Stretching Medicaid

Texas Hopes to Do More With Less  


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Cover Story - September 2006   

By  Ken Ortolon
Senior Editor  

Texan pride makes us reluctant to believe another state has a better idea than we do. But sometimes one does.

Such is the case with the Medicaid monster that threatens to wreck the state budget unless Texas finds a more efficient way to provide health care for our state's most vulnerable citizens.

Medicaid reform will be a top priority for the Texas Medical Association and legislators when the legislature convenes in January, thus they are looking at what other states are doing to cut costs while maintaining patients' access to care. Texas may find some of them have come up with ideas that could work here.

Take our neighbor, Arkansas, for example.

Small business is the backbone of the Arkansas economy, employing nearly half the state's workforce. But small businesses there find it difficult to afford health insurance coverage for their workers.

"Close to half of our workforce in Arkansas work for some type of small business, and of those small businesses, two-thirds do not offer health care coverage," said Julie Munsell, director of communications for the Arkansas Department of Health and Human Services.

More than 400,000 Arkansans lack health insurance, even though most are part of working families and a third earn more than 200 percent of the federal poverty level.

To close that coverage gap, Arkansas will try a pilot project to use federal and state Medicaid dollars to partner with employers to provide basic health coverage, not only for low-income workers but for all workers in businesses with 50 or fewer employees.

Called the Arkansas Safety Net Program, it is just one of numerous innovative programs that states from Massachusetts to West Virginia to Utah are rolling out. These come under waivers from the U.S. Centers for Medicare & Medicaid Services (CMS) or new flexibility Congress recently granted to revamp Medicaid program components such as benefit packages and cost-sharing arrangements.

Arkansas officials say they expect the program to expand coverage to the uninsured and reduce Medicaid costs and uncompensated care provided by hospitals by reducing inappropriate use of emergency departments. The state, however, does not have a savings estimate.

The flurry of activity around the country is driven by escalating Medicaid costs and rising numbers of uninsured.

"What I'm seeing the other states doing," said Texas state Sen. Robert Deuell, MD (R-Greenville), "is trying to cut costs, but the primary factor is that they're trying to deliver health care to more people."

Projects launched in other states have piqued the interest of Texas lawmakers, such as Senator Deuell, who attended the National Medicaid Congress in Washington, D.C., in June, where many of these plans were discussed. He hopes to work with Gov. Rick Perry, Senate Health and Human Services Committee Chair Jane Nelson (R-Flower Mound), and others to craft legislation for 2007 that might bring some of the best ideas from other states home to Texas.

"I always approach legislation as 'What is the problem that you're trying to solve?'" Senator Deuell said. "The problem we're trying to solve right now is that 26 percent of our budget [going to Medicaid] is not sustainable."

Texas budgeted $37.9 billion for Medicaid for the 2006-07 biennium, including $14.2 billion in state funds and $23.7 billion in federal matching dollars. The Children's Health Insurance Program (CHIP) is slated to spend another $1.44 billion during the biennium, including $444 million in state funds and $1 billion in federal dollars. 

Staying Flexible  

Last year's Deficit Reduction Act (DRA) gives states greater latitude to design benefit packages for Medicaid recipients, particularly those in the optional populations that states are not required to cover to receive their federal Medicaid matching funds. For example, the federal government requires all states to cover pregnant women and newborn children up to 133 percent of poverty. Texas, however, covers an "optional" group of pregnant women and newborns up to 185 percent of poverty.

The bill also grants flexibility in designing cost-sharing schemes, such as copayments, and allows states to more tightly monitor asset transfers that seniors might use to inappropriately qualify for Medicaid long-term care coverage.

The changes were recommended by the National Governors Association (NGA), which says they resulted from a bipartisan effort to enhance Medicaid and save both states and the federal government money.

Jennifer Michael, senior legislative associate for the NGA Health and Human Services Committee, says CMS must still approve each state's plan amendments, but that process will be much less cumbersome and time-consuming than the waiver process.

So far, states are using their new flexibility to tailor benefit packages to the specific health needs of their populations.

"If you look at the first few states out of the box to start implementing some changes using the DRA flexibilities - West Virginia, Kentucky, and Idaho - they all have really changed their program in a way a lot of states have been wanting to. And one of the big areas that's most identifiable is really just around benefit flexibility. States weren't able to target certain health needs. They weren't able to tailor benefit packages for health care needs or health care needs by certain populations or by certain areas."

In Idaho, for instance, 50 different Medicaid eligibility categories have been reduced to three separate programs with their own distinct benefit packages.

  • The Benchmark Basic program, for low-income healthy children and adults, covers most traditional Medicaid benefits except long-term care, organ transplants, and intensive mental health treatment.
  • The Enhanced Benchmark program, for the elderly and people with disabilities or special health needs, covers all traditional Medicaid benefits, including long-term and institutional care.
  • Finally, the Coordinated Benchmark program will provide all traditional state Medicaid benefits for elderly residents eligible for both Medicaid and Medicare. Enrollees must register for both Medicare Part B outpatient services and the Part D prescription drug program.

The plan also implements a pay-for-performance program in community health centers and establishes personal health accounts that offer credits for good health behavior.

Senator Deuell says the West Virginia proposal provides a plan with enhanced benefits, such as dental care and eyeglasses, for those who attend health classes, keep their doctor appointments, and avoid inappropriate use of emergency departments. Those who don't agree to those conditions or fail to live up to them get a more basic benefit package.

While personal responsibility is a feature of many state proposals, critics question the wisdom of West Virginia's approach, particularly if the state intends to apply it to children. Federal law prohibits any reduction in benefits for kids who fall within the mandatory populations.   A court challenge is expected. 

Gauging the Impact  

Ms. Michael says the NGA believes the new flexibility will be a boon to states' efforts to stretch their Medicaid dollars and enhance coverage, but much will depend on how open CMS is to new ideas. So far, it appears the agency is working well with states to get new approaches in place.

Still, some say not all states are likely to benefit equally from the new flexibility. A TMA analysis of the DRA indicates Texas may not get much benefit from the law because it covers few optional populations.

Texas Health and Human Services Commission (HHSC) spokesperson Stephanie Goodman agrees, saying that new cost-sharing options would be available only for a limited population in Texas and for limited services. "In other states that have broader coverage of nonmandatory populations, cost sharing is likely to have a more significant savings potential and impact."

HHSC also says Texas already does some of the things included in the DRA reforms, such as its pharmacy program that bases drug reimbursements on actual manufacturers' cost data.       

"Federal reform will use a similar approach by providing cost information to states," Ms. Goodman said. 

The Waiver Stampede  

Several states were proceeding with Medicaid reform plans under CMS waivers even before the DRA provisions were enacted. Foremost among these may be the highly touted Massachusetts plan that incorporates a Medicaid waiver into a larger proposal to provide universal coverage. Florida also has launched a pilot project to combine managed care and a defined-contribution approach for some 200,000 Medicaid beneficiaries in two counties.

The Massachusetts plan uses a CMS waiver to expand Medicaid coverage for children up to 300 percent of poverty. It also uses state and federal dollars to help families earning up to 300 percent of poverty buy health insurance, with a sliding scale premium based on income.

A poll of the TMA House of Delegates in May found members believed some elements of the plan are appealing, but they were skeptical that it could work in Texas. (See "Massachusetts Insurance Plan Gets Mixed Review From Texas Doctors," July 2006 Texas Medicine , pages 24-25.)

The Florida plan allows Medicaid recipients to select from a menu of managed care plans. There is a maximum yearly benefit, as well as enhanced benefit accounts to encourage healthy behavior by Medicaid enrollees. Enrollees can use the accounts to pay for things such as over-the-counter drugs, smoking cessation and weight reduction programs, and other noncovered health services.

Florida officials say the reforms will not lead to cuts in the state's Medicaid budget but will bring predictability to Medicaid spending and reduce its rate of growth. Florida expects to hold spending growth to 8 percent in the first year of its program and 3 percent the second.

Some Texas lawmakers are interested in the Florida plan, including House Appropriations Committee member Dan Gattis (R-Georgetown). At a Texas Public Policy Foundation conference earlier this year, Representative Gattis said he had been studying the Florida plan and thought it was a promising approach that Texas should consider.

Senator Nelson says Texas lawmakers are taking a close look at all of the reform initiatives around the country, but most are only now coming on line, and it will take time to assess their success.

"As we study what is working and what is not working in other states, we also have to consider that Texas is not like any other state in its diversity of needs," Senator Nelson said. "There are initiatives that might work in one region of our state that might not be cost effective in others."

Texas not only leads the nation in percentage of its residents who are uninsured at nearly 25 percent, but also there is great disparity between uninsured rates in various regions of the state. According to the state comptroller, a third of residents in Brownsville, Laredo, and El Paso are uninsured, compared with only 18 percent in Austin. Texas also leads the nation in the percentage of uninsured adults, the number of uninsured working adults, the percentage of uninsured children, and the number of uninsured children, according to the Robert Wood Johnson Foundation.

Senator Nelson's Health and Human Services Committee is scheduled to hear presentations on several state initiatives at a hearing on Sept. 19.

Senator Deuell says most of these initiatives seem to share the general principles of shared responsibility and getting rid of seams in coverage, such as situations where beneficiaries might get bumped off Medicaid or CHIP if their income increases and they no longer qualify for benefits.

He would like to see Texas move toward a system that requires responsibility by beneficiaries and eliminates seams or gaps in coverage. Toward that end, Senator Deuell authored legislation in 2005 to allow people with disabilities who are capable and want to work but who cannot afford to lose their Medicaid coverage to buy in to the program by paying a monthly premium. HHSC is expected to roll out that program this month.

HHSC officials also say they may seek legislative approval or guidance on several initiatives allowed by the DRA. Among those are Medicaid transformation grants to support local and county-based programs for the uninsured, allowing families with children with disabilities to buy in to Medicaid and requiring patient cost sharing when enrollees seek care in emergency departments for nonemergency conditions.

The Medicaid transformation grants were authorized in the DRA and will provide $75 million in 2007 and 2008 for states to adopt innovative ways to improve efficiency and effectiveness in the delivery of care. Among permissible uses of the money are efforts to reduce errors through electronic health records and other technology, increasing utilization of generic drugs, and increasing access to care for the uninsured through university-based hospital and clinic systems. 

Maintaining a Healthy Vision  

TMA is closely monitoring Medicaid reform activity around the country. Abilene otolaryngologist Austin I. King, MD, chair of TMA's Council on Legislation, says he is encouraged by the reform efforts because many dovetail with recommendations for reducing the number of uninsured contained in TMA's Healthy Vision 2010 report.

That report recommends approaches such as allowing families not eligible for Medicaid or CHIP but who cannot afford private insurance to buy in to those programs. It also supports government-employer partnerships such as the Arkansas program that will use Medicaid dollars to subsidize employer/employee-paid premiums to purchase coverage for uninsured workers.

The report is posted on the TMA Web site. Log on to

Still, there is some concern that efforts introducing more managed care and the so-called enhanced benefit accounts and health opportunity accounts, which are similar to health savings accounts, may cause significant confusion for Medicaid beneficiaries.

"Everyone has to appreciate that the Medicaid population is a vulnerable population, and the vast majority - 70 percent - are children," said San Antonio pulmonologist John R. Holcomb, MD, chair of TMA's Ad Hoc Committee on Medicaid. "I don't think most doctors can even understand how a health savings account would work for themselves or their families or for the employees in their practices."

Dr. Holcomb says TMA wants to work with the state to examine whether and how models like these might work in Texas, "recognizing that some of the new options may work for some populations but not others. We also should examine how we might apply technology, such as electronic health records, to lower costs."

Texas also must invest in the Medicaid physician network, Dr. Holcomb adds.

"We hope the discussion about Medicaid reform will highlight the one approach we know saves money and improves care - a physician medical home. We can test new initiatives all day long, but when fewer than half of Texas physicians are even taking new Medicaid patients, we're just spinning our wheels if we don't make significant strides to improve their participation."

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 email at  Ken Ortolon.  


CHIP Enrollment Rebounds Despite Continued Operational Issues

Enrollment in the Children's Health Insurance Program (CHIP) was on its way back up in July after months of operational issues involving contractor-run call centers knocked thousands of kids being off the program.

The Texas Health and Human Services Commission (HHSC) announced in late June that CHIP enrollment as of July 1 would reach 298,731, compared with 293,342 in June. Those numbers are down from nearly 323,000 in December 2005, when Accenture took over as the operator of state human services call centers under the Texas Integrated Eligibility Redesign System.

Some lawmakers and health and human services advocates have been highly critical of Accenture's performance. In May, the Texas CHIP Coalition, which includes the Texas Medical Association, the Texas Academy of Family Physicians, and numerous local, regional, and statewide organizations, complained to HHSC Commissioner Albert Hawkins that there were "serious and as yet unresolved problems" with Accenture's performance.

"Yet, this contractor is scheduled to take over major responsibilities for enrolling and renewing Medicaid and Food Stamps," said the letter, cosigned by TMA President Ladon W. Homer, MD. "These two programs affect more than 4 million Texans (thirteen times the size of the CHIP program) including children, the aged, and Texans with disabilities."

In July, 60 members of the Texas House of Representatives urged Commissioner Hawkins to cancel Accenture's contract for nonperformance and to rebuild the state's social services eligibility system.

HHSC concedes there have been problems with CHIP eligibility determination and enrollment at the call centers. HHSC spokesperson Stephanie Goodman says those problems center mainly on staff training issues and lengthy hold times for parents calling in to enroll their kids.

Ms. Goodman says the situation was further complicated by a policy change regarding CHIP renewal applications made when Accenture took charge of the call center. "At the same time, we implemented a policy change to require families renewing their CHIP coverage to report their income at each renewal period and provide income verification - such as a recent paycheck stub. Previously, families could just check a box on the renewal form indicating their information had not changed."

In its May 25 letter, the CHIP Coalition asked HHSC to continue to extend deadlines for application and renewal completion for as many months as needed to bring "failure to re-enroll" numbers and percentages back down to acceptable levels, to establish adequate contractor and state staffing levels, to identify and resolve computer systems issues, and to restructure the new procedures for income and asset verification to eliminate or minimize requests for additional documentation.

In a June 13 response, Commissioner Hawkins said he had directed the contractor to provide new staff training to address income-processing errors, to provide more accurate information to clients, and to institute a new review process to ensure more accurate enrollment files for health plans and other community-based organizations under contract to provide outreach.

The commissioner also said HHSC would allow the call centers to use other sources, if available, to verify income when clients do not provide proof of income; provide CHIP coverage for applicants who may qualify for Medicaid but have not completed an application; and allow the call centers to accept information on assets by telephone when someone sends in an application or renewal form that does not include that information. 

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