Auditors fail to find savings

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May 3, 2010 - 12:00 AM

TOPEKA — Legislative auditors released two new reports Tuesday, responding to questions seeking ways to save money on Medicaid and school district health insurance costs.
But neither report produced clear options for cost cutting.
In fact, the report on school district health insurance concluded that it likely would cost more to put Kansas school workers into a single health plan overseen by the state than it would to leave things as they are.
Currently, the large majority of school districts have their own health plans purchased directly from insurers or have already joined larger risk pools. Thirteen of the state’s 293 school districts self insure. Four small districts offer no health insurance to their teachers and other employees.
“Based on our analysis of school districts’ current premiums and participation rates, only the Pratt school district potentially could save money by joining the State Employee Health Plan,” auditors found after surveying all the districts and getting responses from 259 of them.
The audit was designed to answer this question presented to auditors by the 2010 Commission, a panel that evaluates school finance: “What opportunities exist for school districts to decrease health insurance costs by joining pools.”
Auditors in their report looked most closely at the possibility of more districts joining the State Employee Health Plan because of five pools currently available to districts it is the only one open to those considered “high risk.”
Currently only 28 districts insure their workers through the state plan.
The report concluded it would cost most districts more to insure through the state plan because the state plan requires a higher employer contribution than the average district currently pays.
Auditors also examined the potential of a new, statewide pool specific to school workers. Most of the districts surveyed indicated they would be interested in joining a new pool, if it would save money. Texas and Nebraska each have a statewide pool for teachers.
But according to the report, a new pool wouldn’t bring down costs.
“Most of the districts we looked at wouldn’t appear to benefit from joining a statewide pool, either because they wouldn’t save money, or because more out-of-pocket costs would be shifted onto their employees,” auditors said.
According to the audit, Kansas school employee insurance costs, primarily for health insurance, grew from about $253 million in the 2004-2005 school year to more than $355 million in the 2008-2009 school year.
Medicaid managed care
Auditors also reported their findings in response to questions from legislators about potential cost savings from expanding managed care within the state’s Medicaid program.
Other states, notably North Carolina, have stepped up their managed care efforts. But auditors said there was too little reliable information to know whether those efforts were succeeding.
“It’s difficult to know if these initiatives are cost effective, or to estimate what potential cost savings might be possible,” auditors wrote, noting that managed care was being expanded in several states because doing so was “logically intuitive, even if unproven.”
According to the audit, eight of 19 states have placed large portions of their high-cost Medicaid beneficiaries into managed care programs and have reported positive results. But only three of those eight states reported cost savings from their initiatives.
Oklahoma reported estimated savings of $14.9 million over five years in avoided emergency room costs. It also estimated savings of $31,500 from “locking in” potential medication abusers to getting prescriptions filled at a single pharmacy.
Oregon reported savings of about $6 million from an initiative aimed at better management of chronic illnesses, including asthma, diabetes and congestive heart failure.
Kansas currently administers four managed care programs for high-cost Medicaid beneficiaries.
Auditors reported that the Program for All-Inclusive Care for the Elderly or PACE, which is overseen by the Kansas Department on Aging and the Kansas Health Policy Authority, saved the state about $560,000 in fiscal 2009, serving about 200 people in eight counties.
Two managed care programs overseen by the Kansas Department of Social and Rehabilitation Services for Medicaid clients with mental health and substance abuse problems were described as “cost effective,” in the audit report, though savings from decreased inpatient psychiatric costs came with increased spending on medications. Net savings were about $4 million in fiscal 2009.
Auditors said no savings were identified from the health policy authority’s HealthConnect program, a limited managed care initiative in which primary-care case managers are paid a small fee for making referrals to specialty services. That program cost about $171 million in fiscal 2009.

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