NEWS RELEASE
October 13, 1999

Engler Announces HMO Improvements

Governor John Engler today announced that State Insurance Commissioner Frank Fitzgerald will undertake a thorough review of the laws governing the licensing and operation of managed care organizations in Michigan.

"Our citizens deserve HMOs that are financially safe, reliable, and able to provide the health care that we expect. Updating Michigan laws is a crucial part of protecting consumers," said Governor Engler. "The Michigan Insurance Bureau is the chief financial regulator of Health Maintenance Organizations, and overseeing their financial health is a crucial component of providing quality health care in Michigan."

Michigan’s HMO law has not been significantly revised since it was passed in 1978. In order to successfully oversee a rapidly growing and changing managed care industry, regulators must have updated laws in place. Over 2.5 million Michigan citizens receive their health care from HMOs.

"Health Maintenance Organizations must have solid management policies and procedures in place so providers can be confident that all medically necessary care will be paid for on a timely basis," said Fitzgerald. "Within thirty days I will make recommendations on how to improve these laws so Michigan citizens can continue to receive quality health care."

Governor Engler also announced important changes in the operations of Qualified Health Plans and the costs associated with psychotropic drugs. Under the current

managed health care contractual arrangement, Qualified Health Plans are fiscally responsible for all psychotropic drugs prescribed by Community Mental Health Service Providers. In order to better align the funding for these important drugs with the health care professionals who are providing treatment, the Department of Community Health intends to move the financial responsibilities for psychotropic drugs to the Community Mental Health Service Providers.

"Michigan has always been a leader in the advancement of the new drugs being used in the treatment of mental disorders," said Engler. "This new initiative will give the Community Mental Health Service Providers at the local level more ability to manage an individual’s care."

"These drugs can provide overwhelming personal benefits to persons with mental illness," said Michigan Department of Community Health Director James K. Haveman, Jr. "The use of these drugs already has -- and will continue -- to provide savings to Community Mental Health Service Providers because of reduced hospitalizations and emergency room usage. All savings by the use of these drugs, or new combinations of them, will be used by the Community Mental Health Service Providers at the local level to enhance services."

As a result of the rapid increase in the cost of all pharmaceuticals and the development of newer psychotropic drugs, the cost to the Qualified Health Plans has risen at a rapid rate. The Department of Community Health will augment funding for Community Mental Health Service Providers to assist in funding the cost of psychotropic drugs.

The Department intends to begin this new system effective February 1, 2000. This includes psychotropic drugs in both Medicaid managed care and fee-for-service.