A meeting of the Medicaid Cost Containment Task Force and Medicaid Oversight and Advisory Committee was held on Tuesday July 20 in Frankfort, KY. This is a joint Senate-House task force charged with advising the legislative chambers and the administration on approaches to reduce the growth in Medicaid spending.
Elizabeth Johnson and Neville Wise, Commissioner and Deputy Commissioner of Kentucky Medicaid, made a lengthy presentation to Senate and House members of the Task Force and Committee. The Task Force and Advisory Committee included a number of lawmakers including Senate President David Williams and House Speaker Greg Stumbo, both aspiring governors.
The presentation by Commissioner Johnson and Deputy Commissioner Wise covered:
- An Overview of the Medicaid Program
- Medicaid Cost Drivers
- Medicaid Cost Containment Measures
- Medicaid Pharmacy Benefit
Medicaid provides coverage to approximately 800,000 of Kentucky’s most vulnerable citizens, including 60,000 children. Medicaid paid for 21,000 births in Kentucky in 2009, approximately 37% of all Kentucky births for that year. That’s a startling percentage given that Medicaid is intended to cover our poorest citizens.
Kentucky’s Medicaid program has seen unprecedented growth in the number of new enrollees over the past year due to a weakening economy. During 2009, over 3,000 new recipients were added each month compared to 930 per month in 2008. Most of the new recipients were children.
According to Commissioner Johnson, Medicaid is the primary payer of healthcare in Kentucky. Medicaid has approximately 40,000 enrolled hospitals, physicians and other providers.
Commissioner Johnson identified the following cost drivers during 2009:
- Extraordinary Events
- Hospital Inpatient Medicaid Settlements
- American Recovery and Reinvestment Act Payment Acceleration (stimulus funds provided to shore up state shortfalls)
- “Unprecedented” Eligibility Growth related to the poor economy
- Cost and Utilization Growth
- More physician offices converting to Primary Care Centers and Rural Health Clinics (with enhanced payment rates from Medicaid)
- New services
- Physician payment increase
The Medicaid cost containment measures taken, or to be taken by Medicaid include the following:
- Post payment pharmacy audits
- Prior authorization of certain drugs
- Changing time when recipients can refill a prescription
- Fill prescriptions from Medicaid Providers only
- Modify coverage of OTC medications
- Enhanced Lock-In Program
- Quit paying for hospital acquired conditions and never events
Efficiencies achieved by Medicaid outlined by Commissioner Johnson are as follows:
- Diabetic supplies to be purchased through pharmacy instead of DME
- New Program Integrity Support Vendor
- Implement recoupment from providers billing in excess of coverage limits
- Revenue Intercepts
- Health Insurance Premium Payments
The following is a list of Medicaid benefit expenditures for selected categories of service in 2009:
- Inpatient and Outpatient Hospital $1.05 billion
- PCC and RHC $149 million
- Community living waiver $241 million
- Physicians $339 million
Total expenditures for these selected programs in 2009 were $1.78 billion (total Medicaid spending, when including other services such as nursing home care were about $5.5 billion). Commissioner Johnson outlined a total savings of $65 million or 3.6% of the selected services (around 1% of total spending) from the above cost containment measures and efficiencies. Some of those measures have not been implemented as yet.
One interesting point made by Senate President Williams was that Kentucky has many people in low wage jobs that have employer sponsored insurance. These people would most likely qualify for Medicaid. In 2014, when coverage mandates begin with Health Care Reform, he speculated that some employers will drop their health insurance and pay the penalty tax. If this happens, many of these people will likely become Medicaid recipients.
There was much discussion about the Lock-In program proposed by Medicaid. This is a program where recipients, who have certain utilization characteristics (inarticulately referred to as “frequent flyers” in the industry), will be “locked-in” to a primary care provider, pharmacy, and hospital for non-emergent care. Commissioner Johnson estimated the savings for Medicaid would be approximately $5 million. If a recipient goes to the ER for non-life threatening services, the Hospital is to discharge the recipient to their primary care physician (PCP) and will be paid an assessment fee only.
President Williams discussed Medicaid’s “Wrap Around” program. This is where a Medicaid recipient is covered by an employee sponsored health insurance plan. Medicaid would pay the recipients premium and be a secondary payer. The discussion centered on whether the Kentucky Medicaid program was actually saving money with such a program. Commissioner Johnson wanted to determine if more recipients are eligible for this program. Senate President Williams wanted the Commissioner to quantify the savings the “Wrap Around” program brought to Medicaid.
Finally, Speaker Stumbo wondered aloud if savings could be achieved by scaling back “optional” programs. For example, pharmacy, dental and home care services are provided at the option of the state. There was some discussion, led by Representative Jimmie Lee of Elizabethtown, around the “unintended consequence of eliminating one of the so-called optional services”. For example, eliminating pharmacy coverage might result in diabetics not getting needed medicines and ending up in the hospital, thereby increasing costs in excess of the savings from cutting the drug benefit.
Dean Dorton Ford’s Point of View
Kentucky’s administrative and legislative leaders face many tough decisions over the next several years. With growing enrollment as a result of the weakened economy and a reduction in federal matching funds from stimulus-enhanced levels, clearly something must be done to bring the Medicaid program under control.
It’s not just a question of saving money. Many are questioning our funding priorities from a longer-term strategic perspective. The Kentucky Chamber of Commerce has pointed out that the increasing percentage of the state budget devoted to Medicaid is coming at the expense of funding for education. Independent of that report, The Kentucky Institute of Medicine has published data showing that poor health status is directly correlated with low education levels.
We are racing to the bottom in this endless pattern of poor education, rising poverty, poor health status and ultimately a workforce that is holding our Kentucky economy back from any real growth.
In our view, this pattern must be reversed.
We believe the citizens of the Commonwealth should commit firmly and finally that our long-term priority will be to provide an outstanding education to every Kentuckian, whether through public or private schools. Our benchmark comparison should be to student achievement in India and Asia, not Arkansas, Illinois or California. Our Medicaid program should be examined with that long-term strategy as a backdrop.
We also firmly believe that health care costs, within Medicaid and generally, are driven by personal choices, in many cases enabled by governmental policies, impacting health status. Some are obvious such as choosing to smoke or deciding not to exercise daily. Some are less so, such as the impact farm subsidy programs have on the production (and consumption) of grains. The various issues leading to the high costs of health care illuminate a complex and multidimensional problem that will respond to decisions made by individuals, policy makers and clinicians.
With that as a background, we suggest that the Task Force, and others studying Medicaid and the Health System in general, consider adopting the following principles:
- Commit to a singular focus on greater educational achievement.
- Provide a well thought-out, effective and flexible approach to improving health, wellness and prevention. An example would be to monitoring a diabetic recipient’s compliance with routine health maintenance and perhaps provide assistance in scheduling meetings with dieticians.
- Change the way providers are paid, rewarding better health status and reductions in the use of high cost services such as hospital emergency rooms rather than rewarding high utilization.
- Utilize the Lock-In program for all Medicaid recipients, providing a mechanism for reducing emergency room usage.
- Kentucky’s Medicaid program is isolated from competition. Kentucky should explore encouraging private plans and networks to compete for Medicaid recipients. Private plans and networks will have to design plans that will attract recipients.
- Kentucky’s Medicaid program could offer choice to its recipients. Kentucky could offer a variety of packages aimed at specific health care needs. Recipients could then choose the plan which suites their individual needs.
- One problem Kentucky Medicaid faces is lack of predictability in expenditures, paying for services after they are performed. Consideration should be given to providing Medicaid recipients with a defined contribution plan or a fixed subsidy with which they could purchase care.
Kentucky Medicaid needs to experiment and be innovative to foster much needed change. The status quo in Kentucky’s Medicaid program is no longer acceptable. The current status of the Medicaid program is unsustainable and will only get worse if nothing is done. Experimentation and innovation must begin now in order to address a crisis once Health Care Reform changes are initiated during 2014.
In summary, we believe the following should be considered in reforming Kentucky’s Medicaid plan:
- There is a correlation to ones education and health and wellness
- Case Management plays a very important role in wellness and prevention
- Without competition, Medicaid costs will continue to climb
- Payment reform should be geared toward patient outcomes rather than fee for service which increases utilization
For more information please contact Jeff Presser at jpresser@ddfky.com or Mark Carter at mcarter@ddfky.com
