Strategy 2: Switch Low-Match Categories to High-Match Categories
Description of Strategy
The federal government pays for part of a state's cost of providing various Medicaid services by reimbursing states for 50 percent to 100 percent of billed costs. The reimbursement level depends on the type of service provided. Reimbursement for "medical services" ranges from 50 percent to 83 percent of the cost depending on a state's federal matching percentage.
Reimbursement for "administrative services" ranges from 50 percent for standard services to 100 percent for more specialized services. Table 2 lists federal payments to states for specific services.
Switching from low-match to high-match categories (i.e., reclassifying a service that the state already is providing into a category that it is eligible for a higher federal match) allows a state to receive enhanced federal reimbursement for a service that it already provides. Making this switch may involve 1) moving some services from "general administrative" to "medical services" if your state's federal matching percentage is higher than 50 percent, and/or 2) determining how to collect more matching money for an existing administrative task now claimed at 50 percent. Some examples follow.
- Services classified as "administrative" might be reclassified to medical services. For example, a state might switch services such as targeted case management from an administrative to a medical service. As a medical service, the state will receive reimbursement at its federal matching rate. Similarly, a state may include certain types of administrative functions in its medical service contracts with managed care organizations. The costs of these functions would then be matched by the federal government at the state's medical match rate. This will be advantageous if the state's federal matching percentage is higher than 50 percent.
- Services classified as "general administrative" could possibly be reclassified as "specialized administrative activities," which are eligible for a higher reimbursement rate. For example, a state may devote two full-time employees to managing the state's computerized Medicaid data and billing system. If the state classifies the services provided by these employees as "administrative," the federal government will pay 50 percent of the costs; if these services are more correctly classified as "operation of mechanized claims processing and information retrieval systems," the federal government will pay 75 percent of the costs. Any time spent by staff on consultants in developing such systems can be claimed at 90 percent (see Figure 2).
- Services performed by skilled professionals may be eligible for a higher reimbursement rate. The federal government will pay for 75 percent of the salaries and benefits of skilled professionals (nurses, etc.) employed by the state or other public agencies whether they are serving in administrative roles or in direct service. Medicaid agencies should determine if they are employing people with professional backgrounds who would be eligible for this enhanced reimbursement.
Pros and Cons
Pros
- This strategy can strengthen the state's capacity to support its existing service delivery system. It allows the state to receive federal funds for services already being provided, thus saving vital state Medicaid dollars.
Cons
- This may require significant resources to implement. For example, a state would have to review its Medicaid policy, analyze its billing structures, and possibly amend its Medicaid plan. Changes in Medicaid plans require approval from the federal government, although this is not likely to be difficult if the amendment is carefully constructed.
- The return on moving from "general administrative" to "medical services" might not be high if a state's federal matching percentage is not much above 50 percent. Although moving from one administrative category to another will result in some savings, the aggregate cost savings might not be high because administration is such a small part of the Medicaid budget.
State Experience
The Lewin Group and Sjoberg Evashenk Consulting, LLC, as part of a study conducted for the Idaho legislature, found Idaho would save about $1.6 million by switching services from low-match to high-match categories. They estimated that the state would save $1.3 million by billing targeted case management separate from administration. These findings were part of a larger study examining the state's Medicaid program to find ways to save money.1 Medicaid officials in Idaho now plan to submit state plan amendments to HCFA to make this change, expecting that the state will realize significant savings without altering any of the services it currently provides.
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Table 2.
Federal Payments to States
(SSA, Title XIX, Sec. 1903. [42 U.S.C. 1396b]) |
|
Payment |
Purpose |
|
50(+) percent |
Direct medical services (Percentage is the federal match, determined state-by-state) |
|
75 percent |
Compensation or training of skilled professional medical personnel and staff who directly support such personnel of the state Medicaid agency or any other public agency |
|
75 percent |
Pre-admission screening and resident review activities (1919(e)(7)) |
|
75 percent |
Certifying the compliance of nursing facilities in conducting periodic education programs for staff, investigating abuse and neglect allegations, and removing names for the nurse aide registry within a year of a finding of abuse or neglect (1919(g)) |
|
90 percent |
Design, development or installation of mechanized claims processing and information retrieval systems |
|
90 percent |
Design, development or installation of cost determination systems for state-owned general hospitals |
|
75 percent |
Operation of such systems |
|
75 percent |
Performance of medical and utilization review or quality review (1902(d)) |
|
75 percent |
Performance of independent external reviews (1932(c)(2)) |
|
75 percent |
Drug use review program (1927(g)) |
|
100 percent |
Costs of implementation and operation of the immigration status verification system (1137(d)) |
|
90 percent |
Costs of offering, arranging and furnishing family planning services and supplies |
|
75 percent |
Establishment and operation of (includes training of personnel) a state Medicaid fraud unit |
|
50 percent |
Administrative costs (1919(g)(3)(B)) |
Design and Policy Issues
- Can the state benefit from this strategy? Look at how the state bills various services and administrative costs. Could services or activities in your state be classified differently? Table 2 shows federal participation levels for different services and types of administration. Consider the experiences of other states outlined above.
- Is the benefit of changing billing classifications worth the cost? To justify higher reimbursement for administrative costs, for example, the state may need to conduct "random moment time" studies to illustrate the exact amount of staff time and effort that are devoted to these activities.
Federal and State Involvement/Constraints
Changes in a state's billing structure will require a state plan amendment or verification of expenditures. If the switch from low-match to high-match results in the state creating a new "medical service," the state will need to amend its Medicaid plan. If a state is making changes in categories for administrative claims, a plan amendment is not needed; however, the state will have to verify expenditures and have back-up documents to support them.
Read More About It
The Lewin Group and Sjoberg Evashenk Consulting LLC. Idaho's Medicaid Program: The Department of Health and Welfare Has Many Opportunities for Cost Savings, prepared for the Idaho state Legislature, November 2000.
Notes
1 The Lewin Group, Idaho's Medicaid Program.
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