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Senate Bill Would Add Transparency to MCO Reimbursement Cuts

Andrew Kitchenman | November 30, 2012

Supporters cite need for open process, while state, insurers see oversight as unwieldy and bureaucratic.

The Senate passed a bill Thursday that would make it harder for managed care organizations to cut payments to home health providers and other companies.

The legislation (S-2241) requires MCOs that oversee the care of Medicaid recipients seek state approval before reducing reimbursements.

The measure was prompted by a proposal from Horizon NJ Health to decrease reimbursements to home healthcare providers by 10 percent. This prompted a backlash from the providers and their supporters who said the cut would be passed along to low-wage workers, such as home health aides.

In the face of opposition, Horizon then scaled back the cut to 4.5 percent.

Supporters from both parties said it’s important to give the state power over cost increases that can affect health workers and patients. State officials and insurance industry representatives argued that the bill would subject changes to an unwieldy, bureaucratic process.

The bill’s future is far from clear. The Assembly version has been referred to the Financial Institutions and Insurance Committee. But opposition from members of Gov. Chris Christie’s administration may signal how unlikely it is that the governor will approve of the measure.

Bill sponsor Senator Loretta Weinberg (D-Bergen) said the experience with Horizon showed the benefit of bringing proposed cuts to light.

“They made their announcement, they caused a great deal of consternation, there was a big public outcry, and then they decided, well, they didn’t need the 10 percent cut, they would do with a 4.5 percent cut,” Weinberg said.

The state has been moving toward providing more care to Medicaid recipients in their homes, using managed care organizations to oversee healthcare providers. Horizon’s proposal cut would have reduced the hourly reimbursement rate to home health providers from $15.50 to $13.95. The providers said this would in turn be passed along to home health aides in the form of smaller paychecks. These aides are typically paid $9 to $10 per hour, according to providers.

Weinberg said she is concerned about circumstances similar to Horizon’s proposal occurring in the future, particularly the possibility of worsening pay for home health aides.

“One of the things you need in order to keep Medicaid patients out of nursing homes and in their own homes is a workforce that has the ability to take care of folks,” she said. “It is economical for society, it’s better care generally if the recipient can function in that way, and it’s cheaper for the state taxpayers.”

Weinberg said that in order to have the necessary workers, “you have to pay them a living wage. The work is hard, it is demanding, and you are taking care of people that other folks either can’t or don’t want to, and I’m very concerned about that workforce.”

She noted that the bill doesn’t prohibit managed care providers from negotiating cuts. “We are just requiring that there be public notice, and that people have a chance to weigh in, and that the state can say, ‘yes, this is appropriate,’ or ‘no, it isn’t,'” Weinberg said.

The bill was supported by all 24 Democratic senators, as well as eight Republicans. Five Republicans voted against it, while three did not vote.

Sen. Diane B. Allen (R-Burlington) said she supported the bill because of the importance of pay to home health aides. Aides and recipients form a relationship, Allen said, and that can help the recipient’s heath improve. This is threatened by low pay and high turnover.

“They may work for two or three months and leave,” for better pay, Allen said.

State Department of Human Service legislative affairs director Freida Phillips wrote in a November 16 letter to senators that the bill would remove needed flexibility for managed care organizations.

“Under the Medicaid managed-care contract, MCOs must utilize strategies that drive efficiency in the marketplace while ensuring access to needed medical care,” Phillips wrote. “As such, they need the flexibility to negotiate autonomously, without excessive government intervention.”

Phillips added that the state is serious in fulfilling its obligation to ensure that Medicaid recipients have an adequate network of providers.

New Jersey Association of Health Plans President Wardell Sanders said in October testimony to senators that the bill establishes an unwieldy process.

“To put the rate-setting process in a politicized governmental process is unprecedented and would restrict an MCO’s ability to provide an efficient and cost-effective network,” Sanders said, adding that it could inhibit other organizations from entering the market.

Sanders said the current management model has worked well, which he said “explains the state’s plan to move 98 percent of Medicaid clients into MCOs over the next year.”

Sanders also said the bill would divert scarce resources away from patient care and seeks to make public proprietary information, including fraud detection activities and provider rate and utilization patterns that could be used by other companies to put an upward pressure on rates. The bill also locks in unequal reimbursement rates from different managed care organizations to the same providers.

The bill received support from labor unions representing home health aides, including Service Employees International Union Local 1199. Local New Jersey political coordinator Justin Braz said it was important to pay home health aides fairly. Braz praised the work put into the bill by Weinberg and fellow bill sponsor Sen. Joseph Vitale (D-Middlesex).

The bill would require public supervision of proposed reimbursement cuts to a range of providers to Medicaid recipients, including to hospitals, nursing homes, and pediatric and adult day health centers, as well as to home health providers.

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