Controlling Medicaid Dollars

TMA Prepares to Battle HHSC Over Medicaid Managed Care

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Legislative Affairs Feature -- March 2005  

By Ken Ortolon
Senior Editor  

Trying to rein in costs, state health and human services officials in 2004 seemed hell-bent on pushing most of Texas' 2.5 million Medicaid beneficiaries into HMO networks. But Texas physicians say that plan is not in the best interest of patients or the state's taxpayers.

The Texas Medical Association believes the state can save money and provide better care for its low-income citizens if it turns to another form of Medicaid managed care -- the primary care case management model (PCCM).

The Texas Health and Human Services Commission (HSSC) last year announced plans to all but scrap PCCM from the Medicaid program. But TMA has launched an effort to save and enhance PCCM to enable physicians to better coordinate care by providing a medical home for Medicaid beneficiaries and cut costs by reducing unnecessary emergency room visits.

While a bill had not been filed at press time, TMA leaders say they are prepared to seek legislation to save and expand PCCM.

"It's been TMA policy for a long time that the best medical care is continuous care," said San Antonio critical care specialist John R. Holcomb, MD, chair of TMA's Ad Hoc Committee on Medicaid. "It's well demonstrated that if people have a medical home, both in the PCCM model and in some of the other managed care models, those patients get better care and more timely care and they spend less time in emergency departments."

Costs Driving Reform  

Texas turned to managed care to control costs in Medicaid in 1991, when the legislature directed state officials to set up Medicaid managed care pilot projects. The first such pilots were launched in 1993 in Austin and the Beaumont-Galveston area.

Since then, Medicaid managed care has been extended into 51 counties, including most major urban areas, and covers about 40 percent of the Medicaid population. The managed care plans include a mix of traditional HMOs, exclusive provider organizations, and PCCM, a noncapitated managed care model in which primary care physicians must authorize most other services, including specialty care. The physicians receive a fee for service when treating patients, plus a small monthly case management fee of roughly $3 per client.

Because of numerous problems, TMA convinced the legislature to halt new Medicaid HMO rollouts in 1999. But the moratorium was lifted in 2001 and, faced with budget deficits in 2003, lawmakers cut Medicaid spending and directed HHSC to expand Medicaid managed care, using the cheapest models.

Following the 2003 legislative session, HHSC hired a consulting firm to assess the cost effectiveness of managed care expansion. It found the potential savings from the HMO and PCCM models are roughly the same for the largest segment of the Medicaid population -- children and pregnant women -- but HMOs could produce greater savings in treating the elderly, visually impaired, and people with disabilities. That group represents a small fraction of Medicaid patients but a high percentage of Medicaid spending.

While physicians have had favorable experiences with some community-based Medicaid HMOs, such as those established by Parkland Hospital in Dallas and Community First in San Antonio, TMA leaders say for-profit health plans care more about returning dividends to their shareholders than delivering care to low-income Texans.

"The PCCM model has worked well in a variety of circumstances where the HMO model has not been as successful from the physician standpoint," said Spencer Berthelsen, MD, chair of TMA's Council on Legislation. "The HMO model has had less success for a number of reasons, including that the HMO networks tend to be narrower and, in many cases, do not provide adequate specialty coverage."  

Dr. Holcomb adds that average administrative costs for HMO plans are 13 to 18 percent. When company profits are added in, that means 20 to 30 percent of the Medicaid dollars is being taken off the top before you even start providing services.

"The state of Texas is having its pocket picked by managed care plans," Dr. Holcomb said.

The result is an already fraying provider network losing even more physicians as doctors frustrated with low payments and high hassles drop out. San Antonio pediatrician Dianna Burns, MD, has practiced in both Medicaid HMOs and PCCMs. She says HMO expansion threatens access to care for her patients.

"At this point, it's important to maintain the PCCM because we have to ensure that patients have access to care from specialists and subspecialists," she said. "With a lot of HMOs, you don't have a broad spectrum of specialists participating."

Dr. Holcomb says the PCCM has lower administrative costs and no profit margin, so more Medicaid dollars go into services. TMA also believes more physicians will agree to take Medicaid patients under the PCCM, particularly if lawmakers approve increased fees or incentives for physicians to provide after-hours care, which might keep children of low-income working parents out of the emergency room.

Enhancing the Model  

Dr. Holcomb says the ad hoc committee believes its proposed PCCM enhancements will save the state more money than HMOs would and will result in better care.

The suggestions include initiating quarterly patient-level reporting mechanisms that give physicians feedback regarding the care and management of their patients, administering health risk assessment screening for patients as they enroll in PCCMs, and establishing a pilot program to see if bonuses for after-hours care will reduce inappropriate emergency room usage.

TMA got an unexpected ally in its fight to preserve PCCM late last year when Dallas and Bexar county officials and legislators asked HHSC to delay implementation of the HMO-only model because of concerns over potential loss of federal Medicaid matching payments, technically known as "upper payment limit" calculations. Michael Darrouzet, executive director of the Dallas County Medical Society, says Dallas officials believe shifting to HMOs would cost Parkland Hospital alone between $100 million and $250 million annually. Other public hospitals may face similar losses.

Dr. Holcomb is not optimistic that HHSC will back off of its plans for an HMO-only rollout. However, Dr. Berthelsen says TMA is discussing legislation with potential bill sponsors to, at a minimum, offer both HMO and PCCM models in urban and suburban areas.

At Texas Medicine press time, Health and Human Services Commissioner Albert Hawkins indicated that his agency likely would delay any decision on expanding Medicaid HMOs pending further consultation with lawmakers.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at Ken Ortolon .  


TMA Recommends Sweeping PCCM Enhancements

The Texas Medical Association Ad Hoc Committee on Medicaid has recommended the following enhancements to the Medicaid primary care case management model (PCCM) for managed care:

  • Initiate quarterly patient-level reporting mechanisms that give physicians feedback on the care and management of their PCCM patients. Reports should provide physicians feedback on selected indicators, including patient utilization of emergency departments, prescription drug costs, compliance with well-child visits and immunizations, and other guidelines established in collaboration with practicing physicians.
  • Administer health risk assessment screenings for patients as they enroll in PCCM (and other Medicaid managed care plans) to evaluate their special health care needs and opportunities for medical intervention. Data should be transmitted to patients' health plan and primary care physician (PCP) to expedite high risk/chronically ill patients' initial physician visit and/or coordination with case and care management services, including disease management.
  • Evaluate incorporating home health, durable medical equipment, and other support services into the medical home model. Linking these services to the medical home will promote better integration of services along the spectrum of care.
  • To reduce inappropriate emergency room usage, establish a pilot program with an enhanced fee schedule or "bonus" for physicians and other health professionals who set up after-hours clinics.
  • Broadly promote use of "ask a nurse" phone lines to give patients an alternative resource for addressing basic health care needs.
  • Initiate broader patient education regarding appropriate self-management of health care issues, as well as how to appropriately use the health care system.
  • Establish differential case management payments for physicians who adhere to clinically based, peer-reviewed performance measures. Currently, all PCPs in PCCM receive a per-member, per-month fee for coordinating and managing patient care. Under this proposal, all PCPs would continue to receive a "base" case management fee, while PCPs adhering to the performance standards would receive an enhanced payment up to a preset maximum. The enhanced fee would be set on a sliding scale so that practices achieving full compliance with the standards would receive a higher incentive payment than those meeting only some.
  • Integrate Texas Health Steps (THS)/Early and Periodic Screening, Diagnosis, and Treatment into the patient's medical home. (This recommendation would apply to Medicaid HMOs as well.) Currently, patients can receive THS services from any THS provider. This approach is antithetical to the concept of a medical home and continuity of care; no other public or private health care payer "carves out" preventive care from other primary care services. Instead, inclusion of these services should be a requirement of the primary care medical home. In parts of the state where PCPs prefer delegating these functions to other health care providers, such as local departments of health, those arrangements should be allowed to continue. However, the PCP should make the decision to delegate, contingent upon specified written agreements or protocols outlining how medical information pertaining to shared patients will be communicated between the PCP and delegated THS provider. The intent of these protocols is to ensure that the patient's medical home is receiving feedback on the outcome of THS exams and that the PCP can provide follow-up diagnostic services and treatment where appropriate.
  • Continue to support Medicaid disease management (enacted during the 78th legislative session).
  • Advocate inclusion of community-based elderly and patients with disabilities into PCCM in lieu of STAR+PLUS HMO. Together, these patient populations account for more than 20 percent of Medicaid enrollment but 70 percent of the costs. Many patients who are elderly or have disabilities have multiple illnesses and physical limitations. To improve the quality of their care while minimizing costs, it is critical that services be closely coordinated across medical and social disciplines (medical, social services, and long-term care).