Deborah Bachrach, JD Bachrach Health Strategies LLC [email protected] November 11, 2010

Deborah Bachrach, JDBachrach Health Strategies [email protected]

November 11, 2010

Medicaid covers more enrollees than Medicare ◦ 25 million more expected to enroll by 2014◦ 16 million more expected to enroll after 2014

By 2016, Medicaid will spend more than Medicare Medicaid and education are the largest items in

state budgets 26 state Medicaid programs would be on the

Fortune 500 list Medicaid is a major payer for obstetrics,

pediatrics, behavioral health and long term care

11/11/10Bachrach Health Strategies LLC

Section 1902(a)(30)(A) of the Social Security Act requires states to adopt payment methods that:

1. Safeguard against unnecessary utilization of care and services;

2. Assure that payments are consistent with efficiency, economy and quality of care; and

3. Are sufficient to enlist enough providers so that care and services are available to Medicaid beneficiaries at least to the extent that such care and services are available to the general population in the geographic area.


Transparent to all stakeholders◦ Government knows what it’s buying◦ Providers can respond to built in incentives◦ Key to accountability

Encourage efficiency Facilitate measurement of quality Accommodate patient acuity

◦ Key to assuring access for sicker patients Collect accurate clinical data Align with other payers Support payment innovations


80% of Medicaid care is still paid FFS FFS payment methods and levels can drive

efficiency and access or the lack thereof:◦ Cost-based rates discourage efficiency and

encourage higher charges◦ Fee schedules and per diem/per hour rates

incentivize volume◦ Both absolute and relative payment levels

influence access


FFS hospital payments exceed $84 billion◦ Largest item in state Medicaid budgets

Medicaid (including Medicaid managed care) pays for 1 in 5 hospital inpatients

Medicaid pays for almost 50% of all maternity and pediatric care and a large percentage of behavioral health care

Hospital clinics are an important source of primary and specialty care in some states/communities

But sound payment policies are equally important in LTC and managed care


Step 1: Analyze current payment methods/amounts Inpatient Rates in 2007

◦ Inpatient payments exceeded costs◦ Used a 1981 cost base; inflated annually◦ Multiple rate add-ons◦ Limited differences for patient acuity◦ Complicated and opaque

Outpatient Rates in 2007◦ Rates frozen for over a decade; well-below costs ◦ Paid same amount for every visit◦ Physician fees – lowest in nation


Step 2: Analyze impact of current rate structure New York led the nation in inpatient spending, but

lagged on outpatient spending Medicaid paying for more care in inpatient

settings; other payers using less-costly outpatient settings

New York performed poorly on national quality scorecards◦ Ranked 50th on avoidable hospitalizations

according to the Commonwealth Fund◦ Ranked average or weak on the vast majority of

AHRQ quality factors


Step 3: Rationalize inpatient and outpatient payment methods and levels

Inpatient Rate Reform (2008/09)◦ Established multi-stakeholder advisory committee◦ Reduced rates by $600 million; established

transition pool ◦ Adopted new payment method (APR-DRGs)

Outpatient Rate Reform (2008/09)◦ Invested $600 million◦ Adopted intensity based payment system (APGs)

Incents efficiency Reflects patient burden of disease


Expand covered outpatient services ◦ Smoking cessation◦ Asthma and diabetes education

Implement statewide medical home initiative Initiate multi payer demonstration in upstate NY Implement potentially preventable readmissions

policy Reform DSH (indigent care) payment formula Positioned for federal reform Alternatives to across-the-board rate cuts


Support proposals with data and facts Use national comparisons where appropriate Engage all stakeholders early and often

◦ Seek consensus on principles of rate reform◦ Consumer support can make the difference

Consider transition support for disadvantaged providers

Provide sufficient lead time between adoption and implementation◦ Systems changes◦ CMS approval


Payment reform offers alternative to across-the- board rate cuts

CMMI will support demonstrations that enhance quality, contain costs & improve population health◦ Multi-payer demonstrations preferred

ACA authorizes specific Medicaid pilots◦ Health homes for Medicaid enrollees w/ chronic condition◦ Bundled payments around a hospitalization◦ Global payments to safety net hospitals◦ Pediatric ACOs

To play, Medicaid must embrace sound payment practices


Documents

Deborah Bachrach, JD Bachrach Health Strategies LLC [email protected] November 11, 2010