Hawaii may delay payments to Quest health plan
By Derrick DePledge
Advertiser Government Writer
The state Department of Human Services has warned health insurance companies that the state may not make payments for Quest — the state's health plan for low-income families — for the last quarter of the fiscal year, leaving insurers to absorb about $300 million in medical expenses until at least July.
The potential delay in payments has stunned insurers and alarmed health care providers, who worry a delay could jeopardize the ability of insurers to cover claims, which would cause cash flow problems and influence how some providers care for Quest members.
"That would be extremely frightening, because if the state isn't paying the plans, then the plans are not going to be paying all of the people who actually deliver the health care services," said Beth Giesting, the chief executive officer of the Hawai'i Primary Care Association, a nonprofit that represents community health centers.
"Of course, that provides a ripple all the way down. If the providers are not getting paid, many of them will not be able to provide the services to the most vulnerable people."
Lillian Koller, the director of the state Department of Human Services, did not return telephone calls left with her spokeswoman seeking comment. But she outlined the situation in January briefings before the Senate Ways and Means Committee and the House Finance Committee.
The department has an estimated $84 million shortfall for the fiscal year that ends in June. Quest — the state's version of Medicaid — is funded with federal and state money, with the federal government now covering about two-thirds of the cost.
The shortfall, however, could prevent the state from providing the matching funds necessary to draw down federal money, forcing the state to delay payments to insurers in April, May and June.
The state makes about $100 million in payments each month to five health insurance plans: Hawaii Medical Service Association, Kaiser Permanente and AlohaCare for Quest; and Ohana Health Plan and EverCare for Quest Expanded Access, the plan for the aged, blind and disabled.
The department asked insurers to float two months' worth of payments to get through the last fiscal year, and also delayed payments in December.
The department has said that one of the reasons insurers are required to have reserves is to ensure prompt payment to providers in the event of such delays.
Koller told lawmakers that the shortfall is primarily the result of an increase in enrollment in Quest, and an increase in reimbursements because the cost of medical care continues to rise.
Quest and Quest Expanded Access, which is for those with disabilities or over 65, cover about 245,000 people.
Koller said that the state should start to have a discussion about reducing the benefit package in Quest, which she said may be the only realistic way to contain costs over time.
Pushing payments forward until next fiscal year, and eventually catching up when state finances improve, is one of the tools the Lingle administration is using to manage through the state's budget crisis.
Gov. Linda Lingle has announced, for example, that the state will delay income tax refunds from April to July, which on paper saves $275 million this fiscal year.
Steve Van Ribbink, the executive vice president, chief financial officer and treasurer at HMSA, sent Koller a letter last week that warned that HMSA "cannot continue to provide access to quality care for the Quest members we serve without the funds to do so."
Van Ribbink said using the delayed payment strategy as a solution to the budget deficit is "illusory" since he believes it cannot be sustained even for a short period of time.
He said payment delays have already forced HMSA to borrow from credit lines and liquidate portions of its investment portfolio to continue uninterrupted payments to providers.
He described it as an "unfair burden" on HMSA and warned that further delays could lead the state's largest insurer to put off payments to providers, which would "place a substantial financial stress on many health care providers."
Jennifer Diesman, vice president of government relations at HMSA, said insurers have not been given any guarantees by the department that they would receive a lump-sum payment in July.
Diesman said the Department of Human Services is also projecting a deficit for the next fiscal year, which Koller put at $146.5 million in her testimony to lawmakers. "There is no clarity about when we would be paid back," she said.
George Greene, the president and chief executive officer of the Healthcare Association of Hawaii, a nonprofit that represents hospitals and long-term care providers, said the delayed payments could leave providers with more uncompensated health care.
Hospitals lost $78 million on Quest care last year, according to an Ernst & Young report.
"What you have here is the beginning of something that could crumble the system," Greene said. "Some of our smaller members that depend on Medicaid payments, they're not going to be able to make payroll, they're not going to be able to buy supplies.
"So as this continues, you really have a detrimental impact to not just the patients, but the providers and also the plans. The longer it goes on, we as an industry have to step back and take a look and say 'What should our positioning be and what should our next steps be?'
"Because at the end of the day, nonpayment, if it gets too lengthy, goes into impacting the quality of patient care."
Insurers and providers have reached out to state lawmakers.
State Sen. Suzanne Chun Oakland, D-13th (Kalihi, Nu'uanu), the chairwoman of the Senate Human Services Committee, said one idea would be to tap the state's hurricane-relief fund to help cover a portion of the delayed payments.
But others privately believe that is unlikely, especially after Moody's Investors Service lowered Hawai'i's bond rating outlook last week to negative from stable, in part because of a lack of reserves.
"That's a lot of money to carry for this state. That will impact providers and, of course, the patients," Chun Oakland said of the potential payment delay.
Chun Oakland has a briefing scheduled on the issue later this month.
"We're very concerned about the impact on access to care, as well as the type of services that can be provided," said state Rep. Ryan Yamane, D-37th (Waipahu, Mililani), the chairman of the House Health Committee.
State Sen. Josh Green, D-3rd (Kohala, Kona, Ka'u), an emergency-room doctor, said the Department of Human Services should rethink its strategy.
"I have grave concerns about the impact this DHS decision may have on health care in Hawai'i, specifically on physician care, hospitals and long-term care facilities statewide," he said.
"Worst still, this will profoundly affect access to care for our children. We need DHS to rethink this decision."
According to the Hawai'i Primary Care Association, 41 percent of all patients seen at community health centers in 2008 were covered by Quest.
Darrin Sato, the chief operations officer at Kalihi-Pälama Health Center, said delayed payments could limit the ability of health centers to handle all the patients who need care, possibly forcing some to refer more patients to more costly hospital emergency room visits.
"We cannot continue to run as a business if we don't get paid," he said.