In general, as a health plan's activities in a service area mature, it begins to post profits. Baumgarten says the same scenario could be applied to Medicaid HMOs in Texas but with two caveats:
He says the expansion in the state of the elderly and disabled Medicaid managed care program promises to boost profitability because the average per-member per-month revenue is in the $800 to $1,000 per month range.
With favorable contracts and discounts from major providers, and if the HMOs perform a better job of care coordination than now happens with fee-for-service payments, then Baumgarten says that should be sufficient to provide a return.
Health insurance exchanges
Despite a lack of support from the state of Texas, Baumgarten sees HIX as having "significant potential" that may even help kick start commercial HMO enrollment, which has dropped like a rock to around 500,000 members as employers have moved to PPOs.
For employers, most of the innovation in health plan product design is "happening outside of the HMO," says Baumgarten. That makes commercial HMOs a tough sell.