By Mike Shields, KHI News Service, March 01, 2010
TOPEKA — The biggest, near-term opportunity for cutting the state’s Medicaid costs can be found in controlling spending on services for the disabled and elderly, a Senate panel was told today by the head of the state Medicaid agency.
"The aged and disabled tend to have many more complex and urgent health needs," Andy Allison told members of the Senate Public Health and Welfare Committee, "and they generally utilize services that are more costly."
Allison, executive director of the Kansas Health Policy Authority, presented a 43-page report on Medicaid savings options to the committee.
The report, ordered by the Legislature last month for March 1 delivery, listed dozens of possible options including some provided by people who responded to the agency’s public call for suggestions submitted via the Internet.
Discouraging smoking, obesity and the chronic illnesses that go with them would produce the most “powerful” savings for Medicaid, Allison told committee members, but it could take years for the state to see those.
Managed care option
A sooner, big opportunity would be to introduce managed care into services provided the disabled and elderly. Those two groups currently account for almost 70 percent of the state’s Medicaid dollars, Allison said, though they represent only 29 percent of the people served by the program.
Allison said services for the disabled have been particularly costly to the Kansas Medicaid program, which saw spending rise $414 million between 2005 and 2009.
The disabled accounted for 64.5 percent of that increase over the past five years, according to the agency’s report. Services for the elderly accounted for 6.1 percent of the $414 million increase and services for children and pregnant women in low-income families accounted for 21.2 percent of the increase even though the numbers served in that category dropped 5.4 percent.
Kansas Medicaid spending has nearly doubled from $1.25 billion to $2.5 billion since 2000 while the number of people served has grown by about 33 percent, Allison said.
"Children and families account for a fifth of the program’s cost but half the population," Allison said, noting that care for the elderly and disabled is significantly greater for the obvious reasons that they tend to be sicker and more expensive to treat than young children.
The state currently used managed care contractors to oversee services for children enrolled in HealthWave, a program for families eligible for Medicaid or the Children’s Health Insurance Program.
Difficult to estimate
Allison said agency reviews had shown little savings attributable to managed care for children and families but that significant savings likely would be possible employing managed care techniques with older, sicker Medicaid beneficiaries.
Allison said it would be "very difficult to estimate" how much the state might save from using managed care for the disabled and elderly but since those groups account for the largest portion of Medicaid spending it was likely that was their portions of the budget would offer the greatest opportunities for savings.
"It almost certainly involves a front-end investment" to set up managed care programs for the disabled and elderly, Allison said. But it likely would pay off in reduced costs down the road.
Among the other options:
The state Medicaid program could stop paying for hospital readmissions, if they occur for the same reason as the initial admission and come within 30 days of discharge.
Kansas could eliminate pharmacy, hospice and other benefits that are not mandated by federal Medicaid rules. Allison said about $890 million in Kansas Medicaid costs were for optional services. He told the committee that eliminating the optional services would produce immediate savings but would likely end up costing the state more in the long run because each of the optional services generally help forego later, more expensive services that are mandated by the federal government.
Privilege fee waiver
One option that Allison outlined is already off the drawing board and was suggested by the three managed care organizations that provide Medicaid services under contract to the state.
At the request of the health policy authority and the managed care providers, Insurance Commissioner Sandy Praeger on Friday issued a letter revoking the contractors’ waiver of the state’s privilege fee assessed against insurance companies. That will result in about $4.1 million more per year for the state treasury beginning immediately.
Bob Finuf, chief executive of Children’s Mercy Health Partners, one of the managed care organizations, said the firm had written a check to the state today for its share: $2.7 million.
Sen. Jim Barnett, R-Emporia, pushed for the cost savings report from the health policy authority. He is chairman of the Senate Public Health and Welfare Committee.
He said the Legislature could use the money collected from the managed care contractors in combination with additional Medicaid dollars that could be pulled down from a new bed tax on nurshing homes to rollback the 10 percent cut in Medicaid reimbursements ordered effective Jan. 1 by Gov. Mark Parkinson to help balance the state budget.
“It’s an excellent report,” Barnett said of the options presented by the health policy authority.
He said he also thought there was merit in considering managed care for the disabled and elderly.
Barnett asked Allison to return to the committee on Wednesday or Thursday to further discuss the options.
For more on this topic read, A closer look at managed care.