TALLAHASSEE (CBSMiami/NSF) – Federal officials Thursday gave the green light to Florida’s proposal to extend a controversial Medicaid managed-care pilot program through June 2014. Officials were locked in more than a year of negotiations about the logistics of the program.

The announcement renews a requirement that most Medicaid beneficiaries in five counties, including Broward, enroll in HMOs or other managed-care plans.

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Also, it means that hospitals and other health providers will continue to tap into a $1-billion-a-year program that bolsters care for low-income and uninsured patients.

Longer term, the announcement sets the stage for Florida to pursue the goal of Republican leaders to transform Medicaid into a statewide managed-care system.

Liz Dudek, secretary of the state Agency for Health Care Administration, issued a statement late Thursday afternoon that said the focus of negotiations with federal officials now will shift to the statewide plan. She and Gov. Rick Scott touted the success of the pilot “reform” program — success that has been hotly debated since the program started in 2006.

“Because of these successes, I look forward to implementing Medicaid reform statewide and allowing all of Florida’s Medicaid recipients to receive more-efficient, higher-quality care,” Scott said.

But in granting the extension, the federal Centers for Medicare & Medicaid Services also required changes in the program. For example, as of July 2012, it will require that managed-care plans spend at least 85 percent of the money they receive on patient care, a concept known in insurance circles as a “medical loss ratio.”

Republican lawmakers and insurance-industry officials have objected to such a ratio, arguing in part that it is difficult and arbitrary to separate medical care from other costs. But patient advocates contend such a ratio is necessary to make sure HMOs spend enough money on care instead of using it for overhead and profits.

The patient-advocacy group Florida CHAIN, which has backed a medical-loss ratio, sent out an e-mail this week that predicted federal approval of the extension. But it also touted federal efforts to revamp parts of the pilot, which Florida CHAIN has long argued jeopardizes patient care.

“The only question was whether CMS would require Florida to reduce the harm of (the pilot’s) most dangerous aspects,” the e-mail said.”In that context, the fact that Florida must make some significant changes should be viewed as a victory for advocates fighting to protect access to health care for our most vulnerable patients.”

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The extension approval also will require the state to set aside $50 million of the $1-billion-a-year Low Income Pool program for new or enhanced programs that will improve the quality of care for poor people. The “LIP” program was created in the pilot to funnel extra money to hospitals and other providers that serve as safety nets.

Some hospitals objected to the $50 million requirement, saying they already have started initiatives to improve care. The requirement likely will divert money that hospitals otherwise could use for expenses such as inpatient care.

In a document that spells out the terms of the extension, federal officials made clear that they see the LIP program as a way to help defray the costs of caring for poor people — and as a way to spur improvements in care.

The pilot, which was a priority of former Gov. Jeb Bush, requires most beneficiaries in Broward, Duval, Clay, Baker and Nassau counties to enroll in HMOs or another type of managed care, known as provider service networks. It was originally scheduled to last five years and expired June 30, 2011.

AHCA began negotiations with federal officials last year on seeking an extension through June 2014. The federal government approved a series of temporary extensions to allow more time for negotiations, with the final temporary extension ending Thursday.

Amid the negotiations, the Legislature this spring approved a sweeping plan to gradually move to a statewide managed-care system. Republican supporters argue that such a plan will help hold down costs while improving the fragmented system of care in the current Medicaid system.

Under the plan, the pilot program would serve as a legal jumping-off point for much of the statewide system.

The pilot program was approved as a “waiver” to federal Medicaid law. In seeking approval from the federal government for the statewide system, Florida will seek an amendment to that waiver.

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