NCPA - National Center for Policy Analysis

Florida's Market-Based Medicaid Reform

October 22, 2013

From 1975 to 2010, Medicaid costs grew 1.8 percent faster than gross domestic product (GDP). If this pace continues over the next 75 years, federal Medicaid expenditures will rise to almost 6 percent of GDP.  By comparison, Medicare spending consumes 3.6 percent of GDP and spending is projected to rise to 5.1 percent of GDP by 2030. Medicaid spending is already the largest item in state budgets, says Michael Bond, a senior fellow with the National Center for Policy Analysis.

Florida exemplifies the states' Medicaid spending problem:

  • From 1990 through 2010, Florida's Medicaid expenditures grew at an annual rate of 10.1 percent.
  • As a result, Medicaid accounted for 29 percent of state expenditures in 2010.
  • With these growth rates, the program would have consumed the state's entire budget in less than 30 years.

However, in 2005, the Centers for Medicare and Medicaid Services (CMS) approved a Florida reform initiative designed to increase beneficiaries' access to care and the quality of care at no greater cost than traditional Medicaid.

  • The federal waiver has allowed the state to move about 413,000 Medicaid beneficiaries in five demonstration counties into health plans run by private providers and insurers.
  • Instead of paying for each separate service hospitals and doctors provide to patients (fee-for-service), Medicaid reimburses the health plans in the five counties for each enrolled beneficiary.
  • To assist beneficiaries with plan selection and other Medicaid issues, Florida created a Choice Counseling Program, which includes a call center that received almost 58,000 calls in a recent quarter.
  • According to surveys, satisfaction with the counseling program ranges from a low of 76 percent for "ease of understanding information" to a high of 98 percent for "being treated respectfully."
  • The cost for each private plan enrollee receiving Supplemental Security Income (SSI) has fallen from 102 percent to 62 percent of statewide average Medicaid expenditures for SSI recipients.
  • One reason for lower costs in the reform counties is privately administered drug benefits. According to estimates by the Menges Group, integrating drug and health benefits in a statewide managed care program could save Florida Medicaid $5.1 billion over 10 years.

CMS approved Florida's request to extend the waiver through June 30, 2014. The state has also requested that the reform be expanded statewide and has received tentative approval from CMS to proceed.

Source: Michael Bond, "Florida's Market-Based Medicaid Reform Demonstration: Cost and Quality Issues," National Center for Policy Analysis, October 2013.


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