NEW YORK – Cash-strapped states are increasingly looking to for-profit insurers to help reduce the costs of Medicaid, the government health plan for the poor that has become the largest contributor to budgetary shortfalls.

Illinois, which is struggling with a $13 billion budget gap, enacted a law on Jan. 25 that required half of the state’s 2.8 million Medicaid beneficiaries to enroll by 2015 with commercial managed-care plans. An additional 19 states, including Texas, have started moving millions more into Medicaid plans, a Kaiser Family Foundation report said.

Driving the migration is a $196 billion Medicaid expense that states must fund in fiscal 2012, 24 percent higher than this year. Hartford, Conn.-based Aetna and UnitedHealth, based in Minnetonka, Minn., say they can curb the growth by having enrollees use networks of doctors and hospitals that coordinate care to avoid duplication of services, needless trips to emergency rooms and untreated conditions.

“Managed care won’t be the entire solution, but I think most states will find it has to be part of it,” said Julie Hamos, the director of the Illinois Department of Healthcare and Family Services.

The trend means more revenue for the larger insurers as well as the smaller Medicaid plans led by Molina Healthcare Inc., based in Long Beach, Calif. As many as 6 million more people may be enrolled in these plans over the next three years, said Thomas Johnson, chief executive officer of the Medicaid Health Plans of America, a Washington trade association.

Even before the 2010 health law begins adding 16 million enrollees in 2014, states “will begin the process” of moving their most expensive Medicaid population — the elderly, disabled and blind and long-term-care patients — into managed care programs, said Joseph Zubretsky, Aetna’s chief financial officer.

Aetna is looking at potential acquisitions in Medicaid managed care to “enlarge our footprint” within and beyond the 10 states where it already operates, Zubretsky said.

Medicaid provided coverage for medical and long-term care to as many as 71.3 million Americans last year, the Congressional Budget Office reported in August.

 


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