Fiscal Fitness: How States Cope

Oregon expects cost savings from primary care investment

The Affordable Care Act (ACA) requires that state Medicaid agencies reimburse primary care providers at 100% of the Medicare fee schedule for two years, notes Donald Ross, manager of the policy and planning section at the Oregon Health Authority's Division of Medical Assistance Programs.

This provides for 100% federal funding match for the states on the difference between their previous rates to primary care providers, and the Medicare fee schedule states will be paying during those two years, he notes.

"Essentially, the state Medicaid agency has an opportunity to give the primary care providers a raise, at no cost to our general fund," says Mr. Ross.

The ACA provides $8 billion over the two years to pay certain physician groups 100% of Medicare fee-for-service rates for certain evaluation and management codes associated with office visits for preventive care, screening and diagnosis in the primary care setting, notes Mr. Ross.

"What the Medicare fee schedule will be for these services in 2013 is something we do not know at this time. So the difference between Oregon 2009 rates and 2013 Medicare rates is an unknown," says Mr. Ross. Therefore, he says, it's difficult to project how much the total increased payments to primary care will be, and how much it would have cost without the additional federal funding.

"To put it in perspective, though, the current primary care Medicaid conversion factor for Oregon is $27.82, and the current Medicare conversion factor is $33.98," says Mr. Ross. "That is a difference of 22%, so the increase will be substantial."

The state will use this temporary additional federal funding to leverage increased and improved access to primary care services, says Mr. Ross, such as routine diagnostic screening and preventive care, in a way that is sustainable beyond the two years the temporary funds will be available.

Provider rates were reduced 7% as of August 2011, adds Mr. Ross, with the exception of primary care services. "These reductions, and many others to other provider types and programs, have been necessary to meet the legislatively approved budget for the 2011-2013 biennium," he says.

The state will benefit from the additional federal funding during the last six months of the biennium, from January 2013 to July 2013, says Mr. Ross, but most of the benefits will be experienced during the following 2013-2015 biennium.

"We did not cut services in our last round of reductions," adds Mr. Ross. "We are achieving all our reductions in spending through rate reductions, utilization controls, care integration and coordination, and like strategies."

The goal is to do more than just pay an increased rate to primary care providers, adds Mr. Ross, and instead, to collaborate with them on new payment methodologies, rewards for reaching quality targets in evidence-based primary care, and other incentives for better access to preventive care and increased wellness in the population.

"If we can reduce costs in other areas by reducing utilization in more expensive settings, and reducing the incidence of acute health-related problems because of early screening and preventive care, we have a chance to divert additional funding to primary care," says Mr. Ross.

Lower expenditures

"Our goal is to experience the cost savings that results from a healthier population," says Mr. Ross. "We look forward to better primary care access, resulting in Medicaid recipients whose health issues are addressed earlier."

Though Mr. Ross says there aren't any estimates for the amount of expected savings, he notes that some of the state's planned approaches have already been implemented in other parts of the country.

"The impacts have been documented in various settings, ranging in size from one patient-centered primary care home to fully integrated health systems that serve an entire community," says Mr. Ross. "There is enough evidence of cost reduction out there for the leadership in the state of Oregon to have made the decision we should go in this direction."

The goal is to move away from delivery systems that deliver care in fragmented and uncoordinated ways, says Mr. Ross, and payment systems that reimburse more for more volume of services provided, instead of reimbursing for value and outcomes.

"That generates lower expenditures on the kind of care that must be delivered when preventable serious conditions and acute events occur," says Mr. Ross. Most of the savings will come from reduced hospitalizations, ER visits, and surgical procedures, he predicts.

"We believe the cost savings will be substantial. We also believe it will be higher quality care for the population," says Mr. Ross.

Workforce shortage

There are not enough primary care providers in many communities of many states, says Mr. Ross, and those that do exist are busy each day caring for individuals with Medicare, commercial insurance, or employer-sponsored coverage, all of which pay higher rates to providers than state Medicaid agencies and managed care plans do.

"The provider is left with tough decisions about practice mix and how much Medicaid, if any, they can afford to see," says Mr. Ross. "If we can increase the rate we pay primary care for Medicaid to Medicare levels, we should see some increased participation in our programs and improved access to primary care."

However, the shortage of primary care providers still needs to be addressed, he says. Another challenge is how to define primary care, and how to operationalize fee schedules for providers that pay one specialty a different rate than another specialty, says Mr. Ross.

"For example, how do you set your claims and benefit systems up, and set providers up in those systems, so that a code billed by a family doctor pays a higher rate than the same code billed by a neurologist?" he asks.

Primary care must be defined in those systems by both the type of provider, and the type of care, says Dr. Ross. "The legislation and rules have given us some guidance on this, but we still need to make sure our systems will adjudicate these claims correctly," he says. "The most significant opportunity for us is that we do have some additional federal funding from the ACA to accomplish this."

This means that ideas won't "die on the vine" because of a lack of funding to implement them, says Mr. Ross. "Instead, they have a chance to actually bear fruit and build sustainable momentum in the transformation of our state Medicaid delivery systems," he says. "This can result in improved capacity for the growing expansion populations in our future."

Mr. Ross says that he expects to see increased participation of primary care providers in the Medicaid programs, and more practitioners who see Medicaid business as a fiscally viable component of a healthy private practice.

"We have this funding for two years. When that time is over, we must have more primary care providers available for the expanding population," says Mr. Ross. "We must have methods for compensation in Medicaid that will sustain that increased access beyond 2014."

Contact Mr. Ross at (503) 945-6084 or