Providers and advocates know that Medicaid rate setting is recognized for being more art than science. Certain states have made an art out of manipulating rates to meet budget numbers. In this difficult fiscal climate, states have turned to health plans and providers, reducing their rates to save money. Since states are bound to maintain Medicaid eligibility or risk facing financial penalties come 2014, cutting capitation rates and reimbursement is the quickest way to plug leaking state budgets.
Oftentimes, a state reduces rates without relieving MCOs of contract requirements forcing them to do more with less and expect managed care companies to take it on the chin. As for providers, states hope they keep seeing patients because they feel it’s their duty or obligation to care for Medicaid patients. All the while, providers barely cover costs each time they see Medicaid patients.
The Supreme Court recently agreed to hear arguments in a case that would enable providers to legally challenge Medicaid agencies for rate cuts. In 2008, the state of California was sued by providers and beneficiaries who allege that a ten percent across-the-board cut to provider rates was illegal. The plaintiff in this case is contending that states are required to provide proof that rates are reasonably related to provider cost.
CMS guidelines require provider rates to be sufficient in order to maintain enough providers in the network to ensure enrollees have the same access to care as the general population. The same goes for rules related to managed care rates and actuarial soundness. But when these laws are too vague or in some situations ignored, are lawsuits the best recourse for MCOs and providers to challenge cuts? Can these providers in California actually sue the state to challenge these reductions?
The case before the Supreme Court has huge implications for states and the federal government. The federal government believes that suits cannot be brought against states for rate reductions even if these cuts may compromise care for beneficiaries. The administration maintains that federal law does not permit individuals to sue the state to enforce provider rate standards. To complicate matters, some Members of Congress are weighing in through a friend-of-the-court brief, indicating that they had always intended that individuals can sue states.
If law suits can be brought against the state for reducing provider rates, what does that do to ballooning Medicaid budgets? We believe allowing lawsuits will actually result in increased costs to states and has all the makings for a recipe for disaster. However, it’s clear that providers and MCOs need some recourse for challenging arbitrary decisions made by states to cut rates. CMS recently released a proposed rule that would require state-level review of rates to determine if they were sufficient to ensure beneficiary access, but also take into account ongoing performance. We believe CMS is on the right track, providing more teeth to the rule while working to strike a balance between state flexibility and rate sufficiency.