The Medicaid Challenge, Part II: Reimbursement & the Federal Government

Last week I looked at some of the major problems afflicting the Medicaid program, including low reimbursement rates for doctors, patients’ lack of access to care, a lower quality of available care, stringent eligibility requirements, and complicated enrollment procedures. In this post I’m going to talk about what we can do to address Medicaid’s deficiencies, specifically with regards to physician reimbursement, quality of care, and the relationship between states and the federal government with regards to Medicaid.

Reimbursement and Access

As I’ve noted in the past, Medicaid reimbursement rates for physicians are very low—on average, just 69 percent of Medicare rates. They also vary widely across different states. In New York, doctors are paid $20 for an hour-long consultation with a Medicaid patient; in some higher-paying states, doctors receive an average of $157.92 for the same service—a more than sevenfold difference.

Clearly, increasing Medicaid reimbursement is an important part of making the program more appealing to doctors, and thus improving patients’ access to care. Indeed, studies show that when reimbursement fees are higher, pregnant women are more likely to retain their doctors for long-term care and children are more likely to have regular access to a doctor and to preventive care. Studies from the Center for Studying Health System Change and the New America Foundation have found that “variation in Medicaid reimbursement levels across states contributes to community variations in physicians willingness to accept Medicaid patients,” and that “high fee levels increase the probability that individual physicians will accept Medicaid patients.”

But increasing Medicaid reimbursement isn’t so easy. Each state sets rates as part of its individual State Medicaid Plan. While states do increase their reimbursement fees from time to time, a patchwork system makes it tough to compel a nationwide increase in payments. Without questions, states would resist such an imposition: Medicaid has already proven to be the fastest growing state expenditure of the past twenty years, and the program makes up anywhere from 20 to 24 percent of a state’s budget. Good luck ordering them to throw more money into Medicaid.

Full Federalization?

Nevertheless Medicaid’s reimbursement schedule should be comparable to Medicare’s. We need a fee schedule that is set at the national level and then adjusted for geographic differences such in local prices, overhead, and malpractice expenses. A more uniform system would be fairer to both doctors and patients.

But as I said, states wouldn’t be too happy with this. For years states and the federal government have been engaged in an ongoing tug-of-war between fiscally strapped states looking for relief and the federal government’s regulations and guidelines.

Nevertheless, the federal government is far from powerless: it already pays 60 percent of every dollar spent on Medicaid (states pay the remaining 40 percent). 

This suggests a solution: if the federal government already pays a greater share of Medicaid costs, and we recognize the need for a national fee schedule, why not just make Medicaid a federal program, a la Medicare?  After all, the federal Center for Medicare and Medicaid Services (CMS) is already deeply involved in Medicaid administration, since it reviews State Plans and their amendments.

There’s some merit to this idea, and in a perfect world, Medicaid probably would look a lot more like Medicare. It would be a more coherent, uniform insurance program that does not perpetuate regional discrimination.  States would probably support this transformation. They’d probably be asked to continue contributing the amount they contribute today—plus an inflation kicker that mirrored overall inflation in goods and services. But getting runaway health care inflation under control would no longer be their headache. It would be Washington’s responsibility.

But while this may sound good in theory, there are major challenges to fully federalizing Medicaid. Shifting the 40 million Americans currently under Medicaid onto the federal government is no simple task. This essentially means doubling the number of people on Medicare. The small government crowd also would fight the federalization of Medicaid tooth and nail, as it would be seen as growing the federal government.

Finally, while certain administrative inefficiencies would be eliminated by fully federalizing Medicaid, those savings wouldn’t be as great as one might expect: Medicaid already has some of the lowest administrative costs of any health insurance in the nation, at just 5 percent.

Dual Eligibles

But there is a way to increase federal responsibility for Medicaid and simultaneously pave the way for a Medicare-style reimbursement schedule. The key is the population known as “dual eligibles,” or patients who are covered under both Medicaid and Medicare. According to Barbara Edwards, President of the National Association of State Medicaid Directors, dual eligibles—who are elderly and/or disabled—make up only 14 percent of Medicaid patients yet account for 40 percent of Medicaid spending across the U.S.

Two-thirds of this 40 percent is spent on long-term care services, i.e. day-to-day or nursing home care for those who are disabled, have chronic conditions, or need help with both medical and non-medical needs on a daily basis.

Long-term care is a particularly important point of intersection for Medicare and Medicaid. According to the National Academy for State Health Policy, Medicaid pays the nursing home costs for just under 70 percent of the nation’s nursing facility residents. For more than half of these people, the nursing facility stay began after a hospital stay and a short-term rehabilitation period which were both covered by Medicare. But Medicare rehabilitation coverage ran out before the patient was ready for discharge from the nursing home. At that point, the patient had to spend down her own assets to qualify for Medicaid, which then steps in to cover her long-term care.

The problem is that Medicaid only kicks in after the patient is already in a nursing home, so the program has no chance of offering more cost-effective home or community-based services as an alternative to institutional care.

Already, Congress is pursing the idea of de-institutionalizing long-term care. The American Academy of Home Care Physicians reports that “the ‘Independence at Home Act,’ which has Democratic and Republican sponsors in the House and Senate, calls for a three-year, 26-state demonstration aimed at showing that Medicare beneficiaries with multiple chronic conditions can “remain as independent as possible for as long as possible and…receive care in a setting that is preferred by the beneficiary.”

The Academy argues that “prospects for the legislation’s inclusion in the major Medicare reform bill Congress is expected to consider next year look bright…But it won’t be the only care-management  proposal Congress gets next that has a home health component, one home health lobbyist predicts.” Doctors who provide in-home care would share in Medicare’s savings.

If Medicare can keep patients out of nursing homes and hospitals by providing home health care, this is a good reason to think about giving Medicare full responsibility for dual eligible patients. Essentially, if a patient is covered by Medicare, then she should be covered only by Medicare, even if she later qualifies for Medicaid.

CMS would have to tweak the systems in order to cover gaps in care. And Medicaid’s eligibility standards and benefits would have to be carried over into Medicare so that low-income patients were not responsible for pay co-pays and could still access long-term care . (Currently, long-term care  is covered only by Medicaid. Under the new program, Medicare would cover long-term care—but only for patients who had spent down their assets and met Medicaid’s eligibility requirements.)

Essentially Medicaid would “give” its 7.5 million dual eligibles to Medicare.  This is a much smaller influx of insurees that the federal government would have to deal with if it tried to take over all of Medicaid.

Meanwhile, Medicare already pays 43 percent of the medical costs for patients who are under both Medicare and Medicaid. Presumably, the states would be asked to make a contribution to the federal government to help pay the 38 percent that the states now pay (the remaining 19 percent is out-of-pocket spending by patients).

But if Medicare is able to devise a more efficient, better coordinated, long-term care system—including at-home care—then the states shouldn’t have to shell out as much as they are paying now.  Thus the states would save money, which would serve as a “bargaining chip” to encourage them to accept a federal, geographically-adjusted fee schedule.

Shifting responsibility for dual eligible patients to the federal government could also serve as a ‘pilot program’ for further federalization of Medicaid. Can CMS handle millions of additional patients? Does a federal health care program handle low-income care better than a state-based program? These are questions that we could begin asking.

Racial Disparities and Quality of Care

The state savings that would come by federalizing care for dual eligibles should also be put to good use to target racial and ethnic disparities in health care—a critically important issue, given that about one-half of Medicaid patients are minorities. Further, a 2006 study from the University of Oregon and NYU found that it was the level of racial segregation in a region—and not the concentration of poverty—that predicted physician participation in Medicaid across the U.S.(Doctors are much less likely to participate in Medicaid in racially segregated areas where large numbers of the  poor are not white). Clearly, race matters.

One important strategy for improving the health of minority populations is to take an ‘ecological’ approach to public health. The Charlotte REACH 2010 program is a good example of this strategy. Focusing on the reduction and control of cardiovascular disease and diabetes among African Americans in the northwest region of Charlotte, North Carolina, REACH 2010 is a multi-dimensional health initiative. Meredith L. King, from the Center for American Progress (CAP), describes the program in a 2007 report:

“At the interpersonal level, the community coalition trains individuals within the community to be lay health advisors…At the organizational level, the community coalition garners participation from the YMCA and diabetes support groups. Primary care disease management and quality-assurance projects for diabetes care” is provided by health care professionals who work with community leaders to help the community stay healthy. One survey found “a 10 percent increase in adults who were physically active at least five times a week and a 14 percent increase in adults who reported eating five or more fruits and vegetables a day from 2002 to 2004.”

A project like REACH might seem an odd fit with Medicaid, but as much of 50 percent of morbidity and mortality can be traced to behaviors and  lifestyle, much of which often correlates with poverty.  (See Maggie’s post on children health and income).

Further, community health programs have long had an important role to play for Medicaid patients: an April study from George Washington University found that Medicaid patients who seek care at community health centers are 14 percent more likely to have a breast exam or receive a pap smear, as compared to those who only relied on their doctors for either screening. Nation-wide, 36 percent of the people who use community health centers are Medicaid patients, even though just 13 percent of the nation is covered by Medicaid. And according to the National Council of State Legislatures, community care reduces Medicaid costs by 30 percent because it reduces hospital admission rates.

Community-based ethnic outreach should become a key plank of Medicaid. Federal Medicaid reimbursement should be crafted so as to encourage physician participation in community interventions and healthcare providers should be rewarded for collaborating with community health centers and for practicing in underserved areas. Reimbursement for interpreter and translator services in hospitals that serve ethnic communities should be strengthened so that more doctors can provide what is called ‘culturally competent care’ (Some states already are experimenting with this). 

Other reimbursement policies can help improve the quality of care that Medicaid provides, —not just for ethnic communities, but for all patients. This can be done by crafting reimbursements that pay more for primary care, preventive care, and medical home care; that incorporate proven clinical effectiveness into reimbursement schedules; and by bundling payments to doctors and hospitals so that they are paid for good outcomes during a single episode of care (In other words, instead of reimbursing a la carte for specific procedures or stages of care, providers would get a lump sum for dealing with a condition, encouraging efficiency, quality and collaboration. This way medical best practices, rather than high-volume care, is encouraged). 

Medicaid is health care program that is too often overlooked. This is partially because everyone likes to talk about universal health care—which, in theory, might make a targeted program like Medicaid obsolete. But there’s much that we can do now to improve Medicaid –and much that we can learn that will help pave the way for sustainable, affordable, high quality nationwide healthcare reform.

In my next Medicaid post, I’ll talk about issues of eligibility and enrollment.

Comments

[anonymous]

"Medicaid reimbursement rates for physicians are very low—on average, just 69 percent of Medicaid rates. They also vary widely across different states. In New York, doctors are paid $20 for an hour-long consultation with a Medicaid patient; in some higher-paying states, doctors receive an average of $157.92 for the same service—a more than sevenfold difference."

i assume you meant 69% of medicare. how do you reconcile the $20 versus $158 paid to physicians in another state if the fed is ponying up 60% of the total $ spent? especially when you maintain the administrative costs are so low.