Medicaid Providers Make a Last Push for Higher Rates

*Correction appended.

In the waning days of budget negotiations, medical providers are sounding their biennial battle cry to raise Medicaid reimbursement rates. Despite their refrain that increasing reimbursement rates could shore up the program’s provider network, the rates probably won’t budge much, as that is traditionally one of few variables that the Legislature relies on to contain Medicaid costs.

“If we can find another way to create cost containment in the Medicaid program, then we wouldn’t have to lean so hard on the provider rates,” said Rep. John Zerwas, R-Simonton. He is House Speaker Joe Straus’ go-to guy for health and human services and Article II in the budget.

In the belt-tightening 2011 session, lawmakers cut reimbursement rates for most providers by 10 to 20 percent, Zerwas said. While budget negotiators are looking to raise a handful of provider rates that are “markedly depressed,” he said the goal this session is to not cut rates further. 

“Texas is one of the lowest states as far as doctor payment under Medicaid,” said Dr. Michael Speer, president of the Texas Medical Association. “We haven’t reached bottom, but we’re right above the catfish — the bottom feeders.”

On average, Texas Medicaid pays 65 cents for every dollar Medicare pays for the same services, according to a Medicaid-to-Medicare fee index compiled by the Kaiser Family Foundation. In its latest survey, the Texas Medical Association found only 31 percent of Texas doctors were willing to accept all new Medicaid patients in 2012, down from 67 percent in 2000. By comparison, 58 percent of doctors accept Medicare patients, down from 78 percent in 2000.

Gov. Rick Perry and other GOP members have repeatedly called Medicaid “broken” because so many providers are unwilling to participate in the program. Medical providers argue that if the Legislature intends to fix Medicaid, raising reimbursement rates would be a good place to start. 

The only Medicaid reimbursements that are guaranteed to rise this session are primary care rates, as a provision in the federal Affordable Care Act requires Texas to bring Medicaid rates for primary care providers to parity with Medicare rates for two years. The federal government will pick up the majority of the tab — $549 million in 2014 — while the state will have to pay $16 million to restore cuts to reimbursement rates made in 2011, according to the Health and Human Services Commission. 

The House version of the budget would redefine obstetricians and gynecologists as primary care providers, enabling them to qualify for the rate increase required by the ACA.

“It seems like a logical policy thing to do, to allow OB/GYNs to be [considered] primary care providers for women,” said Zerwas, noting that he’s still negotiating with Senate budget conferees and it’s “not absolutely baked into our decisions right now.”

“I agree that provider rates need to fairly compensate physicians for these important services,” Sen. Jane Nelson, R-Flower Mound and Zerwas’ counterpart for the health budget in the Senate, said in a statement. “We are evaluating its feasibility as we finalize the budget.”

The tentative Senate version of the budget allots $74 billion for Article II — nearly a billion dollars more than for public and higher education, traditionally the largest portion of the budget — while the House version calls for more than $72 billion.

Both the House and Senate budget proposals include riders that would reduce Medicaid costs by $349 million or $400 million, respectively. Rather than raise Medicaid rates, the riders include provisions to bring Medicaid rates that are above Medicare rates to parity. (The House version excludes home health pediatric services that have no equivalent in Medicare.)

For the majority of the Medicaid program, the Legislature doesn’t set reimbursement rates anymore, as the state contracts with Medicaid managed care organizations to build provider networks across the state by setting competitive reimbursement rates. Managed care contains costs, proponents argue, as the state pays the MCOs a premium for each Medicaid recipient, rather than a fee for each service.

Earlier this month, the Legislative Budget Board approved a small bump — $59 million for the end of fiscal year 2013 — to Medicaid managed care organization’s premiums. A spokesperson for HHSC said that would pay for costs already incurred by MCOs, such as payments to physicians for services.

“There’s really no incentive or no requirement for them to ensure that those increases trickle down to providers that are actually providing the services,” said Rachel Hammon, executive director for Texas Association of Homecare and Hospice. It’s more difficult for Medicaid providers, such as home health agencies, to operate their businesses, Hammon argued, because unlike other industries, which may raise the cost of services to raise additional revenue, “we can’t increase our rates.”

Although raising the reimbursements to MCOs does not necessarily increase payments to providers, Rep. Garnet Coleman, D-Houston, said the Legislature could stipulate that increases in premiums trickle down to reimbursement rates.

“If we want to keep Medicaid providers, up the rates,” Coleman said. “As a matter of fact, that would mean a lot to the infrastructure of the networks that are necessary to serve patients.”

*This story originally misstated the amount proposed budget riders would reduce in Medicaid savings. It has been corrected to state that the budget riders would reduce Medicaid spending by $349 million to $400 million in the 2014-15 biennium.