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News of the Day ... In Perspective

11/22/2006

Middlemen strike it rich—on Medicaid

More than one in three of the nation’s 55 million Medicaid beneficiaries now receive their care from private HMOs. Shares of the four biggest Medicaid HMOs (WellCare, Centene, Molina HealthCare and AmeriGroup) have surged on Wall Street in the past few years.

The HMOs are big donors to political campaigns. WellCare subsidiaries donated $125,000 to Illinois Governor Rod Blagojevech, a Democrat who won reelection this month. WellCare donated $34,000 to the Republican Governors Association this year, and contributed $100,000 to President Bush’s second inaugural celebration.

States generally calculate Medicaid premiums so that the HMO receives less than the state would pay for patient care. In Florida, that’s about 8% less, yielding a savings of $75 million to the state government. The HMO keeps the profits if it spends less.

The HMOs claim to deliver a good-quality product at a reasonable price. Critics say patients get far fewer services. Patients complain that with the HMOs they “have to call 50 doctors to get an appointment.” One pediatrician threatened to quit because the payment of $11.50 a month to meet all a child’s basic medical needs wasn’t enough to cover costs; she got a raise of an undisclosed amount.

The HMOs have plenty of money for corporate jets, big donations for the arts, and stadium-naming rights (Barbara Martinez, Wall Street Journal).

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