Providers Caught Up in Medicaid Woes

ATLANTA — As an onslaught of threats continues to rain
down from the federal legislative and regulatory arenas, home
medical equipment providers are trying to fend off catastrophe at
the state level as well, stakeholders said last week.

Three recent reports, from the National Governors Association,
the National Association of State Budget Offices and Kaiser Family
Foundation’s Commission on Medicaid and the Uninsured, paint a dire
picture of state Medicaid programs.

Even as Medicaid enrollments continue to rise in the face of
recession, states are facing a combined $14.5 billion budget
shortfall in 2010 — and that could balloon to $21.9 billion
in 2011, according to the NASBO report. That is despite the fact
that states have already sheared $200 billion off their budgets for
FY 2009.

Federal funding from the American Recovery and Reinvestment Act
has helped states to curb the most devastating of cuts, but that
program is set to expire at the end of 2010.

“With few, if any options left for achieving significant
additional Medicaid cost reductions and faced with the expiration
of the ARRA … in December 2010, many states may be forced to
consider previously unthinkable eligibility and benefit
reductions,” the Kaiser report said.

The Medicaid situation for HME providers is particularly
critical in Florida, according to Sean Schwinghammer, executive
director of the Florida Alliance of Home Care Services. There, the
state budget is driven by property tax, and property values have
plummeted. If the ARRA money goes away in 2010, Florida would need
to come up with an additional $668 million to continue Medicaid
services at current levels, state legislators told U.S. senators in
a recent letter.

“We are among the most damaged in the nation,” Schwinghammer
said. “And next year’s budget will be worse than this year’s. In an
effort to look for savings, some legislators are grasping at
straws, which includes … pushing for every type of
consolidation and competitive bidding. Our fear has to do with what
the legislature might do in the next session.”

He said legislative committees have already directed
Medicaid-related agencies to explore ways to cut costs associated
with procuring HME, and at least one agency has responded with a
plan that would center around competitive bidding.

That would result in greatly decreased access to care, which is
already in question since Blue Cross and Blue Shield recently
eliminated the
contracts of more than 300 providers throughout Florida,
Schwinghammer said. Now, he said, only about two dozen providers
service all of the Blues patients in Florida.

That, plus the threat of national competitive bidding, numerous
proposed Medicare reimbursement cuts and a skyrocketing number of
audits are savaging the industry, according to Schwinghammer, who
said he talked last week with one of Florida’s long-time HME
business owners who was grappling with his seventh audit in two
years.

“Our industry is in the crosshairs. Every [area] is suffering,
but when you look at the federal level, the state level and the
insurer level, Florida providers are among the most threatened in
the country, if not the most,” Schwinghammer said. “It is worse
here.”

It’s not much better in California, where the budget that
appeared to be balanced — at least for a short period of time
— collapsed in the face of the stubborn recession.

“For the remainder of the current fiscal year, which ends July
2010, [the state has] a $7 billion to $8 billion shortfall,” said
Bob Achermann, executive director of the California Association of
Medical Products Providers. “So those cuts that were balancing the
budget will not balance it.”

Those cuts included a 10 percent HME reimbursement slash from
July 2008 to March 1, 2009, when the cut was reduced to 1 percent.
Some sectors of the Medi-Cal provider community, including doctors,
pharmacies and dentists, won a suit to stop the 10 percent cut. The
decision was upheld by a federal appeals court, and Achermann said
the HME provider community is hopeful it will regain the lost 10
percent in reimbursement.

Even so, other threats remain. Federal relief money via ARRA has
“loosed the noose,” Achermann said, but California’s share was only
a “temporary bump.” He is concerned about the future when Medi-Cal
officials try to make up the difference after the ARRA money goes
away.

The HME sector has so far been successful in sidestepping
competitive bidding. “We were able to convince the state not to go
down the road of contracting for [wheelchairs],” Achermann
said.

However, Medi-Cal reimbursement rates are dropping to the point
where there is no margin in some products, such as diabetic testing
strips, he said. If Medicare competitive bidding project is
implemented in January 2011 as planned, it could spell disaster for
California providers, whose ranks are already thinning, Achermann
said.

“The fear with competitive bidding is that those rates would
become a Medicaid baseline,” he said. The reality in California,
which has a small number of payers, is that they are following what
Medicare and Medicaid are doing.”

While the problems aren’t quite so dire in New York, one issue
is particularly troublesome, according to Alyce Crossman, president
of the New York Medical Equipment Providers.

“They are doing lots of audits and they use this extrapolation,”
she explained. “Let’s say they pull 100 claims and they find that
10 of those have errors. So they figure that 10 percent of the
entire number of claims are in error and they want their money
back.”

That figure can run into the millions of dollars, Crossman said,
adding, “It’s put a lot of businesses out of business.”

NYMEP is trying to get New York Medicaid officials to adopt the
Medicare standard, which does not include extrapolation and
requires, among other things, that the error was intentional.

“I think we’ve got a good argument,” Crossman said. “If it’s
good enough for the federal government, why wouldn’t it be good
enough for the state?”

Meanwhile, as providers wrestle with the Medicaid issues
affecting them in their own states, Medicaid directors are
wondering what they are going to do about a huge influx of people
coming on the rolls as a result of national health reform. Packages
in both houses of Congress mandate opening Medicaid to all whose
incomes total less than 133 percent of the federal poverty
level.

The Kaiser report, which surveyed Medicaid directors in each of
the 50 states and the District of Columbia, reported that 38 of the
medical directors indicated concern about the effects of such an
influx on their budgets.

“In particular, many officials felt that their states would be
unable to finance the cost of a Medicaid eligibility expansion
unless the federal government assumed 100 percent of the costs,
especially during the early years, given the dire fiscal conditions
states are facing due to the recession,” the report said.