Last week I looked at some of the major problems afflicting the Medicaid program, including low reimbursement rates for doctors, patients’ lack of access to care, a lower quality of available care, stringent eligibility requirements, and complicated enrollment procedures. In this post I’m going to talk about what we can do to address Medicaid’s deficiencies, specifically with regards to physician reimbursement, quality of care, and the relationship between states and the federal government with regards to Medicaid.

Reimbursement and Access

As I’ve noted in the past, Medicaid reimbursement rates for physicians are very low—on average, just 69 percent of Medicare rates. They also vary widely across different states. In New York, doctors are paid $20 for an hour-long consultation with a Medicaid patient; in some higher-paying states, doctors receive an average of $157.92 for the same service—a more than sevenfold difference.

Clearly, increasing Medicaid reimbursement is an important part of making the program more appealing to doctors, and thus improving patients’ access to care. Indeed, studies show that when reimbursement fees are higher, pregnant women are more likely to retain their doctors for long-term care and children are more likely to have regular access to a doctor and to preventive care. Studies from the Center for Studying Health System Change and the New America Foundation have found that “variation in Medicaid reimbursement levels across states contributes to community variations in physicians willingness to accept Medicaid patients,” and that “high fee levels increase the probability that individual physicians will accept Medicaid patients.”

But increasing Medicaid reimbursement isn’t so easy. Each state sets
rates as part of its individual State Medicaid Plan. While states do
increase their reimbursement fees from time to time,
a patchwork system makes it tough to compel a nationwide increase in
payments. Without questions, states would resist such an imposition:
Medicaid has already proven to be the fastest growing state expenditure
of the past twenty years, and the program makes up anywhere from 20 to
24 percent of a state’s budget. Good luck ordering them to throw more
money into Medicaid.

Full Federalization?

Nevertheless Medicaid’s reimbursement schedule should be comparable to
Medicare’s. We need a fee schedule that is set at the national level
and then adjusted for geographic differences such in local prices,
overhead, and malpractice expenses. A more uniform system would be
fairer to both doctors and patients.

But as I said, states wouldn’t be too happy with this. For years states
and the federal government have been engaged in an ongoing tug-of-war
between fiscally strapped states looking for relief and the federal
government’s regulations and guidelines.

Nevertheless, the federal government is far from powerless: it already pays 60 percent of every dollar spent on Medicaid (states pay the remaining 40 percent). 

This suggests a solution: if the federal government already pays a
greater share of Medicaid costs, and we recognize the need for a
national fee schedule, why not just make Medicaid a federal program, a
la Medicare?  After all, the federal Center for Medicare and Medicaid
Services (CMS) is already deeply involved in Medicaid administration,
since it reviews State Plans and their amendments.

There’s some merit to this idea, and in a perfect world, Medicaid
probably would look a lot more like Medicare. It would be a more
coherent, uniform insurance program that does not perpetuate regional
discrimination.  States would probably support this transformation.
They’d probably be asked to continue contributing the amount they
contribute today—plus an inflation kicker that mirrored overall
inflation in goods and services. But getting runaway health care
inflation under control would no longer be their headache. It would be
Washington’s responsibility.

But while this may sound good in theory, there are major challenges to
fully federalizing Medicaid. Shifting the 40 million Americans
currently under Medicaid onto the federal government is no simple task.
This essentially means doubling the number of people on Medicare. The
small government crowd also would fight the federalization of Medicaid
tooth and nail, as it would be seen as growing the federal government.

Finally, while certain administrative inefficiencies would be
eliminated by fully federalizing Medicaid, those savings wouldn’t be as
great as one might expect: Medicaid already has some of the lowest administrative costs of any health insurance in the nation, at just 5 percent.

Dual Eligibles

But there is a way to increase federal responsibility for Medicaid and
simultaneously pave the way for a Medicare-style reimbursement
schedule. The key is the population known as “dual eligibles,” or
patients who are covered under both Medicaid and Medicare. According
to Barbara Edwards, President of the National Association of State
Medicaid Directors, dual eligibles—who are elderly and/or disabled—make
up only 14 percent of Medicaid patients yet account for 40 percent of
Medicaid spending across the U.S.

Two-thirds of this 40 percent is spent on long-term care services, i.e.
day-to-day or nursing home care for those who are disabled, have
chronic conditions, or need help with both medical and non-medical
needs on a daily basis.

Long-term care is a particularly important point of intersection for
Medicare and Medicaid. According to the National Academy for State
Health Policy, Medicaid pays the nursing home costs for just under 70
percent of the nation’s nursing facility residents. For more than half
of these people, the nursing facility stay began after a hospital stay
and a short-term rehabilitation period which were both covered by
Medicare. But Medicare rehabilitation coverage ran out before the
patient was ready for discharge from the nursing home. At that point,
the patient had to spend down her own assets to qualify for Medicaid,
which then steps in to cover her long-term care.

The problem is that Medicaid only kicks in after the patient is already
in a nursing home, so the program has no chance of offering more
cost-effective home or community-based services as an alternative to
institutional care.

Already, Congress is pursing the idea of de-institutionalizing long-term care. The American Academy of Home Care Physicians reports
that “the ‘Independence at Home Act,’ which has Democratic and
Republican sponsors in the House and Senate, calls for a three-year,
26-state demonstration aimed at showing that Medicare beneficiaries
with multiple chronic conditions can “remain as independent as possible
for as long as possible and…receive care in a setting that is preferred
by the beneficiary.”

The Academy argues that “prospects for the legislation’s inclusion in
the major Medicare reform bill Congress is expected to consider next
year look bright…But it won’t be the only care-management  proposal
Congress gets next that has a home health component, one home health
lobbyist predicts.” Doctors who provide in-home care would share in
Medicare’s savings.

If Medicare can keep patients out of nursing homes and hospitals by
providing home health care, this is a good reason to think about giving
Medicare full responsibility for dual eligible patients. Essentially,
if a patient is covered by Medicare, then she should be covered only by
Medicare, even if she later qualifies for Medicaid.

CMS would have to tweak the systems in order to cover gaps in care. And
Medicaid’s eligibility standards and benefits would have to be carried
over into Medicare so that low-income patients were not responsible for
pay co-pays and could still access long-term care . (Currently,
long-term care  is covered only by Medicaid. Under the new program,
Medicare would cover long-term care—but only for patients who had spent
down their assets and met Medicaid’s eligibility requirements.)

Essentially Medicaid would “give” its 7.5 million dual eligibles to
Medicare.  This is a much smaller influx of insurees that the federal
government would have to deal with if it tried to take over all of
Medicaid.

Meanwhile, Medicare already pays 43 percent of the medical costs for
patients who are under both Medicare and Medicaid. Presumably, the
states would be asked to make a contribution to the federal government
to help pay the 38 percent that the states now pay (the remaining 19
percent is out-of-pocket spending by patients).

But if Medicare is able to devise a more efficient, better coordinated,
long-term care system—including at-home care—then the states shouldn’t
have to shell out as much as they are paying now.  Thus the states
would save money, which would serve as a “bargaining chip” to encourage
them to accept a federal, geographically-adjusted fee schedule.

Shifting responsibility for dual eligible patients to the federal
government could also serve as a ‘pilot program’ for further
federalization of Medicaid. Can CMS handle millions of additional
patients? Does a federal health care program handle low-income care
better than a state-based program? These are questions that we could
begin asking.

Racial Disparities and Quality of Care

The state savings that would come by federalizing care for dual
eligibles should also be put to good use to target racial and ethnic
disparities in health care—a critically important issue, given that
about one-half of Medicaid patients are minorities. Further, a 2006 study
from the University of Oregon and NYU found that it was the level of
racial segregation in a region—and not the concentration of
poverty—that predicted physician participation in Medicaid across the
U.S.(Doctors are much less likely to participate in Medicaid in
racially segregated areas where large numbers of the  poor are not
white). Clearly, race matters.

One important strategy for improving the health of minority populations
is to take an ‘ecological’ approach to public health. The Charlotte
REACH 2010 program
is a good example of this strategy. Focusing on the reduction and
control of cardiovascular disease and diabetes among African Americans
in the northwest region of Charlotte, North Carolina, REACH 2010 is a
multi-dimensional health initiative. Meredith L. King, from the Center
for American Progress (CAP), describes the program in a 2007 report:

“At the interpersonal level, the community coalition trains individuals
within the community to be lay health advisors…At the organizational
level, the community coalition garners participation from the YMCA and
diabetes support groups. Primary care disease management and
quality-assurance projects for diabetes care” is provided by health
care professionals who work with community leaders to help the
community stay healthy. One survey found
“a 10 percent increase in adults who were physically active at least
five times a week and a 14 percent increase in adults who reported
eating five or more fruits and vegetables a day from 2002 to 2004.”

A project like REACH might seem an odd fit with Medicaid, but as much
of 50 percent of morbidity and mortality can be traced to behaviors
and  lifestyle, much of which often correlates with poverty.  (See
Maggie’s post on children health and income).

Further, community health programs have long had an important role to
play for Medicaid patients: an April study from George Washington
University found that Medicaid patients who seek care at community
health centers are 14 percent more likely
to have a breast exam or receive a pap smear, as compared to those who
only relied on their doctors for either screening. Nation-wide,
36 percent of the people who use community health centers are Medicaid
patients, even though just 13 percent of the nation is covered by
Medicaid. And according to the National Council of State Legislatures,
community care reduces Medicaid costs by 30 percent because it reduces
hospital admission rates.

Community-based ethnic outreach should become a key plank of Medicaid.
Federal Medicaid reimbursement should be crafted so as to encourage
physician participation in community interventions and healthcare
providers should be rewarded for collaborating with community health
centers and for practicing in underserved areas. Reimbursement for
interpreter and translator services in hospitals that serve ethnic
communities should be strengthened so that more doctors can provide
what is called ‘culturally competent care’ (Some states already are
experimenting with this). 

Other reimbursement policies can help improve the quality of care that
Medicaid provides, —not just for ethnic communities, but for all
patients. This can be done by crafting reimbursements that pay more for
primary care, preventive care, and medical home care; that incorporate
proven clinical effectiveness into reimbursement schedules; and by
bundling payments to doctors and hospitals so that they are paid for
good outcomes during a single episode of care (In other words, instead
of reimbursing a la carte for specific procedures or stages of care,
providers would get a lump sum for dealing with a condition,
encouraging efficiency, quality and collaboration. This way medical
best practices, rather than high-volume care, is encouraged). 

Medicaid is health care program that is too often overlooked. This is
partially because everyone likes to talk about universal health
care—which, in theory, might make a targeted program like Medicaid
obsolete. But there’s much that we can do now to improve Medicaid –and
much that we can learn that will help pave the way for sustainable,
affordable, high quality nationwide healthcare reform.

In my next Medicaid post, I’ll talk about issues of eligibility and enrollment.