JEFFERSON CITY • Missouri could save as much as $1 billion annually within the next four years by undertaking an ambitious and potentially controversial overhaul of services and rates provided through the state’s Medicaid health insurance program for the poor, a new study shows.
A 116-page report compiled by a consulting company for $2.7 million says the state could alter reimbursement rates for hospitals, doctors and nursing homes, shift more people to home-care services and better manage prescription drug costs as a way to rein in rising costs.
The study does not recommend tightening eligibility rules, although lawmakers are separately considering a plan to require able-bodied recipients to work in order to receive coverage.
“Without significant changes, Medicaid spending may comprise 26 percent to 30 percent of state general revenues by 2023. To bring growth of Medicaid spending in line with the level of economic growth of the state while preserving access for participants and avoid reducing eligibility or coverage, significant savings would be necessary,” the report says.
The study was launched last year as part of a push by former Gov. Eric Greitens to determine ways to control the escalating costs of Medicaid.
The draft report obtained by the Post-Dispatch was compiled by the consulting firm McKinsey & Co. The company was among five bidders for the contract, three of which bid a lesser amount to complete the study.
The award raised eyebrows because the Greitens’ hand-picked chief operating officer, Drew Erdmann, had worked for the consulting company before taking on his role in state government.
Soon after taking office in June, Gov. Mike Parson dismissed calls that the bidding had been “rigged.”
On Monday, Parson said the state owes it to its residents to take a comprehensive look at how to maximize tax dollars spent on the program.
“Ensuring that each and every Missourian has access to the quality health care they deserve is crucial to improving Missouri’s workforce and infrastructure. Missouri’s Medicaid program serves over 900,000 Missourians, involves three departments and costs more than $10 billion a year,” Parson said.
According to the study, total spending on Medicaid in 2018 was nearly $10 billion, funded with 53 percent in federal funds, 21 percent by state general revenues, with the balance paid by taxes on hospitals and other funds.
The percentage of Medicaid funding that comes from the state is expected to grow to 26 percent within three years, but could jump to 30 percent if Missouri were to experience an economic downturn, the report says.
The study outlines a series of potential changes that are likely to draw fire from the health care industry, as well as advocates who fear the state could be cutting off services to vulnerable populations.
For example, the study said the state could save as much as $270 million if it were to adjust a decades-old system of reimbursing nursing homes for care.
The report also notes the state could save money if it improves health care offerings in rural parts of the state, where recipients may go to hospitals for basic services instead of lower cost clinics and doctor’s offices.
And the report notes that Missouri paid $186 million last year to reimburse care by out-of-state patients.
Under one recommendation, the study says more than 15 percent of hospital costs may be associated with potentially avoidable complications, such as going to the emergency room for an asthma problem or being readmitted to a hospital when a surgical wound gets infected.
“(I)mproving the coordination and quality of care can significantly reduce the volume and costs of” complications, the study notes.
The study comes as Missouri’s Medicaid rolls are already dropping faster than in other states.
Parson last month introduced a budget calling for $50 million less in health care funding because of a drop in the Medicaid rolls. His administration attributed the decrease to an improving economy.
With Missouri’s unemployment rate dropping from 3.7 percent in January 2018 to 3.1 percent in December, officials said more people are getting private insurance.
The decrease of more than 71,000 enrollees over the past year could become fodder in the Legislature. Sen. Scott Sifton, D-Affton, raised questions Monday about the drop.
“The state should provide answers to ensure that no one — no child — was cut from Medicaid simply because of red tape,” Sifton said.
However, Kaiser Health News in a report last week suggested that efforts to weed out residents who are improperly enrolled, and the difficulty of re-enrolling, may also have led to the decline.
To complete the study, McKinsey consultants spent three to four days per week embedded in the state’s Medicaid bureaucracy, talking with top officials and reviewing operations.
In some cases, they found the state could only save money if it spends some upfront to improve computer systems or beef up rural health care options so people don’t go to hospitals for treatments that could be done in clinics.
The effort will be led by former House Speaker Todd Richardson, a Poplar Bluff Republican who was named the state’s Medicaid director last year.
“We must now begin the hard work of planning and implementing a transformation of Missouri’s Medicaid program,” said Richardson. “While the report identifies a range of options for the state to consider — the path forward will ultimately be determined by what is best for Missouri.”
Administration officials say they are on an aggressive time frame to implement some of the recommendations, meaning some of the proposals could be subject to negotiations by lawmakers as the Legislature prepares the state budget for the fiscal year beginning July 1.
Those same officials, however, are not expected to call for an expansion of managed care, in which private companies are paid a fee each month for each participant, rather than a fee-for-service model where health care providers are paid for each service performed.
Three companies, including Clayton-based Centene, provide managed care for most Medicaid recipients in the state.