CMS Declares the Payment Structure for the MCOs Violates A-87…”So What Happens Now?”

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Hey, everybody!! Anyone miss me?  I feel like I haven’t blogged in forever.  And, the thing is, I am so excited about this blog!! I actually found out about the CMS letter last week, but have had zero time to blog (had a very intense, two-day hearing).  So I apologize if you have already seen the CMS letter…but, for others, read on…

I have to say…I love it when I am right!

In North Carolina, we set up managed care organizations (MCOs) to manage behavioral health care for Medicaid.  For the past year, I have been blogging that the MCOs’ payment arrangement with the Department of Health and Human Services (DHHS) is fishy.  These MCOs are pre-paid.  Their profit hinges on spending less.  In order to spend less, the MCOs deny medically necessary services (usually the most expensive) and terminate quality health care providers’ Medicaid contracts.  I mean, come on, why authorize more services and contract with more providers if doing so would directly decrease your profit?

See my blogs: “NC MCOs: The Judge, Jury and Executioner.” Or “How Managed Care Organizations Will be the Downfall of Mental Health in NC.” 

Apparently, I am not the only person concerned with how the MCOs are compensated.

On October 24, 2013, the Centers for Medicare and Medicaid Services (CMS), which is the federal agency charged with overseeing Medicare and Medicaid (as in, if CMS says jump and you accept federal money for Medicaid, you jump) sent correspondence to our Acting Medicaid Director Sandy Terrell. (Remember Carol Steckel abruptly left our Director position, leaving Terrell holding the conch…I bet that conch is getting mighty heavy!).

CMS’ correspondence states that, during its review of NC’s contracts between DHHS and the LME/MCOs, CMS determined an issue.  Specifically, CMS determined that the arrangement between DHHS and the MCOs may be classified as “subgrants or intergovernmental agreements that are subject to the cost principles set forth in the Office of Management and Budget (OMB) Circular A-87 (A-87).”

So what? Who cares if the arrangement between the MCOs and DHHS is classified as a subgrant subject to A-87? Blah…blah….blah….right?

Wrong!

If the MCOs are subject to A-87, then the use of Medicaid funds is limited to “allowable costs.”  Why is that important?  Allowable costs do NOT include….

…..drum roll….

PROFIT!!!!! and other increments above cost.

BOOO…freakin’ YA!

For a rant and rave about the MCOs’ profit, high salaries and expensive health care benefits, see my blog: ”NC Taxpayers Demand Accountability as to Behavioral Health Care Medicaid Funds (And That Medicaid Recipients  Reap the Benefit of Such Funds).

If you take away the ability for the MCOs to profit off of our taxpayers’ Medicaid money, then you take away the monetary incentive for the MCOs to deny medically necessary services and to terminate provider contracts.

Know what else you take away? The desire to be an MCO.

So what happens now? Just because CMS wrote a letter to NC saying it does not agree with our payment arrangement with the MCOs, does that mean that we have to immediately stop and desist from paying the MCOs?  No. 

In fact, CMS also states that it “recognize[s] that changing a long-standing delivery system will take time and potentially state legislation.  We know the process begins with a frank discussion of these issues…”

CMS did, however, provide a couple of choices for us (if, in fact, A-87 does apply):

1. Openly procuring behavioral health services and making the counties compete on the same basis as with any other commercial entity; or

2. Comply with A-87 by changing the payment methodology and reimburse only for the cost of services actually rendered  plus administration costs.

I am actually doing the Snoopy dance as you read this.

Herein lies the problem…How many times in the last 10 years, has NC changed the mental health care system?  How many mess-ups?  How many Medicaid recipients have not received medically necessary mental health care service because of NC changing the mental health system over and over?

So what happens now?

On a sidenote, I love North Carolina’s response to CMS.  Over a month after receipt of the CMS letter, on November 27, 2013, DHHS finally responds with a short, 2 paragraph letter signed by Sandy Terrell.  “As you might expect, North Carolina was surprised to receive the letter outlining [CMS'] concerns regarding the cost principles set forth in the Office of Management and Budget (OMB) Circular A-87…”

NC was surprised???

Not I.

I am reminded of Andrew Lloyd Webber’s “Evita,” when Eva Peron follows her lover to Buenos Aires only to discover he is married with children.  She has all her belongings in a suitcase, turns from her ex-lover’s home and sings, “Another Suitcase in Another Hall.”

So what happens now
(Another suitcase in another hall)
So what happens now
(Take your picture off another wall)
Where am I going to
(You’ll get by you always have before)
Where am I going to

Just like Eva Peron, NC had full faith the MCOs, enacted them statewide, and, then, not even a year into the statewide MCO progam…BOOM! The MCOs are married with kids.

So what DOES happen now?

In the short-term, probably nothing.  And, there is a chance that nothing happens in the long-term.  In NC’s response, Ms. Terrell wrote that “[w]e believe we have information to share with CMS that should alleviate those concerns…”

Most likely, Ms. Terrell will explain to CMS how the wonderful MCOs are completely objective and how they save NC millions in Medicaid money…We will see whether CMS drinks DHHS’ Kool-Aid…

If, on the other hand, CMS demands change, in the long-term, there will be great change.

If we go with Door #1…”Openly procuring behavioral health services and making the counties compete on the same basis as with any other commercial entity,” what will that look like?

I believe CMS is envisioning not allowing the MCOs to monopolize their catchment areas.

Here are the MCOs “jurisdictions” today:

MCOs as of October 2013

And more mergers are currently being contemplated.  But, for now, if you live in Mecklenburg county and need behavioral health care services you must go through MeckLINK.  Raleigh?  Alliance is your MCO.  You have no choice of MCOs and must use a provider within the MCO’s catchment area.

The way I understand CMS’ proposal, if you live in Mecklenburg county, you would not have to receive services from or (if you are a provider) have a contract with MeckLINK.  You could, but there would other options as well.  Door #1 is what I call, “Busting up the Baby Bells!”

What about Door #2? “Comply with A-87 by changing the payment methodology and reimburse only for the cost of services actually rendered  plus administration costs.”

For this option, I believe, that the MCOs could remain where they are, but contract to be paid some, sort of, “cost-plus.”  No more…if you do not spend it, it is your profit. Theoretically if the money were not spent, it would be returned to DHHS, or, somehow, kept for additional services.  Bye, bye, monetary incentive to deny services and terminate providers!

Door #2 is what I call, “Busting up the Ponzi scheme!”

No matter which door NC chooses, it has to be better than our current situation with the MCOs.

Ok, I stopped doing the Snoopy dance.

Because, in reality, there will be change.  We do not know what the changes will be.  And, dag on it, change is scary, especially we are talking about changes to mental health services for Medicaid recipients.

As Eva Peron says, “Where [are we] going to?”

Then, if you have seen the motion picture “Evita,” Antonio Banderes sings, “Don’t ask anymore…”