Fiscal Fitness: How States Cope

Delaware targets inappropriate ER use and hospitalizations

When Delaware Medicaid attempted to implement co-pays, "we didn't get very far with our legislative branch on that," reports Rita M. Landgraf, secretary of Delaware's Department of Health and Social Services.

Co-payments of $3.65 were proposed for visits to medical/surgical centers, outpatient hospital services excluding urgent emergency department (ED) visits, physical, occupational and speech therapies, and all prescription drugs with a $15.00 maximum, says Ms. Landgraf, and co-pays for non-urgent ED visits were not going to be applied to children, pregnant women, individuals who are institutionalized and individuals receiving hospice care.

If the copays had been implemented, says Ms. Landgraf, it would have resulted in a savings of $1,870,000 to the Medicaid program, inclusive of both federal and state dollars.

One reason that the Medicaid cost containment measures were not supported by the finance committee of the legislature is that hospital providers voiced that they would be put in a difficult position in which there would be no guarantee they could collect the co-pay, says Ms. Landgraf, but they would still have to provide the treatment.

"They framed it that it was cost-shifting onto them," she says, while others argued that costs were being shifted to a population that was already fiscally challenged. "The issue turned into a social debate," she says. "If we weren't going to do something across the board with the provider network, which there wasn't a political appetite to do, there was a feeling that we were only doing something to the population."

Under the agency's original proposal, says Ms. Landgraf, the hospital wouldn't be paid for the individual's fourth ED non-urgent visit. "The idea was that it would provide time to manage those individuals who have a tendency to use the ER for non-urgent care," she says.

Surplus of funding

When the co-pays were first proposed, the state's revenue situation appeared to be very serious, adds Ms. Landgraf, but the state later ended up with a surplus of funding. "I'm not sure how this would have played out if that had not been the case," she says. "People would have really been forced to address this from a budgetary perspective."

At the time of the governor's recommended budget proposal, the state was facing a projected $208 million deficit. "The political will did not seem to be there because the state revenues increased later in the year," says Ms. Landgraf. "The committee wished to continue to support the population with no service limitations or co-pays."

Co-pays were just one of the proposed strategies involving increased cost-sharing, says Ms. Landgraf. "We were trying to come up with strategies to cost-share across the board, but we presented things that were not Draconian in any way," she says. "We first did some research around it to see what other states were doing."

The agency's internal study found that 38 state Medicaid programs had implemented some type of benefit restrictions in the previous two years, such as cutting optional services or limiting the number of non-urgent visits to the ED, and those 45 states have some type of co-pay requirement, says Ms. Landgraf.

"We were approaching this with some evidence to back up what we were doing," says Ms. Landgraf. "But because the state found itself in a better situation relative to our revenue stream, everything remained status quo. Meanwhile, the Medicaid budget continues to grow with increased volume and inflation."

Misuse of the ED

Approximately 1,500 Delaware Medicaid clients use the ED for non-urgent care more than three times a year, which costs approximately $1 million in state funds, reports Ms. Landgraf. "Those 1,500 people aren't getting really good outcomes," she says. "If you are using the ER as your primary care doctor, you are going to be vulnerable and compromised from a health perspective."

Currently, the agency is looking at ED utilization data to look for patterns in these users, such as medical conditions or geographic regions. "It's not as though they don't have a primary care physician. On face value, it doesn't appear that people didn't have access to a doctor," says Ms. Landgraf.

It's possible that the patients are unable to get in to see the physician for some reason, even though he or she is accepting Medicaid patients, says Ms. Landgraf, adding that just because there are enough primary care physicians to cover the Medicaid population, it doesn't mean they will actually be seen. "If I find out that 500 individuals are going to one practice, that tells me something. Maybe I need to be having a conversation with that practice about problems with access," she says.

Ms. Landgraf hopes to work with the University of Delaware's College of Health Sciences to support this population in getting care earlier and improving care coordination, and the agency will examine whether the high-utilizers are accessing other services of the state that provide case management, such as the Division of Substance Abuse and Mental Health.

"If they are not, maybe we need to facilitate involvement with other programs throughout our department," she says. "And if they are already a part of our system, both Medicaid and the partner agencies need to have an integrated approach to deliver care."

Proceed with caution

Costs and enrollment continue to spike in Delaware's Medicaid program, says Ms. Landgraf, with about 200,000 individuals currently enrolled of the state's less than one million population.

"I haven't even seen any leveling off," says Ms. Landgraf. "For us to be able to sustain this level of growth, which now represents 16% of the overall state budget, will be problematic."

The state's budget surplus came in part from the gross receipts tax, some of which involves one-time-only revenue dollars such as abandoned property fines, and other tax revenues, says Ms. Landgraf. The state ended up with a surplus of $364 million at the close of its fiscal year on June 30, 2011.

"From a very high-level perspective, it looks like Delaware is coming out of the recession ahead of some other states, although the economy continues to demonstrate extreme vulnerability" she says. "I will believe we are moving forward when I start seeing my benefits either stabilizing or going down, and I am not seeing that."

More than 135,000 people are on the state's Supplemental Nutrition Assistance Program, and these numbers continue to grow, adds Ms. Landgraf.

"The corporate financial statements are looking better, but that is not resonating yet to the ground level, where I am going to see it from a social services perspective," says Ms. Landgraf. "Until I see that, we have to proceed with caution, especially in the Medicaid program."

Contact Ms. Landgraf at (302) 255-9040 or