Federal officials gave final approval last June to Florida’s Medicaid managed care program, which will move nearly 3 million recipients into private HMOs by the beginning of 2014. Florida’s legislature first passed the initiative in 2011, with proponents arguing that Medicaid’s normal fee-for-service system leads to inefficient resource allocation and inferior care.

During the two-year series of negotiations between Florida and Federal officials, the state also agreed to several regulations and consumer safeguards, including:

  • A rapid-cycle response system for recipient complaints
  • Increased recipient participation in Florida’s Medical Care Advisory Committee
  • Continuation of current services for up to 60 days after enrollment
  • HMO validation by Florida’s External Quality Assurance Organization

As in most states, Florida’s Medicaid costs are rising annually, and 2013-2014 expenditures are projected to rise above $22 billion. Privatization supporters expect the new program to curb future cost increases while improving the quality of care. 

Beginning with Long-Term Care Florida’s transition to the program began with roughly 90,000 long-term care patients, many of whom have already enrolled in select insurance plans. Those who haven’t yet chosen will have until December 1st to select from one of seven available state-approved plans.

Under this new system, Medicaid funds will first be paid out to these select insurers, who will then use the money to pay nursing homes, in-home caretakers and other elder care providers. Long-term care patients are Medicaid’s costliest recipients, and Florida lawmakers hope this kick-off will quickly lead to considerable savings.

Florida is the first state to adopt such a heavily privatized program, but it likely won’t be the last. Medicaid payments currently assist nearly 60 percent of all nursing home residents nationwide, and the retirement age population is growing larger by the day. 

“You only have so many dollars to go around, and we have a growing senior population,” said Chris Orestis, CEO of Life Care Funding. “The sad reality I that very few people plan for long-term care.” While retirements are ideally funded by long-term investments and Social Security, the sudden and unexpected need for assistive services can quickly drain savings and drop seniors into the low income brackets necessary to qualify for Medicaid.

In fact, Orestis said he has already worked with several states,  including Florida, to introduce legislation that allows seniors to augment Medicaid payments for long-term care by selling their life insurance policies. Designed to lower future Medicaid bills and increase middle class access to much-needed care, one of these bills has already passed in Texas. Similar to Florida’s program, this new law allows seniors to use the proceeds from their policies to pay for the long-term care providers of their choosing.

Critics in Florida and other states worry that these HMO-like schemes will lead to lower-quality treatments, lapses in care during transitions and fewer choices for recipients. “These are valid concerns,” according to Orestis, “But people need to remember that when they’re on Medicaid and funded by taxpayer dollars, they have very limited choice. Both privatized and public have pros and cons, and you’re not going to get the same benefits that you would if you were paying with your own money.”

Ultimately, however, Orestis and other privatization proponents said these kinds of programs will make long-term care a better and more viable option for struggling seniors. “If you’re a private company and working on a certain amount of dollars, you’re going to operate with efficiency,” he said. “In a competitive marketplace, you can’t sacrifice quality.” While Florida’s new system does limit recipients to a small set of provider networks, those providers will still have to compete for Medicaid funds.

Planning for the Future  In the long run, retirees of all income levels will need to better plan for their futures. Seemingly secure families can lose a great deal of their savings through unexpected long-term care expenses, but Medicaid only covers people in the lowest income and asset brackets. “The economic and demographic drivers that are pushing forward things like privatization could also open the doors to further means testing for participation,” said Orestis. “I think it’s inevitable that more seniors are going to have to fund their own care, long-term and otherwise.”