The program, which began as a demonstration project in Houston, "is creating significant enrollment opportunities" for the Medicaid HMOs says Baumgarten.
Of course, this opportunity pales somewhat compared to the two to three million Texans who were expected to become eligible for Medicaid under the expansion provisions of the federal Patient Protection and Affordable Care Act. Last year the U.S. Supreme Court gave states the permission to opt of the expansion. Texas officials decided to exercise that option.
Meanwhile, baby boomers are leading the Medicare charge. Medicare Advantage HMOs enjoyed double-digit enrollment growth in 2012. More than 500,000 Texas seniors are now in those plans.
Profitability is a mixed bag, though. While Medicare Advantage is the most profitable line of business for HMOs, Medicaid HMO plans lost a collective $74.3 million on their operations in 2012.
Baumgarten attributes the Medicaid losses, at least in part, to expansion costs. He notes that ramping up provider networks and operations to move into new markets is a costly undertaking. Also, to quickly build those provider networks the HMOs may have agreed to unfavorable contracts in terms of their commitment to payment arrangements.
Baumgarten is reluctant to make any guesses about future profitability. "Going forward will they have better success? Who knows? It's an open question."