Ohio Health Policy Review

HPIO interim director: Medicaid could cost state extra $1 billion in 2012

Testifying at Tuesday’s hearing of the state Budget Planning and Management Commission, Health Policy Institute of Ohio Interim Director Greg Moody told the bipartisan legislative panel that unless the federal government provides more funds or the state takes action, the Medicaid program is going to cost Ohio an additional $1 billion from 2011 to 2012 (Source: “Medicaid to add $1 billion to state budget quandary,” Columbus Dispatch, July 20,2010).

And this comes at a time when the state is already expected to face a budget shortfall estimated at between $5 billion and $8 billion.

Moody said his projection is based on the assumption that federal matching funds, which were increased as part of the federal stimulus package last year, return to normal levels and the state experiences a 6.1 percent increase in spending, as projected by the Congressional Budget Office. Moody's presentation is available here (pdf, 10 pages).

While unlikely to remedy short-term budget challenges for the Medicaid program, Moody outlined a series of cost containment strategies that could reduce long-term costs for the program:

• Focus on prevention and primary care
• Care coordination and disease management
• Price and quality transparency
• Payment reforms that reward value
• Behavioral/physical health integration
• Rebalance Medicaid long-term care

Another speaker at the hearing, John Begala, executive director of the Cleveland-based Center for Community Solutions, said among the short-term options that the state may consider are capping hospital payments and reducing the 12.5 percent administrative allowance for HMOs. Those recommendations were included in Community Solution’s recently published report on the state budget, “Thinking the Unthinkable: Finding Common Ground for Resolving Ohio’s Fiscal Crisis.” (pdf, 50 pages)

CMS OKs additional payment to Ohio hospitals for Medicaid expenses

After lobbying from Gov. Ted Strickland, officials at the federal Centers for Medicare & Medicaid Services have given the go-ahead to a state plan to pay hospitals an additional $87 million this year for the care they provide to low-income Ohioans on Medicaid (Source: “Feds OK plan to let hospitals recoup Medicaid expense,” Columbus Dispatch, July 15, 2010).

The bulk payment, which will be disbursed to hospitals by the end of this month, and a 5-percent increase in Medicaid reimbursement fees effective in October were included in last year's state budget to let hospitals recoup some of the money they were losing through a new state franchise fee.

The fee is projected to cost hospitals statewide $718 million over the two-year budget ending June 30, 2011. The two provisions aimed at offsetting that expense will let hospitals recoup $569 million, according to the Ohio Hospital Association.

Health Affairs, RWJ release brief on extra Medicaid funding to states

Health policy journal Health Affairs and the Robert Wood Johnson Foundation have published a new brief that examines whether the federal government should extend its temporary increase in contributions to states for Medicaid funding.

The brief, titled Extra Federal Support for Medicaid, examines how the additional FMAP contributions have helped offset state deficits, since most state budgets by law must be balanced. It also includes proponents' and opponents' views, in particular the debate between the necessity to avoid serious harm to state budgets versus the impact on the federal deficit if the additional assistance isn't offset with spending cuts or revenue increases.

Northeast Ohio health systems begin work developing ACO models

Two Northeast Ohio health systems — Summa Health System in Akron and University Hospitals in Cleveland — have begun working with  National group purchasing organization to create accountable care organizations aimed at improving coordination of care and reforming the way providers are paid (Source: “Alternative to HMOs coordinates treatment delivery,” Akron Beacon Journal, July 5, 2010).
 
Under the ACO concept, doctors and hospitals would get financial incentives to work together to keep patients healthy and out of the hospital. The partners would coordinate their care and then share in any savings if quality and cost goals are achieved. Federal health reform legislation allows for ACOs through Medicare, beginning in 2012 . Under the law, patients in traditional Medicare will be assigned to an ACO if their normal provider participates.

Ohio Medicaid Director: Expansion this year unlikely

Although federal reform legislation enables states to expand Medicaid coverage as early as this year, Ohio Medicaid Director Tracy Plouck said the state’s tight budget makes that unlikely here (Source: “Ohio Medicaid chief says early expansion unlikely,” Associated Press, via Business Week, May 20, 2010).

Plouck said Ohio, like many other states, is concerned about paying its share of the federal-state insurance program, even though the federal government currently pays about 74 percent of Ohio's Medicaid costs, an increased match rate written into the stimulus bill that was signed by President Obama last year. The state’s standard federal match is 63 percent.  That increased aid runs out at the end of 2010, however, and it's unclear if Congress will extend it.

States will be required to extend Medicaid eligibility in 2014, covering people with incomes up to 133 percent of the federal poverty level, or about $29,327 a year for a family of four. Also, childless adults will be covered for the first time. The federal government will pick up 100 percent of the cost for newly eligible enrollees for three years. After that, federal support gradually declines through 2020.

The state had planned on implementing an expansion of Medicaid for children from 200 percent of the federal poverty limit to 300 percent of the FPL as part of the bienium budget that was passed last July. The State's fiscal year 2010-2011 budget called for funding the expansion, and other non-health related measures, with a portion of the State's tobacco settlement dollars; however, questions as to whether the State can use this funding source remain unclear and that expansion also remains on hold.

Tobacco tax hike unlikely in Ohio

Since 2009 16 states and the District of Columbia have raised cigarette taxes and at least a half-dozen more are considering doing the same this year, but there is apparently little interest in raising the tobacco tax in Ohio (Source: “Little interest so far in higher cigarette tax in Ohio,” Mansfield News Journal, April 8, 2010).

Health advocates are pushing tobacco taxes as a way to dissuade smoking and a means to bridge the state budget shortfall. Shelly Kiser, advocacy director for the American Lung Association of Ohio, said doubling the tax to $2.50 a pack would bring in an extra $347 million in revenue a year.

But Gordon Gough, vice president of the Ohio Council of Retail Merchants, said adding to smokers' financial strain may decrease smoking, but would then drive state revenue downward. "There is a tipping point to where too much tax decreases revenue," he said.

State Sen. Dale Miller, D-Cleveland, sponsored a bill last year to raise the tax on non-cigarette tobacco products for the first time since 1992, from 17 percent to 54 percent. The bill died in committee.

"Right now there's a pretty big reluctance to raising taxes," Miller said. "It's not a popular thing to do."

State shifts $4.3 million to home care, assisted living for Medicaid-eligible seniors

The state Controlling Board approved earlier this week the shifting of an additional $4.3 million of state funds to home care and assisted living for low-income seniors (Source: “Extra money will speed care to low-income seniors,” Columbus Dispatch, March 9, 2010).

The move comes two weeks after Gov. Ted Strickland authorized nearly $500,000 in state funds, which halved the waiting list for services for Medicaid-eligible seniors. Both the original amount and the new funds are being shifted from money originally earmarked for nursing-home care but it no longer needed. The transfer of funds does not jeopardize the availability of nursing-home care for those who need it.

Study: Public health care spending to top private spending by 2012

A new study from the Centers for Medicare & Medicaid Services projects that, for the first time ever,  government spending is poised to eclipse private health care spending (Source: “Government moving into central role in health care, with or without Obama plan,” Associated Press via Cleveland Plain Dealer, Feb. 4, 2010).

The study, “Health Spending Projections Through 2019: The Recession’s Impact Continues,” was published in the latest edition of the journal Health Affairs.

Analysis from the CMS Office of the Actuary predicts that federal and state programs will account for slightly more than half of all U.S. health spending by 2012. The shift, which has been anticipated for some time, was accelerated by aging Baby Boomers becoming Medicare eligible and more Americans enrolling in Medicaid because of the economic recession.

"This does mark a pretty stark jump in the data," said Christopher Truffer of Medicare's Office of the Actuary, which prepared the analysis.

Kaiser Health News has created an interactive graphic (Java plug-in required) that details the historical levels of public and private health care spending.

Hospitals say observation units can cut costs

Ohio hospitals are joining a national trend of expanded use of observation units, a practice they say can cut billing by a third (Source: “Hospital observation units prove efficient, cost-effective,” Columbus Dispatch, Feb. 3, 2010).

More hospitals are creating units where patients can be observed for up to 23 hours in most cases.

"A lot of patients are on the bubble -- not well enough to go home, but not sick enough for inpatient," said Janet Susi, the OSU Medical Center observation unit's clinical nurse director. "If patients don't get turned around in 23 hours, we admit them."

Added Kelly McGivern, president of insurance industy trade association the Ohio Association of Health Plans, "Being admitted is a higher standard of care than in observation; prices are higher in an admission."

Rand study: Bundled payments one of best ways to ‘bend the curve’

A study by the Rand Corporation published last month on the Web site for the New England Journal of Medicine concludes that one of the best ways to “bend the curve” on healthcare spending is through the use of bundled payments (Source: “Bundling payments may make biggest dent in health care spending,” American Medical News,  Dec. 1, 2009).

"Fee-for-service payments, today's dominant mode, encourage higher volume rather than better value," Rand's Peter Hussey and colleagues wrote in the New England Journal of Medicine article.

The study, titled “Controlling U.S. Health Care Spending — Separating Promising from Unpromising Approaches,”concluded that bundled payments could save even more than the $1 billion annual savings estimated by the Congressional Budget Office.

Payment reform was one of the four core collaborative transformational strategies identified in the Ohio Health Quality Improvement Plan (opdf, 45 pages) that was released earlier this year after Ohio participated in the Commonwealth Fund/AcademyHealth State Quality Improvement Institute. Payment reform is also a primary area of concentration for the state Healthcare Coverage and Quality Council.