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Appendix B (2. Thru 2.7)

Part 1 (2. thru 2.7)

2. Background

Medicaid is a jointly funded state-federal program that provides payment for medical services to families, the elderly, and people with disabilities, who meet certain low-income guidelines. Federal law and regulations establish minimum levels of coverage that states must provide as well as optional categories which states may choose to cover. Each state covers the required services and eligibility groups, but develops a unique program by determining which optional services and eligibility groups to cover. While states are responsible for the hands-on operation of Medicaid, the federal government plays an active oversight role.

2.1. Role of Texas State Agencies in Medicaid

In Texas, the HHSC is the designated single state agency responsible for the Medicaid program. In this capacity, HHSC's State Medicaid director administers the Medicaid program, setting policies and overseeing operations through the development and oversight of the State Medicaid Plan. HHSC serves as the primary point of contact with the federal government, establishes policy direction, contracts with various state agencies to carry out the technical operations of the program, approves Medicaid policies, rules, reimbursement rates, and operations, and performs other Medicaid related functions.

The operating agencies are responsible for day-to-day operation of the program, including determining eligibility, processing claims, and certifying that health providers meet program standards. Three agencies - TDH, TDHS, and Texas Department of Mental Health and Mental Retardation (TxMHMR) - administer most Medicaid operations, and Medicaid accounts for a sizable portion of those agency budgets. Several other state agencies receive Medicaid dollars for services to special populations. Exhibit 1 provides a list of the participating agencies and their respective programs.

Exhibit 1
JULY 2000
Agency Program/Service
Texas Department of Health Purchased Health Services
Texas Health Steps (EPSDT)
Family Planning
Vendor Drug
Medical Transportation
Medicaid Targeted Case Management
Medically Dependent Children's Program
Texas Department of Human Services Community Care (Personal Care)
Nursing Facility Programs and Services
Long Term Care Licensing, Survey, and Certification
Waivers (CLASS, PACE, CBA)
Waiver for People With Deafness, Blindness, and Multiple Disabilities
Texas Department of Mental Health and Mental Retardation Home/Community Services Waiver
Home/Community Services - OBRA Waiver
Medicaid Targeted Case Management
Rehabilitation (MH)
MRLA Waiver
ICF-MR Services
Texas Department of Protective and Regulatory Services Certain Children in Foster Care or Adoptive Placements
Medicaid Targeted Case Management
Texas Commission for the Blind Medicaid Targeted Case Management
Texas Council for Early Childhood Intervention Medicaid Targeted Case Management
Source: Texas HHSC, State Medicaid Division, February 1999.

TDHS and TDH, in partnership with HHSC, have significant roles in the administration of the Medicaid program. TDHS operates an eligibility determination process for most Medicaid clients and maintains the resulting automated database for client eligibility information calledthe System for Application, Verification, Eligibility, Referral, and Reporting (SAVERR). As a part of this process, TDHS produces and distributes the Med ID forms. TDHS also operates the hospice, nursing home and community care programs.

TDH plays a major role in the payment of claims through the administration of a contract for claims review and payment with the National Heritage Insurance Company (NHIC), for fee-for-service and primary case management programs. In addition, TDH operates the Medicaid managed care program (STAR) and contracts with managed care organizations (MCO) for delivery of some acute care services for certain Medicaid clients. (Note: DHS operates the STAR+PLUS Medicaid managed care program in Harris County and contracts with managed care organizations for the delivery of Medicaid acute and long term care services in that area). As part of the administration of the managed care program, TDH contracts with an enrollment broker for processing information related to recipient selection and assignment of an MCO and primary care physician (PCP). TDH also operates the Medicaid Vendor Drug Program that uses an on-line, point of sale system to provide prescription medications to Medicaid clients.

2.2. Medicaid Identification

A wide variety of medical services covered by Medicaid are delivered primarily through local private and public health providers. The provider must verify that the client is eligible for the specific service being requested on that date to ensure that the service will be eligible for Medicaid reimbursement. The paper Med ID form is the vehicle through which this Medicaid eligibility is verified. By presenting the Med ID form to the provider, the provider can confirm the client's Medicaid eligibility, and the provider has assurance that appropriate claims will be paid. Providers and clients can also verify eligibility by calling the TDH Medicaid hotline.

Medicaid eligibility and its notification process can be complicated for recipients and providers alike. There are eleven types of Medicaid eligibility notices, and even more types of eligibility covering specific clients, periods of time, and services. These eligibility types can change from month-to-month. Clients also can be certified for eligibility in the middle of the month, and in some cases, eligibility is retroactive. The eligibility types can identify specific services for which each individual client is eligible, and individuals within a household may have different types of eligibility. A list of the most common eligibility types is shown in Exhibit 2.

Exhibit 2
JULY 2000
Med ID Type Identification for Clients Approximate Number
of Cards Issued
Per Month
Regular Fee-For-Service Most common type, issued to about 50 percent of all clients who are not in managed care. 629,000
STAR Managed care organization (MCO) TANF clients; access to services controlled by MCO. 321,000
STAR+Plus Managed care organization clients in Harris County. Includes aged and disabled eligibility categories. 56,000
Limited (Lock-In) Regular fee-for-service clients who have been identified as over-users or abusers of services. Specifically limits client to a specific doctor and/or pharmacy. 1100
STAR Limited (Lock-In) Managed care clients who have been identified as over-users or abusers of services. Specifically limits client to a specific pharmacy. 270
Emergency Clients receiving emergency services. Issued retroactively in the weekly update for a limited time, usually 1-3 days. 5,100
Presumptive Eligibility Covers pregnant women prior to delivery for prenatal services. 1,300
Presumptive Eligibility,
After ID's
Covers pregnant women after Medicaid certification 500
Hospice Critically ill clients needing hospice services. 1,300
Qualified Medicare Beneficiaries (QMB) Low income Medicare clients. Covers Medicare deductibles and co-insurance. 59,000
Medicaid Qualified Medicare Beneficiaries (MQMB) MQMBs receive QMB and Medicaid coverage. 228,000
Source: Texas Department of Human Services. 3

2.3. Eligibility Verification Concerns

Agencies and others expressed concerns about fraudulent Medicaid claims resulting from inappropriate and unauthorized use of the paper Med ID. Problems related to timeliness and accuracy with the current Med ID system have also been identified.

In 1997, state legislators charged the Comptroller's Office with conducting biennial studies regarding fraudulent claims in the Medicaid program. 4 The first report identified the paper Med ID as a possible source of the fraudulent use of medical services. That information resulted in the mandate to explore electronic Med IDs. Although no statistics were available, anecdotal evidence from staff indicate that clients can and have shared paper cards with others who are not eligible to receive Medicaid services. In coordination with the State Auditor's Office and the HHSC, the Comptroller's office will complete its second interim report by the 2001 legislative session.

2.4. Current Med ID Eligibility Data Sources

In most cases, eligibility for Medicaid is initiated by TDHS through a collection of client information that is transferred to the SAVERR database. Additional information is imported to SAVERR from a number of other data systems including the Social Security Administration's State Data Exchange (SDX) and the TDH Texas Health Steps system. Eligibility for some services, such as eyeglass exams and hearing aids is limited and is dependent on how recently a client has received the same service. This claims information is provided by NHIC.

A collection of data is transferred to the Medical Identification (MN) system, which accepts or calculates the eligibility category or type, assigns the eligibility type, and generates the Med ID, the TDHS Form 3087. The components, which feed the MN system and the flow of data transfers to MN, are illustrated in Exhibit 3 on the following page.

Medicaid in Business Process

2.5. Timing of Med ID Process

While electronic processes are used in eligibility determinations for all Medicaid programs within the State of Texas, the distribution of that information to clients and providers to confirm Medicaid eligibility is a paper process. The current Med ID is an 8 1/2" X 11" paper sheet, commonly referred to as a card, that is mailed to existing eligible clients monthly. Paper Med ID cards are issued to a family or an individual, as appropriate. More than one family member may be listed on a single card, separate cards may be issued for some family members, and different cards may be issued for different eligibility time periods.

Most recipients receive the Med ID by the first of the month for which the ID is effective. To achieve the timely arrival, corrections and updates to the eligibility database are stopped, or cut off, usually between five and seven working days before the end of the month. In some cases because of weekends and other holidays, this time may be as much as ten days before the end of the month. This cutoff allows paper Med IDs to be printed, folded, inserted, mailed, and delivered to the recipients before the first day of the new eligibility period. 5

As new applications are processed during the month, additional clients become eligible or re-certified. TDHS performs a weekly run to generate and mail the ID forms to these new and recertified recipients. The forms document eligibility through the end of the current month.

Eligibility for certain Medicaid clients can be determined to exist for some time period in the past, resulting in retroactive Medicaid eligibility. Retroactive Med ID forms for periods up to two years are also issued during the weekly runs. According to TDHS staff, it is not unusual for a single client to receive up to five retroactive Med ID forms on a single weekly run, plus other Med ID forms. 6

As of July 2000, the Medicaid population is approximately 1.8 million clients. These clients receive approximately 1.3 million paper Med IDs monthly. Weekly additions of Medicaid eligibility result in approximately 23,000 Med IDs, covering about 30,000 clients. 7

Provider groups consist of approximately 13,000 pharmacies and 265,000 primary health service providers and state and local agencies. Of these, about 26,000 providers and 1,000 clients are located outside of Texas. Provider groups include hospitals, physicians, pharmacists, dentists, psychologists, physical therapists, and other providers of medical and related services. Most providers are located in urban areas, while a smaller number are located in rural areas of Texas. Larger, urban providers tend to have greater access to electronic billing and electronic patient eligibility identification systems than do the rural areas. 8 Exhibit 4 reflects the number of Medicaid clients (cases), providers, and pharmacies.

Exhibit 4
JULY 2000
(All numbers are rounded) In State Out of State Total
Medicaid Clients (cases) 1.8 million (1.3 million) 1,000 (1,000) 1.8 million(1.3 million)
Primary Health Service Providers and agencies 240,000 26,000 265,000
Pharmacists 12,000 600 12,600
Source: Texas Department of Human Services.

2.6. Advantages of the Current System

Although the current Med ID system is cumbersome and costly, it also has benefits that need to be considered when investigating a new process. Some of these advantages are detailed below.

Paper Med IDs can provide assurance to providers and clients that the client is eligible for the period identified on the card. State policy does not require a check of client identification to document that the Med ID cardholder is actually the client. Providers are reasonably assured of payment for eligible services when an original, valid Med ID is presented at the time of service.

The Med ID is used as a mechanism for sending general Medicaid program information, program specific information to targeted client populations, or information on programs other than Medicaid. This is accomplished by inserting a preprinted stuffer in the same envelope with the Med ID. These piggybacked messages are an inexpensive and convenient method of client communication without an increase in postage costs. Currently, TANF and Medicaid cases and benefits are put on hold if the Med ID is returned as undeliverable. The returned Med ID alerts TDHS that a change of address has not been filed, and offers a mechanism for identifying potential fraud or problem cases. When a Med ID is returned, TDHS will attempt to contact the client to update or correct the database, and will re-mail the Med ID, if appropriate. Almost 30,000 pieces or about 2.5 percent of the Med ID monthly mailings are returned to TDHS. 9

All Med IDs carry general program information preprinted on the back of the form, and many Med ID types also have program specific information on the front of the form. This information is directed both to clients and providers. In some cases the forms identify clients who are restricted to a specific provider or to specific services. This information is also contained on the original notice of program eligibility, which is sent to the client, but the information on the Med ID serves as a convenient monthly reminder.

2.7. Disadvantages of the Current Med ID Process

In addition to the costs of monthly mailings, there are other disadvantages to the current system that are detailed below.

The early cutoff date required to print and mail the paper Med ID form results in the inappropriate payment for services for certain cases. There is an automatic hold process for cases that will meet denial and notice criteria by the end of the month. Med ID cards are not distributed to those cases, and TANF, Medicaid, and Food Stamp benefits, if applicable, are denied effective the end of the month. However, this hold process is not applied to cases where there is a reduction of benefits without denying the case entirely. In such cases, if the case action is not taken by the cutoff date, the benefits will continue for an extra month at the current level

Possession of the form is all that is required to receive many Medicaid services. This allows individuals who are determined not eligible to access services. Paper Med ID forms could be loaned, sold, stolen, or lost by eligible clients. This makes fraud relatively easy to commit and difficult to detect.

Some providers are also prone to accept the possession of any paper ID form as evidence of eligibility, without adequate examination or verification of the eligible month and services. For instance, a provider may be presented a Medicaid ID form from the previous month, and provide a service, assuming the client will be eligible in the current month. Often the client is no longer eligible and the claim will be rejected. This is especially likely to happen early in a month. It is not uncommon for clients to forget to take their newest paper form with them to the doctor.

The number of forms received by some families is often confusing to clients and providers. This can lead to patients being reluctant to access services for fear of not being eligible and providers may make incorrect decisions to deliver or not deliver services because the provider can not confirm eligibility for the family member or for the service.

The amount and type of information is sometimes confusing and can also lead to clients getting services for which they are not eligible. For example, it may not be clear which specific services are allowed for a client during a specified eligibility period. Physicians or pharmacists may not realize they are not the primary care physician or the locked-in pharmacist until after the service is provided or that a similar service was recently performed by another provider.

Clients do not always recognize the paper ID as the documentation of Medicaid eligibility. It does not look impressive or like other vehicles of program eligibility. This sometimes results in a client not realizing they are eligible for Medicaid services, especially since some clients are offered Medicaid services at the time and during the same process as their application for other programs. In Texas, about 15% of Medicaid eligible clients whose eligibility is checked by third-party processors are not aware of their eligibility. 10

Unnecessary administrative costs and program expenditures can be substantial to the state. The cost of service delivery to individuals not certified Medicaid eligible consumes monies earmarked for eligible recipients. A system that is more secure, reduces confusion, and decreases inappropriate costs would reduce both administrative and service expenses.

The Texas Department of Health EPSDT Program (known as Texas Health Steps) is under a consent decree resulting from a lawsuit alleging that the paper based process does not effectively communicate critical information. The electronic Med ID process discussed below could improve this situation. However, if the state chooses to implement the recommended process, the Office of the Attorney General must be notified to determine the impact on this litigation.

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