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Approval for Outside Oversight of Controversial Medicaid Payment Reform

But even with an independent monitor, some advocates fear the reform will lead to cuts in services for vulnerable patients

crowded hospital waiting room

State lawmakers showed strong support for a new proposal to provide outside oversight of New Jersey’s ongoing transition to a new Medicaid payment system. Such oversight, some said, is necessary to properly protect patients and behavioral healthcare providers during the controversial reform.

The reform involves moving from a system in which the state paid providers through annual negotiated contracts to one where they are reimbursed on a fee-for-service basis.

Those who work directly with the affected patients — roughly 300,000 adults, including some of the most seriously mentally ill community residents — said even if an independent monitor was quickly established, providers will be forced to reduce services as the state changes the way it reimburses them for a wide variety of treatments. They also said the process would be far less traumatic if the state had phased in the reform over several years, as originally discussed, instead of just 14 months.

Advocates for these community mental health and substance abuse providers told the Senate health committee on Monday that, because of the shift in the state’s payment policy, organizations expect budget shortfalls from $500,000 to $6 million in the coming year. An estimated 20,000 low-income patients could be forced out of therapy, medication management, or other support programs as a result, according to estimates.

The bill (S-2521), introduced in recent weeks by health committee chairman Sen. Joseph Vitale (D-Middlesex), Sen. Robert Gordon (D-Bergen), and supported unanimously by the Senate panel, would establish an independent body to monitor the transition and report back to the Legislature. It would also require the state to hire a consultant to track and analyze the process and determine the impact on patient care and provider organizations.

Healthcare advocates heralded Gov. Chris Christie’s announcement early this year that the state would spend an additional $127 million on Medicaid reimbursements for a range of outpatient behavioral health services. The increase would be fueled by $107 million in federal dollars.

But, as details about the new reimbursement rates began to emerge, providers found the picture appeared less rosy than anticipated. Some treatments would be paid at nearly double the past rate, but for others providers would collect less than they had before, or potentially nothing at all. While new billing codes were created for some services, community providers feared that overall they would be left with fewer funds to cover an ever-growing need.

State officials have defended the process, noting that they have met with providers dozens of times and incorporated a number of their suggestions into the process. And while most states have already made the switch to fee-for-service — and many are now evolving further, to a system that provides “bundled” payments based in part on the quality of patient outcomes —New Jersey is lagging behind. (Most “physical” care claims are now handled through a commercial managed-care company for Medicaid patients in New Jersey.)

New Jersey has discussed the transition for years and, while many substance abuse providers had already made the switch to fee-for-service, the rest were required to do so in July, when the new reimbursement rates took effect. Mental health providers were scheduled to shift in January, but state officials allowed them to delay the transition until next July. During a press event in August, Christie insisted there would be no more extensions.

A representative of the Department of Human Services, which oversees Medicaid, said the transition process was established with input from a consultant who reviewed various models and timelines. Although some states have phased out the contract system while shifting to fee-for-service reimbursements, that staggered implementation would have been challenging in New Jersey, where providers had each negotiated different contract rates for similar services, DHS said.

Lawmakers are hoping the oversight bill will help ensure patients aren’t left out in the cold. An assembly version, by Assemblywoman Valerie Vainieri Huttle (D-Bergen) and Assemblyman Daniel Benson (D-Mercer), awaits a hearing. But providers said the funding is the bottom-line concern.

“This transition itself wouldn’t be such a disaster if the rates were adequate,” Mary Abrams, the senior health policy analyst at the New Jersey Association of Mental Health and Addiction Agencies told the Senate panel. The oversight bill is “absolutely necessary to ensure that the reimbursement rates established under the fee-for-service network are adequate, that patient care is maintained, and that continuity and quality of care are not compromised.”

But Abrams and others said that, even if monitoring could be quickly set up, patients and programs are still at risk. Some organizations have already informed staff members they may lose their job in the coming months, providers noted.

Harry Postel, director of operations at Catholic Charities in Trenton, said his organization serves more than 40,000 patients in four counties in central New Jersey, many of whom have spent “significant time” in state mental hospitals. Without community services like those provided by Catholic Charities, “they are certainly at a risk of reentering the state hospital or using emergency rooms” when in crisis, he said.

Like many in the field, Postel said he supported the transition to fee-for-service, but remains concerned about the funding level during the change. Patients with complex needs and disorganized lives often miss an appointment, he said, requiring staff to go above and beyond to ensure they get treatment. These costs can be hard to cover through a fee-for-service system, which ties payment to an individual procedure or session.

While he credited state officials for their efforts to make it work, Postel said, “they’re going to place these people at risk if the contract dollars are taken out of this” picture.

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