States test Medicaid reforms

The Clinton administration may have hit upon a relatively safe way to determine the best method for reforming America's welfare and health care systems. More than any previous president, Clinton is allowing state governments to experiment with various projects meant to save Medicaid and welfare dollars while improving, or at least maintaining, quality of and access to health care. One of the aims of the program is to reduce emergency room visits and thus decrease cost-shifting by hospitals.

Under federal Medicaid regulations, states must apply for waivers to institute experiments, such as moving Medicaid patients into managed care plans or expanding eligibility for Medicaid.

A waiver is usually specific to a particular project, which may involve an entire state or just a few counties. All waivers are granted with caveats, such as the requirement that the state bear any cost increases caused by the project and that an impartial study be done to determine the effectiveness of the program. Although programs covered under such waivers are limited in time--usually no longer than five years--the president can extend the length.

"The climate for waivers has never been better," says Kala Ladenheim, a senior research associate at the Intergovernmental Health Policy Project at George Washington University, a research group.

Of course, requests for waivers are not automatically granted. "The Clinton administration wants the states to experiment. It just doesn't want them to do the same experiment," says Ladenheim. She adds that waivers often carry provisions not requested by the state.

Three states that either have undertaken or are trying to initiate Medicaid experiments are Tennessee, Illinois, and Massachusetts. In Tennessee, special-interest groups almost sabotaged a project after a waiver was granted. In Illinois, opponents of the plan convinced legislators to prevent the state from requesting a waiver. In Massachusetts, two studies recently reported on the effectiveness of the state's waiver program.

TENNESSEE

Tennessee Gov. Ned McWherter had numerous conversations about Medicaid with President Clinton when Clinton was governor of Arkansas. Clinton had assured McWherter that, as president, he would allow states to experiment with Medicaid. While Clinton kept his promise, McWherter found that obtaining the waiver may be only one obstacle to Medicaid reform.

In 1992, faced with the choice of cutting Medicaid or increasing taxes, McWherter proposed a plan called TennCare to replace Medicaid. Early last year, Tennessee applied to the federal government for a waiver to implement the program. The state's Medicaid budget is $1.4 billion.

Just before Thanksgiving 1993, a federal waiver was granted for a less ambitious program to insure 1.3 million people through June of this year and then 1.5 million over the next four years.

The federal government also imposed conditions, including federal monitoring of the quality of care and federal reviews of contracts between Tennessee and TennCare health plans. McWherter tolerated the requirements, and the project was started. But health care providers balked, primarily because they were unhappy with gatekeeper provisions.

In order to begin the program with a large pool of clinicians, McWherter required providers who were part of the state's Blue CrossBlue Shield plan, which provides services to state workers and others, to be part of the TennCare program. But many physicians dropped out because they didn't like the requirement that all TennCare patients be enrolled in a managed care organization and either choose or be assigned a gatekeeper, says Tony Garr, executive director of the Tennessee Health Care Campaign, an advocacy group.

In December 1993, 7,000 Tennessee doctors were Blue Cross-Blue Shield providers. When TennCare began on Jan. 1, that number dropped to 3,500. The state held firm, attempting to alleviate the doctor shortage by expanding the services that nurse practitioners could perform. Finally, doctors started returning to the system when they lost patients. Currently, 6,000 doctors provide services to TennCare and Blue Cross-Blue Shield. "We still have shortages in certain pockets, but the problem is clearing itself up," Garr says. TennCare currently covers 1.8 million Tennesseans.

ILLIINOIS

While Tennessee faced federal opposition, Illinois Gov. Jim Edgar faced opponents in his own state. When he wanted to start a managed care Medicaid experiment, the plan was voted down by state lawmakers. Moreover, the National Association of Community Health Centers filed a federal lawsuit against the Clinton administration to block any Illinois waiver that might pass the legislature.

Robert Wright, director of the Illinois Department of Public Aid, explains that Illinois has 1.4 million people eligible for Medicaid, but only about 100,000 of them are in HMOs. Over the last five years, Medicaid costs in the state have doubled and are continuing to grow. "We have to do something about [the cost problem], and getting more people into managed care is the best solution we know," Wright says. The state's Medicaid budget is $4.7 billion out of a total state budget of $28 billion.

As in Tennessee, doctors in Illinois were upset over the requirement that Medicaid patients be assigned a gatekeeper. In its suit, the health centers association said the plan would cut funding for federally qualified health centers and hurt people in poor areas. "The centers would like more protection than we are willing to provide under the bill. We'll allow them to be a provider, but we can't guarantee their success," Wright says.

Despite the problems, Wright hopes the legislature will pass a bill requesting the waiver in the 1994-95 session.

MASSACHUSETTS

States that receive waivers with the condition that they commission studies to measure the effectiveness of the experiment may take heart in the case of Massachusetts, an early waiver recipient. Massachusetts received a waiver in January 1992 that allowed it to develop its Medicaid Managed Care Program.

The waiver came with one requirement: "We had to prove that costs would drop and that quality of care and access would be at least stable," says David Ball, director of external affairs for Massachusetts's Division of Medical Assistance. Currently, Medicaid accounts for $3.4 billion out of a $16.3 billion state budget.

Accordingly, the state commissioned two studies: One, conducted by the Heller

School in Advanced Studies in Social Welfare at Brandeis University, looked at a new mental health/substance abuse program, which placed Medicaid patients in managed care plans. It stated that access to and utilization of services increased from 1992 to 1993, quality of care in the opinion of providers and patients was generally preserved, and that mental health and substance abuse expenditures dropped by $47 million, or 22%.

On July 5, a study conducted by the John W. McCormack Institute for Public Affairs at the University of Massachusetts, Boston, reported on the state's Primary Care Clinician (PCC) plan in which Medicaid recipients choose a clinician as their primary gatekeeper. The study concluded Massachusetts spent 7.4% less for Medicaid than it would have without the plan. Much of the savings came from a 22% decrease in emergency room visits and an 18% reduction in lab tests and radiology services.

The study also made some recommendations, such as suggesting that printed material be translated into languages other than English. And it noted that the

management of asthma patients could be improved.

Still, says Ball, "The studies prove the effectiveness of the programs." As a result, Ball expects that at the end of the five-year period for which the waiver was approved, the federal government will renew the waiver.

COPYRIGHT 1994 A Thomson Healthcare Company
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