Implementing MIChild: The Next Step

by Lisa D. Baragar, Consultant for Public Policy

Last month Michigan policymakers finalized their plan for spending the $467 million in federal funds allocated to the state over five years to provide health coverage to uninsured children aged under 19: Governor Engler signed into law HB 5532 (Public Act 54), which (1) extends Medicaid coverage to children with family income below 150 percent of the federal poverty level (in 1998, the level for a family of three is $13,650, and the Medicaid expansion is called Mich-Care) and (2) creates a new health plan called MIChild for children with family income between 150–200 percent of the poverty level.

Under PA 54, a child qualifies for MIChild if s/he did not have comprehensive coverage within six months of applying for the program’s benefits; if, for example, a child had catastrophic coverage only, or if his/her parents did not opt for comprehensive employer coverage because of the cost, the child still would be eligible for MIChild. Under an earlier state proposal, children were ineligible for MIChild if within six months of applying they had access to any level of health coverage at any cost.

Since last August, the children’s health initiative has topped policymakers’ agendas. Although Michigan’s plan has been finalized, people still are debating certain aspects of it. In particular, they want to know how and when the program will be implemented and the extent to which health plans will offer MIChild coverage.

Time Frames

State officials point out that children who are eligible for Mich-Care could begin receiving benefits on May 1. In southeast Michigan, these benefits will be covered under the state’s mandatory Medicaid managed-care initiative. Children living outstate will receive their benefits under the traditional Medicaid program until this summer, when health plans that have been selected to cover outstate Medicaid managed care sign their contracts.

Despite fears that creating MIChild would require much more time and effort than simply expanding Medicaid, state officials began implementing the new program on May 1; it now is in place in five counties—Kent, Lake, Newaygo, Saginaw, and Washtenaw. In the remaining counties, MIChild will be phased in as the state deems appropriate until it is available statewide, expected by September 1. Health plans wanting to participate in MIChild will be able to sign a contract with the state any time they make the decision to do so. So far, three plans have signed an agreement to provide MIChild coverage in the initial five-county area.

MAXIMUS, the state’s Medicaid enrollment broker, also is administering many components of the MIChild program. According to Jan Ruff, MAXIMUS’s project manager, the organization’s duties include providing and processing MIChild applications (the state will determine eligibility), conducting quality analyses, and informing the state how much it must pay each health plan participating in the program.

With MIChild already underway, many people are questioning the extent to which managed-care plans will participate in the new program. Susan Garcia, deputy director for the Michigan Association of Health Plans (MAHP), points out that many health plans are wary of participating in MIChild; she says that the number of plans that participate will be "adequate but not 100 percent." The state explains that it is working to facilitate health plans’ participation in the program; officials believe that despite some concerns, most plans will cover MIChild services.

Small Population

Garcia explains that some managed-care organizations, including those selected to provide Medicaid coverage, may choose not to participate in MIChild because the small size of the eligible population may not justify developing a new product line.

She points out that in the eyes of some health plans, MIChild’s target population is limited: The state claims that as many as 156,000 of the state’s 228,000 uninsured children will be eligible for either Mich-Care or MIChild—36,000 in the former and 120,000 in the latter. The MAHP believes, however, that a total of only 125,000 likely will enroll in either program. Garcia contends that regardless of whether one accepts the state’s or the MAHP’s figure, the number of potential MIChild eligibles is not substantial when one considers that many health plans’ individual enrollment already exceeds MIChild’s total expected statewide enrollment.

State officials believe that health plans will participate in MIChild to protect their market base and ensure that they do not encounter these children as unhealthy adults. Garcia suggests, however, that even if the size of the population were not in question, many health plans may not participate in MIChild because they prefer to avoid certain administrative aspects of the program.

Administration

Garcia points out that if a plan signs up to provide MIChild coverage, it must do so for its entire service area—not just selected counties. This is problematic because in some counties only a handful of children may be eligible for the program. Another concern of health plans that want to begin covering MIChild benefits between now and August is that the state does not plan to begin marketing the program until August. This initially may make it difficult to attract enrollees.

But Michigan officials say they are working to ensure that health plans’ participation in the new program will be relatively simple. The state points out, for example, that unlike the health plans that were selected to provide Medicaid managed-care coverage, those that participate in MIChild will not have to create a new handbook for the program; rather, they will be allowed to create a MIChild insert that can be placed in their existing handbook. Also, health plans will not have to create a new MIChild certificate. Instead, they can amend their existing certificate by creating a MIChild rider. Finally, state officials argue that rather than creating a new product line, health plans that cover benefits for state employees simply will have to amend their state-employee plan (e.g., remove copays and other parts of the insurance plan not included in MIChild) to accommodate their MIChild population.

Although Garcia applauds the state’s efforts to facilitate health plans’ MIChild participation, she explains that many plans still have reservations about providing the coverage. For example, she points out that the plans still have to secure new contracts and reimbursement rates for providers wanting to serve MIChild beneficiaries; the plans cannot simply roll children into an existing program.

Adverse-Selection Rates

Another reason that health plans may avoid covering MIChild enrollees, claims Garcia, is that children who are the most ill likely will be the first to sign up because the unhealthy are easier to identify and enroll than those who are healthy. For example, because MIChild is funded in part through general funds that originally were set aside for children’s mental health, this population, whose mental illnesses frequently are accompanied by severe physical illnesses, will be targeted first for MIChild enrollment. Initially, suggests the MAHP, this will mean higher-than-expected costs for participating health plans.

State officials explain, however, that they have agreed to add 20 percent to the base capitation rate of $60–$66 that will be paid to health plans that participate in MIChild (NOTE: MIChild actually has eight reimbursement cells for each of the state’s nine Medicaid managed-care regions; the 72 cells account for differences in age and gender, but only the composite/base rate will be adjusted). This revised "adverse-selection" rate will remain in effect throughout 1998 and will be paid to health plans regardless of whether the children they cover are sick or healthy.

Garcia points out that the proposed increase in the rate has not yet been guaranteed beyond 90 days from when plans enroll their first member, and, she contends, it is unreasonable for the state to ask health plans to sign a contract to provide MIChild coverage before such an assurance is made.

Conclusion

Although there still are many unanswered questions and unresolved problems relating to Michigan’s children’s health initiative, health plans agree that protecting kids’ health is the bottom line; the MAHP and its members say they will work closely with state officials to achieve this goal.