Cover: Bridging the gap

Tuesday, January 01, 2013 12:08 PM
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Structural reforms could help build expanded access to care

Chet Seward, CMS Senior Director, Health Care Policy
Kim Ross, CMS contributing writer

The results of the November 6 election all but guaranteed two key proposals for bridging the gap between the uninsured and insured will become reality: health insurance exchanges and – in some states – a substantial Medicaid expansion.

The U.S. Supreme Court ruled earlier this year that those key components of the Affordable Care Act (ACA) could stand. The possibility of political pushback remained, however, until Democrats gained ground in both chambers in Washington as well as in the Colorado General Assembly on Election Day. The next day renowned health economist Bob Laszewski PhD, echoed most of the health policy blogosphere when he observed, “The Affordable Care Act (“Obamacare”) is now settled law. It will be implemented. It will also have to be changed but not until after it is implemented and the required changes become obvious and unavoidable.”1

While the final, detailed schematic of the twin bridge to span the uninsured divide is still being constructed, many argue that Colorado is better positioned than most to thoughtfully architect a solution. Colorado is just one of 18 states that elected to run its own health insurance exchange rather than defaulting to a federal exchange in 2014. Passed after a contentious debate in the General Assembly in 2011, the build out of the Colorado health insurance exchange, which is set to go live in October 2013, has been reasoned, stepwise and significant. Some experts hold out the Colorado strategy as a national model for efforts to serve as a new online health insurance marketplace. On the other hand, much more work on Medicaid is necessary, especially given the long-term financial impact on the state and the widely held concerns about the structural flaws within the current program.

The expansion of Medicaid to cover all individuals living in families below 133 percent of the federal poverty level ($30,657 for a family of four in 2012) could mean 200,000 or more new participants in Colorado. The state also could opt to take a different approach – including not expanding at all.

Political calculus
The lines being drawn in Denver and in other state capitols across the country share common themes. One side argues against increased dependence on federal influence, noting that while the initial offer of federal funding may seem generous, a future Congress could renege on the agreement. Per the ACA the federal government will cover 100 percent of expansion costs from 2014-2016, and at least 90 percent thereafter. The other side counters that there will likely never be a better deal to cover the uninsured, substantially limit cost shift to private payers, and leverage existing efforts including the Colorado Medicaid Accountable Care Collaborative to assure greater value within the program.

The calculus for Gov. Hickenlooper and Colorado legislators will be a complex balancing act; evaluating the benefits of a substantial influx of federal dollars against an equally substantial, relative commitment of state revenues to cover their share of the total budget starting in 2017.

Colorado Medical Society and physicians across the state have been similarly grappling with this issue since the Supreme Court’s ruling on the ACA this summer. Since then physicians have been engaged in a multi-pronged CMS strategy to determine the potential consequences for Colorado, the medical profession and patients if the state decides to opt-in or declines to participate in the Medicaid expansion. After months of deliberations the CMS Council on Legislation and the Committee on Physician Practice Evolution have forwarded a recommendation to support the expansion in principle.
The CMS board of directors will consider this proposal during its January meeting. (See sidebar on page 11 for details on this recommendation.)

At press time the political wrangling at the statehouse continues over whether or not to move forward with the expansion. For many the decision boils down to the resources, or lack thereof, necessary to make the right choice to serve low-income patients. Echoing the sentiments of at least nine other state governors, Alabama Gov. Robert Bentley recently reported that, “Alabama will not expand Medicaid ‘under the current structure that exists’ because Alabama ‘simply cannot afford it.’”2 While Colorado has yet to release a detailed budgetary analysis, many other national think tanks have been churning out studies detailing the pain versus gain trade-offs of Medicaid expansion.

Understanding these projections is critical, especially given the likely “woodwork and crowd out” effects on the final size of the expansion population where people that were previously eligible but not enrolled in Medicaid come out of the woodwork and join once they become aware of the program, or those that may already have insurance drop that private coverage to join Medicaid under a new eligibility category. Experts have noted that states may face other losses if they do not expand, including lower federal matching rates, higher costs for uncompensated care, reduced state income and sales taxes resulting from federal payments to providers, decreased economic activity and continuing costs for insufficient systems to care for underserved populations.3 On the flip side an expansion may reduce the cost of other non-Medicaid state programs such as mental health services, public health and local and state corrections and public safety. The Robert Wood Johnson Foundation estimates that Colorado could save $361 million over the next decade by reducing those anticipated costs.4

Stakeholder pressure
There is a growing urgency to this impending debate, given the bets already placed by both the hospital and health insurance industries on building this twin-span bridge that is now significantly dependent on state governments across the country. Futurist and consultant Jeff Goldsmith, PhD, warns in an article posted on the Health Care Blog:
“Hospitals are watching these developments with mounting alarm. National hospital organizations actively supported health reform…(when) they gave up $155 billion in future Medicare payment reductions to gain 30 million new paying patients, and consented to the reduction of disproportionate share payments (DSH) intended to compensate them for their bad debts and charity care. A cancelled Medicaid expansion would place the safety net hospitals in those states at serious economic risk, who would be forced to continue relying on Robin Hood economics to keep their doors open . . . The only reason health plans agreed to unprecedented federal restrictions on their business practices was the promise of near-universal coverage . . . How can health plans in states which decline the expansion be expected to absorb, through guaranteed issue and guaranteed renewal, the flood of adverse selection, not to mention the above discussed provider cost shifting?”5

Sticker shock
For state legislators involved in the appropriations process that has statutory caps, that kind of budget uncertainty is terrifying in an already growing, if not overwhelming, state expenditure category. A recent projection by the Kaiser Family Foundation put Colorado’s obligations, net savings offsets, at roughly 1.9 percent of the state budget over 10 years, or about $581 million.6

In reacting to that study, the Denver Post summed up the probable sentiment among policy leaders on both sides of this proposal in an editorial entitled, “Sticker shock on Medicaid costs.” The editorial notes: “If you know anything about the state budget, it’s probably that there’s not a bunch of extra money lying around. You might even remember the University of Denver report last year that said lagging revenues meant Colorado would be unable to pay for Medicaid, public schools and prisons by 2025 . . . Which is why a recent Kaiser Family Foundation estimate that expanding Medicaid in Colorado under Obamacare could cost the state as much as $858 million over the next 10 years should give all of us pause. If there was an extra $85.8 million a year available, don’t you think someone would have already claimed it? . . . (B)efore opting in, state officials must diligently review the costs and benefits of such a move – and how it might be paid for.”7

CMS President Jan Kief, MD, says CMS shares the same sentiment. “The practical aspects are obvious to us. We have to find a way to capture these badly needed funds and use them intelligently to retool Medicaid more in the form we are now building with the Accountable Care Collaborative and bridge the coverage gap that is otherwise an economic anvil around our collective necks.” (See sidebar on Accountable Care Collaborative on this page.)

Déjà vu
Even though there wasn’t a national analyst, court watcher, or legal expert who anticipated the Supreme Court’s deft handoff of the Medicaid expansion to the states, one could argue that Colorado policy leaders were already there years ago.

“Colorado Medical Society, as early as 2005, was calling for the kinds of reforms that were ultimately embodied in the SB 208 Blue Ribbon Commission on Health Care Reform, which we strongly supported from its inception in 2006,” said CMS CEO Alfred Gilchrist.

The commission’s final report, which was delivered in 2008, produced an extensive list of recommendations to the Colorado General Assembly that are eerily prescient, based on the premise that costs cannot effectively be managed without first bridging the coverage gap and improving the efficiency of the delivery system.

“We must look for ways to stabilize rising costs. For example, if we extend health coverage to more people, we can minimize the cost shift from uncompensated care that represents a ‘hidden tax’ and contributes to escalating health insurance premiums . . . Certain essential building blocks among these recommendations must be put in place before others if those latter elements are to be successful . . . For example, the requirement for all Coloradans to have insurance works only if other measures are enacted to make coverage accessible and affordable, such as expanding public programs, creating subsidies for lower-income people to purchase private insurance and reforming the individual insurance market. Similarly, efforts to expand enrollment in public programs must be preceded by efforts to improve efficiency and increase provider participation in those programs.”8

“The Commission understood, over four years ago, what this bridge building debate in the state capitol will entail,” said Steve ErkenBrack, President and Chief Executive Officer for Rocky Mountain Health Plans. “An opportunity to build a better model which ensures access, not just eligibility, requires a strong underpinning – assuring the delivery system is administratively simple for patients and providers, enhanced patient engagement and care adherence, and reimbursement at rational levels that will sustain physician, hospital, and other providers. Without that, a health system, even if reformed, is on shaky ground,” said ErkenBrack.

  1. Bob Laszewski, MD. The 2012 Elections and 2013 – We Face a Daunting To-Do List. November 7, 2012.
  2. Dana Beyerle. “Bentley: No insurance exchange, Medicaid expansion,” Gadsden Times, 11/13/12.
  3. Ray Perryman. The Only Rational Choice: Texas Should Participate in the Medicaid Expansion Under the Affordable Care Act. October 2012.
  4. Colorado Hospital Association. Why CHA Supports Medicaid Expansion in Colorado. September 2012.
  5. Jeff Goldsmith, PhD. Roberts “Flying Squirrel” Maneuver Takes Down the Affordable Care Act. The Health Care Blog. July 2012.
  6. John Holohan, et al. The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis. Kaiser Family Foundation. November 2012.
  7. Denver Post. “Editorial: Sticker shock on Medicaid costs.” November 29, 2012.
  8. Blue Ribbon Commission on Health Care Reform. Final Report to the General Assembly, January 31, 2008.

CMS Position on Medicaid Expansion

In mid-December 2012 the CMS Council Legislation and the Committee on Physician Practice Evolution approved a position statement developed after months of statewide surveys, focus groups and meetings. The statement endorsed the Medicaid expansion in principle, rearming a long-standing position that efforts to redesign Medicaid and the larger health care system have to be about more than just improving coverage but rather have to improve care value.

“To facilitate successful expansion of access to health care under Medicaid and the ACA, we recommend that the following reforms be addressed urgently,” the statement reads.

The recommendation, however, will not become policy until the CMS board of directors votes at its January meeting after considering the statement and its emphasis on the following positions:

  • Access to care – Ensure appropriate access to care by enhancing reimbursement rates for all physicians to equitable levels that are at least at parity with Medicare.
    • Utilize the HB 1281 pilots and other initiatives to test and accelerate the adoption of alternatives to fee-for-service payment, including bundled payments and other methodologies.
    • Support 12-month continuous eligibility for children in Medicaid, per existing law.
  • Preserve and innovate liability protection – Maintain Colorado’s relatively stable medical liability climate and provide enhanced protections for the use of evidence-based approaches to care management, including, but not limited to, shared decision-making models.
  • Patient engagement – Maximize clear, shared accountability between patients and physicians across the spectrum of care.

    • Explore and promote other options to facilitate patient engagement, health literacy, healthy behaviors and reduce avoidable use of high cost services.
    • Provide incentives for patients and physicians to use patient decision aids and shared decision-making tools.
  • Administrative simplification – Eliminate unnecessary administrative complexity, increase efficiency and standardization of Medicaid administrative processes.

    • Streamline provider enrollment procedures, standardize use of nationally recognized transaction codes (CAHQ/CORE), maximize efficiency of prior authorization using electronic procedures, improve eligibility determination timeliness and transition to Medicare 1500 electronic claims submission.
    • Develop and document a well-defined, fair administrative process for cases of suspected fraud and abuse that includes due process for providers.

Posted in: Colorado Medicine | Cover Story | Health System Reform | Medicaid Reform


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