Fiscal Fitness: How States Cope
North Carolina Medicaid asks its providers to help avoid cuts
Provider rate cuts were likely avoided by North Carolina's Medicaid program because of alternatives suggested by providers themselves.
In addition, Medicaid was able to get certain cost-saving programs/ initiatives pushed through by the legislature because of the economic situation. The state was able to use the downturn-and the resulting surge of individuals becoming eligible for Medicaid-as an opportunity to get good cost- saving programs under way that might otherwise have taken years to get off the ground.
Full impact hasn't come yet
"We have seen thus far this year an increase of 6.4% in our eligibility. But we don't think we've seen the full impact of our eligibility increase," says Tara Larson, North Carolina's Medicaid interim director.
"We know from historical information that there usually is a delay for when the economic impact actually hits the Medicaid world," she says. "In our state, for example, we know that we're first going to have more people showing up at the local department of social services to get food stamps. We see those parts of the program getting hit first."
Medicaid enrollment increases come later down the road, typically when somebody has a medical emergency or realizes he or she is no longer able to get care. "There is usually a delay before they turn to Medicaid to help with their health care, because at first, people are concerned about getting food and heat," says Ms. Larson.
She says Medicaid tends to benchmark with the unemployment rate and then the volume of increases seen by the local departments of health and human services, which is where the state's agencies apply to get Medicaid. "And those are way up. We are expecting our eligibility to continue to rise," Ms. Larson reports.
Over the past three years, she says the state's eligibility has basically remained stable. "It may fluctuate somewhat. Some years, it has actually gone down, and other years there may be a 1% or 2% increase. But we can usually attribute that to something on our policy side, [if] we added an eligibility category or changed a financial rule, something like that. By far, the increases we are now seeing certainly haven't happened in our state in any sort of unplanned way like this, ever before," she says.
Rate cuts could be avoided
"Our state is experiencing significant budget problems. We have had to put on the table various recommendations for cuts, including Medicaid," says Ms. Larson.
Through this process, North Carolina Medicaid has been working with its providers, through professional associations, to solicit ideas for how to avoid cuts to the program, including rate reductions.
"We have been talking with them about some of our ideas, and asking them, 'Have you got other things you would like us to consider or put on the table?'" Ms. Larson says.
Whenever provider rates are cut, there is a concern about how that affects access to care. "We don't want to do those kinds of things," she says. "We want to work with our providers and find out how we can make changes that redeploy financial resources and try not to hurt recipient care. It is very important to have them at the table. They know we are not trying to hide anything."
Providers were given information on the state's budget shortfalls and expenditures, including proposed cuts to Medicaid.
"We said to them, 'At this point, this is the list. We need you to give ...alternatives so we can take something off the list and put something else on the list, and it all needs to have a dollar amount associated with it,'" Ms. Larson says.
Providers gave some surprising responses. For example, they offered to accept certain rate reductions if Medicaid would get rid of a particular administrative burden. They also asked if the state had considered changing its reimbursement methodology, by switching from a per-visit rate to a 15-minute unit of time.
Other suggestions involved better coordination of utilization review, changing some of the criteria for utilization review, changing prescribing patterns for medications, using more generic medications, and avoiding duplication of laboratory testing.
"They are actually coming up with quite a bit of ideas," says Ms. Larson. "And there hasn't been the finger-pointing-'Don't touch me; touch somebody else.' They realize the significance and the seriousness of the problem. The providers told us, 'If you're going to cut the rates, cut them across the board and don't pick and choose among us.'"
"We feel really strongly about getting provider and recipient input on all our policies," says Ms. Larson. "I think our providers would say that we tend to involve them in our decision making."
The back-and-forth discussion isn't going to end at mere suggestions. Providers are actively working to figure out how the state could implement their recommendations.
"Some things are a little soft; for example, we've got to do better care coordination between hospital admission and discharge, but we will need to put a system in place that will do that," says Ms. Larson. "That may take a little more time. We may have to estimate a cost savings associated with it, or we may need to do a state plan amendment or get legislation or pass a rule. All those pieces are being worked on now."
Expand cost-saving programs
Ms. Larson says there is a lot of pride in what North Carolina has done to increase access to health care, both for Medicaid recipients and for its uninsured. "We are concerned about what the budget is going to do to all those initiatives," she says. "We are trying to do things other than cut rates or cut programs or that sort of thing."
One possibility involves looking at Medicaid initiatives that have already demonstrated success in saving money. If more resources were put into those cost-saving programs, or they were expanded, presumably more money would be saved, eliminating the need for cuts.
One strong example is Community Care of North Carolina, the state's clinical home model. The program assigns recipients to a clinical home to provide better care management for individuals with chronic conditions, including prevention activities, such as making sure people are getting the medications they need.
"That's been in operation for several years, and we definitely have seen significant savings," says Ms. Larson. The program started out on a small scale, targeting certain populations with specific priorities, and expanded over the years.
"It does require some upfront cost and infrastructure," she points out. "You've got to have a way of monitoring your data, making sure that the clinical protocols are accepted, and making sure people are aware of everything."
The state's aged, blind, and disabled (ABD) population was added to the program last year. "We are working to try to increase how those folks are being managed," reports Ms. Larson. "In the Medicaid budget, ABD tends to be one of your higher areas of expenditures."
She notes that recently, the National Governor's Association met to discuss clinical models. "That is one of the things our state has been a very strong leader in," says Ms. Larson. "But all these decisions have not been just made thinking only of the bottom line. We think this clinical home is the right thing to do, regardless of the money saved. It has shown better access, it has shown reduction in ER usage, and it has shown better outcomes for people. We can't lose that focus, either."
For this fiscal year, the only budget cuts made to Medicaid involved administrative and contracting services, along with deferring inflationary adjustments on provider rates.
"Other parts of state government have had to go ahead and implement cuts. We have not made cuts, except our typical inflationary rate increases," says Ms. Larson. "We are having to reduce contract amounts and are not doing travel that we typically would have done. That makes it more difficult to continue to handle the day-to-day; your numbers are increasing, but staff positions are frozen." However, cuts to services are a possibility for the fiscal year beginning July 1, 2009, and the following fiscal year also is being discussed.
Impact of stimulus
Even with the federal aid the state will receive from the recently passed stimulus package, a long-term plan is still needed, says Ms. Larson. "Yes, the federal government will help for the next couple of years, but what do we do long term? We can't, from a state policy standpoint, assume that at the current rate of growth of expenditures, that we'll be able to continue and sustain that same rate of growth," she says. "The stimulus package is for 10 quarters. So, two years from now, if our expenditures in the Medicaid program are showing a billion dollars over budget, the state can't afford that."
In addition, Ms. Larson says she expects a continued increase in eligibility for at least the next fiscal year. "Medicaid is the end product. You've got to get the economy back stable, with people getting jobs again, for Medicaid enrollment to begin to decrease."
Ms. Larson reports that a $40,000 position that was open got four applicants not long ago. "For this same position, I now have over 100 applicants, including many PhDs-people who have been in the work force for quite some time who have either been laid off or the company has gone bankrupt."
Drastic times call for drastic measures. And one bright spot is that some of the urgency over cost-cutting could lead to some good programs being implemented.
"Some of these are things that make good public policy. And the budget issues provide us the ability to move forward and do what we need to do; whereas, this may have not been such a high priority before," says Ms. Larson.
She says it helps that the providers and the legislators "are really coming together. There doesn't appear to be the territorial issues that you sometimes face when you try to change something."
"Everything we are doing, we are keeping within our mission here at the department of health and human services," Ms. Larson says. The questions being asked at meetings discussing the Medicaid program and possible cuts include, 'How does this move our public policy on health care forward? What makes sense clinically? What make sense from an efficiency and effectiveness standpoint?"
"People are saying things like, 'We need to keep this in place because it is right for people and we need to find the resources to make that happen,'" she says. "Maybe we would have been able to do something faster and slower, and the budget is either helping us or hindering us. But we can't lose sight of what is good public policy."
Contact Ms. Larson at (919) 855-4103 or [email protected].
Provider rate cuts were likely avoided by North Carolina's Medicaid program because of alternatives suggested by providers themselves.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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