Controlling Medicaid Expenses Can Help States Improve Bottom Lines

State officials face shrinking budgets and hard choices. One of the largest line items on their balance sheets – Medicaid expenditures – represented nearly 21 percent of state budgets in fiscal year (FY) 2008 on average and is expected to grow in the coming years.¹ However, new, no-risk approaches to boost Medicaid program efficiency and reduce costs can provide some level of budgetary relief.

“Health care costs are increasing at a higher rate than inflation, and our country faces a growing Medicaid population in a faltering economy. These trends are putting states in a very difficult position,” said Tom McGraw, senior vice president, Ingenix Government Solutions. “State budgets are in dire circumstances, and two-thirds of states are facing deficit positions, many in the billions of dollars, with bleak projections for the near future.”

“Current state budgets are at least as bad as we have seen since the severe recessionary period of the early 1980s,” according to Scott Pattison, executive director of the National Association of State Budget Officers (NASBO). “The expectation is that passage of the stimulus package will provide significant relief to states for Medicaid in the short term, but that long-term program models to reduce Medicaid costs must still be addressed by fiscal 2010 or 2011,” he added.

McGraw cited a December 2008 report issued by the National Governors Association and NASBO, which stated that “the downturn in the economy is expected to result in significant increases in Medicaid enrollment as it has in previous economic downturns."²

Further, the report states that the Centers for Medicare & Medicaid Services estimates that enrollment in Medicaid will increase annually at an average rate of 1.2 percent over the next decade.³ With these anticipated increases, “better coordinated care, performance enhancements and curbs on Medicaid program fraud, waste and abuse will be needed to make a significant dent in state health care budgets,” McGraw said.

Even though most states have instituted cost-containment strategies to help reduce spending, historically these programs have not been able to staunch the flow of Medicaid money out of state coffers. “Under many cost-containment programs, states are able to identify areas of inefficiency, but generally do not have the resources or the technology tools to become more efficient in their health care delivery,” he said.

Fraud and abuse detection saves money

Medicaid fraud and abuse prevention is one of top management and performance challenges for 2008, according to a report from the US Department of Health and Human Services’ Office of the Inspector General. “The magnitude and growth of health care expenditures, combined with the health and financial impact…on vulnerable populations, make it critical that these programs operate efficiently and effectively and be protected from fraud and abuse. In 2007, the Medicaid program accounted for nearly $350 billion in health care spending; the Federal share was almost $191 billion.”⁴

McGraw noted, “With increasing utilization of Medicaid programs, instances of fraud, incorrect billing and lack of coordinated billing can have an exponential effect, so controlling these factors can make a big difference.”

Ingenix offers a variety of fraud and abuse detection tools that will help states prevent payment on erroneous claims, discover potentially fraudulent claims and recover overpayment losses. “Through economies of scale, even minor overpayments can quickly balloon into millions of dollars,” McGraw indicated. “With access to a third of the nation’s Medicaid data, Ingenix enables governments to curtail these expenditures, and in some cases can deliver recovered costs within 120 days.”

Ingenix Claims Editing System (iCES) provides states with the tools they need to ensure claims accuracy, and if necessary, to perform prospective fraud detection, investigation, and payment avoidance. Impact PI (for Program Integrity) assists states in identifying inaccurate claims, fraud and overpayment after claims are paid for retrospective recovery. These technology solutions can enable states to improve payment accuracy, reduce inappropriate payments, increase recoveries from overpayments, and help control costs. Ingenix also can provide states with outsourced services that identify unusual claims, that hold claims for further investigation, and that analyze claims post-payment for the possible recovery of inappropriate payments.

McGraw describes Ingenix fraud detection expertise as “unique,” citing a program integrity team that includes more than 220 physicians, pharmacists, biostatisticians, data analysts, criminal investigators and other experts. Many have strong backgrounds in government programs and some have served as Medicaid directors or program integrity directors.

“We have extensive experience in extracting, transforming, loading, warehousing and analyzing Medicaid claims and other health care data,” he remarked.

Clinical efficiencies lead to lower costs

Although many states have embraced fraud and abuse detection tools as a way to control costs, they are less apt to employ care management tools. However, considering increasing Medicaid enrollment and an aging population, states need to take a fresh look at ways to become more clinically efficient as they strive for solvency, McGraw asserted.

“States have attempted to manage care more efficiently in the past, often outsourcing care management to their health plan partners because the state doesn’t have the tools or the personnel to do this alone,” he said. McGraw noted that Ingenix can work with states to provide solutions such as Impact Pro™ and Impact Intelligence^™ that can help states to:

• Identify members in need of a specialized intervention program
• Determine which intervention programs could have the most impact on the quality of members’ health
• Analyze and measure the success and quality of current intervention programs
• Discover opportunities for new programs as the health profile of members and populations change
• Understand the issues driving members’ use of health care resources, and collaborate with those members to provide the most appropriate interventions.

Working with Ingenix’s sister companies and strategic partners OptumHealth and AmeriChoice, states can add clinical expertise to the care management equation, which may enable them to identify high-cost individuals with chronic and/or multiple conditions, such as transplant recipients, diabetics, expectant mothers and neonatal intensive care patients. Identification is the first step toward providing better, more cost-effective care.

“When states can intervene with high-cost patients, whether by offering those individuals educational opportunities regarding their conditions and recommending improvement behaviors, or by providing their doctors with evidence-based protocols,” McGraw explained, “they are more than likely to see better patient outcomes, fewer hospitalizations and lower overall costs.”

Ingenix solutions offer results, no risk

Amidst current economic conditions and  state budget crises, states may not be able to authorize up-front expenditures on program integrity and care management services – even though McGraw asserts that they will more than pay for themselves. In response, Ingenix Government Solutions has developed a performance-based solution for state Medicaid programs, whereby payment is based on the realization of program efficiencies, cost savings and/or cost recoveries.

To date, Ingenix has documented savings in excess of $3 billion for state clients. In addition, Ingenix recently identified an opportunity to save $20 million per year for beneficiaries who were not properly enrolled in other programs for which they were eligible, and assisted another state in identifying $100 million in pharmaceutical expenses that were inappropriately paid by Medicaid.

“In these tough times, Ingenix is poised to help states stem their rising Medicaid costs,” McGraw said. “Because we can work for states on a contingency basis, it costs states nothing to evaluate our services. If we don’t get results, states don’t pay,” he noted. “That’s how confident we are in our ability to perform.”

¹ National Governors Association, National Association of State Budget Officers, “The Fiscal Survey of States: December 2008.”
² Id.
³ Id.
⁴ “FY 2008 Top Management and Performance Challenges Identified by the Office of the Inspector General,” http://www.oig.hhs.gov/publications/challenges.asp

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