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Will provider rates be cut? Quicker, simpler payment can soften the blow
The number of states facing budget shortfalls will continue to grow, which means states will make some tough choices, including possible provider rate cuts, predicts Stan Rosenstein, principal advisor of Health Management Associates in Sacramento, CA, and former director of California's Medicaid program.
"I don't think we've yet hit the bottom of the states that are in trouble. I think we will be seeing a lot of states that will be in worse shape as things deepen," he says. "Every time you see new data on increased unemployment and that rate continues to grow, that tells me that states are not yet at the bottom."
A March 2009 report from the California Legislative Analyst's Office says that state is now facing an additional $8 billion deficit over the next 16 months. According to the report, the state is not collecting enough tax revenue to support its nearly $100 billion general fund-and more than 40 states are in a similar situation.
"So, tax revenues, at least in California, are continuing to drop," says Mr. Rosenstein. "States may well be in situations that are extremely difficult. The number of states that the economic stimulus wasn't enough for, I fear, will be growing and growing."
Since states won't cut eligibility, because this was protected by Congress, this will leave states with this difficult choice: Do they cut optional benefits, such as dental, podiatry, and optometry services, or do they cut provider rates?
"I fear that some states will be forced to make cuts in their Medicaid program. And no state wants to do that," says Mr. Rosenstein. "But still, the fundamental problem states will face is they have to balance their budget. If they don't have enough funding, they can't cut eligibility. The other places that states save large amounts of money are benefits and rates."
However, cutting provider rates could affect access to care, which is "a significant problem," he adds.
According to Jesse S. Anderson, state plan coordinator for Oregon's Division of Medical Assistance Programs (DMAP), the state has a number of proposed reductions pending legislative approval, including benefits and provider rate reductions. "We normally give providers a cost-of-living adjustment increase to rates each January. However, this is one of the reduction items that directly impact the provider," he says.
Mr. Anderson says DMAP periodically goes through exercises to reduce or eliminate administrative burdens for its managed care organization plans, as the penetration rate is fairly high in Oregon.
States are exploring ways of maintaining access even in the event of provider rate cuts. "There are certainly ways to make rate cuts more palatable," says Mr. Rosenstein. "You can reduce the billing requirements to make participation simpler administratively, or you can speed up payment. Often, providers will be less dissatisfied with the rate reduction if they get paid quicker."
According to Cindy Christensen, operations manager of Alaska's Division of Health Care Services, the majority of health care providers practicing in Alaska are enrolled in the state Medicaid program. "Based on the increasing number of claims that we process, recipient helpline statistics, and the types of inquiries received at the division level, Alaska Medicaid clients are typically able to access primary care providers," she explains.
However, clients do experience some difficulty accessing dental services and certain therapies for children. "This difficulty is largely due to work force shortages," says Ms. Christensen. "Participating dentists have told us that low rates were one reason that Medicaid recipients could not access dental services."
To address this, the Department of Health and Social Services requested and received a special appropriation from the Alaska legislature to increase dental rates, effective July 2008, but has very limited data to determine if this has improved access due to the short time frame.
In addition, Ms. Christensen says Alaska Medicaid has looked at the length of time from submission to payment for dental claims. A clean claim can be processed within seven days of electronic receipt. "Alaska also does not require its dental providers to bill third-party payers prior to submission of a claim to Alaska Medicaid," she reports. "Alaska Medicaid uses a pay-and-chase contractor to capture third-party dental payments."
According to a study published online in the November 2008 issue of Health Affairs, even if provider rates are increased, delays in reimbursement discourage Medicaid participation by physicians. The researchers linked state-level data on average reimbursement times to the 2004-2005 Community Tracking Study Physician Survey and found that increased rates may be insufficient to increase physicians' participation, unless they also are accompanied by reductions in administrative burden.
Peter J. Cunningham, PhD, a senior fellow at the Center for Studying Health System Change in Washington, DC, one of the study's authors, says he was surprised by the findings to some degree. This is because states have been moving toward greater automation of their Medicaid claims processing, which should speed up payment.
"On the other hand, we know from surveys and anecdotal evidence that physicians still complain a lot about slow payment and other administrative burdens in Medicaid," he says. "The results in this study confirm that slow payment does affect physicians' decisions to accept Medicaid payments."
Dr. Cunningham says the bottom line is that automation by itself won't necessarily speed things up in a way that's satisfactory to physicians. There continue to be administrative barriers for timely review and processing of Medicaid claims.
"Increasing fees alone won't necessarily increase access to physicians for Medicaid enrollees, if payment is slow," he points out. "There needs to be some attention to reducing payment time and other administrative barriers."
Certainly, some states are committed to increasing access for their Medicaid enrollees. These states are attuned to the problems with Medicaid reimbursement, and they are expected to make efforts to both increase reimbursement levels and speed up payment.
"However, other states that are more concerned with the strain that Medicaid is putting on their state budgets aren't necessarily looking for ways to further increase spending," says Dr. Cunningham. "On the contrary, administrative barriers to fast payment may be more or less deliberate as a way to both reduce Medicaid billing fraud, as well as general cost containment."
Contact Mr. Anderson at (503) 945-6958 or email@example.com, Ms Christensen at (907) 334-2430 or firstname.lastname@example.org, and Dr. Cunningham at (202) 484-4242 or PCunningham@hschange.org.