Survey of Medicaid contracts identifies weak links in purchasing of health care
Survey of Medicaid
December 31, 1996
A soon-to-be-released survey by George Washington University (GWU) is likely to lead many Medicaid officials to make changes in their Medicaid managed care contracts before they sign on the dotted line again with managed care plans.
For the past 18 months, GWU lawyers have been analyzing state Medicaid managed care contracts, and finding examples of imprecise language that "may sound picayune but can be very serious," says Sara Rosenbaum, director of the Center for Health Policy Research at GWU and leader of the study. Contract language determines "what’s covered and what’s not covered," she says, which can have enormous implications for Medicaid beneficiaries and for state governments.
"When you are buying managed care for poor people, you are not buying discounted insurance, you are buying a health care system. This is all they have, they can’t go out of plan, they can’t afford other services," says Ms. Rosenbaum.
"The Medicaid program probably faces the biggest challenge of any purchaser trying to buy managed care services because the risks facing people who are enrolled in the Medicaid program are significantly higher on average than the risks that confront other people enrolled in managed care," she said at the annual meeting of the American Public Health Association in New York in November.
One of the recommendations of the study, scheduled to be released in early 1997, is that states should pay more attention to legal terms and definitions in their contracts.While this may be "no news" for managed care plans that have, for years, been signing contracts with sophisticated employer-purchasers, states are still making the transition from their roles as regulators of health care to purchasers of health care.
Some examples of how unclear contract language can cost states dollars:
• Federal Medicaid law covers four types of pregnancy services--prenatal, delivery, post-partum and conditions that complicate pregnancy. Some state contracts are not completely consistent with federal law and only specify that prenatal, delivery and post-partum care will be provided. Although not intended by the state, this omission results in the state remaining liable for these services..
• Some contracts say only that "routine immunizations" will be covered. States may intend for the guidelines of the Centers for Disease Control and Prevention (CDC) to be used, but unless contracts specify this, plans will use their own definitions of "routine."
For issues such as access and network adequacy, Ms. Rosenbaum believes it would be useful for states to organize working groups to develop ground rules and standards in much the same way that HEDIS helped develop a consensus on quality measures.
Pew gives $1.2 million grant
The Medicaid contract survey by GWU was funded by a $1.2 million grant from Pew Charitable Trusts, a $250,000 grant from the Annie E. Casey Foundation, and by grants from the CDC, and Substance Abuse and the Mental Health Services Administration (SAMHSA).
Ms. Rosenbaum says the feedback she is getting from Medicaid officials is that the survey is "the single most useful" tool because it will allow them to compare contract language used by their state to that used by other states.
Ms. Rosenbaum says the study will provide tables on about 100 issues such as benefits, definitions of "medical necessity," requirements for provider networks and access, etc. The tables will compare language used by the various states in their contracts.
Medicaid contracts don’t only impact the Medicaid agency, Ms. Rosenbaum says. They also impact state agencies that depend on Medicaid funds. "Medicaid agencies are on the hot seat of the purchasing system, but they are by no means the only purchasers," she says. "The purchasers include all the other agencies whose budgets are actually greatly affected by Medicaid." Health departments, for example may realize 50-70% of their budgets from the Medicaid program, she says.
Contract surprises
One state was surprised to learn "after the fact" that treatment for tuberculosis at local health department clinics was not covered under its managed care contracts, nor was direct-observe therapy for tuberculosis. (In direct-observe therapy, patients are being observed taking their medications.) When challenged, the plan told the state that the contract did not specify which providers were to be included in the network and that it did not view direct-observe therapy as "medical treatment," but as a nursing or case management intervention.The state ended up by doing a "carve-out" to cover these services.
Ms. Rosenbaum says only two states—Florida and Missouri—specified that local health departments were to be reimbursed for tuberculosis screenings, even if the local health department was not in the plan’s network.
While states don’t "purchase by disease," they sometimes need to be specific about therapies such as direct-observe therapy for tuberculosis or about situations such as court-ordered treatment.
Judges may order treatment for mental illness or substance abuse as well as for tuberculosis for Medicaid patients. Ms. Rosenbaum says the plans’ exclusions and limitations in coverage may apply unless a state’s contract specifies that court-ordered treatments are to be covered. If coverage is not specified in the contract, the state would have to pay for the court-ordered treatment.
However, before states include anything in a contract, she warns, they need to be sure they have the will to enforce it. "If you are not prepared to monitor and enforce an item, then my advice to most state Medicaid agencies is don’t even bother trying to draft it into the contract.
"If that’s a bottom-line issue, you not only have to think about, is this plan going to pay, but how is it going to make payment?’" says Ms. Rosenbaum. For instance, if a state decides it wants plans to reimburse local health departments for certain services, states need to determine if the fees will "be recouped from advance capitation payments and paid over to the health departments if not paid in a timely fashion. That’s what I mean by enforcement."
Ms. Rosenbaum says it is not workable to produce a model contract because there is so much variation among Medicaid programs. More likely is that model specifications will be developed on various issues for states to incorporate in their contracts.
The CDC originally helped sponsor the survey of contracts because of its interest in how tuberculosis prevention and treatment services are being handled in a Medicaid managed care environment. The CDC is hoping to develop model specifications for states on issues that impact tuberculosis, HIV prevention, sexually transmitted diseases and immunizations. Paul Stange of the Office of Managed Care at the CDC says the contract also may be the place to define the roles of managed care plans and public health agencies in population-based health activities.
The CDC "is clearly concerned and interested in, and is spending a lot of energy thinking about, how to describe the intersection of the delivery of clinical services provided by plans," and those community-oriented, population-based activities traditionally carried out by public health, says Mr. Stange.
Ms. Rosenbaum says one recommendation to states is that they pay more attention to subcontracts between plans and providers. In another GWU study of contracts between managed care organizations (MCOs) and community mental health and substance abuse centers (MH/SA), researchers concluded that "contracts between MH/SA centers and MCOs overwhelmingly favor the MCOs in a number of critical respects." In a draft report, dated June 1996, one of the researchers' findings was that plans often only purchase specific services from MH/SAs , not the comprehensive services that MH/SA centers offer and that the Medicaid agency may expect.
Contact the GWU Center for Health
Policy Research at 202-296-6922.
Survey of Medicaid contracts identifies weak links in purchasing of health care
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