TMA Offers Cost-Cutting Suggestions

 TMA Testimony by Heidi Schwarzwald, MD

Senate Finance Committee
Health and Human Services Commission
Heidi Schwarzwald, MD

Feb. 3, 2017

Submitted on behalf of:

  • Texas Medical Association
  • Texas Pediatric Society
  • Texas Academy of Family Physicians
  • Federation of Texas Psychiatry
  • American Congress of Obstetricians and Gynecologists — District XI (Texas)
  • Texas Association of Obstetricians and Gynecologists

Thank you for the opportunity to comment regarding strategies Texas might consider to mitigate rising health care costs in Medicaid and other tax-payer funded programs. Without a doubt, this issue is one of the most vexing — and intractable — issues facing health policymakers, patients, and physicians.  Looking back at testimony from our organizations, there are very few sessions over the past decade when this issue hasn’t arisen in one form or another. We say this not to minimize the challenge, but to amplify that there is no simple solution.  

Multiple factors contribute to higher health care costs, ranging from dysfunction within the overall health care system, including burdensome paperwork and regulations, an aging population, and rapid increase in chronic diseases such as diabetes and heart disease, to medical innovations, including new drugs that treat or even cure illnesses heretofore with poor prognoses. Additionally, mounting evidence shows that social determinants of health — poverty, lack of education, unhealthy physical environments, and early childhood trauma, among other challenges — contribute to poor health. 

Innovative care delivery models are forging new partnerships to address many of these factors.  Many show promise in reducing unnecessary care as well as health care costs. But it will take a concerted effort by all stakeholders — regulators, payers, physicians, providers, and patients — to crack the proverbial health care cost nut. Our organizations are committed to working with you to identify and support prudent, evidence-based reforms to constrain Medicaid costs. We offer the following for your consideration. Over the next couple weeks, we will evaluate additional proposals identified by you, our members, and other stakeholders. 

Expand and Promote Value-Based Initiatives 

The Health and Human Services Commission (HHSC) contractually requires Medicaid HMOs to implement innovative new delivery models in partnership with physicians and providers. Referred to commonly as value-based payment initiatives or alternative payment models, they range in scope and services but with the common goal of ensuring care is delivered in the most appropriate setting for the patient’s condition. Currently within Medicaid, there are numerous variations of value-based projects (VBPs) (see attached report, Overview of Texas Medicaid-CHIP MCO and DMO Value-Based Contracting Initiatives in 2016).  Most Texas physicians practice in solo and small groups. Accordingly, most of the VBP initiatives currently involve straightforward financial rewards, for example, for improving timeliness of services, such increasing number of same-day appointments and/or offering after-hours care, or meeting predetermined quality metrics, such as early-entry prenatal care. However, some larger physician entities have partnered with health plans to implement “episode of care” models where the practice is paid a set amount for the all the medical services provided in a certain time frame for a particular illness, such as cancer or cardiac care. Physician-led accountable care organizations (ACOs), which accept full or partial or full financial risk for medical care across a patient’s continuum of need, also are popping up. 

While data are still sparse, early evidence indicates that innovative physician-managed care organization partnerships can do what they aim to do: reduce costs while improving access and quality. The Texas Children’s Health Plan pregnancy medical home initiative is but one example (see separate slides). In the Valley, two large physician-led accountable care organizations seek to partner with HHSC to establish Medicare-Medicaid to improve care coordination for patients dually eligible for Medicare and Medicaid. Our organizations strongly support expanding value-based payment initiatives, starting with establishment of a best practice learning network to help HMOs and physicians come together to learn about promising VBP approaches and how to replicate them. To succeed, value-based payments must actively involve practicing physicians in their design to address common operational concerns about the model, including potentially burdensome reporting requirements or lack of usable data or analytical support. Further, VBP opportunities must be communicated clearly to physicians.  A regular complaint from physicians interested in VBP arrangements is either they do not know how to initiate the dialogue with a plan about potential partnerships or the plan does not respond to the practice’s overtures.  

Approximately 70 percent of Texas physicians practice in groups of eight or fewer physicians. As such, not all VBP models will work for all practice types. Plans should be required to offer an array of VBP opportunities that will allow physicians with varying VBP expertise and experience to participate.  For example, small physician practices might not be able to meet all of the criteria of a certified medical home, but could meet some of them. Practices should be offered incentives for even incremental changes. Larger physician practices may be interested in more sophisticated models, such as bundled payment arrangements or forming ACOs. These must be voluntary, particularly if there is any “down-side” risk. 

We also support allowing VBP initiatives have the flexibility to offer value-added services such as supported housing for adults and wrap-around services focused on overall school success in children and adolescents. Lack of housing, food insecurity, and other socioeconomic factors contribute to poor health outcomes. Without the ability to address these issues, even the most well-run alternative payment programs may struggle to achieve long-term cost savings because medical care is just one factor in improving health outcomes. 

Further, any mandatory alternative payment arrangements should reward physicians for improving quality rather than imposing penalties, which likely would result in physicians leaving Medicaid. Best practice performance measures must be harmonized across payers to avoid challenges of collecting and reporting different data sets for Medicaid, Medicare, and commercial payers.

Reform Medicaid Vendor Drug Program

One of the most vexing, complaint-inducing aspects of Medicaid is the mind-boggling complexity and daftness of the vendor drug program. Under current law, the program is ruled by two masters — the Health and Human Services Commission, which develops and oversees a single, statewide Medicaid formulary and preferred drug list (PDL) and the Medicaid HMOs, which administer the drug benefit according to HHSC policy and rules. The legislature devised this approach in 2011 with good intentions (and with medicine’s support) to minimize complexity and paperwork for patients and prescribers. In reality, it has not worked that way. The current process is plagued with bureaucracy and confusion.

As just one of myriad examples, a drug designated “preferred” on the preferred list still may be subjected to prior authorization because it is also subject to what are called clinical edits — additional safety or utilization edits. Many of the clinical edits, which are designed by a committee of physicians and pharmacists, are indeed warranted, such as those to prevent adverse drug reactions or to restrict certain drugs (e.g., antipsychotics) to patients above a certain age. But the contractor that develops the PDL is different from the one that develops the clinical edits, meaning the two processes are not integrated. Physicians often prescribe a preferred drug thinking no additional approval is needed, only to get a call from the pharmacist saying the drug denied due to a clinical edit. When TMA recommended that a website and electronic portal be developed to avoid the confusion, it was told it would take 18 months or more to integrate the two.  

Another complaint is that the state-administered Medicaid PDL, unlike commercial or Medicare drug lists, often designates brand-name drugs as preferred. This is because HHSC is required to negotiate supplemental rebates with drug manufacturers to get the lowest price. A drug for which there is no supplemental rebate cannot be considered preferred (except in rare circumstances). Because cost is a driving factor in what drugs are considered preferred, it is easy for manufacturers to manipulate the process to ensure the brand-name drug is treated preferentially.

Under current law, the current bifurcated management of vendor drugs will expire at the end of this biennium, meaning the Medicaid HMOs will assume full management of the vendor drug management. An HHSC analysis of the cost-savings potential of proceeding with full carving in of the drug benefit into HMOs indicates it will reduce Medicaid general revenue costs $40 million annually. In a budget environment as difficult as this one, our organizations thus support carving in the drug benefit in the hopes of eliminating or mitigating the need for other, more damaging cuts, such as reducing Medicaid services or coverage.  

While allowing the HMOs to fully manage the drug benefit will reduce costs and allay some physician administrative concerns with VDP, it raises other concerns, including the potential that the HMOs will decrease utilization by requiring greater use of step therapy or adopting utilization management criteria inconsistent with best practices or clinical evidence. To address these concerns, physician leaders are collaborating with the Medicaid HMOs to develop statutory safeguards to protect patients. Among the reforms supported by medicine and health plans are: 

  • Ensuring prescription drug continuity of care when patients enroll in a Medicaid HMO or switch plans;
  • Grandfathering patients taking selected brand-name drug classes from being required to switch to a generic, including antipsychotic, antidepressant, and anticonvulsant drugs;
  • Limiting the number of step therapy attempts and establishing easy, expeditious “prescriber prevails” protocols for physicians to override a step therapy protocol because it is not clinically indicated or the patient has previously tried and failed a step therapy protocol;
  • Requiring HMOs to publish rationale for step therapy and clinical criteria used to develop it; and
  • Establishing a standardized approach to developing and reviewing step therapy criteria to ensure cross-plan consistency. 

While the details are to be hashed out, there is an agreement in principle to these reforms.

Continue Efforts to Improve Maternal and Birth Outcomes

Working with physicians and other stakeholders, Texas has initiated innovative programs, such as the Healthy Texas Babies Initiative, Healthy Texas Women programs, and regional perinatal care system to improve the lives of mothers and children. These investments have paid off.  Over the past decade, Texas’ rate of premature babies has steadily declined, low-income women losing Medicaid face fewer barriers to preserving access to preventive care via Healthy Texas Women, and hospitals and physicians will soon implement evidence-informed neonatal levels of care ¾ that will be followed soon by maternal standards of care  which will promote the right level of care for babies at birth.

But while birth outcomes data show important improvements, distressingly, in 2016 two independent reports  found Texas’ rate of maternal mortality more than doubling over the past two years, with African-American women at the greatest risk of death. Indeed, black women account for 11.4 percent of births but 28.8 percent of maternal deaths. Multiple factors contribute to the higher maternal mortality/morbidity rates, with experts baffled by why Texas’ rates far exceed that of other states. But there are useful, evidence-informed steps Texas can take in the next biennium to improve the lives of mothers and babies — and reduce costs. 

We respectfully urge you to reject reductions in Medicaid and Children’s Health Insurance Program eligibility for pregnant women, a potential cost-containment measure identified by the Health and Human Services Commission. Early and ongoing prenatal care is vital not only to ensure pregnant women receive important preventive care, such as vaccines and nutritional counseling, but also to detect and manage behaviors and illnesses that may affect the health of the mother and baby, including smoking, high blood pressure, substance abuse, and diabetes, all of which contribute to poor birth outcomes.  

Babies born prematurely cost roughly 18 times more than a full-term baby. Over the first year of life, HHSC estimates a premature baby will cost Texas Medicaid an average of $100,000, while a full-term baby a tiny fraction of that: $572. Further, cardiac disease and behavioral health issues are the highest contributors to maternal death and severe illnesses in Texas.  

We also respectfully recommend the following: 

  • Implement coverage for postpartum (perinatal) depression screening during the well-child exam. During a child’s first year of life, the mother frequently will interact with the child’s physician, providing an opportunity to evaluate the mother’s mental health at the time via a standardized screening tool. Postpartum depression is linked to poorer short- and long-term physical and behavioral health outcomes among mothers and children. By treating depression early, Texas can improve lives while lowering Medicaid and societal costs.
  • Invest in services to prevent maternal mortality or morbidity, including interconception care for women at high risk of future preterm pregnancies or postpartum complications.
  • Enact robust outreach efforts to increase uptake of long-acting reversible contraceptives, which are 20 times more effective than other forms of contraception, thus reducing unplanned pregnancies and abortions. 
  • Maintain funding for the Healthy Texas Women and Family Planning programs, which provide women preventive health services, including well-woman exams, contraceptives, cancer screenings, and treatment for illnesses such as hypertension and diabetes.    

Test Promising, Innovative Strategies to Reduce Emergency Department Utilization

Using dollars available under the Medicaid 1115 waiver Delivery System Reform Incentive Payment (DSRIP) program, several emergency medical service providers in Texas initiated pilots to test paramedics providing nonurgent primary care in the field (under physician direction) rather than transporting patients to the emergency department. Prior to the pilots, analyses of emergency department data revealed a small number of patients — often with one or more chronic physical and/or behavioral health disorders — relied on the local emergency department for primary care or other services, such as prescription refills, or even to get a meal. Under the model, after the paramedic assesses the patient, if it is determined no urgent care is needed, the EMS team instead makes an appointment for the patient the following day in a community clinic to ensure medical needs are met. In some cases, if the patient needs nonmedical services, such as food services, Meals on Wheels or other social services are arranged. 

Technical and payment issues have stymied the model in Medicaid, but outcomes data from several DSRIP projects indicates reduced emergency department usage among patients connected to these programs.

Deploy Advanced Care Coordination Models for Patients With Complex Medical Needs

According to the Center for Medicare & Medicaid Services, 5 percent of Medicaid patients account for 54 percent of total Medicaid expenditures, and 1 percent of Medicaid beneficiaries account for 25 percent of total Medicaid expenditures. Among this top 1 percent, 83 percent have at least three chronic conditions, and more than 60 percent have five or more chronic conditions. These patients are known as “super utilizers” because they often rely on emergency departments for care better delivered in a community clinic or physician’s office. 

Across the country, entities have formed to better address the complex needs of these patients. Two years ago, Houston physicians, health systems, Medicaid HMOs, community clinics, criminal justice entities, and social service agencies came together to establish a “unified” safety net, known as the Patient Care Intervention Center (PCIC), with the goal of eliminating silos that cause duplication of services or prevent chronically ill patients from obtaining timely medical care, or both, thereby contributing to poorer health outcomes and higher costs.  

A team of physicians, nurses, behavioral health specialists, emergency medical personnel, and community health workers work collaboratively to provide and coordinate PCIC patients’ care. In addition to traditional medical services, such as primary, specialty and behavioral health care, patients in PCIC receive home visits, assessments of their ability to perform tasks of daily living, health care education, and a dedicated care manager to facilitate making and keeping appointments and complying with a care plan. Because “social determinants of health” (as described above) are frequently cited as a contributing factor to PCIC patients’ health outcomes, the initiative also works with local affordable housing entities, food banks, and other social service agencies to remove nonmedical barriers that may impede patients’ ability to effectively manage their own health. Most of the PCIC patients lack health insurance, but the program also enrolls Medicaid patients.

According to PCIC, which PBS television recently profiled, the initiative saw a combined reduction in hospital and emergency department usage of 59 percent, saving $1.6 million over a 12-month period.

Bolster Community-Based Behavioral Health Services

Texas’ population is rapidly growing. Yet current reporting informs us that only a small percentage of those in need of care are able to access mental health and substance abuse systems. Poor access to care puts a financial burden on the criminal justice system, schools, hospitals, and publicly funded programs — such as Medicaid — due to increased rates of incarceration  and higher use of public hospital emergency departments, homeless shelters, and the foster care system. Physicians support working with local mental health authorities to promote access and improve quality of our state and local public health behavioral systems. 

To build on the state’s behavioral health investments, we recommend the following: 

  • Promote increased use of medication-assisted therapy for patients with substance abuse disorder;
  • Expand availability of the state’s neonatal abstinence syndrome (NAS) program;
  • Promote early use of naloxone for opioid overdoses to reduce rates of overdoses and fatalities;
  • Expand availability of support services such as housing assistance and peer specialists to avert high-risk patients from repeat incarcerations or frequent visitation to hospital emergency departments; and
  • Renovate state hospitals to protect patient safety while also growing innovative partnerships with community hospitals to expand inpatient mental health capacity. 

To ensure these populations gain and maintain access to these services, we encourage you to ensure those with substance use disorders who are dependent on public behavioral health services have access to evidence-based medication-assisted therapy and supportive care. We believe investing in these services, and also expanding support services for women and newborns at risk of neonatal abstinence syndrome, can provide a lasting impact. The Texas Department of State Health Services’ NAS program provides resources to help pregnant women, mothers, and their babies access support services to address opioid misuse. These supports can play an integral role in preventing infant withdrawal symptoms by giving them access to the recommended treatments. The Population Health and Management Journal (2015) studied infants from a large Medicaid plan born with NAS, and found an average length of stay of 21 days in the hospital. They estimate a hospital stay half as long would correspond to $396 million saved annually. By investing in these support services, we can reduce incidence or severity of NAS, in turn costing the state less in Medicaid funds, and resulting in shorter hospital stays for mom and baby. Keeping children and families close to their support networks only enhances their rates of success in recovery.

About one in four adults is affected by mental illness each year, and almost half of all adults are expected to be affected by mental illness during their lifetime. Keeping the focus on local choice and options for community needs, we have an opportunity to fill gaps and enhance crisis services. For example, as long as the state ensures people in an emergency can access naloxone for opioid overdoses, more lives can be saved. We encourage supporting state hospital-based and community center-based initiatives in partnership with state academic medical centers to improve access to quality care for those experiencing a behavioral health crisis. These partnerships can impact our ability to provide essential repairs, renovations, and new construction for our state hospitals. 

Texas officials have recognized that residents with mental illnesses disproportionately reside in Texas prisons and jails. In 2012, nearly 20 percent of the adult offenders in Texas state prisons, on parole, or on probation were former patients of Texas’ mental health system. Supporting the diversion of competency restoration — allowing patients to receive mental health care programming rather than incarceration — ensures those with mental illness are getting the services they need, in an environment that supports their success. Moving those individuals from high-demand inpatient state hospital beds to mental health services in their community can result in substantial cost savings and a return on investment in behavioral health prevention and early treatment. Savings vary by the type of intervention, such as care in an emergency department versus having access to a community-based crisis stabilization bed, over being in jail rather than in a jail diversion program. However, for those in need of a higher level of care, we must ensure we maintain psychiatric bed capacity across the state.

Lastly, addressing these gaps by investing in mental health services ultimately will pay for itself through reduced incarceration and emergency department costs, and healthy development of some of our most vulnerable children. We must continue to work to ensure these needs are met and that we provide the utmost care to some of our most vulnerable populations.  

Invest in Proven Public Health Initiatives to Reduce More Costly Chronic Disease   

In less than 15 years, one in five Texans will be 60 years old or older, and a great proportion of these likely will have one or more chronic diseases — diseases that often mean a person is unable to participate fully in the normal activities of daily living. Chronic conditions like arthritis, cancer, diabetes, and cardiovascular diseases are most likely to cause disability. But aging does not have to lead to disability from a chronic disease. State chronic disease prevention programming can enable individuals and communities to access programs that we know help prevent or mitigate a chronic illness. For example, programs that support physical activity and healthy eating can slow the rate of increase of overweight and obesity in Texas children and adults.  

While physicians can advise our patients that a healthy lifestyle is essential to healthy aging,   the preventive and clinical care we offer our patients in the medical home — or other alternative payment models — is most effective when complemented with strong public health services. The collaboration between medicine and public health presents the best opportunity to reduce and manage the chronic conditions and disabilities associated with aging. For this to work, we need your continued support so that state and local public health agencies have the ability and resources to provide services and programming.   

We are also greatly concerned about reductions in tobacco-control activities. Each Texas household already pays hundreds of dollars each year for the costs of smoking in our state. The reductions in tobacco control will have an immediate impact on current effective efforts to promote use of the Texas tobacco Quitline, support local tobacco control coalitions, reach out to children and youth on tobacco use, and maintain the current level of tobacco enforcement activities. These reductions would be shortsighted and will only contribute to increased budget costs in the future. Tobacco use is associated with costly and potentially preventable hospitalizations, which represent substantial costs to the Medicaid program and other programs across the state.

The Centers for Disease Control and Prevention concurs that tobacco-related diseases contribute significantly to Medicaid costs. State-level, smoking-attributable medical expenditures among adult Medicaid recipients range from $40 million in Wyoming to $3.3 billion in New York. Texas’ costs are estimated at $943 million. Reducing smoking rates among Medicaid patients is a constructive approach to reducing costs while saving lives. 

We understand the many complex decisions you will face as you work to achieve a balanced budget this session. But investing in evidence-based care delivery, public health, and mental health interventions is the only sure-fire way to ensure Texas does not experience even higher price tag in the future. 

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Last Updated On

February 04, 2017