The controversy over a proposed change in reimbursement rates for community health centers dominated today’s joint Public Health committee meeting. The centers say the change, part of the Arkansas Department of Human Services’ proposed plan for the “private option” for Medicaid expansion, would put them out of business. Key Republicans like House Public Health Chair John Burris say this ain’t so. Sparks flew!
Here’s the gist: by law, community health centers get a higher Medicaid reimbursement rate — known as the “prospective payment system” or PPS — than other providers because of their unique mandate (by law, they offer more comprehensive services, operate in underserved areas, and must offer their full range of services to anyone that walks in the door, regardless of insurance status or ability to pay). The question is how to reimburse the centers for the folks that will be gaining coverage under the "private option." The centers say they should still get the PPS rate for the newly eligible because this is still Medicaid — it’s Medicaid funds, and the “private option” must cover all Medicaid-mandated services. DHS and the Republican architects of the “private option” say that the whole point of the policy is to move toward a more market-based approach, so the centers should negotiate with the private carriers for reimbursement rates for the new “private option” patients, just like any other provider.
It’s almost like this is a proxy fight for whether the “private option” should be considered Medicaid expansion! No wonder folks are digging in their heels.
The debate is fairly technical and wonky but got quite heated today, and the community health centers have enough political clout that some sort of resolution may be necessary to advance the “private option.” In more than two hours of questioning and debate, there was an awful lot of the two sides talking past each other, but after the jump, see highlights, core positions from each side, and some key questions going forward.
• Even with the enhanced PPS rate, the health centers say that they are only reimbursed at about 80 cents for every dollar of cost. They project that a private reimbursement rate would be only 59 cents on the dollar. That’s a hit that would force them to reduce services or shut down sites, they say. “We’re very fragile, we’re non-profits with very, very thin margins that cannot sustain bumps in the road,” said Allan Nichols, CEO of Mainline Health Systems in southeast Arkansas. “If bumps happen, I can list the name of the communities that get to suffer those bumps. … Two of my six sites will disappear. It’s just absolute. They’re operating on such a thin line right now that it’s just not possible to take the hit.”
• Burris, Sen. David Sanders, and Sen. Jonathan Dismang — the Republican lawmakers closely associated with the “private option” — believe that the centers are not factoring in the total impact of the policy in their projections. Without getting too far into the policy weeds, the core point from the Republicans, and it’s a valid one, is that an individual patient that moves from uninsured to coverage under the “private option” is a net gain for the clinics. A private rate of 59 cents on the dollar is less than the PPS rate of 80 cents, but it’s still more than nothing. (The centers get federal grants to help them cover the cost of the uninsured, but this is a fixed pot rather than a per-patient funding source; shifting patients from an uninsured pool to “private option” coverage wouldn’t have any direct impact on their grant money.)
• The health centers presented projections to the committees that showed significant losses to each center from the proposed reimbursement policy, ranging from $250,000 to $1.8 million. However, the listed formula used to come up with these projections appears to be inadequate. They estimated that 50 percent of their uninsured would sign up for the “private option,” then calculated the cost of those patients compared to the revenue that would come in via a private rate. Those costs exceed the revenues, and they listed the result as “estimated losses” of the proposed rate change. This is not a helpful number for two reasons: 1) they ran no alternative projection looking at cost/revenue under PPS (which still operates at a loss), so they’re comparing to a baseline of no expansion at all, rather than the policy they want — expansion with PPS rate and 2) the estimate makes no mention of the cost of treating these people if they were uninsured.
• So are the health centers wrong about the big losses they’ll be taking? Not necessarily. This is a point that Community Health Centers of Arkansas CEO Sip Mouden didn’t make until toward the end of the meeting, but the centers anticipate that they’ll be serving significantly more patients overall. Some of their patients will move from uninsured to the "private option." But they also predict that they’ll be getting brand new uninsured patients. This is what happened when Massachusetts expanded coverage: the people that remained uninsured—and there will always be some — flocked to the health centers. If the number of uninsured stays about the same and the number of Medicaid/"private option" patients (each of whom represents a loss) increases, the centers will be in trouble.
• The centers have an even bigger worry than that. DHS is seeking a waiver of federal rules to get permission to let private carriers negotiate their own rates for the "private option" rather than the PPS rate. According to DHS, this only applies to the folks newly eligible under the "private option" — anyone that qualifies for the existing Medicaid program would still get the PPS rate. DHS could tighten up the language in their request to the feds to make this more clear. But even if they did so, the centers believe that legally, once the waiver was enacted, a future Medicaid director would have the ability to take away their PPS rate for all Medicaid patients. Everyone agrees that the centers would face massive losses if they saw a reduced reimbursement rate for their current Medicaid patients (as opposed to just for the new "private option" folks that are currently uninsured). A big question looming over the negotiations to come: is there a mechanism to offer legal assurance that reimbursement for their current Medicaid patients won't change?
• Democrats Rep. Reginald Murdock and Sen. Stephanie Flowers gave extremely impassioned defenses of the community health centers (it's worth saying, the centers undeniably serve a vital role in offering high-quality care in underserved communities). Is this issue big enough to start peeling off Democrats from re-appropriating the "private option" if this particular waiver is included? Hard to say, but of course the margins on a super-majority are tight. Usually expansion advocates worry about Republicans jumping ship, but it works both ways. Worth noting too that some conservative legislators representing rural areas are also strong advocates of the health centers and that the centers are generally very effective lobbyists.
• Flowers asked DHS Director John Selig, "How do you square one federal grant and a mandate and a provision in federal law to pay a certain rate with what you’re doing here? I understand you’re trying to waive it. How in the world do you square that?" This is actually a good question. Guidance from the feds seems to clearly indicate that access to the centers is a mandated Medicaid service and that the "private option" must cover all mandated Medicaid services. Federal law is clear that the centers should be reimbursed with the PPS rate. Of course, DHS wouldn't include a waiver unless they had a pretty good idea the feds would go for it. A number of healthcare watchers I've spoken with both locally and nationally believe that the feds are very invested in seeing the Arkansas "private option" succeed, so the truth is that federal officials may be willing to bend.
• Burris had a testy exchange with Mouden over the question of a possible lawsuit. Responding to a quote that Mouden gave the Times saying a lawsuit had never been discussed, Burris was incredulous, saying "I've had about ten people talk to me about a lawsuit." Mouden insisted that there had been no such talk. Burris asked whether she could promise the centers would not sue; Mouden said that was up to her board.
• You can understand why the centers are drawing a line in the sand — they believe this is potentially an existential threat. But what about DHS and Burris and co.? I'm a little confused by how strongly they're pushing. I had assumed there was a major cost difference at stake. DHS is holding any projections close to the vest, but Burris said today it was a couple of million a year. In the context of the overall size of the program, we're talking about a rounding error here.
• Is a compromise possible? The level of contentious frustration on both sides today might be reason for pessimism, but in the end, my guess is that this is a headache that local and federal health officials are going to want to avoid. Selig said a number of times that the governor does not want to see "undue harm to the community health centers." Selig suggested creating a fund to help them out in the event that the dire predictions came true. For her part, Mouden mentioned the idea of simply postponing the waiver for one year, during which time data could be gathered to more clearly determine the impact of expansion on the centers. For all of the acronyms and numbers thrown around today, nobody knows for sure just what the centers' patient populations will look like a year from now, so Mouden's suggestion sounds like a prudent course. My guess is that Burris, Sanders, and Dismang — to use the phrase we heard dozens of times today — "respectfully disagree."