Fiscal Fitness: How States Cope

Colorado's Medicaid program expands to cover 100,000 uninsured

The Colorado Health Care Affordability Act has just been signed into law, which will provide coverage to more than 100,000 uninsured Coloradans without any cost to taxpayers, phased in over three years.

State general funds will not need to be leveraged to draw down additional federal funds to provide coverage. Instead, by assessing a provider fee on hospitals, Colorado will generate about $600 million a year to provide coverage to the uninsured and receive $600 million in federal matching funds. The combined $1.2 billion will cover more than 100,000 currently uninsured Coloradans through its Medicaid and Child Health Plan Plus programs.

"Colorado has a strong commitment to expanding public health insurance. The Colorado Health Care Affordability legislation allows for us to follow through on that commitment. There is also a recognition that now the hard work needs to happen to get federal approval," says Sandeep Wadhwa, MD, Medicaid director and chief medical officer with the Colorado Department of Health Care Policy and Financing. "I am sure there will be even more excitement when we are able to reduce the percentage of uninsured people and give people more options for coverage."

Dr. Wadhwa says he thinks the fact that the expansion didn't require a draw on the state general funds "moved us more into a philosophical discussion rather than an economic discussion. There was more discussion around 'What's the sustainability of this?' or 'Should we be drawing so much federal money?' But it wasn't controversial in that we weren't spending state general fund money."

The first expansion will bring children and pregnant women up to 250% of the federal poverty level (FPL) from 205%, and will bring caregivers up to 100% of FPL. "These expansions represent a win-win. Clients will receive coverage and comprehensive health care services, and providers will have a payment source for services that were previously uncompensated," he explains.

Dr. Wadhwa notes that while many states have expanded to similar rates of coverage, very few have used a provider fee to finance that expansion. "We can do the expansions up to 250% by state plan amendments," he says. "But the expansion for childless adults and buy-in program for people with disabilities require[s] waivers. This waiver process is one where we will really learn from other states."

Provider rates cut only 2%

According to Dr. Wadhwa, Medicaid wasn't planning to cut any optional services or eligibility categories even before the stimulus package. However, a 4% rate cut was being talked about for Medicaid providers. With the stimulus dollars, the state was able to keep up with expanding enrollment and also reduce the provider rate cut to 2%.

From an access standpoint, primary care and dental services are Colorado Medicaid's biggest areas of concern. "Having said that, we are also hearing from a lot of our providers that their practices are slowing down on their commercial side. As people have higher deductibles, they are not going to the doctor; so Medicaid becomes a better payer," says Dr. Wadhwa. "Our rate structure is still roughly at 90% of Medicare's, but that is a whole lot better than zero if your practice is having open slots."

Recently, Medicaid has seen some modest increases in provider enrollment. In October 2008, 70% of family physicians participated, and this number increased to 76% as of June 2009.

Despite feeling the impact of the recession, the state wanted to preserve the gains it made in primary care access, and the 4% rate cut was resulting in push-back from the provider community. "Certainly, states have had to make a lot more severe cuts than that. But the 4% was playing out as a 'free day for Medicaid,' as it came out to a little less than 1/20 of a work month," says Dr. Wadhwa. "We were sensing that we were pushing the envelope."

First, Dr. Wadhwa says, "We asked and received flexibility for how we accomplished the 2% reduction. We went to our providers asking for recommendations on how to save money on avoidable utilization as offsets to a rate cut. We had a fascinating and productive dialogue."

As a result, Medicaid's dentists, primary care physicians, and direct care providers, including personal care workers and certified nurse assistants, got 0% rate cuts. All other providers got a 2% rate cut.

"What we came up with were some targeted volume reductions," says Dr. Wadhwa. "For example, we had a conversation with doctors about positron emission tomography [PET] scans. We had never put any rules or guidance in effect about these before. So, here was an area where doctors in the state agreed we could develop some prior authorization rules." Nonemergency CT scans and magnetic resonance imaging scans also were targeted.

"In collaboration with the doctors, we got ideas and buy-in by providers to take ownership to tackle areas where we felt like there were opportunities to safely reduce volume," says Dr. Wadhwa.

Likewise, feedback was obtained from the dental community, which identified some services as possibilities for prior authorizations to offset rate reductions.

"We also have a broader initiative around ERs and readmission rates. If we can pull that off, then I think we may be able to come off the 2% rate reduction for the other providers or mitigate the impact of potential future budget shortfalls," says Dr. Wadhwa. "These initiatives are still being defined."

No cuts in services

Medicaid's goal is to continue trying to find areas with avoidable utilization. However, a recent budget put a damper on those activities at least temporarily, with the distressing news that the state has a shortfall of $354 million for the upcoming fiscal year. "We are very anxious to work with the governor's office and the legislature to see what share of the shortfall the Medicaid program will have to bear," says Dr. Wadhwa. "From a state financing point of view, the rumors of economic recovery are still a little early."

Enrollment began climbing in January 2008 and has increased 12% over the past 12 months, with 60,000 additional clients in April 2009 than the previous year. Due to the stimulus funds, Medicaid was able to meet that caseload without cutting any optional services and benefits.

"We never proposed any cuts in services, but we certainly stopped considering expanding our services," says Dr. Wadhwa. "We had a whole agenda of new things we wanted to do. We had a plan to expand services for our adults and created a dental benefit that wasn't emergency only. That side of the equation got wiped out. We'll need to wait until we can find some financing to make that request. There is no ability to do that now."

As for medical home initiatives, these are "one of our central pieces of cost-saving and a way to improve health outcomes," says Dr. Wadhwa. "We will be getting a first year report that will give us a sense of how the programs are doing. In the interim, we are continuing to expand those programs. We've got a preliminary sense they are giving us good results."

Contact Dr. Wadhwa at sandeep. wadhwa@state.co.us.