Modernize Medicaid MCOs with Value-Based Payment Initiatives

Written Testimony by Ryan Van Ramshorst, MD

House Human Services Committee

April 24, 2018

Submitted on behalf of:

Texas Medical Association

Texas Pediatric Society

Texas Academy of Family Physicians

Texas Association of Obstetricians and Gynecologists

American College of Obstetricians and Gynecologists District XI - Texas Chapter


The committee will meet to consider Interim Charge 2, a review of managed care in Texas. In particular, the committee will focus on the following: 

  • Review the history of Medicaid Managed Care in Texas and determine the impact managed care has had on the quality and cost of care.
  • Review initiatives that managed care organizations (MCOs) have implemented to improve quality of care and determine whether MCOs have improved coordination of care.
  • Review the Health and Human Services Commission's (HHSC) oversight of MCOs, and make recommendations for any needed improvement. 

Chairman Raymond and committee members, thank you for the opportunity to testify. I am Ryan Van Ramshorst, MD, a practicing pediatrician in San Antonio, and chair of the Texas Medical Association’s (TMA’s) Select Committee on Medicaid, CHIP, and the Uninsured. Today I will be speaking on behalf of TMA, the Texas Pediatric Society, and the other medical societies listed at the top of my written testimony. 

If any of you are familiar with the movie the Sound of Music, Medicaid is a bit like the lead character Maria — beloved and confounding. An angel and a demon. Medicaid is indispensable to the patients it serves, highly efficient at containing costs, and an innovation laboratory, often the forerunner for creative value-based arrangements. At the same time, it is undoubtedly exasperating and burdensome to patients and physicians.  

Though far from perfect, Medicaid matters. A study conducted in 2016 found that Texas Medicaid health plans perform comparably to commercial PPOs on key maternal and pediatric access-to-care and quality measures.[i] Further, a study from the National Bureau of Economic Research found that childhood Medicaid coverage reduces adult rates of chronic disease and disability, while increasing future employment. [ii]

Medicaid is a crucial partner in addressing the state’s most pressing health care challenges, including improving maternal health outcomes and advancing early intervention, treatment, and recovery for people with mental illness and/or substance use disorders.  Moreover, for Texas’ most vulnerable children — those with physical or intellectual disabilities or who are in foster care — Medicaid links them to the services they need to thrive. This can range from long-term care services and supports for children with physical or intellectual disabilities, to early trauma-informed evaluations of children taken into protective custody to help devise treatment plans that address their emotional, psychological, and physical well-being. 

According to the Texas Conservative Coalition Research Institute, careful scrutiny of Texas Medicaid’s costs shows that caseload, not per-person expenditures, drives Medicaid cost growth. Caseload accounts for 6.2 percent of annual cost increases compared with per-member per-month costs of 1.1 percent. [iii]  

Key to Texas Medicaid’s performance is the growing use of value-based payment (VBP) initiatives — dynamic partnerships between physicians, clinics, and health plans to improve patient outcomes while lowering costs. VBP represents the next evolution in managed care. Without VBP, Texas Medicaid would have no choice but to rely more heavily on outmoded cost-containment strategies — including more red tape and hassles, an outcome no one wants. TMA has begun to catalogue Medicaid VBP. The approaches are as varied as Texas’ people and places, but examples are:

  • Rewarding physicians for offering same-day appointments or after-hours services to help reduce inappropriate emergency department usage;
  • Building a “pregnancy medical home” to coordinate and integrate all the services women need throughout pregnancy, including behavioral health services for women diagnosed with perinatal (postpartum) depression or a substance use disorder;
  • Co-locating physical and behavioral health services so that patients with multiple health needs, such as diabetes and depression, can obtain care at a central place; 
  • Partnering with social service and private organizations to remediate environmental factors within a child’s home, such as mold or dirty carpet, that exacerbate asthma and contribute to higher emergency department usage; and
  • Training primary care physicians in the STAR Kids network in one of three different levels of patient-centered medical homes — elementary to advanced — based on the needs of practice, thus allowing physicians to gain practical and financial experience with VBP.

For all its good, Medicaid nevertheless confounds. It is replete with outdated paperwork and bureaucracy, much of which evolved during the Medicaid fee-for-service (FFS) era but makes little sense in managed care. The Texas Health and Human Services Commission (HHSC) and the state Office of Inspector General (OIG) administer the program with feet firmly planted in both the managed care and the FFS worlds, inadvertently creating redundant or conflicting guidance for plans — and by extension for network physicians. Furthermore, vestiges of FFS hamstring health care delivery innovation while also inadvertently fostering mistrust and frustration. Examples are: 

  • Opaque managed care organization (MCO) contract amendment process, resulting in new policy guidance to the plans without the benefit of public input.
    • Major MCO policy changes are often enacted via amendments to the Medicaid Uniform Managed Care contract or manual, precluding opportunity for public comment, which is a key element to ensuring the new policy serves the best interest of Medicaid patients, physicians, and the state.
  • Lethargic HHSC process and procedures to update existing or add new Medicaid medical, dental, prescription, and long-term care policies, resulting in outmoded standards of care.
    • HHSC staff are tasked with updating policies, yet the agency often takes six months or more to do so, handcuffing efforts for physicians and plans to adapt quickly to more cost-effective ways to provide care. Often, by providing the new service or additional tests, the physician or provider and MCO can lower costs by preventing more expensive services, such inpatient hospital care.
  • Inconsistent Medicaid FFS rules and policy, resulting in red tape and/or recoupment of payments, often years later.
    • HHSC and OIG must eliminate outdated vestiges of FFS that do not protect patients, physicians, or providers. TMA continues to hear about the OIG requesting recoupments when plans relax prior authorization (PA) requirements for high-performing physicians or providers, or the plan’s payment policy is inconsistent with FFS policy. Anecdotally:
      • An MCO that entered into a value-based payment arrangement with therapists attempted to relax burdensome FFS prior authorization requirements for a high-performing group, but OIG notified the plan it must abide by the FFS rules; and
      • An OIG auditor questioning the authority of a plan to pay primary care physicians higher rates for services offered on evenings or weekends, arguing that if the physician practice publicized it offers services after 5 pm and/or on Saturday, then the practice’s extended office hours are not actually “after hours” — a ruling that could completely undermine the plan’s efforts to reduce emergency department usage. 

If Texas wants physicians to enter into alternative payment arrangements, then physicians cannot fear that a year later OIG will recoup payments for doing the right thing just because MCO and FFS contracts are misaligned.

As managed care has proliferated, so too has the amount of red tape. Texas has multiple health plans for each product type — STAR, STAR+PLUS, and so forth. Physicians who contract with multiple Medicaid MCO plans must contend with different PA requirements for each, though such red tape brings no concomitant increase in quality. Most prior authorization requests are ultimately approved, so imposing them only increases physician overhead while delaying care. Thankfully, some MCOs have taken steps to limit PAs only to those services that are very expensive and/or highly specialized. Other plans regularly review their PA requirements to eliminate those of low or minimal value. These best practices should be replicated across all Medicaid MCO plans. Further, when PA is still required, there should be process to exempt high-performing practices from complying. 

Care coordination also remains inordinately confusing and time consuming, well short of its intended goals. The intent of care coordination is to ensure patients, particularly those with the most significant needs, get the right care at the right time, as well as to assist physicians successfully transition patients from one level of care to another, such as from an inpatient stay to the community, where follow-up care may be needed. But these connections are not happening routinely. For the newest Medicaid managed care program, STAR Kids, physicians routinely report they are unable to identify and contact service coordinators. Families and patients also do not know who their service coordinator is and in many cases have never heard from them. Some physicians will try to call and help them figure it out, but end up reaching dead ends. 

As the state works to reprocure MCO contracts, we feel we also must convey our collective worry about competitively bidding Medicaid MCO contracts. On paper, competitive bidding sounds reasonable, but we fear competitive procurements will shift emphasis away from best value and instead force the agency to consider only the lowest price. Such a process likely will disadvantage community-based MCOs, which finance care for the sickest in their local communities and may be unable to price their products as aggressively as larger for-profit plans seeking to gain market share. Conversely, in a few other states where competitive bidding has been attempted, plans submitted higher-cost bids, forcing states either to pay more or walk away.  

Community-based MCOs anchor the program in the communities where they operate. Their community ties and collaborative approach to managing patient care make them the most popular among our members (though none are perfect). As good neighbors, they also act as models for other plans in the market. Indeed, organized medicine fought to require community-based MCOs in Medicaid managed care in the first place, because health care is best delivered at the community level.

Ensuring qualified community-based plans operate in each market and expanding their offerings to include all Medicaid MCO product lines (such as STAR+PLUS) is key to our mutual efforts to avoid further erosion in Medicaid physician participation. 

To ensure Medicaid managed care works for patients, physicians, and the state, our organizations make the following recommendations: 

  • Provide stakeholders at least 10 days to review and comment on major Medicaid MCO contract amendments by posting proposed language on the HHSC website. HHSC has a similar policy to seek public comment on proposed medical policy revisions.
  • Require the Medicaid MCOs, Texas Vendor Drug Program, and Texas Medicaid and Healthcare Partnership to annually review prior authorization requirements and eliminate or streamline those with low value. If PA is retained, the rationale for doing so should be posted publicly.
  • Clearly state within Medicaid rules and contracts that Medicaid MCOs have the authority to enter into alternative payment arrangements and exempt “Gold Starred” practices from burdensome prior authorization requirements.
  • Eliminate outdated vestiges of FFS that do not protect patients, physicians, or providers by working with physicians, providers, plans, and patients to catalogue inconsistent and outmoded policy and practices.
  • Establish a process to allow health plans to implement an interim medical or drug policy when HHSC has not been able to implement a new or updated policy so long as the interim policy benefits patient care.
  • Streamline and simplify care coordination, including requiring care coordinators to coordinate care with the people who actually provide it by establishing a clear reference document outlining what care coordination services are available by plan type, a mechanism for physicians to quickly and securely communicate with the patient’s plan that care coordination is needed, and timeframes in which care coordinators must connect with a patient’s primary care physician and specialists as well as the patient.
  • Ensure qualified community-based plans operate in each market and expand their offerings to include all Medicaid MCO product lines (such as STAR+PLUS) to avoid further erosion in Medicaid physician participation. 
  • Publicize details regarding MCOs compliance with Medicaid network adequacy requirements, including corrective action plans for MCOs who are not in compliance.
  • Identify where there are opportunities to recruit additional physicians through HHSC mapping of participating Medicaid managed care physicians to physicians in direct practice by community and specialty.

Lastly, it goes without saying that Medicaid’s low costs per person are due in part to low payment rates for physicians. Medicaid physician payment rates have not received a meaningful, enduring payment update in more than a decade. Physician payments also are not indexed to inflation, meaning that each year Texas fails to increase payments, the farther Medicaid payments fall behind commercial payers and Medicare. The Texas Medicaid 1115 transformation waiver and other hospital supplemental funding methods give some relief to our hospital partners, but there is no similar program for physicians. Medicaid managed care plans can do only so much. While some plans pay higher payments for some physician specialties or services, many specialties are left out, particularly subspecialties. Texas must find a way to increase physician Medicaid payments.

[i] Texas Medicaid Performance Study 2016, The University of Texas School of Public Health on behalf of Methodist Healthcare Ministries.

[ii]  The Long-Run Effects of Childhood Insurance Coverage: Medicaid Implementation, Adult Health, and Labor Market Outcomes, National Bureau of Economic Research, Andrew Goodman-Bacon, December 2016.

[iii] Texas Conservative Coalition Research Institute, Evaluating the Cost-Effectiveness of Medicaid Managed Care, March 2018. 

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Last Updated On

May 17, 2018