated 1.1 million persons could have enrolled, according to projections. One of the major objections to the program in the Senate (the bill was passed by the House but not the Senate) was that the income level was too high, leading to "middle class welfare." 14

The state's welfare reform program is called WAGES (Work and Gain Economic Self-sufficiency). It builds on the previous Family Transition Program (FTP), which began in 1993 as a two-county pilot project in Alachua and Escambia Counties. Under the pilot project, most AFDC recipients had a two-year time limit for cash assistance and were allowed to keep more of their earnings in order to create savings accounts. The project also broadened eligibility in JOBS (Job Opportunity and Basic Skills) participation, and offered case management support to families.

Consensus that FTP's approach was the right direction for the state resulted in 1996 legislation authorizing WAGES. WAGES put stricter limits on the time recipients were allowed to receive cash assistance. It also placed a 48-month lifetime limit on benefits, required adults to work or engage in work-related activities as a condition of receiving benefits, established immediate sanctions for people who do not comply with work requirements, and required teen parents to live at home under adult supervision and stay in school.

The Department of Children and Family Services is responsible for recommending policies related to Medicaid under the federal welfare reform law. The state has an integrated eligibility system to assure that all TANF recipients will be enrolled in Medicaid. Several interviewees believed that the biggest challenge for welfare reform would be a national economic recession: They thought that Florida would then be more seriously affected because during economic hardship, people who are unemployed often move from cold areas to places like Florida, where it can be cheaper to live. At the same time, few in the state were worried about state welfare benefits serving as an attraction to those from out of state; these benefits are already near the bottom relative to other states and are expected to remain there.

Other Public Financing Programs

Florida does not have a statewide General Assistance program, and thus it has no General Assistance medical program either. Only one state program other than Medicaid provides assistance to low-income, otherwise uninsured people—the Healthy Kids Program.

The Healthy Kids Program is a school enrollment-based insurance program that provides comprehensive health insurance coverage to approximately 39,300 school-aged children and their younger siblings as of August 1997. 15 The program has won national awards for innovation in government, and the Robert Wood Johnson Foundation has recently committed a significant amount of funds to help other states replicate the program. It began in 1991 as a three-year Medicaid Section 1115 waiver demonstration, financed with state and federal funds. When the demonstration ended, federal financing also stopped; as of FY 96-97, the program relies on financing from the state (about 49 percent), participating families (about 35 percent), and local governments (about 16 percent). 16

As of this writing, the Healthy Kids Program is operating in 17 counties throughout the state (an increase from 9 counties in the previous year), covering approximately half of the uninsured children in the state. 17 To participate, local school districts, which in Florida correspond to counties, must contribute an increasing share of total program costs over time, usually obtained from ad valorem taxes.

All school-aged children and their younger siblings are eligible for the Healthy Kids Program. Of participating children, 71 percent come from households with incomes below 133 percent of the FPL; 15 percent, from households with incomes between 134 and 185 percent of the FPL; and 14 percent, from households with incomes above 185 percent of the FPL. The Healthy Kids Program encourages parental responsibility by requiring families to contribute to the costs of providing health insurance for their children. Each local area develops a sliding-scale premium schedule, with eligibility for reduced premiums tied to eligibility for the free- and reduced-lunch programs. There are also copayments for some services. The average monthly cost of the Healthy Kids Program is $51.00. Participating health plans are selected based on competitive bids, and only one health plan is chosen in each county.

In 1996, Governor Chiles requested $36 million for Healthy Kids from the legislature and received $13 million to expand the program. In 1997, he requested and received an additional $16 million, which will expand the program to serve a total of 60,000 children. (This averages $450 per child, less than the average cost of the program because of (1) local government and family contributors and (2) differences in the expected costs of the new target population.) In addition, the legislature granted ACHA the authority to seek a Section 1115 waiver to cover children with incomes up to 185 percent of the FPL through the Healthy Kids Program. According to Healthy Kids officials, if this waiver is approved, it would allow the program to cover 118,000 children and thus 15.7 percent of the state's estimated 750,000 uninsured children.

Insurance Reforms

Florida's health insurance reforms were enacted as part of the 1992 and 1993 health care reform laws. Both laws regarded reform of small-group health insurance as an important component of promoting competition in health care and using managed care to achieve cost savings. The 1992 law defined small groups as including 50 employees or less, and all insurers offering policies to small groups were mandated to offer basic and standard benefit plans defined by the Department of Insurance. The 1993 law required all insurers offering policies to small groups to guarantee issue of policies without regard to health status, preexisting conditions, or claims history; provided portability of plans between employers; and required the use of modified rating on all small-group products, with adjustments allowed for age, gender, family composition, tobacco usage, and geographic location. Neither law affected the individual market.

Since 1993, there has been no legislative action with respect to insurance reform in the small-group or individual market. At the time of the site visit, Florida legislative staff were working to implement an alternative mechanism for the individual insurance market portability reforms to meet federal provisions of the Health Insurance Portability and Accountability Act. According to respondents, the state had two options: (1) Mandate that group or individual carriers offer coverage, or (2) Reopen the state's high-risk pool. 18 Group insurance carriers were prodding individual market carriers to offer some products, while individual carriers were trying to convince the state to reopen its high-risk pool.

As part of its "managed-competition" health care reform laws, Florida created 11 regional Community Health Purchasing Alliances in 1993 as state-chartered, nonprofit private purchasing organizations. CHPA membership is available to, though not mandated for, firms that have 50 or fewer full-time employees, including the self-employed. All policies provided through the CHPAs must be issued through an insurance agent. In 1995, there were 64 registered carriers in the small-group market. 19 Forty are designated as Accountable Health Plans (AHPs), which are allowed to offer HMO, preferred provider organization (PPO), point-of-service (POS), and extended provider organization (EPO) products through the CHPAs. Since the inception of CHPAs, there has been significant growth in the number of individuals covered; by January 1997, 18,000 small businesses were participating, representing more than 76,000 covered lives. 20 Though the program does not directly subsidize insurance premiums, slightly less than half of the 76,000 enrollees were previously uninsured. This proportion is higher than that in other states' purchasing cooperatives for small businesses—almost double that in the Health Insurance Plan of California, for example—because Florida allows groups of one (the self-employed) to enroll.

Despite the potential of CHPAs to lower uninsurance rates among small firms, several factors limit their ability to provide more affordable insurance. According to the Florida Office of Program Policy Analysis and Government Accountability (OPPAGA), CHPAs may suffer from adverse selection; that is, those who need insurance because they have medical conditions are more likely to purchase it. 21 The majority of enrolled firms had only one to two employees, whereas only 1 percent had 20 to 50 employees. This suggests a fair amount of adverse selection, leading insurers to charge higher premiums. In addition, CHPAs are prohibited from negotiating rates with insurers so that the CHPAs cannot take advantage of their market power. Because of these factors, premiums for CHPA-sponsored insurance plans were only about 6 percent less than premiums for the same plans offered outside of the CHPAs, according to a 1995 report commissioned by OPPAGA. This is less than the cost advantage expected for group purchasing.


Financing and Delivery System

Florida's health care market is one of the most competitive and entrepreneurial in the country. Most HMOs are for-profit and are in a period of instability; mergers and acquisitions are occurring at a fast pace. In addition, more hospitals are for-profit than in most other states. There has been little apparent public concern over issues raised by conversions from nonprofit to for-profit status. However, the recent emergence of alliances between public hospitals and investor-owned organizations and the potential conversion of some of the bigger public hospitals to private ownership (such as Tampa General) are likely to increase interest in this issue.

Hospitals, and in particular hospitals in the larger systems, are faring relatively well, perhaps because of the large Medicare market. (Medicare is generally seen as a better payer than private managed care plans.) The hospital industry remains over-bedded, which means that HMOs can still negotiate significant discounts. Safety net institutions are in relatively good financial health, in large part because of local financing arrangements that exist in many of the metropolitan areas with large low-income populations.

Commercial Managed Care

Commercial managed care has been growing rapidly in Florida, as more purchasers of health care switch to managed care as a lower cost insurance alternative. As of 1995, 25 percent of the state's population was enrolled in an HMO. 22 HMO market penetration, however, varies considerably across the state. Tallahassee, dominated by state employees who have incentives to enroll in managed care plans, has the highest HMO penetration, at 42.1 percent. Dade County has the second highest, at 40.8 percent, and the Tampa-St. Petersburg area has approximately 28.1 percent HMO penetration. As of 1992, 26.7 percent of the state's population was enrolled in a PPO.

Enrollment in commercial managed care is concentrated in a few HMOs. As of 1996, 10 HMOs accounted for approximately 81 percent of commercial enrollment, and 5 HMOs (Blue Cross/Blue Shield's [BC/BS] Health Options, Humana Medical Plan, United Health Care Plans of Florida, Prudential Health Care Plan, and Cigna) accounted for almost 60 percent of the market.

The Florida HMO market has been a profitable one, but it has become less so in the last few years, particularly for the smaller HMOs. In 1995, with a few exceptions, the top 10 HMOs fared quite well, recording net revenues in excess of $125 million, or 86 percent of total HMO profits. 23 The remaining 28 HMOs, with approximately 20 percent of the market, garnered only 14 percent of the profits. More recent data show that about half of the state's HMOs had losses in the last quarter of 1996. Medicaid HMOs showed particular signs of financial distress as state rate reductions and increasing competition have made their margins much smaller. Consolidation in the market is expected, as smaller, struggling HMOs are attractive acquisitions for larger Florida-based and national HMOs.

In the last decade, state policy has generally favored the growth of managed care. Yet, as in the rest of the country, the last two years have seen a spate of new legislation to regulate managed care. In 1996, the state enacted Senate Bill (SB) 886, which included a number of changes to state regulations of managed care organizations. First, the bill required the Department of Insurance to publish the medical loss ratios of all plans, although there continues to be debate around how to categorize certain expenses (medical expense vs. administration and profit). SB 886 also required HMOs to pay for emergency room screening tests that are consistent with symptoms. The law further required a minimum length of stay for maternity cases.

At the time of our visit, the 1997 legislative session appeared likely to see another round of legislation. According to the Florida Association of HMOs (FAHMO) 24 and state legislative staff, likely bills included greater access to certain specialists; prohibitions on gag clauses (though most HMOs have already adopted the "patient rights" principles of the American Association of Health Plans); requirements that HMO medical directors be licensed in Florida; written standards on referrals, quality, and access indicators; uniform customer satisfaction surveys; establishment of an early and periodic screening, diagnosis, and treatment (EPSDT) target of 90 percent versus the current rate of 60 percent for Medicaid HMOs; expedited grievance procedures; medical necessity processes; provider credentialing requirements; and ownership of patients' medical records by physicians. 25 None were considered by FAHMO to be worth a serious fight, given the negative publicity that HMOs have been receiving. There have been concerns about HMO quality, especially among Medicaid HMOs. (These issues are discussed below in the Medicaid managed care section.)

Hospital Market and Regulatory Issues

The Florida hospital market is considered over-bedded. As of 1996, hospitals averaged only a 51 percent occupancy rate. 26 The competitive pressures exerted on hospitals by HMOs and other managed care plans through negotiated discounts have forced hospitals to change rapidly. Their responses have included consolidating through acquisitions and mergers to attain greater efficiencies and market leverage, aligning with physicians either in physician-hospital organizations that can contract with managed care plans or buying physician practices outright, developing or becoming part-owner in an HMO, and attempting to convert acute care beds to subacute or nursing-care beds.

It is in this last area that state policy has been most influential. The state's certificate-of-need program—which attempts to maintain nursing home occupancy rates at 91 percent—makes redeploying excess acute beds to nursing-care beds difficult. The nursing home industry has fought the hospital association's attempt to deregulate conversion of beds from acute to subacute, leading to legislative defeats for hospitals in both 1995 and 1996. Both sides agreed that it could once more become a legislative issue in 1997.

Mergers and For-Profit Conversions

Reflecting trends in the rest of the country, Florida HMOs are consolidating through acquisitions and mergers. In total, there were 18 mergers or acquisitions between 1993 and 1996. 27 Most of the big HMOs in Florida are members of national chains. Hospitals also have been consolidating, and in the process, the hospital market in Florida has changed from one of independent hospitals to one dominated by several large hospital systems. According to the Florida Hospital Association, 77 transactions have occurred involving an acquisition or merger of a hospital or group of hospitals since 1990, peaking in 1994. By 1996, 76 percent of the beds and hospitals were in a hospital system. The resultant market is dominated by three hospital systems, Columbia/HCA, Tenet HealthCare, and Adventist Health System/Sunbelt, which together account for 45 percent of the hospitals and beds in the state. While for-profit systems have been driving the consolidation movement, nonprofit systems are growing as well. Although consolidation activities have been high, the actual impact on the number of hospitals and beds has been relatively small. Between 1990 and 1995, a net reduction of only 213 acute-care hospital beds occurred.

An interesting development in Florida has been the discussion or formation of joint ventures and coalitions between public and for-profit institutions. Public hospitals in both Jacksonville and Miami have proposed or discussed a joint venture with Columbia/HCA. The University Medical Center in Jacksonville has planned to enter into an operating agreement with for-profit Columbia/ HCA to operate the hospital. The joint venture would continue to provide city-sponsored care but would be operated by Columbia/HCA. Interviewees in Miami indicated that Jackson Memorial Hospital had approached Columbia/ HCA regarding a potential relationship, which had yet to be disclosed. Tampa General has proposed privatization, though it is not clear whether or not this would be in partnership with an existing private entity.

The state attorney general's office has taken an interest in such deals because of the potential loss of community assets. The attorney general filed a motion (Butterworth v. University Medical Center) in 1996 after the University Medical Center (UMC) in Jacksonville refused to provide documents regarding the relationship between UMC and Columbia/HCA. The attorney general's office is also deciding whether or not it should review Tampa General's privatization plan.

At the same time that the attorney general's office and consumers are worried about the loss of community assets, Columbia/HCA and the South Florida Hospital Association have publicly challenged the tax-exempt status of nonprofit hospitals that they argue provide little community benefit. A 1994 proposed bill would have required nonprofit hospitals either to provide more than 3.7 percent of revenues in charity care and bad debt or to pay the state's 6 percent sales tax. The South Florida Hospital Association is currently gathering data on the community benefits provided by nonprofit hospitals to determine whether or not they equal or exceed the tax benefit the hospitals receive.

Medicaid Provider Reimbursement
(including DSH Payments)

While Florida has moved to enroll more Medicaid enrollees in capitated managed care, at the time of the site visit, the majority of hospital and physician services were provided on a fee for service (FFS) basis through the state's primary care case management program, MediPass. Thus, although the importance of FFS reimbursement may wane in the future, a significant portion of hospital and physician services is still reimbursed on an FFS basis.

The generosity of Medicaid hospital FFS payments in Florida relative to the rest of the nation has declined. According to data from the American Hospital Association, for the nation as a whole, Medicaid payments as a percent of costs increased considerably, from 78 percent in 1989 to 93 percent in 1993. In Florida, however, the ratio remained relatively constant at 82 to 83 percent, changing only one percentage point between 1989 and 1993. 28 Nonetheless, representatives from the state hospital association and various hospitals indicated that the level of Medicaid payments was not viewed as a serious problem because competition has driven down private rates to the point where Medicaid rates appear good. Currently, no Boren amendment suits are being brought against the state by hospitals.

Compared with other states, Florida has a relatively modest disproportionate share hospital program, spending about $334 million in 1995 (table 3) and $369 million in FY 96-97. As of 1995, DSH spending represented only 5 percent of total Medicaid spending, considerably lower than that for the United States as a whole (12 percent). Moreover, since 1992, DSH has remained at approximately 5 percent of total state Medicaid expenditures.

Florida currently maintains five DSH programs: (1) regular DSH, which provides payments to those hospitals that treat a disproportionate share of charity and Medicaid patients; (2) mental health DSH for hospitals that serve patients requiring psychiatric services, regardless of their ability to pay; (3) a DSH program that supports graduate medical education; (4) DSH payments to regional perinatal intensive care centers (RPICCs), which have exceptionally high costs or long lengths of stay for infants; and (5) rural hospital DSH payments. As of FY 96, the mental health DSH program was the largest component (49 percent), followed by the regular program (41 percent), teaching hospitals (5 percent), rural hospitals (2 percent), and the RPICCs (2 percent). 29

The regular DSH program began in 1988 and was funded largely through provider taxes, which were deposited into the Public Medical Assistance Trust Fund, and general revenues. In 1990, state lawmakers expanded the Trust Fund's revenues by increasing the cigarette tax; in 1991, by expanding the base to include ambulatory surgical centers, clinical laboratories, freestanding radiation therapy centers, and diagnostic imaging centers; and in 1992, by imposing a $1.50 assessment for each patient-day provided by nursing homes. Between 1988 and FY 92-93, some of these funds were used to leverage federal funds and provide specific hospitals—those that treated a high percentage of Medicaid and indigent patients—with additional revenues. These funds were also used to support graduate medical education (begun in FY 91-92), RPICC (begun in FY 89-90), and rural hospital DSH programs (begun in FY 93-94).

In response to changes in DSH rules contained in the federal Omnibus Budget Reconciliation Act of 1993 (OBRA 93), the state created a new intergovernmental transfer program to help finance DSH payments. To pay for the regular DSH program, a few publicly owned hospitals provide the lion's share of state revenues through intergovernmental transfers. As of 1993, approximately $88 million in intergovernmental transfers came from Dade, Duval, and Hillsborough Counties. 30 According to state officials, the eligibility criteria and payment formulas were designed so that the large public hospitals in these counties receive a significant portion of regular DSH monies. As a result, the three hospitals receive about 81 percent of the state's regular DSH dollars, and all other DSH-qualifying hospitals receive the rest.

In further response to OBRA 93, the state aggressively expanded its mental health DSH program, managing to spend up to the allotment allowed under OBRA legislation. The state transferred approximately $81 million that was previously used to fund the state-owned mental health institutions to the DSH program to draw down federal matching funds. Although the mental health DSH program represented only 27 percent of DSH in FY 92-93, it has been a vehicle for growth in DSH. By FY 96-97, the mental health DSH program accounted for almost 50 percent of total DSH expenditures.

As of 1993, Medicaid physician fee levels in Florida were roughly equivalent to the national average Medicaid fee levels and 78 percent of Medicare fees. Between 1990 and 1993, fees for obstetric services increased considerably. For example, the fee for a vaginal delivery increased by 60 percent, while a common primary care visit increased by only 7.5 percent. Between 1993 and 1996, fees increased by over 80 percent for the same primary care visit, while obstetric fees remained the same. 31

Changes in fee levels in Florida between 1993 and 1996 were largely driven by the implementation of the Medicare resource-based relative-value scale (RBRVS). The state's Medicaid program began reimbursing physicians using the RBRVS in 1995. The state maintained budget neutrality by creating a conversion factor that led to no change in total expected expenditures for physician services. The movement to RBRVS shifted 10 percent of expenditures from medical and surgical specialty visits to evaluation and management visits. Since that time, there have been few changes in physician fees.

Recently, the governor has recommended an across-the-board reduction in fees to fund retroactive payments to physicians who successfully sued the state because they had been paid the Medicaid rate rather than the Medicare rate for their services to dual eligibles. The governor has recommended a reduction in the conversion factor that would cut rates by an average of $7.09 per procedure. This amount represents approximately 19.2 percent of the $453 million budget for physician services expenditures. 32

Medicaid Managed Care

Florida's history with Medicaid managed care dates back to 1977, when the legislature granted authority to the Medicaid agency to contract with HMOs. However, there was little interest on the part of HMOs. In 1978, Medicaid also obtained authorization to contract with county public health units on a prepaid basis, which resulted in one demonstration program in Palm Beach County. The pace of managed care contracting picked up in 1983, when the legislature authorized Medicaid to contract with prepaid health plans (PHPs), which are health care organizations that accept capitation payment but, as federal law permits, do not have to obtain a state HMO license until three years from the start of the contract. The state contracted with four PHPs. Despite efforts to solicit interest among plans on a case-by-case basis, by 1989 the state still had no contracts with commercial HMOs, and there were only about 50,000 enrollees in PHPs out of about 900,000 total beneficiaries.

Further Medicaid HMO growth was spurred through state policies in the early 1990s that made it easier for HMOs to enter the market. Among the most important policies were those allowing door-to-door marketing, as well as marketing in welfare and food stamp offices; establishing relatively generous rates, based on 95 percent of FFS payments, which in turn were higher because of updated fee schedules; and lowering capitalization requirements for PHPs to only $250,000 in reserves. These changes led to a substantial increase in small PHPs and HMOs contracting with Medicaid—14 in 5 counties by 1990 and 29 in 48 counties by 1995. Many of the HMOs were out-of-state companies that got their start by acquiring small Medicaid PHPs.

In 1991, the state launched a primary care case management (PCCM) program called MediPass. Like many other PCCM programs, it pays a $3.00 monthly case management fee to physicians or clinics to coordinate all the care for patients and to authorize all services, which continue to be paid on a FFS basis. While some assert that AHCA developed MediPass because not enough HMOs would participate in Medicaid, others believe that MediPass provides enrollees with an alternative to HMOs and ensures that HMOs have some competition.

The state passed a law in April 1993 that required enrollment in managed care for much of the Medicaid population. As a result, the state began efforts to implement MediPass in all areas of the state. The state submitted a revised 1915(b) waiver proposing statewide expansion, which was subsequently approved by HCFA.

The state's passage of the 1993 law requiring mandatory enrollment in some type of managed care program was driven by two forces. The most important was budgetary. With annual Medicaid program growth rates in the 20 percent range, the legislature was desperately seeking relief, and managed care seemed to hold the key to cost savings for the nonelderly population. 33 Second, AHCA believed that expansion in managed care and the resulting savings were essential to financing the Florida Health Security Program. Although the legislature turned down Florida Health Security's proposed eligibility expansion, partly because of concerns that managed care savings might not be sufficient to cover all those eligible, it still wanted to harness some of the savings to hold down annual growth rates.

Enrollment

As a result of state policies and successful HMO marketing tactics, Florida's Medicaid managed care market grew rapidly between 1991 and 1995. 34 In 1991, about 123,000 (13 percent) Medicaid beneficiaries were enrolled in some form of managed care: HMOs, PHPs, or the MediPass program. By 1996, nearly one million (66 percent) Medicaid beneficiaries were enrolled in some form of managed care. As a result of the 1995 enrollment freezes and rate reductions, however, enrollment in Medicaid HMOs or PHPs actually dropped between 1995 and 1996 by about 37,000, and the number of Medicaid HMOs or PHPs dropped from 29 in FY 94-95 to 19 in FY 96-97. Enrollment in the MediPass program has increased every year because of the 1993 mandate to implement the program in every county.

Until recently, the state's 1915(b) waiver allowed statewide mandatory enrollment in MediPass of all newly eligible AFDC and SSI populations (or those coming back onto Medicaid after a 90-day exit period), if they do not choose to enroll in an HMO or PHP. This recently changed, however, as a result of SB 886, the law passed in 1996 that allows the state to mandate assignment into either MediPass or an HMO or PHP. Effective February 1, 1997, the state began assigning new AFDC-related enrollees according to a ratio established in SB 886: 60 percent of those who do not select either program voluntarily will be assigned to HMOs or PHPs and 40 percent, to MediPass. 35 SSI recipients were to be assigned starting May 1, 1997 (and notified of the requirement to choose or be assigned on March 1, 1997). The only exceptions to mandatory enrollment are for dual eligibles, presumptively eligible pregnant women, medically needy, and those in skilled nursing facilities (SNFs) or ICFs/DD. 36

The rapid growth in Medicaid HMOs and PHPs during the early 1990s came at some cost. In December 1994, a yearlong investigation into Medicaid HMOs in South Florida led to a weeklong series of articles in the Fort Lauderdale Sun Sentinel that exposed poor-quality care and flagrant marketing abuses. In response to public outcry, the state placed a moratorium on the licensing of any new Medicaid HMOs in January 1995. It also froze enrollment in the 28 Medicaid HMOs that were already licensed until the AHCA could conduct on-site visits to assess plan compliance with patient medical records requirements, quality-of-care standards, and marketing practices. 37

Based on AHCA's findings, the state made substantial modifications to Medicaid HMO contracts commencing after July 1995, many of which were subsequently incorporated into law in 1996. Medicaid HMOs and PHPs are now prohibited from door-to-door marketing, marketing in Food Stamp and AFDC offices, "give-aways," and subcontracts with brokerage firms or independent agents. Plans must also submit marketing materials to AHCA for approval, and all such materials must contain the state's toll-free HMO complaint hotline. Marketing commissions were limited to 40 percent of total compensation. The state's role in marketing and beneficiary education, which has been minimal, will increase as a result of SB 886, which authorized a choice-counseling program to be implemented during 1997. AHCA received $15 million to implement this program. 38 At the time of the site visit, it was developing the request for proposal (RFP) for an enrollment broker, which would allow face-to-face counseling and interactive kiosks.

Contracting Issues

In August 1995, Medicaid began adjusting capitation rates by age for the first time. According to HMO association representatives, the adjustment had the effect of reducing rates by 14 percent on average. There was a perception that more could be squeezed from HMO/PHP rates, despite an assessment by AHCA that the current financial status of many HMOs/PHPs is tenuous. In SB 886 and corresponding FY 96-97 budget language, the legislature set a target of $17 million savings (out of $700 million spent annually on HMOs), by cutting capitation rates from 95 percent to 92 percent of FFS rates. To achieve this, SB 886 mandated a competitive bidding process for HMOs, with a maximum rate of 92 percent of FFS rates allowed, over HMO opposition. HMOs were allowed to bid as low as 87 percent. In February 1997, 25 bidders were announced in the notice of intent to award contracts. Among the existing contractors, only two did not choose to submit bids. Nine new plans won awards, including Humana, which is entering the Medicaid market for the first time in Florida. Alpha Health Plan, composed of many of the state's Federally Qualified Health Centers (FQHCs), also won an award.

The legislature's targeted level of savings for FY 96-97 is unlikely to be achieved for two reasons. First, the law assumed that the bidding process and awards would be made shortly after the start of the fiscal year (July 1996), but the process took considerably longer. 39 Second, HMOs and PHPs claimed that the rewards for low bids, that is, more enrollees, were not sufficient to make a difference, so only one of them bid at less than 92 percent of FFS rates.

The RFP was portrayed by AHCA as the first time that contract awards would be based on the quality of care delivered by the plans. Plans would be awarded points, with 80 percent of the points depending on quality measures, such as service delivery and benefit enhancements, and only 20 percent on price. 40 Plans would be awarded more enrollee slots as the number of points increased. Plan representatives believed the importance of quality was overstated, since any plan with an existing contract needed only to document its service delivery, patient service, and quality assurance procedures. Thus, only the new plans had to prove their ability to provide high-quality care.

Even before the contracts were signed, the plans contested AHCA's capacity limits. Bidders that scored high enough to win contracts were given "enrollment capacity awards," based on their final scores. The number of Medicaid eligibles in each county as of July 1996 times 110 percent was used as the measure of overall enrollment capacity. The state determined enrollment slots allocated to each plan based on its share of the points awarded and the total enrollment capacity in the county. Because points did not vary much among plans, the result of this complicated scoring system is only a little more capacity for the highest scoring plans than for the lowest scoring plans.

Another problem with the new contracting system is that the state's capitation rate methodology is not very sophisticated, as one AHCA official readily admitted. As a result, if rates are set too high, HMOs may get windfall profits; if too low, quality of care and plan solvency are threatened. AHCA would like to implement a risk adjustment system to correct the current system's flaws but believes that the HMO industry will fight it. A private consultant study estimated that $60 million would need to be transferred among plans to even out the risk levels—an amount too great to be ignored. The study found that virtually all of the difference was due to some plans having more SSI enrollees than others. If risk adjustment occurs, it will probably have to be legislatively mandated.

Those plans that sign contracts will, for the first time, be required to be commercially licensed. SB 886 requires Medicaid HMOs and PHPs to have a certificate of authority from the Florida Department of Insurance or to obtain one within a year of signing a contract. Exceptions are still made for plans owned and operated by a county, a county public health unit, a county-owned-and-operated hospital, or one or more FQHCs. 41 By having to obtain a commercial HMO license, all Medicaid contracting plans are subject to greater oversight of their financial status by the Department of Insurance, which helps AHCA monitor HMO and PHP finances. Furthermore, AHCA requires all contracting plans to maintain at least 25 percent commercial enrollment (not Medicare or Medicaid) unless the plan has a waiver from HCFA. It was noted, however, that even when plans have both Medicaid and commercial enrollees, they often have separate provider networks. Thus, the 75-25 rule may not achieve what was intended. Finally, all Medicaid contractors are required to report HEDIS 2.5 (Health Employer Data and Information Set) measures, and AHCA has also designed a member satisfaction survey that all Medicaid HMOs and plans participating in the CHPAs must use.

Elderly Managed Care

AHCA and the Department of Elder Affairs are trying to implement a pilot project in Palm Beach County called the "long-term care diversion waiver." It involves capitation of an integrated set of long-term care and acute-care services for 600 elderly persons. Although the program is not yet operational, the FY 97-98 budget bill proposes a doubling of the program. Advocates and policymakers both acknowledge that the program is very limited in scope relative to the needs of the elderly population in Florida. Nonetheless, it is considered an important first step toward managed care for the elderly population.


Delivering Health Care to the Uninsured Population

State and County Public Health Programs

Historically, county public health units in Florida served as the major health care delivery system for the poor—Medicaid enrollees and uninsured alike. As branches of the state health department, all county health departments at some point provided maternal and child health services; Women, Infants and Children (WIC) services; family planning; and sexually transmitted disease screening and treatment. A few county health departments provided more comprehensive primary care services. Most of these services were Medicaid-reimbursable for Medicaid clients, and county public health units received cost-based reimbursement for them, according to state law. Some counties, such as Dade, have closed their primary care clinics and have shifted their focus to core public health activities, such as communicable disease control, maternal and child health support services, and environmental health.

Counties also have the primary responsibility for financing health care for the poor who are ineligible for Medicaid. However, the extent of county effort varies considerably. Since the 1930s, Florida has allowed localities (cities, counties, and special districts) to establish special health care taxing districts. There are currently 21 in the state. Through the establishment of the taxing district, some cities in Florida have been able to expand their tax base to include suburban areas, which increases the flow of money considerably. In some cases the money raised is quite significant, representing half of all money used to fund care for the medically indigent.

Most of the taxing districts use their revenues to support public hospitals (as in Dade and Broward Counties), although some distribute the funds more broadly among hospitals providing uncompensated care or to private hospitals that have leases with the district. In Hillsborough County, the taxes are used to support a unique program providing insurance to many of its uninsured, low-income residents (discussed further below).

Impact of Government Policies and Market Changes
on Safety Net Providers in Dade and Hillsborough Counties

While the major safety net providers face tremendous competitive pressures, particularly for Medicaid patients, many of the organizations visited have weathered the storms of change reasonably well over the past few years. A major reason for this success is an increase in local support for indigent care. In both Dade and Hillsborough Counties, local support for indigent care has increased considerably with the implementation of a half-cent sales tax in each locale. In addition, part of the success of the safety net providers stems from their ability to adapt to the requirements of a competitive managed care environment. Hospitals and FQHCs have developed their own HMOs or PHPs, partnered with other HMOs and PHPs, developed networks with other health care providers to achieve greater efficiencies, or refocused on their core missions.

Not all safety net providers in the sites visited are faring well, particularly community clinics. In the present relatively rosy fiscal environment, how well safety net providers have survived seems partly a function of the manner in which increases in local funds are distributed to those providers. In Hillsborough County, where the revenues have been used to fund systems of care across many different types of providers, most safety net providers seem to be doing remarkably well. In Dade County, where the revenues are centralized in the large public hospital, some community clinics are not faring so well. Without local subsidies, clinics have less maneuvering room in such a highly competitive market.

Competition for Medicaid patients and potential reductions in Medicaid reimbursement levels have raised the level of concern among safety net providers. While increases in reimbursement and eligibility in the early 1990s have helped safety net providers considerably, providers and advocates are worried that planned reductions in Medicaid rates or a further loss of patients to other providers will undermine the financial viability of the safety net providers and will re-create the access problems that existed in the 1980s. Safety net providers recognize that many Medicaid patients currently receive care through other institutions when they have Medicaid coverage. However, they are less certain that those institutions will continue to provide care to individuals who lose their coverage. If the safety net providers fail or scale back services as a result of losses in revenue, then at the very least, quality of care for the uninsured (both the chronically uninsured and those who fall on and off Medicaid or other third-party coverage) may decline. At worst, the uninsured may be forced back into the emergency room as a primary source of medical care.

Tampa/Hillsborough County

Hillsborough County, which encompasses the city of Tampa and the surrounding suburban and semirural areas, has a population of 879,000. The market was characterized as very competitive, with Columbia/HCA and BayCare having emerged as major players in the hospital market. The HMO penetration rate now stands at 25 to 30 percent, a rapid jump from 14 percent in 1994. This increase was prompted in part by the entry of United HealthCare and Health Plan of Florida into the market in 1993-94 and by their subsequent marketing to small businesses that dominate the economy. Their growth has created both pressure for hospitals to discount their fees to hospitals and tighter provider networks.

The Hillsborough County Health Care Plan (HCHCP), which provides health coverage to otherwise uninsured, low-income people, was developed to reduce the double-digit growth rate in uncompensated-care costs. Before HCHCP, $34 million in property taxes supported the county's obligations for indigent care, the majority of which was used to subsidize Tampa General Hospital (TGH), a publicly owned facility. According to respondents, as a result of a rapid rise in indigent care costs to the county (about 20 percent per year) and to other area hospitals (about 10 percent per year), a County Board of Commissioners advisory board recommended a plan to provide and finance health care services for the county's indigent population based on managed care principles. By September 1991, the Florida legislature and the county board approved a half-cent sales tax to finance the program, which began in 1992. In FY 95, the HCHCP spent approximately $63 million providing services to 27,000 individuals. 42

HCHCP provides insurance coverage to a relatively small pool of individuals at little cost to enrollees. Individuals with income below 100 percent of the FPL and who are not eligible for Medicaid or other health insurance are eligible for HCHCP without any premium contributions. 43 A catastrophic plan is also available for people earning up to 200 percent of the FPL, but it requires premium sharing. The program offers a comprehensive benefit package, including primary care, inpatient and outpatient surgical services, mental health, dental care, substance abuse services, and home health services. Cost sharing is limited; patients have a small copayment for prescribed medical equipment, vision care, and dental care.

The program contracts on a risk-basis with four provider networks (one per geographic area within the county) to provide inpatient and outpatient services to HCHCP beneficiaries within a global budget negotiated annually with the county. Participating network providers include TGH (which participates in all four networks), two private nonprofit hospitals, two for-profit hospitals, the University of Florida faculty, two FQHCs, the county public health units, and private community physicians. Enrollees are given an HCHCP card and can choose any participating provider as their primary care physician. At the time of eligibility review, enrollees can request a change of provider.

The HCHCP program has grown considerably since inception and has had a significant impact on the county's indigent care costs. From 1993 to 1995, the caseload increased by 23 percent, from 21,000 to 27,000 patients. Respondents estimated that the program provided coverage to 66 percent of the population eligible for HCHCP. According to most respondents, the program has been very successful. First, the program has redistributed the delivery of indigent care among providers and relieved some of TGH's indigent care load. Second, it has reduced emergency room use by program participants by nearly 25 percent, saving the county more than $8 million. 44 Third, the program has reduced the average length of stay by more than 30 percent, resulting in estimated inpatient hospital savings of $2 million. Finally, HCHCP has expanded the number of community care sites.

Despite its successes, the HCHCP could become somewhat unstable, given its funding source. The significant growth in reserves (in excess of $100 million) has led some politicians to suggest that the program does not require such extensive tax support. 45 In the event that the tax used to fund the program is repealed or reduced, the safety net providers could find themselves in serious financial trouble.

The major safety net hospitals in Hillsborough County are TGH and St. Joseph's Hospital. Besides having a system of family care centers, TGH has the region's only Level 1 trauma center, two aeromedical helicopters, a regional burn center, and many other specialty programs. TGH also owns and operates its own Medicaid HMO, called Healthease. Over the past five years, St. Joseph's-St. Anthony's Health System has grown from a single hospital to a complete system, which also includes Women's Hospital, Tampa Children's Hospital at St. Joseph's, and other services, such as home health and diagnostic centers.

TGH provides the bulk of care to the uninsured, and St. Joseph's handles a growing share of the Medicaid market. According to AHCA annual hospital reporting data, TGH's charity care in 1995 was $52.4 million; St. Joseph's reported $21.3 million that same year. The competition for Medicaid patients is putting financial pressure on TGH. St. Joseph's-St. Anthony's Health System now serves more of the Medicaid market than TGH. TGH reports that it went from serving 60 percent of the Medicaid market to 30 percent (and dropped from 5,600 to 3,000 deliveries per year). Meanwhile, St. Joseph's went from 19 percent to 38 percent of the Medicaid market by luring pregnant women to a newly acquired women's hospital; it is now building a new children's hospital to gain more of the children's market.

The loss of Medicaid revenue means that TGH is increasingly reliant on state and local support and its own initiative in developing strategies to increase the organization's efficiency and market viability. Despite the fact that St. Joseph's provides a sizable amount of care to the low-income population, TGH receives the lion's share of public support for care for the medically indigent. In FY 95-96, St. Joseph's received $10,000 from the state in DSH payments, a small fraction of the $18.3 million TGH received. 46 Other state policies are helpful to TGH as well. For example, while TGH's HMO (Healthease) had only about 4,000 Medicaid members in early 1997, it was awarded 37,000 slots in the latest Medicaid RFP process, which TGH believes reflects an effort by the state to assist safety net hospitals. Furthermore, the state's certificate-of-need process prohibits the proliferation of tertiary and quaternary services, thus protecting the interests of TGH. Locally, TGH has an advantage because all four HCHCP geographic networks contract with TGH for specialty services.

There are two FQHCs in Hillsborough County: Tampa Community Health Centers (TCHC) and Suncoast Community Health Centers. TCHC opened in 1986 with one site, but it has grown to five clinical sites. Suncoast is located in a more rural area of the county. It began as a program of the county health department serving Hispanic migrant farm workers, and it has added two more sites and is expanding its staff and clientele. Because of the growth in Medicaid HMOs, Suncoast has lost 4,000 Medicaid patients in the last three years, harming its ability to provide a full range of services to its patients.

As survival strategies, the two FQHCs have become very involved in Medicaid managed care and HCHCP. For example, both TCHC and Suncoast are the designated "gatekeepers" for two different HCHCP networks. TCHC has contracts with several Medicaid HMOs, yet it says it is losing money on all these contracts. For this reason, Suncoast has not become part of one of the leading Medicaid HMOs' network, but nonparticipation has hurt it. To try to regain Medicaid patients, both TCHC and Suncoast were two of 17 FQHCs in Florida that allied to form the Alpha Health Plan. Alpha recently won a contract in the most recent round of Medicaid HMO awards. Alpha will pay the FQHCs better rates than other Medicaid HMOs and will also pursue commercial contracts to comply with the 75-25 rule.

The Hillsborough County Health Department decided in 1994 that it would withdraw from the HCHCP and divest from directly providing primary care services, even though it still needs Medicaid business to support health services to the uninsured who are ineligible (e.g., undocumented aliens) or who do not sign up for HCHCP. The health department instead contracts with a group of midwives and pediatricians to provide primary care to uninsured and Medicaid-covered children and pregnant women. Most of the funds for these services are generated from Medicaid FFS payments under MediPass. The health department also has a few Medicaid managed care contracts.

Miami/Dade County

Dade County, which includes the city of Miami and the surrounding urban (South Beach) and suburban areas, had a population of more than 2.1 million in 1995, with 1.7 million people under the age of 65. Respondents indicated that although access to care for low-income individuals has improved considerably since the early 1990s, problems remain. According to advocates, a large number of women and children are still not receiving health care services, especially undocumented immigrants from Central and South America and Haiti. The county has unique health problems as well, such as hanta virus, tuberculosis, malaria, cholera, and hepatitis, which are attributable to some extent to Miami's status as an immigration center.

The Miami-Hialeah metropolitan area had the second-highest HMO penetration rate in the state, at 37.8 percent. 47 With a bed-to-population ratio of 4.1 per 1,000, the hospital market is over-bedded. The hospital market is concentrated in two for-profit systems and a nonprofit hospital system. Together, for-profit Columbia/HCA and Tenet control almost 40 percent of the beds in the market. The Dimension System, which is technically a physician-hospital organization comprising for-profit and nonprofit hospitals, controls almost 26 percent of the beds.

The county's dominant source of care for the indigent is Jackson Memorial Hospital, a publicly owned hospital that receives substantial subsidies from the Dade County Public Health Trust (the public hospital taxing district). According to Jackson Memorial officials, although the Trust and Jackson Memorial Hospital are separate entities, they are regarded as one, since all of the Trust funds are allocated to Jackson Memorial Hospital and its affiliated centers. The Trust is funded through a variety of revenue streams: (1) a half-cent sales tax that was passed by Dade County voters in September 1991 and raises $96 million annually; (2) ad valorem taxes, which in FY 95-96, totaled $84 million; and (3) federal and state grants, which total about $10 million annually. The remainder of the $750 million budget is generated through DSH payments and through commercial, Medicaid, and Medicare revenues. (Jackson Memorial receives approximately 50 percent of state DSH payments.)

Jackson Memorial is the major safety net hospital in Dade County, accounting for 50 percent of all Medicaid inpatient days in the market in 1993 and 55 percent of all charity care and bad debt ($124 million in 1995). 48 Whether or not there are other safety net hospitals is a subject of debate. While certain hospitals provide significant amounts of care to Medicaid-eligible people, they provide relatively little charity care compared with Jackson Memorial. These facts have called into question the manner in which local, state, and federal funds are distributed. The mayor's office and the South Florida Hospital Association argue that other hospitals in Dade County, which together provide about 50 percent of the care to the low-income and uninsured population, should receive some of the funds from the half-cent tax. The mayor's office would like to decentralize health care along lines similar to those in Hillsborough. 49

In the past few years, Jackson Memorial's share of the Medicaid market has declined because of increasing competition for Medicaid patients. According to Jackson Memorial officials, between 1990 and 1995, Medicaid inpatient days dropped from 484,000 to 391,000, a 20 percent decline. Whereas Jackson Memorial once provided 90 percent of obstetrics care to low-income patients, its share has dropped to 50 percent. A priority for Jackson Memorial has been to maintain patients, primarily Medicaid patients, in its system. To do so, it has expanded its primary care patient referral base; it now owns or affiliates with six primary care clinics. It has also expanded an existing managed care plan (Jackson Memorial Hospital Health Plan), which recently won a contract in the Medicaid managed care bidding process. It created a new managed care plan (with a private managed care plan and University of Miami Hospital) to capture more of the Medicaid and commercial capitated market. In addition, it is lobbying the state to modify the certificate-of-need regulations so that it can convert hospital beds into swing beds. Finally, the hospital is attempting to reduce costs through cuts of up to 1,000 full-time employees.

Nine primary care centers in Dade County provide care to low-income people. The growth of Medicaid managed care has resulted in a loss of revenues for all community clinics, creating substantial financial problems. In some cases, clinics have lost Medicaid patients and the revenues that they provided, resulting in a loss of some capacity to subsidize care for the uninsured. In other cases, clinics have lost Medicaid revenues but have continued providing care to Medicaid patients assigned to other primary care providers and uninsured patients, presumably with funds provided in their grants from the federal Bureau of Primary Health Care. Some are reconsidering their mission in light of these changes; while federal grants and FQHC cost-based reimbursement have served as a cushion, some clinics believe they are at the end of their rope.

Community clinics in Dade County have pursued a variety of strategies to maintain their competitiveness and Medicaid patient base. A group of four major clinics banded together to form Health Choice Network to conduct joint purchasing, integrate management information and fiscal systems, coordinate medical directorships, and create market power to negotiate with managed care plans. Health Choice has been fairly successful in negotiating contracts with hospitals and health plans because of its large Medicaid obstetrics patient base. It has referral relationships with several hospitals, but not with Jackson because Jackson does not refer patients back to the clinics and does not offer admitting privileges to Health Choice's physicians. In addition, Jackson opposes having the Trust, or any county funds, provide financial support to the clinics.

Like other county public health units, Dade County's health department had for many years provided both traditional public health services and comprehensive primary care services. Between 1993 and 1995, Medicaid encounters decreased by about 30 percent, causing the department to rethink its mission. Seeing a rise in communicable diseases, such as AIDS and tuberculosis, the county decided that it should not continue to provide primary care services. It issued an RFP for an organization to take over its maternity and pediatrics services in four clinics. Jackson Memorial's bid was accepted in part because of its assurance that it would maintain a commitment to providing care to the uninsured, including documented and undocumented aliens. The county has maintained two clinics, which provide family planning, immunizations, and other traditional public health services.


Long-Term Care for the Elderly and Persons with Disabilities

The need for long-term care services for older adults is potentially enormous in Florida. In 1995, 2.7 million people, or 19 percent of the state's population, were over the age of 65, which is substantially higher than the national average of 12.7 percent and makes Florida the state with the greatest proportion of elderly. Given this, there is substantial pressure to develop a larger, but low-cost, system of long-term care.

Supply, Expenditures, and Utilization

As in other states, long-term care in Florida is heavily financed by the Medicaid program, and long-term care services are an important part of the total Medicaid budget, though less than in many other states. For example, in 1995, the state spent 28 percent of its total Medicaid budget on long-term care services, compared with a national average of 34 percent. Medicaid spending on long-term care in the state grew slightly more rapidly than other components of the Medicaid program between 1992 and 1995, at an annual rate of 14.7 percent, about twice the national rate (table 6). However, long-term care spending per elderly and blind and disabled recipient was still 36 percent lower than the national average in 1995, primarily because of a low supply of nursing-home beds and relatively little spending on home and community-based care.

In 1996, there were 699 certified nursing homes and 79,000 long-term care beds in Florida. Occupancy rates in Florida nursing homes are about 91 percent. While the state's certificate-of-need law allows the number of beds to rise if the occupancy rate increases, Florida's ratio of 30 beds per 1,000 people over age 65 was one of the lowest in the country in 1994, compared with a national average of 53.3 per 1,000 elderly. 50 As of 1994, there were 1,450 licensed home health care agencies in Florida. There were also 120 licensed adult day care centers and 2,364 licensed residential care facilities in 1994, including assisted living facilities and adult family-care homes. 51

Other types of facilities serve the developmentally disabled. These include four state-operated Developmental Services Institutions. Most of the beds in these facilities are certified as ICF/DD and serve approximately 15,500 individuals at any given time. In addition, there are 2,200 beds in privately operated ICFs/DD and 804 long-term residential care facilities with 5,778 licensed beds. In 1994, 44 percent of persons with developmental disabilities in institutional settings were in facilities with more than 16 beds.

Long-Term Care for the Elderly

Florida spent $1.1 billion in 1995 on long-term care for the elderly (table 6). The state relies more heavily on nursing home care to provide long-term care services to the elderly than do most other states. In 1995, 94 percent of long-term care expenditures for the elderly under the Medicaid program were for nursing home services, compared with 84 percent nationally. Spending on nursing home care for the elderly rose more rapidly than the national average, at an annual rate of 11.2 percent between 1992 and 1995. (The national rate was 7.6 percent.) While nursing home bed supply is allowed to increase, it is carefully regulated by the state.

Reorganizing the Delivery System

Although there appears to be growing interest in expanding home and community-based care for the elderly and disabled, Florida continues to lag behind most states in doing so. Advocates and policymakers acknowledge that the current system of nursing home care, with its low number of beds, may be unsustainable and that there is likely to be huge demand in the long run. Yet policymakers remain concerned that offering home and community-based services will be unaffordable. The nursing home industry supports alternatives to nursing homes, including the small waiver programs the state has implemented, because it believes that if the state purchases services more cost effectively, it can stretch current long-term care dollars further.

Florida operates a state-funded long-term care program called Community Care for the Elderly (CCE), which helps functionally impaired elderly live in the least restrictive environment suitable to their needs. In FY 96-97, the state will spend a projected $41 million in state general revenues to provide community-based services to approximately 38,500 functionally impaired older people, including those served under a Medicaid home and community-based services waiver. 52 All CCE clients are screened annually for Medicaid waiver eligibility (see below); those found eligible and meeting level-of-care conditions are transferred to the waiver program, allowing the Department of Elder Affairs to maximize federal funding. According to the Department of Elder Affairs, another 8,000 to 11,000 are on the waiting list. Priority is given to those who are at risk of entering an institution or those who have been abused, neglected, or exploited.

The Department of Elder Affairs and AHCA share responsibility for administering the state's several home and community-based care waivers that serve the elderly. The primary home and community-based care waiver for the elderly is a 1915(c) waiver that diverts disabled adults and elderly from nursing facilities. Elderly individuals qualifying for Medicaid and assessed by a health professional as frail, functionally impaired, and at risk of nursing home placement are eligible for services under the waiver. The FY 96-97 estimated budget for all services under this waiver was $36.1 million. The federally assigned maximum enrollment cap in this waiver program for FY 96-97 is 16,943, but only 9,550 individuals are expected to receive services under the program, because the state has not appropriated the required matching funds. 53

While the nursing home bed supply in Florida is quite low, the state has more licensed residential care beds per 1,000 elderly population than the rest of the nation (24.2 beds, compared with 20.1). Residential care facilities include both assisted living facilities and adult family-care homes. 54 Assisted living facilities are residential options for the elderly and disabled that provide housing, meals, and supportive services. Currently, there are more than 1,800 assisted living facilities statewide, serving more than 60,000 residents (averaging 33 residents each); another 600 adult family-care homes serve about 1,200 residents. Most residents cover the cost of their own care in these facilities, but the state provides a subsidy for some low-income residents. 55 There is no state certificate-of-need requirement for assisted living facilities. Thus, the state cannot regulate their growth. According to the Florida Commission on Aging with Dignity, occupancy rates range from 70 percent to 80 percent, suggesting ample capacity.

Although Florida's apparent dearth of nursing home beds relative to its proportion of elderly citizens has raised concerns about access, nursing home industry representatives speculate that assisted living facilities and adult family-care homes may be serving as providers to those not able to secure a nursing home bed. They also speculate that the elderly in Florida may have more financial resources than those in other states and less need for public support for nursing home care.

Traditional Cost Containment Methods

Nursing homes receive Medicaid reimbursement according to an adjusted cost-based methodology, with rates determined prospectively on a per diem basis. They are not case-mix adjusted. Medicaid currently pays on average $92 per day, higher than the national average of about $83 per day. Annual target limits on increases are very low; the state did not recognize cost increases resulting from changes contained in the federal Omnibus Budget Reconciliation Act of 1987, for example.

The state regularly cuts funds from institutional care line items in the Medicaid budget. Over the past five years, Medicaid has absorbed over $1 billion in budget reductions, a substantial amount of which was in the area of institutional provider payments. For example, modifications to nursing home reimbursement policy in 1991 resulted in a $31 million cut, followed by a $20 million cut in FY 92-93, a $13 million cut in FY 95-96, and a $17 million cut in FY 96-97. Despite these reductions, nursing homes have not filed any Boren amendment lawsuits, largely because they believe such suits consume too many resources and have not produced the desired results.

The nursing home industry has made Medicaid reimbursement a perennial priority issue. According to the Florida Health Care Association, 80 percent of nursing homes report that their costs are not covered by Medicaid. The industry reports that "high Medicaid homes" (those with more than two-thirds Medicaid patients) are almost four times as likely to be under conditional status (those with identified problems) than "low Medicaid homes." Several nursing home chains have been in administrative hearings with AHCA over July 1996 rate reductions (rather than Boren suits, which are filed in federal court). Industry representatives predict that as budget reductions for institutional long-term care continue, the state will see an erosion in the quality of patient care.

Certificate-of-Need Restrictions

As mentioned earlier, Florida has one of the lowest nursing-home bed supplies in the country. Nursing home bed growth is carefully regulated by the state. The bed supply increases by about 1,800 to 2,400 beds each year, based on allowable growth limits under the state's certificate-of-need law. According to AHCA officials, there are 8,000 more long-term care beds currently in the construction pipeline (under previous certificate-of-need approvals).

Medicaid Eligibility for Nursing Home and Home Care Services

Florida's medically needy program does not cover institutional services (nursing homes, ICFs/DD, and state mental hospitals), preventing qualification for Medicaid through spend-down on nursing home expenses.

Many Miami nursing homes were concerned about the impact of the welfare reform law on their Medicaid residents who are legal aliens. The state, however, elected to continue Medicaid eligibility for those who entered the country prior to August 1996, ensuring that the Medicaid nursing home benefit is secure for most people. The general sense in the industry is that influential Miami legislators will support funding of legal immigrants in nursing homes who will still not qualify for Medicaid, estimated at 2,000 to 3,000 people.

Medicare Maximization

In 1996, the legislature required AHCA to ensure that home health care beneficiaries exhaust all Medicare benefits before using Medicaid coverage. It also required prior authorization for home health care.

Limits on Transfer of Assets and Estate Recovery

The leader of an advocacy group for low-income elderly has publicly complained that approximately 5 percent to 10 percent of new Medicaid applicants become eligible through "artificial impoverishment schemes." 56 While Florida has yet to address this problem, in FY 96-97, the AHCA planned to expand its estate recovery efforts. 57 SB 886 allows the Department of Revenue to share estate information with AHCA's Medicaid Estate Recovery Program, which may increase recovery rates.

Younger People with Disabilities

Responsibilities for younger persons with disabilities are spread across a number of agencies, including the Developmental Services Program, Department of Mental Health and Substance Abuse, and Children's Medical Services within the Department of Health. The overall strategy for providing services to this population has been to reduce the reliance on institutional settings and increase community-based care. However, for the developmentally disabled and the mentally ill, the need for both institutional and community-based services outpaces the supply of services and state resources to purchase such services.

Institutions and Community-Based Services for the Mentally Ill and Developmentally Disabled

In the early 1990s, Florida explicitly sought to maximize federal revenues for covering the developmentally disabled through its Medicaid home and community-based services waivers. According to officials in the Developmental Services program, two main waivers are used by the state of Florida for disabled nonelderly populations: a Developmental Services waiver that covers almost 11,000 individuals and a smaller Aged/Disabled Assisted Living waiver that covers about 1,300 people. The state currently has approval from HCFA for 20,000 individuals in the Developmental Services waiver, and the state has authorized funding for 11,000 individuals. Increased use of these waivers has allowed the state to serve individuals in community settings at a lower cost than serving them in institutions. The movement to serve this population in the community is seen as advantageous to the clients as well. Finally, the shifting of the financing of care from the state to the federal government has allowed the state to serve more clients with the same amount of state resources. 58

Despite the greater reliance on community-based care, of the 28,000 persons served by the Developmental Services program (including through waivers), more than 9,000 have been identified as having unmet needs. More than 90 percent of these individuals are eligible for home and community-based waiver services. A similar situation exists for persons with mental illness. According to the governor's budget recommendations, only 32 percent of the need for mental health services in the state is being met.

A number of recent lawsuits have tested the issue of whether long-term care services for the disabled are entitlements. In Does v. Chiles, plaintiffs alleged that the state's policy of rationing ICF/DD services by limiting ICF/DD beds and putting qualified persons on waiting lists violates federal law and that the state is not providing services with "reasonable promptness." In July 1996 the courts ruled that the waiting lists violated the reasonable promptness requirement and ordered the state to address this in their Medicaid plan and limit waiting list time to no more than 90 days. The state estimates that it would cost $700 million to comply, and it has appealed the decision. This suit essentially will determine whether ICF/DD services are an entitlement.

In the 1995-96 session, the legislature determined that ICF/DD services (which are optional) are a "runaway cost item" and decided that the state would no longer fund services in privately owned ICF/DD facilities. With the change in legislation, the state also removed $34 million from the Developmental Services program budget. In response, the Cramer v. Chiles suit was filed, with plaintiffs contesting the legislation. The plaintiffs alleged that there was no plan to transition the 2,200 individuals currently in privately owned ICFs/DD into other programs, namely the home and community-based services waiver program. The court granted a preliminary injunction that the state continue to pay for 100 percent of the costs of those individuals currently in privately owned ICFs/DD until the state completes a plan to transition these individuals into a community-based setting approved by HCFA.

The outcomes of the state's appeals of these two decisions will likely set the tone for the provision of long term-care services for disabled persons over the next few years.


Challenges for the Future

Florida faces a number of major challenges in the near future. A primary concern is the size and scope of the Medicaid program. Governor Chiles has proposed the expansion of Medicaid coverage for children under age 3 with household incomes up to 185 percent of the federal poverty level; he has also requested authorization to increase the number of children covered by the Healthy Kids program to more than 100,000. However, growth in Medicaid expenditures in the past decade has made the Medicaid program a serious target for budget cutters interested in allocating more funds to education and corrections. Reductions in Aid to Families with Dependent Children caseloads and a number of other factors have mitigated the impact of these cuts on the program in the past. However, any change in the rosy economic situation in Florida could create problems, forcing state officials to make decisions regarding the core of the Medicaid program: eligibility levels and benefits. At the same time, over 19 percent of the state's population lacks health insurance of any kind, despite rapid growth in Medicaid enrollment in recent years. With the passage of its State Child Health Insurance Program, the state is likely to expand coverage further for children. But given recent cuts in the program, Medicaid expansions to cover other uninsured populations are unlikely.

Moreover, the state faces a challenge with respect to both welfare reform and long-term care. Welfare reform provisions will end Medicaid assistance to future legal immigrants in Florida. Although some interest has been shown in extending state-funded coverage to those individuals already in the United States who were made ineligible for Medicaid, it will come at some cost to the state. Failure of the state to act will mean costs to local areas.

Florida has the largest elderly population in the country, yet it currently spends comparatively little on long-term care; demand for these services is expected to rise considerably. The nursing home bed supply is low by national standards, and the state has restricted increases in nursing home payment in recent years, raising concerns about the impact on the quality of care. The state is also under pressure to expand long-term care services at home and in the community.

The state's attempt to expand coverage through insurance reform has been only partially successful. The state had hoped, with reform in the small group market and the development of Community Health Purchasing Alliances (CHPAs) to reduce the cost of health care and expand insurance coverage. To date, there has been little downward pressure on premiums. Moreover, the CHPAs have been only partially successful at expanding coverage to small businesses, in part because of legislative constraints on their bargaining ability. Florida faces a challenge in making the CHPAs more efficient, as well as in expanding insurance reform to the individual market.

In general, the Florida provider market is experiencing rapid change. The state has experienced considerable growth in commercial managed care. At the same time, Florida's health care market is experiencing rapid growth in for-profit health maintenance organizations (HMOs) and for-profit hospitals. Further consolidation among both HMOs and hospitals can be expected. It is unclear whether or not this will lead to improved efficiency in the marketplace and lower health care costs, and if so whether or not the lower costs come at the price of quality. Equally important, it is unclear whether nonprofit hospitals faced with increasing competitive pressures will continue to be able to provide services to low-income populations.

Alongside the rapid growth in commercial managed care, the state has embarked on a path of dramatic increase in the number of individuals in Medicaid managed care, the results of which are uncertain. Enrollment abuses and quality-of-care problems have led to calls for increased regulation of the Medicaid managed care industry. In Florida as in other states, there are likely to be a number of proposals for managed care regulation in the near term, which could have important implications for Medicaid as well as for the nature of market competition in the state.

With strong antitax sentiment throughout the state, prospects for expanding the state role in health care financing are uncertain. (Enactment of the State Child Health Insurance Program in August 1997, with the offer of substantial new federal funds, will alter these prospects.) Safety net institutions, both hospitals and community health centers, are facing serious competitive pressures. They are finding it more difficult to compete for Medicaid patients because of the increase in Medicaid managed care. The growth in Medicaid managed care, coupled with the large uninsured rate, places a large burden on local providers and on local governments. In Dade and Hillsborough Counties, local taxes have been increased to fund a small insurance program (Hillsborough) and to support a major hospital (Dade). The safety net could be threatened if a recession occurs or if the local areas are unable to sustain public support for these institutions and their mission. The state has increased its support of Tampa General Hospital and may have to play a greater role in supporting the safety net throughout Florida in the future.


Notes

1. State of Florida, The Governor's Budget Recommendations, FY 1997-98. Summary, January 1997.

2. State of Florida, The Governor's Budget Recommendations, FY 1997-98, Summary, January 1997.

3. State of Florida, The Governor's Budget Recommendations, FY 1997-98, Summary, January 1997.

4. Department of Children and Families, Impact of Restrictions on Legal Immigrants, February 1997.

5. Agency for Health Care Administration, Medicaid Statistics: Florida Medicaid Program, November 30, 1996.

6. State of Florida, The Governor's Budget Recommendations, FY 1997-98, Summary, January 1997.

7. Agency for Health Care Administration, Medicaid Statistics: Florida Medicaid Program, November 30, 1996.

8. Eligibility is based on Medicaid criteria for children up to age 13; older children must be in families earning under the federal poverty level. The program has 23 local offices and numerous providers under contract who provide services to children with physical disabilities that traditional providers may not be qualified to treat. Services are funded largely through Medicaid revenues (72 percent to 73 percent), with federal Title V and some state funds covering the costs of the uninsured.

9. Legislators Guide to Medicaid, 1997.

10. The Boren amendment required states to pay hospitals and nursing homes the costs associated with an economically and efficiently operated facility (that meets quality and safety standards). The Boren amendment was repealed by the Balanced Budget Act of 1997.

11. State of Florida, The Governor's Budget Recommendations, FY 1997-98, Summary, January 1997.

12. Urban Institute calculations based on HCFA 2082 data and projections from the March 1994 Current Population Survey, in "Medicaid Expenditures and Beneficiaries: National and State Profiles and Trends: 1984-1994," Kaiser Commission on the Future of Medicaid, November 1996, page 31.

13. Florida Agency for Health Care Administration, Medicaid Services Budget Forecasting System Reports. These figures are less than the number of enrollees in 1995 reported in the Urban Institute's analysis of HFCA 2082 data, which counts all of those enrolled at any time during the year.

14. For further details, see Ku, Leighton, "Florida Health Security Program," in Increasing Insurance Coverage through Medicaid Waiver Programs: Case Studies, Urban Institute, November 1994, pages 79-93.

15. Healthy Kids, 1997 Annual Report, February update.

16. Healthy Kids, 1997 Annual Report, February update.

17. These counties are Alachua, Broward, Collier, Dade, Duval, Escambia, Flagler, Hardee, Hendry, Highlands, Hillsborough, Okeechobee, Palm Beach, Pinellas, St. Lucie, Santa Rosa, and Volusia. Another 12 counties have been designated as planning sites, and 3 counties are designed as future sites.

18. The Florida Comprehensive Health Association is the state's high-risk pool, which was designed to cover individuals whose prior medical conditions made it difficult for them to obtain coverage. It caps premiums at 200 percent to 300 percent of the standard low-risk individual rate and is funded through enrollee premiums and assessments on insurance carriers. There are currently 2,387 enrollees, but enrollment was closed in July 1991 to new enrollees because insurers did not want to pay for anticipated losses. If the pool were reopened, one possible source of funding would be an assessment on health care providers.

19. Office of Health Policy, AHCA, Request for Proposals: Health Care Practice in a Reformed Market, June 1995.

20. Community Health Purchasing Alliance, Monthly Program Report.

21. Office of Program Policy Analysis and Government Accountability, Review of the Status of Community Health Purchasing Alliances in Florida, Report No. 96-5, September 1996.

22. Florida Hospital Association, FHA Eye on the Market: Health Care in the Sunshine State, 1996.

23. Department of Insurance, Annual Ranking Report of Licensed HMOs in the State of Florida, December 31, 1995.

24. FAHMO members are largely commercial HMOs. FAHMO does not include some licensed plans that have chosen not to join, nor does it include several HMOs that primarily enroll Medicaid clients, which created their own association. The two groups sometimes split on issues related to managed care.

25. Many of these bills did pass the legislature, but at the time of this report, were awaiting action by the governor. See HB 297 and HB 325—Managed Health Care Entities, SB 244—Direct Access to Dermatologists. An update can be obtained on the World Wide Web: http://www.leg.state.fl.us/senate/summary/health.html.

26. Florida Hospital Association, FHA Eye on the Market: Health Care in the Sunshine State, 1996.

27. Florida Hospital Association, FHA Eye on the Market: Health Care in the Sunshine State, 1996.

28. One interviewee indicated that current Medicaid payments represented only 72 percent of costs. The reason for the discrepancy in measures of generosity may be a function of variations in period, different data sources, or a hospital-specific issue.

29. Agency for Health Care Administration, Medicaid Services: Summary of Disproportionate Share Hospital Payments, Fiscal Years 1987-88 through 1996-97.

30. According to FY 96-97 state budget documents, intergovernmental transfers account for only $72.4 million of DSH revenues. The reason for the decline is not clear.

31. Norton, Steve, "Medicaid Fees and the Medicare Fee Schedule: An Update," Health Care Financing Review, vol. 17, no. 1, pp. 167-87.

32. State of Florida, The Governor's Budget Recommendations, FY 1997-98, Summary, January 1997.

33. A study by Florida State University showed that MediPass saved 13 percent over traditional FFS. Barrilleaux, C. et al., "Florida MediPass Evaluation Report," submitted to Florida Agency for Health Care Administration, December 1995.

34. Information from various sources: Agency for Health Care Administration. Medicaid Statistics. Florida Medicaid Program. November 30, 1996. Legislators Guide to Medicaid. Health Care Financing Administration Managed Care Report, 1995 and 1996.

35. SB 886 specified that new assignees who had not made a choice between MediPass or a Medicaid HMO would be equally distributed between the two programs and allowed them 90 days to make a choice. However, the "Cut Bill" changed this to a 30-day period and required that in the first quarter 60 percent of enrollees who have not made a voluntary choice be assigned to Medicaid HMOs and 40 percent be assigned to MediPass. AHCA's plan is to look at the actual ratio of voluntary preference for four quarters and revisit the assignment ratio at that point.

36. A separate Section 1115 waiver request is being prepared that would allow the state to lock Medicaid recipients into either an HMO/PHP or MediPass for a period of one year, after a Medicaid recipient has been given 30 days to make a choice and 60 days to switch plans.

37. In April 1995, the state lifted enrollment caps for eight Medicaid HMOs that were found to meet 90 percent to 98 percent of all 46 contract standards. Those meeting less than 90 percent of quality standards were subject to fines and penalties, enrollment caps at previous levels, or a halt on expansion into other counties.

38. Until recently, only $1 million was available for enrollee education; this was just enough to print brochures and operate a hotline (which opened in November 1996).

39. The RFP was issued at the end of August 1996, with a submittal deadline of October 4, 1996. The RFP called for posting notices of intent to award on December 2 and awarding contracts by January 1, 1997. But the process was held up for a couple of months by a protest against the RFP, filed by one of the major Medicaid HMOs. A settlement was reached that allowed the process to continue, and the notice of intent to award was issued on February 12, 1997. However, as of mid-April, contracts had still not been signed, again due to some protests.

40. Agency for Health Care Administration, 1996-97 Medicaid Prepaid Health Plan: Model Contract.

41. A bill passed by the legislature in 1997, but not yet signed by the governor, would extend from July 1, 1997, to January 1, 1998, the time period for FQHCs and county plan providers that contract with Medicaid as prepaid plan providers to be licensed by the Department of Insurance as HMOs. It also prohibits the FQHCs from receiving prepaid reimbursement during this interim period.

42. "Nationally Honored Health Care Plan Rates County Legislators' Strong Support," editorial, Tampa Tribune, 1/10/97.

43. Undocumented aliens are not eligible for the program.

44. Hillsborough County, Hillsborough County Health Care, 1997.

45. On May 1, 1997, it was reported that the Florida legislature passed a bill on April 29 allowing Hillsborough County "to continue collecting a sales tax to pay for its health plan for the poor," according to the Tampa Tribune. The bill, "now certain to win approval from Gov. Lawton Chiles (D)," represents a compromise in which the county's half-cent sales tax would be extended until 2005, but the county commission "is expected to cut the tax in half for four years to spend down part of a $114 million surplus." The measure would also allow the county "to roll back" its $26.8 million property tax to support the program. This turn of events is likely to mean no expansion in the program, and it may even have to cut back somewhat.

46. Agency for Health Care Administration, Medicaid Services: Summary of Disproportionate Share Hospital Payments, FY 1995-96.

47. Florida Hospital Association, FHA Eye on the Market: Health Care in the Sunshine State, 1996.

48. Agency for Health Care Administration Hospital Financial Data, 1995. American Hospital Association Annual Hospital Survey Data, 1993.

49. On January 16, 1992, then-County Commissioner Alexander Penelas published Health Net, a report that described a decentralized indigent care program modeled after the Hillsborough plan. No new plan has been developed, but respondents indicated that this plan was still considered a plausible option.

50. American Association of Retired Persons, Across the States, 1996.

51. American Association of Retired Persons, Across the States, 1996.

52. Florida Department of Elder Affairs, Resource Manual, 1997.

53. Florida Department of Elder Affairs, Resource Manual, 1997.

54. American Association of Retired Persons, Across the States, 1996.

55. Florida Department of Elder Affairs, Resource Manual, 1997.

56. H. James Towey, "Millionaires on Medicaid," commentary in St. Petersburg Times, December 8, 1996.

57. Legislators Guide to Medicaid, 1997.

58. Department of Health and Rehabilitative Services, Monthly Data Report, September 1996.


APPENDIX
List of
People Interviewed

TALLAHASSEE

State Government
Agency for Health Care Administration

Tom Arnold
Doug Cook
Marilyn Y. Evert
Kate Morgan
Sally Morton
Nancy Ross
Bob Sharpe
Dyke Snipes
Celeste Putnam-Tanzy

Department of Children and Families

John Bryant
Susan Dickerson

Department of Elder Affairs

Charlie Liem

Department of Health

Donna Barber
James Howell, M.D.
Rick Hunter, M.D.

Department of Insurance

Michele Newell
Tom Warring

Office of the Governor, Planning and Budgeting Office

Paul Belcher

State Legislators and Legislative Staff

Representative George Albright
Lynn Dixon
Michael Hansen
John Wilson

Provider/Plan Associations

William Bell, Florida Hospital Association
Greg Glass, Florida Primary Health Care Association
Erwin Bodo, Florida Health Care Association (nursing homes)
Richard Dorff, Florida Association of HMOs

Advocacy Groups

Marcia Beach, Advocacy Center for Persons with Disabilities
Jack Levine, Florida Center for Children and Youth
James Towey, Florida Commission on Aging with Dignity

Others

Rose Naff, Florida Healthy Kids Corp.


TAMPA/HILLSBOROUGH COUNTY

Hospitals

David Rogoff, St. Joseph's Hospital
Bruce Siegel, M.D., Tampa General Hospital

Community Health Centers

Burt Parmer, Suncoast Community Health Centers, Inc.
Gloria Elliott, Tampa Community Health Centers
Terrence Shirley, Tampa Community Health Centers

City/County Officials

Phyllis Busansky, Former County Commissioner
Douglas Holt, Hillsborough County Department of Health and Social Services
Cretta Johnson, Hillsborough County Department of Health and Social Services
Victor Martinez, M.D., Hillsborough County Department of Health and Social Services
Pat Bean, Deputy County Administrator

Others

Cynthia Sampson, Community Health Purchasing Alliance District 6
Charles Mahan, University of South Florida School of Public Health
Jay Wolfson, University of South Florida School of Public Health


MIAMI/DADE COUNTY

Hospitals

Joseph Rogers, Jackson Memorial Hospital
Harold Rohrer, Jackson Memorial Hospital
Sandy Sears, Jackson Memorial Hospital
Cliff Bauer, Hialeah Hospital
Linda Quick, South Florida Hospital Association

Community Health Centers

Stanley P. Balsley, Stanley C. Myers Community Health Center, Inc.
Betsy Cooke, Health Choice Network
Beverly Press, Stanley C. Myers Community Health Center, Inc.
Fatima Zafar, M.D., Economic Opportunity Family Health Center

City/County Officials

Lillian Rivera, Dade County Public Health Department
Joseph Romallo, Dade County, Office of the Mayor

Others

Modesto Abety, Dade County Children's Services Council
Jenni Bergal, Fort Lauderdale Sun Sentinel
Gary Clarke, PCA Family Health Plan
Fred Schulte, Fort Lauderdale Sun Sentinel


Tables & Figures

Table 1
Table 1
Source of Area Shaded Blue: Current Population Survey (CPS) three-year average 
(March 1996-March 1998, where 1996 is the center year)
edited by the Urban Institute to correct misreporting of citzenship.

Table 2

Table 3Table 3


Table 4Table 4



Table 5Table 5



Table 6Table 6




About the Authors

Debra J. Lipson, currently a health policy consultant in Geneva, Switzerland, at the World Health Organization, continues her work on projects related to safety net providers. She was formerly associate director of the Alpha Center, where she managed research studies on state and local health care reform, with an emphasis on the financing and organization of health services for the poor and uninsured.

Stephen Norton is a research associate at the Urban Institute's Health Policy Center, where he specializes in research on the Medicaid program, maternal and child health, and those institutions providing care to the medically indigent. He is the author of a number of articles on health care. Most recently, his work has focused on assessing the impact of the Medicaid expansions to pregnant women and children on access to care, the displacement of private insurance, and provider uncompensated care burdens.

Lisa Dubay is a senior research associate in the Urban Institute's Health Policy Center. Ms. Dubay's recent research has focused on the impacts of Medicaid expansions for pregnant women and children on health outcomes and insurance coverage. In other work, she is assessing the impacts of Medicaid managed care on access to care and birth outcomes for pregnant women, and the extent to which defensive medicine operates in obstetrics. Ms Dubay has published numerous articles in health policy journals.

This report is part of The Urban Institute's Assessing the New Federalism project, a multi-year effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Project codirectors are Anna Kondratas and Alan Weil.

The project has received funding from the Annie E. Casey Foundation, the Henry J. Kaiser Family Foundation, the W. K. Kellogg Foundation, the John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the Commonwealth Fund, the Robert Wood Johnson Foundation, the Weingart Foundation, the McKnight Foundation, and the Fund for New Jersey. Additional funding is provided by the Joyce Foundation and the Lynde and Harry Bradley Foundation through a subcontract with the University of Wisconsin at Madison.

The Authors thank the many state, county, and local officials and others who participtaed in interviews and provided information.



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