by Charlie Harper
Georgia makes few apologies about being a “business friendly” state. In fact, it promotes the concept as the “No. 1 state to do business” as publicly as possible. Thus, when powerful organizations popular with Georgia’s governing majority party announce opposition to a proposed merger, it is worth some time understanding why.
Last week, the Medical Association of Georgia, the Georgia Pharmacy Association, and the Georgia Society of Clinical Oncology sent a letter to Insurance Commissioner John F. King asking him to block the merger between Centene Corporation and Wellcare of Georgia Inc. Both companies are major providers of managed care services for Georgia’s Medicaid patients, which serves as the crux of the organizations’ arguments. The implications are wide and deep.
The width of this merger is explicit in the letter of protest. The groups claim that the merger would create the largest Medicaid provider in the country, and would give the company 61% of Georgia’s patients on Medicaid’s managed care program.
To help put the magnitude of the stakes in perspective, the letter claims that there are over 1.3 million Georgians served by Medicaid in managed care programs, with nearly 815,000 served by the two companies proposing to merge. In a state of 10 million, we’re talking about a system that directly involves 13% of all Georgians.
Looking deeper, there are a number of other hands involved in the process before a dollar paid by the state on behalf of the patient reaches the medical provider. Key to the argument against the merger is the rake taken by Pharmacy Benefit Managers (PBMs), at least two of which Centene has an ownership interest according to the letter.
A 2018 legislative report indicates that Georgia spent $120 million on pharmacy benefits under the program, but only $90 million was actually disbursed for drug reimbursement. The remaining $30 million was retained by PBMs. To quote the letter, “25% of the prescription drug spend was not spent on patients’ drugs, but rather, was spent paying a third party administrator.”
While the PBM’s management of prescription drug benefits are highlighted as central to a system seemingly designed to obscure who is actually being paid for what, the letter also notes other large and increasing management fees going to corporate overhead rather than patient care. “Peach State has a management agreement with affiliate Centene Management Company, in which the affiliate is paid 11.5% on net revenue up to 1 billion dollars and 10.5% in excess of 1 billion dollars. In 2017 this amounted to $116,496,970 paid to Centene Management Company. Centene paid $146,476,367 in general administrative expenses in 2018.”
If numbers here are causing your eyes to glaze over, let’s try to bring this back to why these organizations composed of front-line health care providers are objecting to the growth of managed care plans.
Years ago during the farm aid era, it became popular to raise awareness of the farmers’ plight by pointing out that from a $3.49 box of cereal, the farmer received six cents. (Those are current numbers courtesy of the National Farmers Union.) With agri-business specialized and vertically integrated, mom and pop farmers are removed from most of their customers by layers of processors, shippers, and retailers –each taking their own cut.
Today, doctors and pharmacists still talk directly to their patients. The money that patients pay for health care, however, goes through a web of insurance companies, PBMs, managed care companies, and/or hospitals – each setting their own policies and contracting with each other over how much they will charge for their services.
We patients continue to pay more. The providers – especially those in rural Georgia – continue to lose money on Medicaid patients. Doctors and pharmacists are using this opportunity to ensure the money taxpayers are investing for healthcare actually reaches the patient and their healthcare providers, and not just building an ever expanding monopolistic bureaucracy.
Charlie Harper is publisher of GeorgiaPol.com and executive director of PolicyBEST, which focuses on policy issues of business climate, education, science and medicine, and transportation.