One-stop shopping might get you to love Medicaid

HCFA experiment could ease work for physicians

While lawmakers on Capitol Hill are grabbing headlines over health care reform, some policy-makers are quietly weighing a novel experiment in integrating Medicare and Medicaid managed care.

If successful, the tests could lead to a new approach in coordinating acute-care and long-term benefits for the nation’s sickest patients, and could simplify the payment process for thousands of physicians.

HCFA has been closely watching a series of demonstration projects involving Medicare and Medicaid recipients in 16 states, including Arizona, Minnesota, Oregon, and Wisconsin.

The demonstrations target some six million Americans who are currently dually eligible for Medicare and Medicaid benefits and represent the most severely ill, aged, poor, or disabled.

HCFA has been monitoring the demonstration projects in hopes of finding a way to trim the staggering $106 billion in health care bills that dual eligibles present the two federal health care programs annually.

If successful, the government may take the idea nationwide and thereby achieve savings in serving a growing segment of the beneficiary population, according to some Medicaid analysts.

"Dual eligibles comprise one of the toughest patient groups for providers and states to coordinate. A success would be significant," says Neva Kaye, an analyst with the nonprofit National Academy for State Health Policy in Portland, ME.

Indeed, according to HCFA, dual eligibles account for 35% and 30% of total Medicaid and Medicare costs, respectively. Yet, they represent only 16% and 17% of all beneficiaries in each program. For hospitals and physicians, these patients belong to "two heavily bureaucratic programs overladen with complex regulations, paperwork, and red tape," Kaye says. But as the demonstration sites are beginning to suggest, "states can simplify the whole process," Kaye says.

Here’s how and why:

• States participating in the pilots are coordinating both programs by contracting with private, community-based managed care agencies to manage both the Medicaid and Medicare benefits under one plan administration. The agencies function much like commercial health maintenance organizations (HMOs) but are nonprofit, have no commercial enrollees, and serve only the dual-eligible population.

But in some states, commercial plans such as Phoenix-based Cigna Health Plans of Arizona have also gotten into the market. Many already have Medicare risk contracts and would like to add Medicaid to their benefit plans.

Reducing costly admissions

• The goal is to effectively coordinate enrollee services to help reduce costly inpatient admissions and nursing home stays through intensive case management and home care therapies.

In many states, the agencies serve either the frail and elderly or the poor and disabled separately. But some are forming partnerships to serve both populations, says Mary Parish Gavinski, MD, medical director of Milwaukee-based Community Care Organization, a five-physician agency that contracts with Wisconsin Medicaid to serve only the frail and elderly.

• The agencies deliver a full range of integrated medical, surgical, and long-term care to enrollees by contracting with a network of providers, including physicians, hospitals, and nursing homes. Some also permit the enrollee to sign up with a local Medicaid-risk or Medicare-risk HMO, and will pay for any services not covered by Medicare fee for service (such as copays and deductibles) or the Medicare risk plan.

• As managed care organizations (MCOs), the agencies are paid by the states under a capitated risk arrangement. In some states, such as Wisconsin, they’re permitted to subcapitate with providers. Per-member-per-month (PMPM) rates are determined by using the Medicare Average Adjusted Per Capita Cost (AAPCC) index, which sets rates by individual counties.

But the contracting agencies are under no obligation to offer providers a similar capitated fee, although many do, says Rhonda Brede, executive director of Phoenix-based Ventana Health Systems, which serves rural parts of Arizona.

• The AAPCC rates are typically adjusted to reflect severity. They’re re-set at levels to cover the projected cost of skilled nursing, home care, and ancillary services. For example, in Wisconsin, Community Care is paid a comprehensive $2,100 PMPM.

In contrast, Oregon’s rates are broken out by the enrollee’s eligibility and level of services. For example, a blind and disabled Medicare beneficiary will be covered for $190.18 PMPM for medical-surgical services. Without Medicare, the Medicaid-only capitation is $514.28 PMPM.

Rates are much lower in some states, but they’re broken down by services such as primary care or hospitalization. In Arizona, for example, rates for primary care under the dual Medicare-Medicaid program range between $18 and $20 PMPM. Medicare-risk plans typically pay much more, at about $50 PMPM. But many don’t offer skilled nursing and home care benefits, while community-based long-term care agencies such as Ventana Health do, says Brede. As a result, many primary care physicians contract with both commercial and community-based plans.

In Wisconsin, Community Care subcontracts with specialists and pays them 95% of the Medicare fee-for-service allowable, which is 15 percentage points higher than the standard Medicare 80% allowable, Gavinksi says.

• For providers, the system simplifies the payment process. Medicare is almost always the primary payer. But contracted providers typically bill the managed care agency, which then processes the claim and issues the Medicare or Medicaid payment.

"Medicare has been more liberal toward physicians in working with this age group," says supporter Norton Freedman, MD, a solo practice physician in Holbrook, AZ, who contracts with Ventana Health. "I’m essentially working for Ventana, which eliminates a lot of confusion about payments," Freedman adds.

But not everyone is a fan. "Medicaid is still largely a write-off in Oregon," complains Charles E. Hofmann, MD, a primary care physician with Intermountain Medical Associates, a three-member group in largely rural Baker City.

The Oregon Health Plan, which administers the Medicaid program, has been running enormous deficits, which has forced the state to curtail benefits and has frustrated providers with additional paperwork, Hoffman complains.

"I’m all for efficiency. But I’m not holding out much hope whenever it comes to working with Medicaid," Hofmann says.

Following are names and telephone numbers of sources quoted in this issue:

Community Care Organization, Milwaukee; Mary Parish Gavinski, MD, medical director. Telephone: (414) 536-2100.

Ellen Altman Milhiser, Medicare analyst, Gaithersburg, MD. Telephone: (301) 417-0814.

Ventana Health Systems, Phoenix; Rhonda Brede, executive director. Telephone: (602) 331-5100.

American College of Cardiology, Bethesda, MD; Paul Bonta, policy analyst. Telephone: (800) 435-9203.

Gosfield & Associates, Philadelphia; Alice Gosfield, president. Telephone: (215) 735-2384.

McDermott, Will & Emery, Washington, DC; Albert W. Shay, JD, health care attorney. Telephone: (202) 778-8118.

Veterans Affairs Hospital/Allegheny Medical Center, Philadelphia; Neil J. Farber, MD. Telephone: (215) 762-7000.