SPRINGFIELD – Democratic state leaders said Tuesday that Illinois’ “managed care” Medicaid system is threatening the viability of hospitals and access to health care in many parts of the state, and they are pushing legislation they say would reform the system.

“We have a broken managed care program in Illinois, and it’s threatening the very future of our health care providers and the patients they serve all around this state,” Senate Majority Leader Kimberly Lightford said during a news conference unveiling the legislation.

Under the managed care system, which Illinois launched in 2011, insurance companies are paid a flat, per-patient monthly fee to manage the care of most Medicaid recipients. These managed care organizations, or MCOs, are required to reimburse health care providers and make sure patients receive follow-up care with specialists, therapists or rehabilitation facilities following a medical procedure.

In theory, the managed care system is supposed to improve patient care and lower costs by avoiding preventable emergency room visits or hospital readmissions.

But Lightford, a Democrat from the western Chicago suburb of Maywood, argued that neither of those goals has been achieved. Instead of managing care, she argued, the MCOs are merely managing costs through excessive denials of claims and delayed payments, especially for facilities known as safety net hospitals, which serve large numbers of Medicaid and uninsured patients, and small, rural “critical access” hospitals that have 25 or fewer beds.

“Instead of coordinating care and services and saving the state money, the MCOs get their savings by denying claims submitted by hospitals by an average 26 percent statewide,” Lightford said.

Prior to managed care, when the Medicaid program operated on a traditional fee-for-service basis, Lightford said the denial rate was closer to 2 or 3 percent.

In addition, she said, even when claims are approved, many hospitals have to wait as long as 150 days to get paid.

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Lightford and Rep. Camille Lilly, a Chicago Democrat who is vice chair of the House human services budget committee, are sponsoring legislation that would require MCOs to make expedited payments to critical access and safety net hospitals. It would also require MCOs to promptly prepare follow-up care management plans after a patient is discharged from a hospital, and to update their health care provider rosters on a weekly basis to prevent unnecessary claim denials.

Their bills – Senate Bill 1807 and House Bill 2814 – are similar to a number of other managed care reform bills that have been introduced this session, and Lightford said she believes legislation will start moving through committees quickly.

Officials at MeridianHealth, one of the MCOs that works in the Illinois Medicaid program, defended its company’s track record and disputed the contention that it denies 26 percent of initial claims.

“MeridianHealth maintains regular dialogue with our providers and hospital partners regarding member care and claim processes,” the company said in an email statement. “Working through the Illinois Association of Medicaid Health Plans, Illinois managed care organizations helped create a unified billing guide to streamline access to billing information. Our success is confirmed by our reporting to the Illinois Department of Healthcare and Family Services that illustrate Illinois MCOs have a claim denial rate of less than 11 percent.”

Lightford said she and her colleagues hope their proposals will bring about reform of the managed care system. But she also said she believes there is support within the General Assembly for abandoning the managed care model and returning Medicaid to the traditional fee-for-service system.

“We’d like to try with the reforms and see if we can work with the MCOs, but I wouldn’t discard that coming in the future if that’s what’s needed,” she said.