Shoring up Medicaid

Lawmakers Boost Physician Fees Despite Budget Woes

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Cover Story -- October 2001  

By  Ken Ortolon
Associate Editor

The situation was critical. Increasing numbers of patients on Medicaid and low reimbursement for treating them were bringing many physicians to the brink of financial ruin. Things were particularly bad on the Texas-Mexico border, where some physicians saw their Medicaid and Children's Health Insurance Program (CHIP) caseloads reach 90 percent. A few were forced to stop seeing Medicaid patients and move to other cities where there were not so many patients needing Medicaid services.

Fearing a health care and economic disaster, a coalition of physicians along the border was joined by the Texas Medical Association and other groups across the state in a lobbying effort for higher Medicaid fees and reforms to the Medicaid system.

Their pleas did not fall on deaf ears.

High Hopes  

Going into the 77th session of the Texas Legislature this year, physicians were optimistic that lawmakers might approve the first substantial fee increase for physicians in the Medicaid program in nearly a decade.

A small, 2.7-percent rate hike approved by the legislature in 1999 -- the first increase in seven years -- had done little to help the financial outlook for physicians in inner cities, rural areas, and along the border who had high Medicaid patient loads. The fragile Medicaid provider network was beginning to show cracks, leading to access-to-care problems for patients in both Medicaid and CHIP.

But even before the session began, hopes for meaningful fee updates appeared to be dashed. Virtually on the eve of the session, State Comptroller Carole Rylander reduced her estimate of the surplus funds lawmakers would have to spend. And, it appeared that most of those funds would be eaten up just covering a $600 million shortfall that had appeared in the Medicaid budget for the 2000-01 biennium.

Undaunted by the budget situation, however, legislative leaders crafted a package of Medicaid reforms that included not only the much needed fee increases, but also measures to simplify the Medicaid enrollment process designed to bring some 600,000 additional Medicaid-eligible children into the program. In fact, overall health and human services spending was boosted by some 17 percent, with the bulk of the new monies earmarked for Medicaid.

Unfortunately, a third Medicaid bill developed by a special House-Senate Medicaid work group and containing TMA-backed reforms of the Medicaid managed care program was vetoed by Gov. Rick Perry. However, many of the provisions of that bill might be carried out administratively by the Texas Health and Human Services Commission (HHSC). Health and Human Services Commissioner Don Gilbert appears to be committed to accomplishing many of TMA's priorities contained within the vetoed bill.

The Bad News  

Fort Worth surgeon Robert W. Sloane Jr., MD, the immediate past chair of the TMA Council on Legislation, says many physicians were very disappointed with the increase in 1999 because it "didn't translate into anything meaningful for most practicing Medicaid providers."

By the time the legislature convened in January of this year, the problems on the border were so bad that physicians there created a special border Medicaid coalition to lobby the legislature for increased provider fees. Organized by the El Paso County Medical Society, the group included the presidents and other leaders from every county medical society along the border from El Paso to Brownsville.

Coalition members made several trips to Austin to testify before House and Senate budget-writing committees, as well as to meet with the governor and lieutenant governor. The group worked closely with TMA, the Lone Star State Medical Association, and numerous specialty societies in lobbying not only for fee updates but also for the other Medicaid reforms.

"We asked for an increase in reimbursement along the Rio Grande from El Paso all the way down to Brownsville and in other extended areas away from the border where there were high levels of indigent populations," said El Paso physician Dale Burleson, MD, who was active in the coalition.

"The reason for asking for more money for border physicians is not that we want to get paid more on the border than guys in Dallas or Houston or Austin," Dr. Burleson continued, "but to acknowledge that inadequate Medicaid fees have a disproportionate impact on border physicians who treat not only high numbers of Medicaid and CHIP patients but also the indigent. These physicians don't have the ability to cost shift to private pay patients. We were asking for increased fees for these high-volume providers on the border so that we can make their lives reasonable from an economic standpoint."

The Good News  

The physicians found a receptive audience. Despite the tight budget, the House Appropriations Committee and Senate Finance Committee found $197 million in new state funds to update fees for physicians, hospitals, and other health care professionals. Specifically, $50 million of that total was earmarked for professional fees, which will draw down another $75 million in federal matching funds, for a total of $125 million for professional services.

State Rep. Garnet Coleman (D-Houston), vice chair of the House Public Health Committee, says there was wide support for the fee updates because lawmakers recognized the importance of maintaining the provider base.

"We had just come off a consent decree in which Judge [William Wayne] Justice said we were in violation in some areas for Texas Health Steps," Representative Coleman said. "So it was very important that we have a provider base to see patients in that program, both dental and medical, and that we continue to have a hospital provider base for tertiary care."

State Rep. Kyle Janek, MD, (R-Houston) agrees. "Everybody recognizes that access is a problem if you don't have providers," he said. "You've got to have an adequate number of providers in certain areas where there is such a heavy Medicaid population."

Targeting the Money  

Unlike the rate increase of 1999, this year's update will not be applied across the board. Dr. Sloane says the appropriations bill rider containing the new fees is very specific about how the money is to be applied.

"There are three general stipulations in the rider," Dr. Sloane said. "One is that there has to be an increase in the Early and Periodic Screening, Diagnosis and Treatment [EPSDT] medical screening program."

HHSC already has moved to carry out that directive. While the appropriations rider was not specific about how much the EPSDT, or Texas Health Steps, screening fees should be increased, the commission approved, based on recommendations from TMA, a raise from $49 to $70 per screening visit that took effect on Sept. 1.

El Paso County Medical Society President Manny Alvarez, MD, says that will be a major boost for high Medicaid providers.

"That's a fabulous increase for our pediatricians," Dr. Alvarez said. "It certainly brought a smile to them and will help them quite a bit. With the increase, a lot of physicians have reopened their practices to new Medicaid and CHIP patients."

As part of the EPSDT stipulation, the appropriations rider also directed HHSC to develop a system of bonus payments for physicians who complete the scheduled EPSDT screenings. HHSC has not yet determined how the bonus program will work, but a Physician Payment Advisory Committee (PPAC) made up of physicians from various specialties from across the state will have input into decisions about the program.

The PPAC was scheduled to meet in September to begin formulating recommendations on the bonus program.

The second major stipulation in the rider was that HHSC should update selected office-based evaluation and management codes with a goal of increasing primary preventive health care. Finally, HHSC was directed to develop some mechanism to reward high-volume Medicaid providers along the border and in inner cities.

TMA Governmental Affairs Director Helen Kent Davis, who followed the budget debate and who has been tracking HHSC implementation of the fee updates, says it is unclear how "high volume" will be defined. PPAC also will weigh in on that issue, she says.

"All of this was couched in terms of retaining those physicians in selected parts of the state who, if they were to leave the program, would have a significant negative impact on access for children," Dr. Sloane said.

Will the updates help retain Medicaid physicians in El Paso and elsewhere? Dr. Alvarez says yes. Will the updates help attract additional physicians to those areas, which have some of the highest patient-to-physician ratios in the country? Probably not.

In formulating the Medicaid fee update, it was clear to all involved -- physicians and lawmakers -- that the new monies aren't nearly enough to expand the provider base, Dr. Sloane says. To do that would require substantially more money, raising Medicaid rates to a level akin to Medicare.

Boosting Enrollment  

While lawmakers were shoring up the Medicaid provider network, they also were focusing attention on other problems in the program, most notably a lag in enrollment of Medicaid-eligible children.

Despite tremendous success in enrolling children in CHIP, Texas had an estimated 600,000 children who were eligible for Medicaid but not enrolled. Several interim legislative studies had looked at enrollment and other problems, and a survey of low-income Texas families pointed to several barriers to getting full enrollment in the program. Among them were long waits for appointments, inconvenient office hours, and complicated application and enrollment forms. These were barriers CHIP applicants did not face.

Medicaid required face-to-face interviews with new applicants, which often were inconvenient for working parents. CHIP did not have such a requirement. The Medicaid application form, with required attachments and documentation, could be as long as 25 pages. The CHIP application was only one to two pages. Medicaid required frequent re-enrollment. CHIP provided 12 months of continuous coverage. All of these barriers discouraged parents from enrolling their children in Medicaid.

"It is not fair for children at 101 percent of poverty to have an easier time getting into health coverage than a child at 99 percent of poverty," said Representative Coleman. "It's just patently unfair. Our system was set up in such a way that it created that disparity."

To address the problem, Sen. Judith Zaffirini (D-Laredo) filed Senate Bill 43. The measure was cosponsored by a large, bipartisan group of representatives and senators, including Representative Coleman. It passed overwhelmingly and was signed by Governor Perry.

SB 43 directs HHSC to implement several measures to tear down the barriers to Medicaid enrollment. The agency is to develop a consolidated application for Medicaid and CHIP, allow mail-in application and recertification for children's Medicaid, and allow a simplified, self-declared assets test, with no additional documents or proof required.

SB 43 also calls for the phase-in of continuous eligibility for children up to age 19, with six months of continuous eligibility by February 2002 and 12 months as early as September 2002 but no later than June 2003.

HHSC also was ordered to establish a process for promoting smooth transitions from Medicaid to CHIP, hold "health care orientations" for new Medicaid enrollees, and establish policies to ensure that children get their Texas Health Steps/EPSDT preventive care services.

Representative Janek says the changes should please liberals and conservatives alike.

"One of the complaints conservatives make about government is that it's cumbersome and a lot of the bureaucracy involves a tremendous amount of red tape," he said. "We cleared a great deal of that up with the simplification bill. We made it easier for patients to get access to the system."

From a fiscal standpoint, that made sense even though it carried a price tag, Representative Janek adds.

"To put it in stark political terms, liberals will like it because it's a strengthening of the social safety net. Conservatives like it because it's the smartest way to spend those resources," he said. "If you don't take care of those patients using state money for which you get a federal match, then you're just going to put the burden on the hospitals and on the local providers, and some of the hospitals are on very thin margins."

Veto, Again?  

The third element of the Medicaid equation during the 77th session was cost containment. Caseload and utilization growth in Medicaid, along with an accounting trick by which lawmakers had funded only 23 months of the program in the 2000!!-01 budget, forced lawmakers to pass a $600 million emergency appropriation for Medicaid early in the session.

That, along with fraud allegations leveled at the Medicaid carrier by the Travis County District Attorney's Office and lawmakers' concern over how the acute care portion of Medicaid was being managed by the Texas Department of Health, prompted House Appropriations Committee Chair Rob Junell (D-San Angelo) and Senate Finance Committee Chair Rodney Ellis (D-Houston) to appoint a joint, bipartisan Medicaid work group in February to look at ways to streamline Medicaid and improve cost efficiency. The investigation into the fraud allegation ended without any criminal charges against National Heritage Insurance Co. The company agreed to reimburse the state $3.4 million and pay a $250,000 penalty.

Cochaired by Senator Zaffirini and Representative Coleman, the work group toiled late into the session to produce a package of Medicaid reforms that not only produced $205 million in cost savings for the state during the 2002-03 biennium but also included many TMA-backed changes in the Medicaid managed care program.

Among the Medicaid managed care reforms were the adoption of standardized referral and credentialing processes, elimination of preauthorization for routine services, examination of the Texas Health Steps/EPSDT enrollment and participation requirements for physicians, and enactment of tougher complaint mechanisms for Medicaid managed care plans.

SB 1156 also directed that Medicaid managed care utilize the primary care case management model (PCCM) for any new managed care rollouts. (See "PCCM: What Is It?")

The bill passed on voice vote in the House and unanimously in the Senate, but Senator Zaffirini and Representative Coleman were stunned when Governor Perry vetoed it. The governor said the measure was not needed because HHSC already has statutory authority to carry out most of the reforms.

Representative Coleman said the first inkling that the bill was in trouble did not come until the House-Senate conference committee report was being printed.

"We were having the conference committee report printed at the time the governor's office asked for a meeting," he said. "If we had delayed that printing, it would have killed the conference report."

Representative Coleman called the veto "shortsighted."

"The five-year savings from that bill was $416 million in general revenue," he said. "It provided for increased coverage for women, for people with mental illness, for people with HIV and AIDS, and for permanent legal residents of Texas. And, it had safeguards for physicians in dealing with Medicaid HMOs."

Even though SB 1, the appropriations bill, also contained the cost-savings provisions, Representative Coleman says the veto could cause a budget shortfall.

Representative Janek, who also served on the joint work group, disagrees.

"There was some disagreement among members as to whether the Health and Human Services Commission had the authority to make the changes that came out of the work group," he said. "I believe the commissioner of health and human services does have that authority. Those cost-saving measures can be done administratively."

Representative Janek also defends the veto on grounds that SB 1156 had been loaded with provisions that had not been part of the work group's recommendations.

"That bill grew overnight to much more than just the Medicaid work group," Representative Janek said. "It truly was a Christmas tree with a lot of other programs hung on it in the closing days of the session."

Moving Forward  

Just how much authority HHSC has to accomplish the vetoed reforms will soon be put to the test. Commissioner Gilbert already has indicated his agency will move forward with at least some of the major provisions of SB 1156.

In late August and early September, HHSC held a series of 24 public hearings on rolling out the PCCM model for Medicaid managed care in 203 counties where the HMO model is not already in place. PCCM is akin to a managed fee-for-service plan and is widely supported by physicians who currently participate in it.

In the hearings, HHSC indicated its intent is to begin the expansion in March 2002. TMA supports the PCCM as a prudent approach to reducing Medicaid costs without saddling patients and physicians with unnecessary new administrative hassles. That being said, TMA is concerned about the aggressive implementation schedule.

"For PCCM to work well, physicians and patients must understand what their respective responsibilities are," said Robert Gunby, MD, of Dallas, chair of the TMA Council on Socioeconomics. "Many physicians, much less patients, don't know what PCCM is. Some believe it is just another name for an HMO. TMA is advocating for an early and intensive education campaign to be sure patients and physicians alike understand their respective roles in PCCM."

Additionally, some aspects of PCCM may not work well in rural and border communities. TMA and local county medical societies have asked HHSC to be flexible in the PCCM design to ensure that the model doesn't inadvertently hinder care or deter physicians from participating.

Other priorities HHSC has outlined for the interim include integration of Medicaid and CHIP, streamlining of duplicative activities and consolidation of the Medicaid program within HHSC, and cost-savings measures, such as mandatory enrollment of patients with disabilities in Medicaid managed care, selective contracting with hospitals, and others.

Regardless of the progress made during the interim, Medicaid likely will be on the front burner again in 2003.

Representative Janek says the legislature made it easier for patients to gain access to the Medicaid system and shored up the Medicaid fee schedule, particularly for physicians who have a heavy Medicaid caseload. "But, we have to look at these issues all the time," he added. "There is no single fix. Every budget is starting fresh with new arguments and new priorities."

And Dr. Burleson from El Paso says the border coalition will not rest on its laurels.

"We found that even getting started late in the legislative session, we really made a big difference," Dr. Burleson said. "The legislators really wanted to hear from us. They want to know what's going on, and they want to hear it from their constituents, not just the paid lobbyists.

"I think we are going to organize and get started a lot earlier next time and see if we can't move forward from here."

Ken Ortolon can be reached at (800) 880-1300, ext. 1392, or (512) 370-1392; or by email at  Ken Ortolon.  

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