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Opinion: A pathway for Medicaid expansion implementation and reform


Jason Bean recently authored a thoughtful opinion in this publication about the hard work that lies ahead for Missouri’s General Assembly as we prepare to implement the expansion of Medicaid, as approved by the voters on Aug. 4. Like Jason, I am committed to listening to the voters and moving forward with implementation.

State Sen. Lincoln Hough

He laid out three ways we could move forward. Option 1 included expansion without reform, Option 2 involved refusal to expand and allowing the courts to take over, or Option 3 would expand with needed and long overdue reforms. Like him, I’m firmly in that third camp and want to lay out three reform areas aimed at making that option successful.

The first Medicaid reform builds on the notion of sustainability — both for the state budget and for health care providers. All health care providers across this state have been rocked by the COVID-19 pandemic, as has the state’s budget. As of this writing, we are nine months into this pandemic, and if we’ve learned anything, it’s the need for a strong and sustainable health care system. That’s important for both urban and the rural health care providers.

It is important to note, that one key to that sustainability is the ongoing role of the Federal Reimbursement Allowance (FRA). This program taxes four health care provider groups in the state: hospitals, nursing homes, ambulances, and retail pharmacies. These taxes are used to draw down federal matching dollars. The FRA tax pays 85 percent of the state’s share of Medicaid hospital payments and is the third-largest source of revenue in the state budget, trailing only the state individual income and sales taxes.

The revenue impact of these health care providers’ contributions cannot be overstated. In FY 1990 before the first provider tax began, state general revenue funded 39.5 percent of all Medicaid spending. In FY 2020, that percentage was 16 percent. Every dollar of Medicaid cost paid for with a provider tax is a cost that does not have to be borne by the State of Missouri’s general revenue fund. Sustainability means recognizing this contribution and doing all we can to preserve it. It also means understanding the health care economics that underpin the payment system. Even if the state pays providers at their allowable costs, the tax must be subtracted to get to the true value of that payment — many of them receive approximately 65 cents on the dollar. Sustainability matters — and how we manage this part of the program is critical to the success of the Medicaid program now and under expansion.

The second area of reform is to ensure there is both a fair and reasonable return to those who deliver services to state government. While some health care providers are getting payments below costs, others are receiving full payment for their services, and as observed by many, those in that category — largely the state-contracted Medicaid managed care organizations — received a significant windfall this year when the health care system literally shut down for nearly two months during the pandemic. With elective procedures halted, far fewer payments were being made to health care providers, yet the payments from the state to these organizations continued. The legislature certainly needs to look at and consider a “clawback” of those unspent state dollars. This could go a long way to help finance expansion.

Perhaps the most important is the third and final area for reform: making sure care is delivered as efficiently as possible. Put another way, how do we design incentives in a manner that gives us confidence that we are paying health care providers for making the most appropriate and efficient decisions in the treatment of Medicaid patients? And just as importantly, how do we align incentives so that our Medicaid program is producing good health outcomes for all Medicaid participants?

It is in this value-based payment design where we truly begin to harvest real and long-term savings in the program. This differs from the tools we’ve used in the past where the government simply turned the knobs on the program and ratcheted down payment rates. Better incentives for healthy behaviors by Medicaid beneficiaries, coupled with incentives for health care providers to work with enrollees to help them stay healthy, saves millions on the back end from intense and expensive interventions.

The health care community calls this the “Triple Aim” — better care, better health, lower cost. The good news is we have a program already working here in Missouri that is delivering Triple Aim results, but it is only in limited use. It’s the Primary Care Health Home. The Missouri program focuses on identifying patients with specified high-cost conditions and investing in targeted care management where it is most likely to generate greater savings. The program is not only successful in reducing medical spending, it has won national awards for addressing the needs of behavioral health patients.

A proven concept, the Primary Care Health Home program captures all the elements we need for a successful Medicaid program — a proven track record, easy statewide scalability, appropriately aligned payment incentives, a focus on prevention, dollars kept in local communities, puts health care providers in charge of their patients’ care, and provides for both state and provider sustainability.

Medicaid director Todd Richardson has called for a world-class Medicaid program here in Missouri. That can only happen through true payment reform and I, for one, am committed to that task.