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Section I. Medicaid Fee-for-Service (FFS) Study

Overview of the Texas Medicaid Program
Medicaid Fraud and Abuse Detection Activities
Medicaid FFS Study
Medicaid FFS Study Recommendations

Overview of the Texas Medicaid Program

History

The Texas Medicaid program is a jointly funded federal-state entitlement program that pays for defined medical care for the poor. It was created under Title XIX of the federal Social Security Act of 1965. Medicaid is the largest source of funding for medical and health-related services for America's poorest people. The federal government provides broad national guidelines allowing each state to establish its own eligibility standards to determine its scope of services, to set its own payment rates and to administer its own program. [1] As a result, each state's program is unique.

Texas began participating in this program in September 1967. In February 2004 about one in nine Texans (2.5 million out of 22.2 million) relied on Medicaid for health insurance and long-term care services. [2] Non-disabled children make up the majority (59 percent) of Medicaid clients. The aged and disabled clients account for the majority of the Medicaid expenditures (62 percent) even though they comprise only 20 percent of the people using Medicaid. [3]

Since 1993, the Texas Health and Human Services Commission (HHSC) has been the state agency with oversight responsibility for the Texas Medicaid program. In this role, HHSC is responsible for Medicaid program policies and operations in Texas. In September 2004, HHSC finalized a reorganization that merged 12 agencies into four new departments as directed by House Bill (H.B.) 2292 from the 78th Texas Legislature in 2003.

The new departments are:

  • the Department of Aging and Disability Services (DADS);
  • the Department of Assistive and Rehabilitative Services (DARS);
  • the Department of Family and Protective Services (DFPS); and
  • the Department of State Health Services (DSHS). [4]

Along with Medicaid services, HHSC is responsible for the Vendor Drug Program, the Children's Health Insurance Program (CHIP), Health and Human Services (HHS) rate setting, HHS program policy, Temporary Assistance for Needy Families (TANF), eligibility determination, nutritional services, family violence services, the HHS ombudsman and interagency initiatives. [5]

The primary goals of the reorganization were to consolidate organizational structures and responsibilities, eliminate duplicate administrative systems, and streamline the processes and procedures used to deliver services. [6]

Along with the reorganization of HHSC, the 78th Texas Legislature enacted several major policy changes to help control continually rising Medicaid costs. The changes included a statewide expansion of the managed care program, benefit changes, a disease management initiative and the establishment of a Preferred Drug List. [7]

Texas Medicaid Administrative Systems

In 1996, the Texas Department of Health (now part of DSHS) created the Texas Medicaid Administrative Systems (TMAS). TMAS is essentially a formal organizational relationship of contractors that perform support and operational services for the Medicaid program. TMAS consists of three contractors that provide four general services for the state:

  • claims administration/Medicaid Management Information System (MMIS) service: Processes and adjudicates all claims for Medicaid that are outside the scope of arrangements between Health Maintenance Organizations (HMOs) and the state. Effective January 1, 2004, Texas Medicaid and Healthcare Partnership (TMHP) became the claims administrator. The contractors that form the TMHP partnership are listed below;
  • Primary Care Case Management (PCCM) Network Administrator: Develops and manages the state-administered plan PCCM program. Under the PCCM program, primary care providers contract with the network administrator to provide a "medical home" for clients, in exchange for a $2.92 per member per month fee for each PCCM client. TMHP is the state's current PCCM network administrator;
  • enrollment broker: Helps educate clients concerning their health plan and primary care provider (PCP) choices and enrolls them into Medicaid managed care. Maximus is the state's current Enrollment Broker. Maximus originally contracted with the state in 1997; and
  • quality monitor: The Institute for Child Health Policy (ICHP), contracted in August 2002, provides external reviews to assess Medicaid clients' access to care and the quality of care provided by the PCCM network, Medicaid HMOs and CHIP health plans. The quality monitor also collects encounter data and health care claims paid by the HMOs. [8]

TMHP is a coalition of contractors headed by Affiliated Computer Services, Inc. (ACS):

  • ACS has full responsibility for meeting the contract terms with the state;
  • Accenture provides technology infrastructure, application maintenance, program management and data center operations;
  • Computer Associates provides performance engineering and programming
    expertise;
  • Hewlett Packard provides hardware and technical expertise;
  • MMC Group provides technical and operations staff;
  • Public Consulting Group, Inc. provides third-party recovery activities; and
  • SBC Communications provides data and voice connectivity, and network management. [9]

Financing and Expenditures

The Medicaid program is jointly financed by the states and the federal government through a Federal Medical Assistance Percentage (FMAP) determined annually based on each state's average per capita income level with the national income average. This federal contribution ranges from 50 percent to 83 percent of the payments for Medicaid services provided by each state. [10] The 2004 FMAP for most services in the Texas Medicaid program was 63.17 percent for the first three federal fiscal quarters and 60.22 percent for the last federal fiscal quarter. The federal fiscal year begins on October 1 and ends on September 30. The state is responsible for the balances of 36.83 percent and 39.78 percent. The federal share of the state's Medicaid administrative costs is 50 percent for most items. [11]

Since Medicaid is an entitlement program, neither the federal government nor the states can limit either the number of people who enroll or the amount of money available for services. Combined federal and state spending on Texas Medicaid in state fiscal year (SFY) 2004 was an estimated $17 billion with $14.9 billion for health care services. [12] Texas Medicaid spending is distributed among four main health care delivery programs: fee-for-service, managed care services, long-term care services and reimbursements to hospitals serving a disproportionate share of low-income persons.

Medicaid Population and Services

Eligible Groups

To be eligible for federal funding, states must provide Medicaid coverage to eight specific groups, mainly those with low income and resources who are tested against threshold levels. A complete description of these eligibility groups is in Appendix A.3. [13]

The groups are:

  • individuals who meet the requirements for the AFDC program that were in effect in the state on July 16, 1996;
  • children under age 6 whose family income is at or below 133 percent of the federal poverty level (FPL);
  • pregnant women whose family income is below 133 percent of the FPL. Services to these women are limited to those related to pregnancy, complications of pregnancy, delivery and postpartum care;
  • Supplemental Security Income (SSI) clients in most states;
  • clients of adoption or foster care assistance under Title IV of the Social Security Act;
  • special protected groups (typically individuals who lose their cash assistance due to earnings from work or from increased Social Security benefits, but who may keep Medicaid for a period of time);
  • all children born after September 30, 1983, who are under age 19, in families with incomes at or below the FPL; and
  • certain Medicare beneficiaries with low incomes and limited resources.

The FPL refers to the poverty guidelines issued by the U.S. Department of Health and Human Services each year in the Federal Register. The federal government uses these guidelines to determine financial eligibility for government assistance programs, including Medicaid. The published poverty guideline for a family of three was $15,670 in 2004. [14]

Texas' Eligible Groups

Texas has 33 various Medicaid programs to provide medical services for residents who qualify. Potential clients must meet both federal and state eligibility requirements to receive Medicaid health care services. Some examples of these programs are the TANF, State Paid Foster Care, Aged, Blind and Disabled, and Single Pregnant Women. A complete list of the Texas Medicaid eligible groups is in Appendix A.6.

During the late 1980s and early 1990s, Congress expanded Medicaid eligibility to include a greater number of elderly residents, people with disabilities, children and pregnant women. As a result of these changes, the Texas Medicaid population tripled in a decade, and added more than 1 million people between 1990 and 1995.

Texas' Medicaid monthly average enrollment peaked in fiscal 1996 with 2.1 million enrollees. The state's Medicaid enrollment gradually declined to 1.8 million in fiscal 2000. Since then, the average monthly enrollment has gradually increased, with 1.9 million in federal fiscal 2001[15] and 2.9 million in federal fiscal 2002. [16]

Covered Services

The federal government requires states to provide mandatory services (for example, inpatient hospital, vaccines for children and physician services). There are an additional 34 optional services, such as prescribed drugs and optometrist services, that states may choose to include in their Medicaid programs. [17] Texas Medicaid provides a majority of the optional services, such as optometry services, chiropractic services, physical therapy, occupational therapy and eyeglasses. Moreover, Texas Medicaid covers birthing centers, genetics, renal dialysis and school health related services. [18] (See Appendix A.7 for a complete list of the general medical services, excluding long-term care services provided by Texas Medicaid.)

The Medicaid program also provides long-term care services to eligible low-income Texans in nursing facilities and through community-based care. In fiscal 2003, about 234,000 clients per month received long-term care services with 69,000 in nursing
facilities and 103,000 receiving primary home care, attendant care or day activity/health services. [19]

Providers

Enrollment and Reimbursement

Health care providers choose to be enrolled into the Medicaid program through an application process with the claims administrator, TMHP. This process includes completing legally binding forms and meeting specific eligibility requirements. For example, one of the requirements for a genetics provider is: "The provider must use a team of professionals to provide genetic evaluative, diagnostic and counseling services." [20] In general, all licensed professionals, such as physicians and nurse practitioners, must be authorized by their professional licensing authority. They must also be concurrently enrolled in Medicare, though there are exceptions for groups such as pediatricians. [21]

Texas Medicaid uses a variety of methods to reimburse enrolled providers. Most providers are paid on a FFS basis or a fee schedule listed in the provider's specific service section of the Texas Medicaid Provider's Procedure Manual. All hospitals-except in-state children's hospitals and specified psychiatric facilities-are reimbursed using the Texas Medicaid Diagnosis Related Grouping (DRG) method. [22] DRGs consist of a given set of diseases, like diabetes, and disorders, such as a bone fracture, compiled into clinically related groups that use similar hospital resources and length-of-stay patterns. The DRG payment system is essentially based on averages for length of stays and the number and intensity of services provided. [23]

Medicaid Managed Care Reimbursement

In 1993, the implementation of the State of Texas Access Reform (STAR) Medicaid managed care program brought additional reimbursement methodologies to the Texas Medicaid program. These methodologies are applied to two different models of Medicaid managed care summarized below: [24] In the Texas Medicaid program, these models are referred to as Managed Care Organizations (MCO).

Health Maintenance Organizations (HMOs) - Organizations licensed by the Texas Department of Insurance that deliver and manage health services under a risk-based arrangement. These organizations receive a monthly "capitation" payment for each person enrolled based on an average projection of medical expenses for the typical patient.

Primary Care Case Management (PCCM) - This model assigns a Primary Care Provider (PCP) to each PCCM Medicaid client participant. The PCP must authorize most other health care services, such as specialty physician care, before the Medicaid program can reimburse them. PCPs enrolled in the state-administered plan, Texas Health Network, receive a $2.92 monthly case management fee per assigned client in addition to a fee-for-service or scheduled service fee.

This study's sample consisted of professional claims paid by the traditional FFS reimbursement method, including claims submitted for clients in the PCCM managed care program paid in the FFS system.



ENDNOTES

[1] Centers for Medicare & Medicaid Services, "Medicaid: A Brief Summary", September 16, 2004, http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp. (Last visited January 14, 2005).

[2] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 1-1, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[3] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 1-2, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[4] Texas Health and Human Services Commission, About HHSC, http://www.hhsc.state.tx.us/. (Last visited January 14, 2005).

[5] Texas Health and Human Services Commission, About HHSC, http://www.hhsc.state.tx.us/. (Last visited January14, 2005).

[6] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 1-4, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[7] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 1-4, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[8] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 3-14, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[9] Texas Medicaid & Healthcare Partnership, What is TMHP?, http://www.tmhp.com/ (Last visited January 14, 2005)

[10] Centers for Medicare & Medicaid Services, "Medicaid: A Brief Summary", September 16, 2004, http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp. (Last visited January 14, 2005).

[11] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. Glossary-10, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[12] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 5-1, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[13] Centers for Medicare & Medicaid Services, "Medicaid: A Brief Summary", December 3, 2004, http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp. (Last visited January 20, 2005).

[14] U.S. Department of Health and Human Services, "The 2004 HHS Poverty Guidelines," (Baltimore, Maryland, May 3, 2004), http://www.aspe.hhs.gov/poverty/04poverty.htm. (Last visited January 14, 2005)

[15] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fourth Edition (Austin, Texas, May 2002), p. 4-4, http://www.hhsc.state.tx.us/Medicaid/reports/PB/2002pinkbook.html. (Last visited January 14, 2005).

[16] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 4-5, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[17] Centers for Medicare & Medicaid Services, "Medicaid: A Brief Summary", September 16, 2004, http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp. (Last visited January 14, 2005).

[18] Texas Department of Health, National Heritage Insurance Company, 2002 Texas Medicaid Provider Procedures Manual (Austin, Texas), pp. III-IV.

[19] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 4-18, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).

[20] Texas Department of Health, 2002 Texas Medicaid Provider Procedures Manual, p. 21-1.

[21] Texas Department of Health, 2002 Texas Medicaid Provider Procedures Manual, p. 34-6.

[22] Texas Department of Health, 2002 Texas Medicaid Provider Procedures Manual, pp. 3-1 to 3-5.

[23] St. Anthony's Publishing, St. Anthony's DRG Guidebook (Reston, Virginia: St. Anthony's Publishing, Inc., 2001), pp. Inro-3-6.

[24] Texas Health and Human Services Commission, Texas Medicaid in Perspective, Fifth Edition. (Austin, Texas, June 2004), p. 6-2, http://www.hhsc.state.tx.us/medicaid/reports/PB5/PinkBookTOC.html. (Last visited January 14, 2005).