A Historic Increase

Lawmakers Boost Medicaid Physician Payments

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Legislative Affairs Feature - July 2007  


ByKen Ortolon
Senior Editor  

Texas Medicaid patients likely will have improved access to care and an easier time finding new medical homes as a result of one of the largest budget increases in the program's history.

Texas lawmakers in May approved a new two-year state budget that dedicates the biggest increases for physician payment updates in more than a decade. And, a special physician committee, the Physician Payment Advisory Committee (PPAC), will advise the Texas Health and Human Services Commission (HHSC) on how to fairly allocate the new funding to improve availability of health care services.

The Texas Medical Association made increasing Medicaid physician payments one of its top 2007 legislative priorities after surveys showed the number of Texas doctors accepting new Medicaid patients had dropped from 67 percent in 2000 to only 38 percent in 2006, largely due to stagnant reimbursement rates in the Medicaid program.

In a letter to key lawmakers in October, then-TMA President Ladon W. Homer, MD, urged approval of a 22.5-percent increase over the next biennium and a goal of reaching parity with Medicare within five years. Once the session began, TMA leaders testified in support of fee increases before both House and Senate budget-writing committees, submitted background information, and met extensively with key lawmakers.

Now, TMA leaders are cautiously optimistic that physicians will return to the program.

"Hopefully, we're going to see increased participation," said TMA President William W. Hinchey, MD. "Hopefully, we're going to have more of these people in a medical home."

While the fee increases make tremendous progress toward achieving TMA's goal of competitive Medicaid rates, some physicians warn that they will still lose money on each Medicaid patient they see and that legislators must continue to invest in the physician network if the state is to maintain the progress made during this session. 

Long Time Coming  

Medicaid physician payment rates have remained essentially unchanged since 1992. Meanwhile, physicians' overhead costs have continued to rise, forcing many doctors to limit the number of Medicaid patients they see or to get out of the program entirely.

While lawmakers actually cut payment by 2.5 percent in 2003 because of a multibillion-dollar budget shortfall, the political climate changed greatly this year. Staring at significant access problems in both Medicaid and the Children's Health Insurance Program (CHIP), a federal class action lawsuit, and a huge projected surplus, lawmakers this year seemed inclined to boost Medicaid spending from the outset of the session.

Even before the session began, House Speaker Tom Craddick (R-Midland) acknowledged that Medicaid payment rates lagged behind rising costs, and other legislative leaders pledged to work for a fee increase. In fact, early versions of the budget bill included a 10-percent across-the-board increase.

State Rep. Ryan Guillen (D-Rio Grande City) says lawmakers heard loud and clear from their physician constituents that Medicaid fees were a major problem affecting access to care.

"I began working with border doctors last summer on the needs of the region, and one of the recurring issues was the lack of adequate provider reimbursement for treatment of Medicaid patients and how that related to the 'medically underserved area' designation that covers most of South Texas," said Representative Guillen, vice chair of the House Appropriations Committee. "The Texas Medical Association and other health care providers in my district did a good job of making sure we had the information and background to make important decisions that led to an early effort to increase provider reimbursement."

But the news got even better in April when the state agreed in principle to settle a longstanding lawsuit contending it did not ensure that all children in Medicaid received appropriate preventive and specialty care services under the Early Periodic Screening, Diagnosis, and Treatment Act (EPSDT), known as Texas Health Steps.

Under the settlement in Frew vs. Hawkins , lawmakers agreed to boost the funding pool for physician Medicaid payment rates for children's health care services by 25 percent and dental payment rates by 50 percent. Separate from the Frew case, lawmakers also increased payment rates for services to adult Medicaid patients by 10 percent and voted to restore the 2.5-percent cut from CHIP payment rates in 2003. (See " Lawmakers Approve Medicaid Reforms, Restore CHIP Funding.")

In all, lawmakers agreed to boost Medicaid funding by more than $1.8 billion in state and federal matching funds to increase payment rates, improve outreach and education to Medicaid-enrolled families, and improve the availability of medical and dental services in rural and border regions. Those funds include:

  • $101.5 million to increase the funding pool by 10 percent for physician services provided to adults;
  • $203 million to increase the funding pool by 25 percent for physician services provided to children;
  • $50 million for targeted rate increases for medical and dental pediatric-related subspecialty care;
  • $258.7 million for a 50-percent increase in dental payments;
  • $150 million to implement strategic medical and dental initiatives; and
  • $45 million for outreach, education, transportation, and other initiatives. 

The strategic medical and dental initiatives likely will include mobile dental clinics in underserved communities, loan forgiveness programs for physicians and dentists who agree to practice in underserved areas, and other measures, yet to be determined, to improve health care access for children in underserved communities.

On June 1, PPAC issued recommendations on how the fee increases would be applied. It called for:

  • Restoring the 2.5-percent fee cut mandated by the legislature in 2003 for all codes.
  • Updating the Medicaid relative value units (RVUs) to the 2007 levels, with a "hold harmless" clause to assure no code sees a decline, plus a 5-percent increase for any code that was held harmless.
  • Increasing Texas Health Steps preventive codes to between 92 and 100 percent of the Medicare conversion factor. The increases will vary, depending on whether the patient is a new patient or an established patient.
  • Increasing evaluation and management codes by 27.5 percent or more.
  • Increasing vaccine administration fees by 30 percent.
  • For anesthesia, which is not part of the RVU system, increasing the base units to the Medicare level and increasing the conversion factors by 27.5 percent.

Additionally, if funds are left over, the state will use the monies to further improve payments for vaccine administration, address unique payment issues for pathologists, and further update those codes that were increased by 5 percent.

Medicaid HMOs would be required to pass the funding directly to physicians with no deductions. Health plans that follow the traditional Medicaid fee schedule will be required to adopt the above methodology. For plans that rely upon a different rate methodology, the plan must attest to how the monies will be passed through. HHSC will audit the plans to assure compliance with financial penalties imposed on those that do not.

For adult Medicaid services, PPAC also recommended the state update the RVUs to the extent possible within the funding appropriated.

HHSC, which must approve the recommendations, is scheduled to hold a public hearing on the proposals this month. U.S. District Judge William Wayne Justice, who presides over the Frew case, will review them as well. If approved, the new rates will take effect Sept. 1. 

BringingPatients   " Home "  

San Antonio pulmonologist John R. Holcomb, MD, chair of TMA's Select Committee on Medicaid, believes these increases will be enough to get physicians across the state to "at least consider" starting to take Medicaid patients or opening their practices to new Medicaid patients.

"We believe it [the fee increase] will accomplish its purpose, although I don't know exactly what the amount of increased access will be," Dr. Holcomb said. He says the proposed Texas Health Steps fee hike is particularly significant, as those preventive services are often tedious and time consuming. 

"With that fee increase and the increases for other services, I believe the medical home will be reinforced," Dr. Holcomb said. "I think the whole program is going to be strengthened, and access will be increased."

Reaction from Medicaid physicians, however, is mixed.

Edinburg internist E. Linda Villarreal, MD, says the increases will be a huge help in the Lower Rio Grande Valley, where the payer mix is predominantly government programs such as Medicaid, CHIP, and Medicare.

"As it applies to the Valley, it's definitely going to help us," Dr. Villarreal said. "It's going to make a significant impact creating access to medical homes instead of patients using ERs, and it will improve the continuity of care for kids because it will be easier to find a physician who is willing to provide them services."

Athens family physician Douglas Curran, MD, appreciates the increase, but says he still will lose money on many Medicaid patients. For example, he says, a Level 3 office visit now pays about $28. A 25-percent increase would boost that to about $35, but a Level 3 visit now costs Dr. Curran about $40. "It just means I'll lose less." 

Step by Step  

TMA also was disappointed lawmakers chose to bifurcate payment rates between children and adult Medicaid services and did not maintain parity between Medicaid and CHIP payment rates. Dr. Hinchey says TMA will continue to advocate for Medicaid fees that are closer to parity with Medicare and commercial payment rates.

If not, any increase in physician Medicaid participation may be short lived, Dr. Curran says.

"I'm hoping this is the start to real reform in the Medicaid payment arena," he said. "If that continues to happen, you'll see more and more docs come back in. If it doesn't, there may be a little uptick for a while but then I think there'll be an exodus of doctors from the program again."

Ken Ortoloncan 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 Preserves Patient Care

Texas legislators made some tremendous accomplishments on behalf of Texas patients and physicians in the 2007 session. In addition to acting on Medicaid and Children's Health Insurance Program (CHIP) funding, legislators did the following toward achieving TMA's legislative agenda, Preserve Patient Care  [PDF]. They:

  • Did not dilute Proposition 12 or the landmark 2003 medical liability reforms;
  • Preserved tax deductions for Medicaid, Medicare, TRICARE, charity care, and CHIP, while giving practices with less than $1 million in gross receipts annually a lower marginal tax rate;
  • Allowed no expansions of scope of practice by allied health professionals;
  • Gave employers, their employees, and Texas patients and their physicians better access to health care information about medical service costs and patient out-of-pocket expenses; and
  • Returned mandatory structured physical education to Texas public schools through high school.

All of these measures were awaiting Gov. Rick Perry's signature or veto at press time. A detailed analysis of the 2007 session and its impact on medicine in Texas will be published in the August issue of Texas Medicine


Lawmakers Approve Medicaid Reforms, Restore CHIP Funding

While the physician fee increase approved as part of the new state budget should improve access for Medicaid patients, lawmakers also enacted Medicaid reforms that will promote healthier lifestyles and could extend private health coverage to low-income Texans who do not qualify for Medicaid.

Lawmakers also voted to restore most of the cuts in the Children's Health Insurance Program (CHIP) that were enacted in 2003.

Senate Bill 10, which gained final approval in both the House and Senate on the final weekend of the session, directs the Texas Health and Human Services Commission (HHSC) to develop and seek federal waivers to conduct pilot programs to promote healthy lifestyles, improve cost efficiency in the Medicaid program, and expand coverage to the uninsured.

The healthy lifestyles pilot would provide positive incentives, such as expanded benefits or value-added services, for Medicaid recipients who participate in weight loss, smoking cessation, or other disease management programs.

The bill also creates a Medicaid health savings account pilot program for adult patients, authorizes HHSC to seek a waiver to create tailored benefit packages to provide customized benefits to meet the specific health care needs of certain recipients, and authorizes HHSC to seek a waiver to create a Texas Health Opportunity Pool to help uninsured Texans purchase private insurance.

The Texas Health Opportunity Pool would use hospital disproportionate share and upper payment limit funds to help subsidize private insurance through Three-Share - which provides coverage by having the government, the employer, and the employee share the cost of insurance - or other programs.

The Texas Medical Association generally supported the bill, which TMA officials say builds on previous reforms in the Medicaid program. TMA leaders worked closely with Sen. Jane Nelson (R-Lewisville) to amend the bill to ensure that the health savings account pilot applies only to adult Medicaid beneficiaries and that no Medicaid benefits are cut, including assuring that children continue to have access to the full range of benefits included within the Early Periodic Screening, Diagnosis, and Treatment program.

TMA also succeeded in getting a pay-for-performance feasibility study that was added in the House of Representatives to make sure any pay-for-performance system is based on scientifically valid, evidence-based measures appropriate for the Medicaid population and that HHSC also may consult with physicians and hospitals in the feasibility study.

Lawmakers also passed House Bill 109, which restores many changes made to CHIP in 2003, including reinstating 12-month continuous coverage for children whose families earn less than 185 percent of the federal poverty level. The children's parents will have to reapply every six months. The 12-months continuous coverage provisions do not apply to children on Medicaid.

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Last Updated On

June 07, 2016

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