Georgia Medicaid Managed Care and HMO Outsourcing Debate
This paper examines the debate surrounding Georgia's House Bill 392, which established a 6% quality assessment fee on HMOs operating in the state to fund the transition of approximately one million Medicaid and PeachCare recipients into privately managed care organizations. The paper outlines the fiscal pressures driving this shift — Medicaid costs growing at 10–12% annually against a state budget growing at only 5% — and traces the structure of Georgia's managed care rollout plan. It then presents opposing arguments, including concerns about implementation delays, rationing of care, and high member turnover in HMOs. The paper concludes that, despite legitimate concerns, Medicaid managed care outsourcing represents the most viable path to controlling costs while preserving coverage for Georgia's working poor.
- Introduction: Medicaid Costs and the Push for Managed Care: Rising Medicaid costs drive Georgia toward HMO outsourcing
- Proponents of Outsourcing Medicaid to HMOs: Georgia RFP, House Bill 392, and Michigan's success
- Opponents of Outsourcing Medicaid to HMOs: Concerns about care quality, delays, and HMO turnover
- Why Medicaid Outsourcing Is Necessary in Georgia: Cost savings, uninsured risk, and state budget realities
- Conclusion: Managed care as best option for Georgia's working poor
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What makes this paper effective
- Presents a balanced two-sided structure before taking a clear position, lending credibility to the final argument by acknowledging legitimate counterarguments.
- Grounds policy claims in specific fiscal figures (10–12% annual Medicaid growth, $2.5 billion state spending, $92.4 million in Kentucky savings), making abstract budget concerns concrete and persuasive.
- Uses direct legislative quotation from House Bill 392 to demonstrate engagement with primary source material, not just secondary commentary.
Key academic technique demonstrated
The paper demonstrates effective use of the concession-rebuttal structure: it devotes a full section to opposing viewpoints — implementation delays, care rationing, HMO turnover — before systematically addressing each concern in the argument section. This technique, common in policy analysis writing, shows intellectual honesty while ultimately strengthening the writer's own position.
Structure breakdown
The paper opens with contextual framing of the Medicaid cost crisis, then moves through three body sections: a pro-outsourcing section detailing Georgia's RFP process and House Bill 392; an opposition section drawing on peer-reviewed journal sources; and a synthesis section that weighs both sides before endorsing managed care outsourcing. A brief conclusion reinforces the practical stakes. The structure is well-suited to undergraduate policy analysis at the state government level.
Introduction: Medicaid Costs and the Push for Managed Care
Medicaid has long been a subject of debate throughout the country. Healthcare is a critical need, and many Americans lack any form of health coverage. Medicaid is therefore vitally important because it provides healthcare to the poor. For many years, both federal and state governments have attempted to reduce the costs associated with Medicaid. Some states have resorted to allowing HMOs to take responsibility for a portion of Medicaid recipients. This is particularly true in Georgia, with the passage of House Bill 392. According to Goggin (2002), "the shift to managed care has been evident in both the private and public sectors… Today, over 85% receive health care through some type of managed delivery." Similarly, growth in managed care coverage of Medicaid clients grew from 14% in 1993 to 56% in 2000 (Goggin, 2002).
For the purposes of this discussion, we will focus on the implications of House Bill 392 and explain why such legislation is necessary in the state of Georgia. Medicaid costs are currently outpacing the growth of Georgia's budget. For this reason, many people — including state legislators — have advocated moving healthcare away from state-funded programs and placing it in the hands of HMOs. This paper will also present an opposing view of outsourcing Medicaid to HMOs.
Proponents of Outsourcing Medicaid to HMOs
According to an article released by the Medical Association of Georgia (MAG) entitled "Georgia Medicaid Managed Care RFP Review," the program that would remove one million people in Georgia from Medicaid and place them in HMOs had long been under consideration. The article states that in early 2005, MAG presented the Department of Community Health's release of a Request for Proposal (RFP) on January 8, 2005 (Georgia Medicaid Managed Care RFP Review). This RFP was directed at Care Management Organizations (CMOs) to function in six regions of the state for numerous Medicaid patients, replacing the existing Medicaid program (Georgia Medicaid Managed Care RFP Review). According to the article, proposals were due on April 4, 2005, and the program was scheduled for implementation by January 1, 2006, in the Atlanta and Central Regions. Implementation in the Eastern and Northern regions was to begin by July 1, 2006, and in other regions by December 2006 (Georgia Medicaid Managed Care RFP Review).
The initial contract term was set to run from July 1, 2005, through June 30, 2006, with six annual options for renewal (Georgia Medicaid Managed Care RFP Review).
The review also highlights several points that reinforce the feasibility of the plan. One of the chief concerns for patients is that they might lose the ability to choose their own primary care physicians (Georgia Medicaid Managed Care RFP Review). However, the article clarifies that patients can request their preferred physicians and may change physicians. Patients can also opt out of the program: members may request disenrollment without cause within 90 days of initial enrollment, and after that initial period may request disenrollment once per year without cause (Georgia Medicaid Managed Care RFP Review). The article further states:
"A member may request disenrollment from a CMO plan for cause at any time. Cause may include: member moving out of CMO region; the CMO plan does not provide the covered service sought; moral or religious objections; the member needs related services performed at the same time and not all are available in the network or because of unnecessary risk; the member requests to be assigned to the same CMO plan as family members; the member's eligibility category changes; or other reasons related to poor quality of care, access, or lack of providers experienced in the needed area" (Georgia Medicaid Managed Care RFP Review).
The main reason House Bill 392 was so important to legislators is that it establishes the funding needed to place one million PeachCare children and Medicaid recipients with privately run HMOs and remove them from the state-run health plan (Tax on HMOs Passes State Senate, 2005). This plan is essential to reducing Medicaid costs in Georgia, which have been increasing by 10 to 12% each year, while the state budget is growing by only about 5% annually. Last year alone, the state spent $2.5 billion on Medicaid expenses (Tax on HMOs Passes State Senate, 2005).
The purpose of House Bill 392 is to establish a 6% tax on HMOs conducting business within the state — referred to as a quality assessment fee (Tax on HMOs Passes State Senate, 2005). According to the actual bill:
"(a) Each care management organization shall be assessed a quality assessment fee, in an amount to be determined by the department based on anticipated revenue estimates included in the state budget report, with respect to its gross direct premiums for the preceding quarter. The quality assessment fee shall be assessed uniformly upon all care management organizations. The aggregate quality assessment fees imposed under this article shall not exceed the maximum amount that may be assessed pursuant to the 6% indirect guarantee threshold set forth in 42 C.F.R. Section 433.68(f)(3)(i)" (House Bill 392, As Passed House and Senate).
The revenues gathered from this tax will compensate for the federal funding Georgia will forfeit when it contracts out the healthcare of Medicaid recipients to private HMOs (Tax on HMOs Passes State Senate, 2005).
Many states have outsourced Medicaid to HMOs, with Michigan representing the most successful example. According to Goggin (2002), Michigan moved incrementally to establish managed care for Medicaid patients and within two years was able to transition 800,000 people from Medicaid into HMOs. Like Georgia's plan, Michigan implemented the program in stages and enjoyed significant success while reducing state costs.
Conclusion
Georgia would benefit greatly from the implementation of this program because it will control costs while ensuring that the elimination of traditional Medicaid does not result in a rise in the number of uninsured persons. The facts presented in this research should be taken into consideration by legislators and opponents of Medicaid managed care alike. The state of Georgia must reform the system in some way to ensure that the working poor can receive healthcare. The implementation of this program appears to be the most logical means of accomplishing that goal.
References
Baily, M. A. (2003). Managed care organizations and the rationing problem. The Hastings Center Report, 33(1), 34+.
Georgia Medicaid Managed Care RFP Review. Medical Association of Georgia. 2005.
House Bill 392 (As Passed House and Senate). 2005. 33 0691/AP. By: Representatives Brown of the 69th, Harbin of the 118th, Keen of the 179th, and Cooper of the 41st.
King, M. P. (2003, January). Hurdles of health care reform: The obstacles are enormous, and so are the stakes. But there are some new ideas for reining in health care costs and keeping Americans healthy. State Legislatures, 29, 22+.
Perry, M. J. (2003). Promoting public health insurance for children. The Future of Children, 13(1), 193+.
Ross, D. C., & Hill, I. T. (2003). Enrolling eligible children and keeping them enrolled. The Future of Children, 13(1), 80+.
Sloan, F. A., & Hall, M. A. (2002). Market failures and the evolution of state regulation of managed care. Law and Contemporary Problems, 65(4), 169+.
Tax on HMOs passes state Senate. (2005, March 25). The Atlanta Business Chronicle.
Tomsic, T. D. (2002, June). Managing Medicaid in tough times: States are struggling with soaring Medicaid costs. Some are using short-term solutions, others have launched bold reforms.
Goggin, M. L. (2002). Nonincremental policy change: Lessons from Michigan's Medicaid managed care initiative. Public Administration Review, 62(2), 206+.
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