Fix It First

Medicaid Congress Recommends Reform, Expansion 

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Legislative Affairs Feature – April 2013 

Tex Med. 2013;109(4):27-32.

 By Amy Lynn Sorrel 
Associate Editor 

Every time Edinburg gastroenterologist Carlos J. Cardenas, MD, needs preapproval for treatment or medication for a Medicaid patient, he and his staff spend at least 20 minutes on the phone. Multiply that by several patients a day and multiple HMOs – each with a different process – and the time spent away from patient care adds up.

Every time a patient eligible for Medicare and Medicaid goes to see Athens family physician Douglas Curran, MD, he takes a 20-percent pay cut because the state no longer covers the Medicare copayment for those poor, senior, or disabled patients. Multiply that by more than 300,000 dual-eligible patients across the state that doctors still see so their complicated illnesses don't go untreated, and the amount of money lost to physician practices adds up.

With every simple mistake on a Medicaid billing form, physicians like Alex Kenton, MD, a neonatologist in San Antonio, worry about state authorities accusing them of fraud. If he takes on a high volume of Medicaid patients, the chances of becoming a target appear to add up.

And every year Medicaid payments to Texas physicians continue to fall below the cost of care, fewer physicians can afford to treat those patients.            

Those burdens and scores more prompted TMA's Medicaid Congress to develop a thorough fix-it list for Texas leaders, one that physicians say holds the keys to strengthening the ailing program and attracting doctors back to it.

Doctors hope the recommendations will factor into the many Medicaid discussions expected to take center stage this legislative session and beyond. The program already is the subject of several bills that aim to save money by expanding Medicaid managed care, adding quality-based payment initiatives, and fighting fraud.

Also, pressure mounts on state lawmakers to snag billions of federal dollars available under the Patient Protection and Affordable Care Act (PPACA) to expand the Medicaid program. Some legislators appear to entertain the idea despite staunch opposition from Gov. Rick Perry to grow the Medicaid program as prescribed by the federal health system reform law.

Part of that pressure now comes from physicians.

The reform recommendations by the Medicaid Congress are a critical component of a TMA Board of Trustees resolution offering support for a bipartisan, flexible approach to expanding Medicaid coverage to more of the state's uninsured, namely low-income parents and childless adults.

The Texas Hospital Association, the Texas Association of Community Health Centers, and other advocacy, faith-based, and business groups have also endorsed expansion.

Texas could draw down $100 billion in federal funding over 10 years to match $15 billion in state money, according to a report by Billy Hamilton, the state's former deputy comptroller and now consultant.

"That money could go a long way to help underserved populations in every area of the state. But none of that can happen without viable physician practices delivering care, and given the present trajectory, I can tell you that viability is stressed," said Dr. Cardenas, vice president of the TMA Board of Trustees.

"To expand the program without fixing what's wrong with the infrastructure would not be the right course. So we think the approach we are taking is a measured approach that moves us in the right direction and is right for our patients," he said.

On top of the fiscal benefits, TMA leaders also highlighted the medical benefits of expanding Medicaid coverage.

"There is undisputable evidence in the peer review literature that kids and adults with insurance, even public insurance, do better in health care outcomes over a period of years," said John Holcomb, MD. The San Antonio pulmonologist cochairs the Medicaid Congress and leads TMA's Select Committee on Medicaid, CHIP, and the Uninsured.

The Fix-It List 

Finding a way for Texas to expand Medicaid coverage is among more than 100 different recommendations the Medicaid Congress researched and developed with input from diverse physician specialties and geographic regions across Texas.

Raising Medicaid rates to cover the cost of care, reducing administrative hassles, and ridding unfair and unnecessary regulatory burdens also would go a long way toward improving access to care. Those steps are critical before expansion can be considered, TMA President Michael E. Speer, MD, says.

"Because Medicaid patient-care rates are often below the actual cost of care, Texas physicians are forced to severely limit the number of Medicaid patients they can see. This forces many Texas Medicaid patients to forgo normal medical care in a doctor's office and to overutilize expensive emergency department care," he said.

That's why doctors say equalizing Medicaid payment rates to the same levels as Medicare is a key reform that must precede any expansion of Medicaid in Texas. The long-standing issue of Medicaid payment reform is such an obvious one that the Medicaid Congress' report did not spend too much time discussing it, Dr. Holcomb added.

The congress' list also encompassed everything from reversing the dual-eligible payment cuts and ensuring fair fraud and abuse investigations, to promoting improvements in care delivery and benefits coverage.

Among other solutions: 

  • Standardize Medicaid HMO prior authorization forms,
  • Maintain a single statewide preferred drug formulary,
  • Recognize all billing modifiers used by Medicare and commercial insurers,
  • Promote physician-led accountable care organizations (ACOs),
  • Pay physicians for after-hours services,
  • Develop strategies to reduce patient no-show rates,
  • Improve data sharing among primary care physicians, specialists, and health plans, and
  • Enhance enforcement of HMO network adequacy.  

"I checked, and Medicaid's rulebook is now 1,800 pages long" and filled with red tape, Dr. Holcomb said.

He also noted a connection between the low Texas Medicaid payment rates – which stand at just 78 percent of Medicare pay on average – and the decline in physician participation rates. In 2000, 67 percent of Texas physicians accepted all new Medicaid patients, compared with 31 percent in 2012, according to TMA surveys. (See "Texas Physicians Who Accept All New Medicaid Patients.") 

That's why bolstering payments, especially for dual-eligible patients, is a top priority.

"This is a hard population to take care of. As an adult pulmonologist, that's most of what I see under Medicaid, and these people have nighttime ventilators and all sorts of complicated problems," Dr. Holcomb said.

The 2011 Texas Legislature directed the Texas Health and Human Services Commission (HHSC) to limit payment for those patients' services by discontinuing Medicaid coverage of their Medicare deductible and the copayment (which is 20 percent of most services) when the Medicare payment exceeds the Medicaid allowable, which is almost always the case for physician services. According to HHSC, the policy change saved Medicaid nearly $450 million.   

In January, HHSC restored coverage of the annual Medicare deductible (currently $147 per beneficiary), but the 20-percent coinsurance cut remains.

The cut hit many physician practices hard, particularly those in rural and border areas where doctors who serve a disproportionate number of dual-eligible patients were forced to retire early, lay off staff, or take out loans to keep their doors open.

But it's an issue affecting the entire state, says Dr. Curran, also a TMA trustee. "This impacts our ability to pay our employees. And it limits our ability to recruit young physicians."    Harlingen ophthalmologist Victor Gonzalez, MD, already lost six young physicians he trained to other parts of the state.      

When patients can't get care in a Harlingen emergency department, "they will end up in San Antonio, Houston, or Dallas at a much greater expense," said Dr. Gonzalez, Hidalgo-Starr County Medical Society president and member of the TMA Border Health Caucus. "When the health care infrastructure collapses, it hurts everyone."

Adding to frustrations are new rules physicians say fail to differentiate between honest mistakes and outright fraud, and expand the Office of Inspector General's ability to hold payments before – rather than after – a fair investigation. (See "Guilty 'Til Proven Innocent," December 2012 Texas Medicine.)

"If there is real fraud going on, by all means, stamp it out. But there ought to be clear due process," said Dr. Kenton, a member of the Medicaid Congress.

Instead of just financially penalizing physicians for billing mistakes, the state should seek first to engage physicians in a corrective action plan if they are having trouble coding properly, suggests Barry S. Lachman, MD. He, too, is a member of the Medicaid Congress and medical director of the Parkland Community Health Plan.

That's a model his health plan follows and one the state should, too, he says. "Unless we get physicians the technical assistance they need, we are not helping them practice better."

Dr. Cardenas added that streamlining HMO operations and holding health plans accountable are increasingly important as the state continues to expand Medicaid managed care.

"When you have to stay on the phone for 20 minutes before you get a peer-to-peer preauthorization, and when you get put through the same rigmarole over and over again, we are no longer talking about managed care. This is managed access," he said.

Most of the congress' recommendations likely will require only administrative changes by HHSC.

Commissioner Kyle Janek, MD, acknowledges the payment and administrative pressures that continue to squeeze doctors and threaten the program and says he wants to take those "problems" and "turn them into opportunities" for reform.

But he stands by the fraud rules his agency approved.

"This is not optional," Commissioner Janek said. "We are not being unreasonable in what we are trying to do. We are not talking about simple mismanagement. We're talking about fraud."

Meanwhile, legislative action will be necessary to implement some of the congress' reforms, including significant increases in physicians' Medicaid payments, restoring the dual-eligible payment cuts, maintaining a single statewide preferred drug formulary, and enhancing due process for physicians accused of fraud, waste, or abuse.

On the latter, Senate Bill 8 by Sen. Jane Nelson (R-Flower Mound) essentially codifies the HHSC-approved fraud rules.

TMA officials are working with the senator to ensure that due process protections and other safeguards are included. Because billing varies by specialty, for example, TMA would like to see a fraud-review panel that includes physicians and that verifies fraud allegation before HHSC begins holding payments.

Not Your Mother's Medicaid 

Expanding Medicaid coverage in any way also requires huge amounts of political will, and momentum appears to be building.

Beginning in 2014, PPACA allows expansion of Medicaid coverage to poor adults with incomes up to 138 percent of the federal poverty level. That is about 2 million people in Texas. The federal government will pick up the full tab for the expansion population for the first three years, then gradually reduce its contributions to 90 percent by 2020 and thereafter.

Texas receives 60-percent matching federal funds for the current Medicaid program.

Some Democrats support full expansion of the current Medicaid program as allowed under PPACA.

The Legislative Budget Board (LBB) in February recommended funding to expand Medicaid in its spending priorities under the Senate budget bill, Senate Bill 1. An earlier LBB proposal supported a bid by some urban counties to use their tax dollars to fund a local expansion, although the federal government has said it would endorse only a statewide plan.

However, Governor Perry has repeatedly said Texas will not expand Medicaid.

In his State of the State address to the legislature in January, the governor declared that "Texas will not drive millions more into an unsustainable system, and that stance has not changed an iota."

He and other Republicans are concerned about the federal government's ability to shift the cost of an expansion population back to the states after the first few years.

Physicians are equally concerned, given earlier broken promises by the federal government to fix what they say is a broken Medicare payment system. That ongoing battle over the Sustainable Growth Rate formula has added another layer of uncertainty for physician practices and access to care.

But some Republicans now say they would consider a solution that allows Texas to reform its program and use federal expansion funds as they see fit. HHSC Commissioner Janek says he, too, is exploring options with the Centers for Medicare & Medicaid Services.

Dr. Holcomb notes that such flexibility already exists under PPACA for states to devise an expansion that differs from traditional Medicaid coverage, which for the most part covers children, the disabled, and elderly who are poor.

For example, the law authorizes the use of patient copayments and deductibles on a sliding scale, an idea Commissioner Janek says he would support. Texas also could develop a narrower benefit package tailored to the expansion population of low-income, childless adults. Lastly, if states choose, they can bail out at any time if conditions change.

"We must look beyond the federal government's expansion solution to design one especially for Texas and for Texans," Dr. Speer said in a column published in Texas Weekly, an influential Austin political newsletter.

Rep. John Zerwas, MD (R-Simonton), who sits on the House Appropriations Committee, says he might favor an expansion so long as it does not break the state budget or flood emergency departments with Medicaid patients who turn out to be underinsured because not enough doctors will treat them.

"We [lawmakers] have got to consider the fact that there is a lot of money out there the federal government wants states to use for the purpose of providing coverage to people who aren't insured right now, and Texas leads the nation in that," he said. "But I agree with the governor: If we are going to continue to do the same old thing and add a couple of million more patients to the mix, we are going to see the whole thing fall apart." 

Representative Zerwas agreed the time is now for the state to consider a Medicaid waiver, block grant, or other options, including those put forth by TMA.

"Let's talk about these things that might make a difference for Texas, and let's see if we can get our leadership comfortable with the idea that there is a place for doing this."

Senator Nelson also said she agrees with TMA that "there must be more flexibility and certain conditions met before we consider expanding Medicaid. We need to improve access to care and encourage more providers to participate in Medicaid, but expanding the program as directed by the Affordable Care Act is not a realistic option for Texas. Especially for our seniors and dual-eligible population, our Medicaid services need to be of the highest quality, and part of that is ensuring those services are delivered by providers who are adequately compensated."  

Rep. Garnet F. Coleman (D-Houston), an early proponent of expansion, says the bipartisan solution TMA calls for is "already on the table. We just need to take it."

While he expressed concern that a so-called "flexible" approach could translate to a reduction in Medicaid services, Representative Coleman also added his support for other reforms, like raising Medicaid payment rates and promoting ACOs.

As for other changes, physicians are seeing progress on some fronts.

Dr. Cardenas pointed to one health plan that helps South Texas physicians manage difficult populations, for example, by helping provide asthma patients with certain medical supplies.

In addition, many HMOs have begun implementing systems to reward physicians for reducing nonurgent emergency department use, and HHSC has supported similar policies, according to the congress' report. Meanwhile, TMA representatives on an HHSC-appointed Quality-Based Payment Advisory Committee are developing ways for Medicaid HMOs and fee-for-service plans to engage physicians in new payment models that reward improved costs and patient outcomes.

Representative Zerwas also highlighted a 2013 LBB Government Effectiveness and Efficiency Report that recommends a legislative oversight committee for Medicaid managed care operations to make sure health plans live up to their contract requirements and ensure appropriate use of state funds.

"Those concerns have been heard, and we [lawmakers] are looking at some legislative ideas that might help," he said.

The Medicaid Congress' recommendations are by no means exhaustive, Dr. Holcomb says.

"But now there is pick and shovel work that has to be done so we can fix this. The bottom line is we need a more physician-friendly Medicaid program in order to get doctors to come back or get them into the program for the first time."  

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Making the Case  

Texas Republicans argue that without flexibility, expanding the current Medicaid program as prescribed by the Patient Protection and Affordable Care Act (PPACA) could add unwieldy costs to the state budget. They also point to uncertainty over the federal government's ability to back out of subsidizing an expansion after the first few years.

On the other hand, a number of recent studies point to several economic benefits that could come along with expanding the Medicaid program in Texas.

According to the Urban Institute and Kaiser Family Foundation, states stand to lower their uncompensated care costs as more uninsured gain coverage through Medicaid expansion. In Texas, 1.75 million people with incomes below 133 percent of the federal poverty level (FPL) are uninsured and could qualify for expanded Medicaid coverage. If Texas opts out, Texans with incomes between 100 percent and 133 percent of FPL would be eligible for federal subsidies to purchase coverage in a health insurance exchange. Those earning below FPL would not, which would still leave an estimated 1.33 million Texans uninsured. (See "The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis.") 

Texas economist Ray Perryman says expansion would involve costs, but also benefits. "Medicaid expenditures lead to substantial economic activity, federal funds inflow, reduction in costs for uncompensated care and insurance, and enhanced productivity from a healthier population. … Every $1 spent by the state returns $1.29 in dynamic state government revenue over the first 10 years of the expansion." His research shows that from 2013 to 2017, the state could draw down $28 billion in federal funds in exchange for putting up $3.1 billion. (See "Only One Rational Choice: Texas Should Participate in Medicaid Expansion Under the Affordable Care Act.")   

In a follow up to his initial report favoring a Medicaid expansion, former chief revenue estimator for Texas, Billy Hamilton released a county-by-county analysis showing local tax revenues across the state would increase by $2.1 billion from the $23 billion in federal health care funds the state could receive to expand coverage to low-income adults from 2014 to 2017. (See "Expanding Medicaid in Texas: Smart, Affordable and Fair.")  


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