Idaho Medicaid leaves no stone unturned to fill $247M budget gap
There is no question that Medicaid programs can use all the legitimate cost-cutting ideas they can get, but Idaho has gone the extra mile.
"Idaho's economy is not good and has not picked up. Our unemployment rate is still pretty high," says Leslie Clement, administrator of the Department of Health and Welfare's Division of Medicaid. "We were in really good shape before the economy went south, but it dropped more dramatically than other states. We qualified for the highest FMAP tier that you can get."
The state's Division of Medicaid launched a new website to solicit public input to address a projected $247 million budget deficit for FY 2011. "To put this in perspective, our Idaho Medicaid budget is about $1.5 billion total funds," says Ms. Clement. "And we are looking at about a $71 million general fund shortfall, with a total of $250 million shortfall for the existing state fiscal year. It is huge, and is not doable."
The program already has made many provider pricing reductions and some benefit reductions. Initial budget reductions began in FY 2009, resulting in a reduction of about $20 million in general funds.
"The next year, this general fund reduction amount doubled," says Ms. Clement. "The original appropriation was further reduced, after an updated economic forecast showed state revenues declining."
Medicaid could not complete the 2010 year within budget without holding the final three weeks of claim payments. "This pushed $25 million into the current year, which added to the magnitude of this year's budget challenge. And now we are at it again," says Ms. Clement. "After two years of doing cutbacks, to be at this point in another fiscal year is just daunting."
Lawsuits target access
Over the past two years, Idaho Medicaid's rate cuts were applied across a range of providers, including hospitals, nursing homes, and intermediate care facilities. Physician and dental rates were frozen. "This year, legislators directed us to freeze all rates and ensure that none were above Medicare rates," says Ms. Clement. "Medicaid will follow that direction, with some exceptions."
Idaho currently pays some primary care doctors slightly more than Medicare rates to protect access. "We probably need to continue that to hang on to our participation. We also have work shortage issues here for primary care docs," notes Ms. Clement.
No further provider rate cuts are planned at this time, due partly to lawsuits. Idaho had initiated a methodology and rate reduction change to one of its community-based services, but was stopped by an injunction.
"Once Medicaid providers begin filing lawsuits, others see it as a great opportunity to jump on that bandwagon to stop the agency from making further pricing reductions," says Ms. Clement. "It is clear that we cannot arbitrarily cut rates. We don't want to do anything that creates a health and safety issue. We are given legislative direction and also have to comply with federal law. You can't make a policy change that limits access to medical service."
One lawsuit involved a group of providers which claimed that a pricing reduction for home and community-based services wasn't in compliance with federal Medicaid requirements for access. "We disagreed with them and continue to disagree. We entered into a settlement conference with them, and we are now working with them to do a cost study," says Ms. Clement. Another lawsuit was dismissed, because Idaho Medicaid was able to demonstrate that access had been carefully monitored after the rate reduction, and no problems were identified, Ms.Clement says.
"We had gone through the state plan amendment approval [with the Centers for Medicare & Medicaid Services], and we were on solid ground," says Ms. Clement. A third lawsuit is still outstanding and involves a pricing reduction made several years ago.
Cost-cutting changes
Instead of pursuing further rate reductions, Idaho reduced the maximum hours for which certain benefits can be billed. "During the last legislative session, we told legislators that if we were not going to receive the necessary appropriation to fully fund Medicaid, we were at a point where we needed to consider eliminating certain benefits," says Ms. Clement. "Even though we believed we were at the point, legislators just weren't ready to make that policy decision. Instead, they asked us to continue to find other ways to reduce costs."
In Medicaid's 2011 appropriation bill, legislative intent language identifies a number of cost reduction approaches. These include price freezes, price reductions, limiting prices to Medicare rates, and reducing benefits. Management strategies include selective contracting, waivers, standardized assessments, and other benefit modifications.
Here are some of the management strategies that were implemented to reduce costs:
The Medicaid provider tax methodology was used to reduce general fund expenses for hospitals and nursing homes.
"We had already established a hospital assessment through state statute and an approved state plan amendment, but we increased the percentage of the tax this year to save $25 million in state general funds. We are in the process of implementing a similar approach for nursing homes and hope to save about $10 million," says Ms. Clement. "Those are the two areas that we are anticipating the biggest reductions."
Edits were made to the program's claims system to improve program integrity.
One goal is to avoid duplication of benefits, which was occurring primarily in the developmental disability and mental health areas.
A transportation broker model was implemented for non-emergency medical transportation.
The program's dental plan administration was outsourced to a commercial health plan, under a managed care arrangement.
"That was a really successful change that we made a couple years ago. It expanded access for the majority of our Medicaid enrollees, and we just added our disabled population to that," says Ms. Clement. "We now have the best access rate in the country for kids. So, that was a positive thing to do, along with all of the draconian measures we had to implement."
Ideas solicited
To be sure no stone was left unturned in finding ways to trim costs, "We went through an enormous public participation effort," says Ms. Clement. Cost-reduction surveys were posted on the department's website, and both providers and non-providers were asked to respond.
The online survey included questions about reimbursement methods, managed care, waivers, and other benefit and pricing questions to elicit ideas to reduce costs. More than 600 surveys were completed.
"We are compiling all of the recommendations and suggestions and will post the feedback we received on our website. We will then start writing temporary rules to see if we can start chipping away at that shortfall," says Ms. Clement.
In addition, more than 30 meetings were held with every type of provider group in the program, from nursing homes to personal care agency providers. The goal was to elicit ideas for how to reduce program costs while maintaining a viable program.
Each meeting was scripted to share the same budget overview information and ask the same cost reduction questions. "We also asked that providers focus on their own programs and not suggest reductions in other programs," says Ms. Clement.
The input did not include many pricing changes that will yield short-term savings, but there were good ideas discussed about changing reimbursement methodology that might help program sustainability over time.
Other suggestions involved efficiencies. While these won't necessarily reduce Medicaid benefits costs, they do reduce the administrative costs incurred by providers. "And that is a good thing, when you are asking them to make do with less," says Ms. Clement.
As for wiping out the $247 million budget shortfall, Ms. Clement says, "we don't think we will get very far into that, but we're doing what we can do. We made a good effort to sustain the program in its current form without eliminating any benefits, but I think we will come up short. Legislators will need to determine if they can fund the gap that remains."
For the most part, suggestions from non-providers weren't feasible or weren't in compliance with federal requirements. "For the general public to understand Medicaid law is asking a bit much," says Ms. Clement. "There were some comments such as, 'You shouldn't let anybody in who tests positive on a drug test.' Or 'Why don't you charge people who go into an ED a whole lot more money?'"
Ms. Clement says that a drastic increase in co-pays is probably unrealistic. "This whole notion of cost-sharing is not a very easy thing to administer. We have a very poor population, and one that is exempt from most cost-sharing requirements," she explains.
Other ideas might be worked on over the long term, but won't result in a budget cut for the short term. Still, both providers and the general public appreciated being asked their opinion.
"We wanted them to be engaged. One of the best things about this process was the educational value," says Ms. Clement.
Providers were given information on the budget status, what providers are paid, and what percentage of total Medicaid costs this comprises. They were given a target amount to come up with, such as a 10% reduction in nursing home payments.
"It's one thing to say, 'We need a 3% reduction,' but it's different when they actually saw all the information across the whole Medicaid program," says Ms. Clement. "They may have come expecting to sit and listen, but walked out the door with their mouths wide open because they were amazed at the depth of the problem."
New systems rolled out
Idaho Medicaid just implemented a brand new Medicaid Management Information System (MMIS). While the program expects to reap many benefits from the new system, the timing was difficult. The implementation occurred right after a three-week payment freeze for all providers at the end of the last fiscal year. Then at the start of the new fiscal year, the new MMIS system was used to process all the claims that were held. Understandably, providers were very anxious about possible glitches.
"They had to take loans out to get through the payment freeze. Obviously, there are challenges any time you implement a brand new system," says Ms. Clement. "Frankly, we are inundated with provider calls, saying the timing of the new MMIS implementation in this budget environment couldn't be worse." Some providers were paid only a portion of their overall payment due to system problems, which had to be corrected.
Idaho Medicaid also replaced its eligibility system in early 2010. "We've been so focused on developing these new systems that we haven't even had a chance to catch our breath in terms of the health information exchange work," says Ms. Clement. "We haven't done much work at all in terms of that."
A recent layoff of 12% of the workforce made the system implementations more difficult. For two fiscal years, the state managed to avoid layoffs with the use of furloughs, but as of FY 2010, this was no longer feasible. "Not only was our workforce impacted, but we had to reduce operating costs, which means we have to pay our contractors less. So, that was a struggle," says Ms. Clement.
Idaho Medicaid's new systems are transitioning from a project phase to an operational phase, explains Ms. Clement, during a time when resources are already tapped.
"A year from now, or maybe even nine months from now, we will be in a better position. We will have better systems with improved functionality. Changes can be made easier than with the old mainframe systems," says Ms. Clement. "But right now, it's a tough time."
All of the policy changes related to cost reductions that need to be implemented ideally wouldn't be done with a brand new system. Generally, says Ms. Clement, "You want to have a stable environment that you know is performing the functions accurately before you start throwing in a lot of changes. But we don't have that luxury."
Contact Ms. Clement at (208) 334-5747 or [email protected].
There is no question that Medicaid programs can use all the legitimate cost-cutting ideas they can get, but Idaho has gone the extra mile.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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