News Release

HHS Approves Innovative Medicaid Reform Demonstration in Florida

HHS Secretary Mike Leavitt today approved an innovative Medicaid reform plan that will allow Florida beneficiaries to choose health care plans that best suit their needs, for the first time introducing competition and consumer choice to this government-funded health care program.

�Introducing competition and consumer choice will improve quality of care and empower Florida�s 2.2 million Medicaid beneficiaries,� Secretary Leavitt said. �I commend Governor Bush for his leadership in transforming his state�s program.�

Enrollees will play a more active role in deciding how they will receive health care by selecting from a group of state-approved managed care plans that will compete for their business. Beneficiaries will have up to 30 days to choose a health plan. If no plan is chosen, the beneficiary will be automatically enrolled in a plan selected by the state.

�The Florida demonstration will be very valuable in informing the national dialogue about reforming Medicaid to better serve the people who count on it,� said Mark B. McClellan, M.D., Ph.D., administrator of the Centers for Medicare & Medicaid Services, (CMS) the agency which oversees the Medicaid program. �Florida is working to make the current Medicaid system more efficient, but more importantly, Florida is working to give people access to care that better reflects their own health needs and preferences. This demonstration provides a framework for improving care and making Medicaid more sustainable without eliminating services or restricting eligibility.�

In requesting this historic demonstration program, Florida officials determined that their Medicaid growth rate of 13 percent per annum for the past six years was unsustainable. In 2005, for example, Medicaid spending is expected to consume 25 percent of the state�s budget, or over $15 billion per year. Under the Section 1115 demonstration granted today, Florida will maintain a reasonable rate of program growth while providing enrollees access to improved quality health care services.

Under the Section 1115 demonstration granted today, Florida will calculate an annual amount that it will provide for each enrollee which will be determined by reviewing the enrollee�s �risk� or health status and historic use of health care services.

Beneficiaries will choose a managed care plan with a benefit package that best suits their needs. The demonstration will allow plans to offer �customized� benefit packages, although each plan must cover all mandatory services as outlined in federal law. Plans may also enhance their benefit packages to attract more enrollees.

In addition to having a choice of Medicaid managed care plans, beneficiaries -- for the first time -- can �opt-out� of Medicaid altogether and receive subsidies for their share of the cost to purchase employer-sponsored insurance (ESI). If a beneficiary chooses employer-sponsored coverage, they will be entitled only to the benefits covered by that plan as well as to any cost-sharing requirements, even if they exceed normal Medicaid limits. Beneficiaries considering switching to an available employer plan will be able to receive individualized counseling about its potential benefits and risks. Opting-out is voluntary and beneficiaries may chose to rejoin Medicaid within 90 days of opting-out.

Another ground-breaking feature of the Florida demonstration is the establishment of a so-called �enhanced benefit account� (EBA) program. This program will provide direct incentives to Florida demonstration enrollees who participate in state-defined activities that promote healthy behaviors such as weight management, smoking cessation and diabetes management. Beneficiaries will be allowed to accumulate funds in their EBA and use them for non-covered health-related needs such as over-the-counter medications. Even individuals who leave the Medicaid program can retain use of any funds remaining in their EBA (for health-related uses) for up to three years as long as their incomes remain at or below 200 percent of the federal poverty level.

The demonstration will also establish a fund of $1 billion annually to help the state pay safety-net providers caring for the uninsured.

Florida will begin the phase-in of this unprecedented demonstration in two counties, Broward (Ft. Lauderdale) and Duval (Jacksonville), in July 2006. A statewide implementation plan will follow. The demonstration is approved to run through June 30, 2011.