Deborah Bachrach, JDBachrach Health Strategies [email protected]
November 11, 2010
Medicaid covers more enrollees than Medicare ◦ 25 million more expected to enroll by 2014◦ 16 million more expected to enroll after 2014
By 2016, Medicaid will spend more than Medicare Medicaid and education are the largest items in
state budgets 26 state Medicaid programs would be on the
Fortune 500 list Medicaid is a major payer for obstetrics,
pediatrics, behavioral health and long term care
11/11/10Bachrach Health Strategies LLC
Section 1902(a)(30)(A) of the Social Security Act requires states to adopt payment methods that:
1. Safeguard against unnecessary utilization of care and services;
2. Assure that payments are consistent with efficiency, economy and quality of care; and
3. Are sufficient to enlist enough providers so that care and services are available to Medicaid beneficiaries at least to the extent that such care and services are available to the general population in the geographic area.
11/11/10Bachrach Health Strategies LLC
Transparent to all stakeholders◦ Government knows what it’s buying◦ Providers can respond to built in incentives◦ Key to accountability
Encourage efficiency Facilitate measurement of quality Accommodate patient acuity
◦ Key to assuring access for sicker patients Collect accurate clinical data Align with other payers Support payment innovations
11/11/10Bachrach Health Strategies LLC
80% of Medicaid care is still paid FFS FFS payment methods and levels can drive
efficiency and access or the lack thereof:◦ Cost-based rates discourage efficiency and
encourage higher charges◦ Fee schedules and per diem/per hour rates
incentivize volume◦ Both absolute and relative payment levels
influence access
11/11/10Bachrach Health Strategies LLC
FFS hospital payments exceed $84 billion◦ Largest item in state Medicaid budgets
Medicaid (including Medicaid managed care) pays for 1 in 5 hospital inpatients
Medicaid pays for almost 50% of all maternity and pediatric care and a large percentage of behavioral health care
Hospital clinics are an important source of primary and specialty care in some states/communities
But sound payment policies are equally important in LTC and managed care
11/11/10Bachrach Health Strategies LLC
Step 1: Analyze current payment methods/amounts Inpatient Rates in 2007
◦ Inpatient payments exceeded costs◦ Used a 1981 cost base; inflated annually◦ Multiple rate add-ons◦ Limited differences for patient acuity◦ Complicated and opaque
Outpatient Rates in 2007◦ Rates frozen for over a decade; well-below costs ◦ Paid same amount for every visit◦ Physician fees – lowest in nation
11/11/10Bachrach Health Strategies LLC
Step 2: Analyze impact of current rate structure New York led the nation in inpatient spending, but
lagged on outpatient spending Medicaid paying for more care in inpatient
settings; other payers using less-costly outpatient settings
New York performed poorly on national quality scorecards◦ Ranked 50th on avoidable hospitalizations
according to the Commonwealth Fund◦ Ranked average or weak on the vast majority of
AHRQ quality factors
11/11/10Bachrach Health Strategies LLC
Step 3: Rationalize inpatient and outpatient payment methods and levels
Inpatient Rate Reform (2008/09)◦ Established multi-stakeholder advisory committee◦ Reduced rates by $600 million; established
transition pool ◦ Adopted new payment method (APR-DRGs)
Outpatient Rate Reform (2008/09)◦ Invested $600 million◦ Adopted intensity based payment system (APGs)
Incents efficiency Reflects patient burden of disease
11/11/10Bachrach Health Strategies LLC
Expand covered outpatient services ◦ Smoking cessation◦ Asthma and diabetes education
Implement statewide medical home initiative Initiate multi payer demonstration in upstate NY Implement potentially preventable readmissions
policy Reform DSH (indigent care) payment formula Positioned for federal reform Alternatives to across-the-board rate cuts
11/11/10Bachrach Health Strategies LLC
Support proposals with data and facts Use national comparisons where appropriate Engage all stakeholders early and often
◦ Seek consensus on principles of rate reform◦ Consumer support can make the difference
Consider transition support for disadvantaged providers
Provide sufficient lead time between adoption and implementation◦ Systems changes◦ CMS approval
11/11/10Bachrach Health Strategies LLC
Payment reform offers alternative to across-the- board rate cuts
CMMI will support demonstrations that enhance quality, contain costs & improve population health◦ Multi-payer demonstrations preferred
ACA authorizes specific Medicaid pilots◦ Health homes for Medicaid enrollees w/ chronic condition◦ Bundled payments around a hospitalization◦ Global payments to safety net hospitals◦ Pediatric ACOs
To play, Medicaid must embrace sound payment practices
11/11/10Bachrach Health Strategies LLC