Balanced budget act reopens reimbursement battle between 14 states and community health centers
Balanced Budget / Reimbursement Battle
December 31, 1997
Some 14 state governments are engaged in a heated dispute with federally-qualified community health centers (FQHCs) over how to apply a provision of the federal balanced budget act
The matter is now in the hands of Health and Human Services Secretary Donna Shalala, who will determine whether those states have to pour tens of millions of Medicaid dollars into the centers over the next six years.
At issue is language that requires states to make supplemental payments to the centers to help them make the transition to Medicaid managed care.
The law requires states to pay centers the full difference between what they receive from Medicaid under managed care and what they would have received previously under fee-for-service in the next two years. In the third year of the phase-out, the supplement drops to 90% of what the centers received previously, and continues to drop to 85% in the fourth year and 70% in the final two years of the phase-out.
The 14 states—Alabama, Delaware, Florida, Hawaii, Kentucky, Maryland, Minnesota, New York, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee and Vermont—all received Section 1115 waivers exempting them from from an earlier law guaranteeing "reasonable" reimbursement to health centers for providing primary care service to Medicaid recipients.
The states argue that those exemptions from the earlier law, passed by Congress in 1989 and 1990, also exempt them from the provision in the new budget Agreement.
For the 36 states without such waivers, the dispute is irrelevant. They are covered by the new budget language.
The health centers in the states that are challenging the language say a decision that the states do not need to pay would seriously threaten their ability to provide care to 2 million people in those states.
Robert Hinckley, spokesman for the New York Department of Health, noted that New York’s Legislature developed its own version of such supplemental payments as part of its waiver. The state will give the health centers 90% of their lost revenue the first year and 50% the second.
Mr. Hinckley also noted that New York is encouraging the state’s hospitals to include community health centers in their plans for making the transition to managed care. New York hospitals will get $1 billion over the next five years in transitional assistance.
But, not every state is buffering the transition to managed care for the centers which now face intense competition for their patients from health plans.
"No phase-out in Ohio"
"There’s no phase-out here, none," said Katherine Kuck, deputy director of the Ohio Primary Care Association, which represents the state’s community health centers. Ohio state officials’ response to the budget language has been non-existent, she said. "They haven’t made any moves to implement it, or given any indication they feel a need to implement it."
Ian Timm, executive director of the Oregon Primary Care Association, said the reaction was similar when he approached Medicaid officials in his state:
"The state of Oregon’s position is, What part of waiving FQHC (Medicaid funding rules for federally-qualified health centers) did you not understand?’ "
Lee Partridge, director of health policy at the American Public Welfare Association, argues that imposing the requirement on the 14 states would be unfair because of the wide range of financial and programmatic arrangements they have already worked out with the centers. For example, she noted that in several states, including Rhode Island and Massachusetts, community health centers have formed their own HMOs to contract with the state and compete more effectively with other managed care organizations.
But, Daniel Hawkins, director of federal and state affairs for the National Association of Community Health Centers, argues that the wording of the balanced budget act suggests Congress intended the phase-out to apply in the states with existing waivers. Two chapters of the legislation address the Medicaid changes, he noted.
"One gives the states a lot more flexibility in doing managed care," Mr. Hawkins said. "At the end of that chapter is a provision stating that nothing in this chapter shall be applicable to states with waivers. Chapter 2, with the new payment system for the health centers, has no such similar language. So our contention is that Congress didn’t mean to exclude states with waivers in effect."
HCFA and HRSA disagree
Whether the federal government will read the legislation that way is yet to be determined. Mr. Hawkins said that Health Care Financing Administration officials, who oversee Medicaid, recommended against applying the supplemental funding requirement to states with waivers. But, he said, the Health Resources and Services Administration, which oversees the maternal health program among others, urged that states with waivers be required to provide the phase-out funding. That left the matter in Secretary Shalala’s lap.
Federal officials wouldn’t comment on the dispute. "All I can say is that it’s something the department is still looking at," said Theresa Sachs, a health insurance specialist in HCFA’s Center for Medicaid and State Operations.
The lost Medicaid revenue, if the dispute is resolved in states’ favor, would make it impossible for the centers in those 14 states to provide for as many of the uninsured, according to Mr. Hawkins.
"About 40% of that population is Medicaid and 40% is uninsured," he said.
"Some of these centers only have one or two doctors. If you lose that Medicaid money, that’s (a significant part)of your income, which means you may have lost your ability to keep one of those doctors. How long is that other guy going to stay on under those circumstances?"
Health centers in Ohio already are seeing such impacts. "We had one small center that had Medicaid losses of $170,000 in the 12 months ending in October," Ms. Kuck said. "We’re already consolidating sites. We’ve closed about six sites in Cleveland, Columbus, Cincinnati and one in rural Ohio."
Mr. Timm said that while a couple of health centers have merged in Oregon, the real impact of the funding crunch under Medicaid managed care has been on patients’ access to care. "They’ve laid off staff that provide outreach services and enabling services like interpretation. More than 50% of the visits to community health centers in Oregon are from patients who require interpretation services," he said.
Ms. Kuck said she’s not convinced that for-profit managed care companies will pick up the slack—especially for the uninsured.
"Our mission is to serve. They’re in there to make a profit. I’m worried about how care would continue to be provided."
Nationally, it is estimated that some 3,000 community health centers treat nearly 10 million patients, about 75% minorities. But the new competition for Medicaid patients has reduced the number seen by federally funded health centers from 3 million in 1994 to 2.5 million in 1996.
Even with the continued federal protections, Sara Rosenbaum, director of the Center for Health Policy Research at George Washington University Medical Center in Washington, has predicted some "really serious failures" by the health centers over the next few years.
—Harvy Lipman
Contact Mr. Hinckley at 518-474-7354, Mr. Hawkins at 202-659-8008, Mr.Timm at 503-228-8852, Ms. Kuck at 614-224-1440, Ms. Sachs at 410- 786-0307, and Ms. Partridge at 202-682-0100.
Balanced budget act reopens reimbursement battle between 14 states and community health centers
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