Health Care Reform: Reducing Waste and Improving Efficiency in Today's Medicaid

As the nation’s largest health insurance program, Medicaid plays a huge role in the current health care reform debate. The program serves over 50 million people and has total outlays equaling over $280 billioni. Medicaid is much more than simply a program for the poor. It may also serve those who qualify for Supplemental Security Income (the elderly, blind and disabled), working parents, the medically needy, and mandatory groups with incomes above the poverty line. The program operates jointly within the federal government and the states, but the states have the main responsibility for funding the program and making sure that it is operating smoothly. Medicaid typically operates as a vendor payment program where states directly pay health care providers on a fee-for-service basis.

States may also pay for services through prepayment arrangements such as health maintenance organizationsii. To improve quality, most states use a managed care systemiii. One of the main questions in this debate is what to do with public programs like Medicaid and Medicare. If the private insurance market truly reforms, then will there be a need for these programs? The House Leadership Bill and the Senate Leadership Bill, which are the two main bills that are being considered, both seem to think that there will be.

Both of these bills advocate for the expansion of Medicaid. Proponents of expansion generally state that Medicaid would be a simple way to extend comprehensive coverage. On the other hand, opponents are concerned about denying certain populations access to private insurance. Some states worry about their ability to pay for the program in the long runiv. But it seems like at least in this round of debates, expansion has won and now the issue is how that should happen.

Two central characteristics of reforming the Medicaid system are reducing waste, fraud and abuse within the system, as well as controlling costs while maintaining if not improving quality. Spiraling costs are one main reason for reform in the first place, and both of those characteristics tie into the high cost that our country pays for the program. Measures that will reduce waste, fraud and abuse, as well as create other ways to lower costs will positively impact the Medicaid program, as well as the health care system overall. If quality can be improved in addition, the United States will have a much stronger and more sustainable program than the costly, inefficient one that dominates the system today.

Reducing Waste, Fraud, and Abuse

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The reduction of waste, fraud, and abuse in the Medicaid program is an important component of the health care reform debate. Because of our highly fragmented health care system, there are a huge number of providers and suppliers who operate independently, and it is imperative that the government have some sort of a method to make sure that all the business being done is legal, efficient and effective. There are a few ways that the government currently does this. Program integrity in general is the responsibility of the individual states, and Medicaid Fraud and Abuse Control Units are under state authority. Also, the Medicaid Integrity Program (MIP) was established by the Deficit Reduction Act of 2005v.

This program was the first comprehensive federal strategy to prevent and reduce fraud, waste and abusevi. The MIP increases federal resources, as well as requires the Centers for Medicare and Medicaid Services (CMS) to devise a national strategy to combat Medicaid fraud, waste and abusevii. The CMS has two main responsibilities under the MIP. The first is to hire contractors to review provider activities, audit claims, identify overpayments, and educate providers and others on program integrity issues. The other is to provide effective support and assistance to states while they attempt to decrease provider fraud and abuseviii. Appropriations for the program are now at $75 million per yearix. Both the House Leadership Bill and the Senate Leadership Bill deal with this issue, and they support a continued effort to eliminate waste, fraud and abuse from Medicaid.

The House Leadership Bill discusses this issue in great detail. The bill requires providers and suppliers to adopt compliance programs as a condition for participating in Medicaid. It requires integrity contractors that carry out audits and payment reviews to conduct effectiveness evaluations on a regular basis and to provide annual reports. The bill also increases funding for the Health Care Fraud and Abuse Control Fund by $100 million, creates a comprehensive Medicare and Medicaid Provider/Supplier Data Bank to conduct oversight of suspicious activity, and creates a national pre-enrollment screening program which would be used to determine whether potential providers or suppliers have been excluded from other federal or state programs or whether they have a revoked license in any state. Other measures include enhanced oversight periods or suspended enrollment in areas deemed to be at high risk of fraudulent activity, new penalties for submitting false data on applications, false claims for payment, or for hindering audits or investigationsx.

The Senate Leadership Bill strives for the same goals as the House Leadership Bill, so many of the proposals are very similar. The Bill requires additional data reporting to Medicaid Management Information Systems to detect waste, fraud and abuse, as well as establishing procedures for screening, oversight and reporting requirements for providers and suppliers that participate in any public programs. It permits states to impose a moratorium on enrollment of providers or suppliers identified to be at a high risk for fraud, waste and abuse. It also increases funding for health care fraud and abuse control programs by $10 million per year and requires states to implement fraud, waste and abuse programs by 2011xi.

Controlling Costs and Improving Quality

One of the most obvious problems of the United States health care system as it functions today is the exponentially growing costs. Cutting these costs is a huge part of reforming the system. But if costs are drastically cut following reform, quality is another sector that must be looked at. If cutting certain costs is directly related to a decrease in quality, perhaps lower costs would not be a viable solution in that situation. Currently, there are a few measures that try to cut costs and meanwhile improve quality in the system. States are now allowed to perform health care reform demonstrations in order to test methods of covering uninsured populations and to test new delivery systems without incurring new costsxii. In regards to quality, the Centers for Medicare and Medicaid Services recently developed a Medicaid/CHIP Quality Strategy.

Included in this strategy are evidenced-based care and quality measurements, quality-based payments, health information technology, partnerships, information dissemination, technical assistance, and sharing of best practices. This strategy involves specific ways that the CMS will assist states to improve the quality of their servicesxiii. Although it is quite obvious that these areas need much improvement. Both the House Leadership Bill and the Senate Leadership Bill discuss the topic of cost control and improved quality extensively.

The House Bill supports the expansion of Medicaid, which automatically means an increase in total outlays. Costs are estimated to increase by $425 billion from 2010 to 2019xiv. To balance out these costs, a number of cost containment strategies are included in the Bill. The main aspects of the strategies include Medicaid pharmacy reimbursement and prescription drug rebate provisions which are predicted to save $24.6 billion and reductions in Medicaid disproportionate share hospital payments to save $10 billion. The bill also requires an annual report on Medicaid payment rates and methodologies as well as an explanation of the processes that are used. This will allow providers and the general public the opportunity to review and comment on rates.

In addition, the bill plans to establish an accountable care organization pilot program in Medicaid to test payment incentive models. In terms of improving quality, the House Bill suggests the establishment of the Center for Medicare and Medicaid Innovation. This center will test payment and service delivery models to improve both quality and efficiency. The goal is to evaluate all models and develop the ones that improve quality without increasing spending or reduce spending without reducing quality. Also, in order to improve quality in regards to patient satisfaction, the bill requires hospitals and states to provide information such as the most common inpatient and outpatient services, and to have that information be accessible to the publicxv.

The Senate Leadership Bill proposes less of a cost increase, and therefore less cost containment policies. The predicted cost increases are around $374 billion from 2010 to 2019. The main savings that this bill points out are the same as the ones in the House Bill: Medicaid prescription drug coverage (savings of $38.4 billion) and reductions in Medicaid disproportionate share hospital (savings of $22.4 billion). This bill also includes the creation of the CMS Innovation Center, which would have the same function and goals as described above. An additional quality-improving measure of this bill is the establishment of the Medicaid Quality Measurement Program. The goal of this program would be to establish priority for the development and advancement of quality measures for adults enrolled in the Medicaid programxvi.

The CMS Innovation Center is another thoughtful suggestion. By delegating the responsibility of improving quality and efficiency to a single body, that body will have less opportunity to be distracted by other concerns. And as with the waste, fraud, and abuse programs, since the Innovation Center will be working on improving quality and efficiency in Medicaid, it will hopefully likely run efficiently and with high quality itself. In terms of political feasibility, these two issues are probably the most universal of all the issues on the table. No one in this debate believes that costs do not have to be contained while maintaining a high level of quality. Everyone seems to agree that this matter is of utmost importance.

Conclusion

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The two bills currently under consideration both focus on decreasing waste, fraud, and abuse and containing costs and improving quality. Both bills are willing to invest initially in these issues to hopefully find that they decrease costs in the long run. Preliminary investments in new centers, programs, requirements, and processes may be like high at first, but once these forces start working, the overall costs are sure to decrease with time. By enacting these measures, the efficiency and the effectiveness of our health care system will increase.

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References

"Affordable Health Care for America Act." Committee on Energy and Commerce, 07 Nov. 2009. Web. 03 Dec. 2009.

Baucus, Max. America's Healthy Future Act of 2009. Vol. S. 1796., 2009. THOMAS. The Library of Congress. 03 Dec. 2009.

Dingell, John D. Affordable Health Care for America Act. Vol. H.R. 3962., 2009. THOMAS. The Library of Congress. 03 Dec. 2009.

Hoffman, Jr., Earl D., Barbara S. Klees, and Catherine A. Curtis. "Brief Summaries of Medicare and Medicaid." Centers for Medicare and Medicaid Services. U.S. Department of Health and Human Services, 01 Nov. 2008. Web. 03 Dec. 2009.

Lyke, Bob. "Health Care Reform: An Introduction." Congressional Research Service, 29 July 2009. Web. 03 Dec. 2009.

"MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

"Medicaid." Centers for Medicare & Medicaid Services. U.S. Department of Health and Human Services. Web. 03 Dec. 2009.

Rangel, Charles B. Patient Protection and Affordable Care Act. Vol. H.R. 3590., 2009. THOMAS. The Library of Congress. 03 Dec. 2009.

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Endnotes

i.) See Hoffman, Jr., Earl D., Barbara S. Klees, and Catherine A. Curtis. "Brief Summaries of Medicare and Medicaid." Centers for Medicare and Medicaid Services. U.S. Department of Health and Human Services, 01 Nov. 2008. Web. 03 Dec. 2009. 

ii.) Ibid

iii.) "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

iv.) See Lyke, Bob. "Health Care Reform: An Introduction." Congressional Research Service, 29 July 2009. Web. 03 Dec. 2009.

v.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

vi.) "Medicaid." Centers for Medicare & Medicaid Services. U.S. Department of Health and Human Services. Web. 03 Dec. 2009.

vii.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

viii.) "Medicaid." Centers for Medicare & Medicaid Services. U.S. Department of Health and Human Services. Web. 03 Dec. 2009.

ix.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

x.) See "Affordable Health Care for America Act." Committee on Energy and Commerce, 07 Nov. 2009. Web. 03 Dec. 2009.

xi.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

xii.) See Hoffman, Jr., Earl D., Barbara S. Klees, and Catherine A. Curtis. "Brief Summaries of Medicare and Medicaid." Centers for Medicare and Medicaid Services. U.S. Department of Health and Human Services, 01 Nov. 2008. Web. 03 Dec. 2009.

xiii.) See "Medicaid." Centers for Medicare & Medicaid Services. U.S. Department of Health and Human Services. Web. 03 Dec. 2009.

xiv.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

xv.) See "MEDICAID AND CHILDREN'S HEALTH INSURANCE PROGRAM PROVISIONS IN HEALTH REFORM BILLS: Affordable Health Care for America Act & The Patriot Protection and Affordable Care Act." Focus on Health Reform. The Henry J. Kaiser Family Foundation, 02 Dec. 2009. Web. 03 Dec. 2009.

xvi.) Ibid