Pennsylvania is considering paying Medicaid recipients – in some cases as much as $200 – as an incentive to visit higher quality and lower cost hospitals and doctors.
Experts say the strategy has never been tried by other states.
Gary Alexander, the state’s Medicaid director, said his agency hopes to launch the plan by early next year in an effort to help control rising expenses in the $30 billion program.
“We are looking at a model to save hundreds of millions of dollars by steering Medicaid beneficiaries to the most cost effective settings,” Alexander told about 300 health insurance executives last week at a meeting in Washington. “To reward beneficiaries we would give them some incentive… so if the state saves $1,000 on a medical procedure we may give the beneficiary $100 or $200 as a reward.”
After his talk at a conference sponsored by the industry group America’s Health Insurance Plans, Alexander told KHN that his incentive plan would initially be targeted to the nearly 1 million Medicaid recipients still in the traditional fee-for-service Medicaid program. Later, he said, it could be expanded to the more than 1.2 million in private Medicaid managed care plans.
Alexander said he does not believe the state would need to get approval from the federal government for the incentive program, although other Medicaid officials disagree.
Darin Gordon, the Tennessee Medicaid director who served on the same AHIP panel as Alexander last week, said in an interview the incentive plan would be unique. “While we have been looking at charging higher co-pays for higher costing/lower performing providers to encourage use of the higher value providers — the Pennsylvania approach may result in an even larger behavior change due to the size of the incentives.”
Interestingly, neither the Pennsylvania Hospital & Health System Association nor the state’s Medicaid advisory board said they knew anything about the incentive plan.
Advocates for the poor, however, said they are concerned with any plan that would limit Medicaid recipients’ access to care.
“People on Medicaid should be able to go to the doctor or medical provider of their choice,” said Michael Froehlich, an attorney with Community Legal Services in Philadelphia. “We are all in favor of better quality health services but if it comes at the expense of restricted access to neighborhood doctors then I think we would want to take a closer look at it.”
Pennsylvania, like most states, already has too few doctors, particularly specialists and dentists, participating in Medicaid, he said.
Carey Miller, a spokeswoman for Alexander, who is the state’s secretary of public welfare, said the incentive plan “is something we are looking at but not something we are doing at this time.”
In the past decade, a growing number of private health insurers, including Aetna and United Healthcare, have lowered co-payments to their members as an incentive for using lower cost and higher quality doctors and hospitals. In Medicaid, the joint federal-state health program for low-income people, enrollees typically pay nothing or nominal co-pays for most medical care.
At the meeting, Alexander said his agency was taking a “slow approach” to implementing the 2010 health law, which will add 16 million people to Medicaid, including nearly 700,000 in Pennsylvania. “We have enough to do without looking to do any expansion at the point,” he said.
Pennsylvania is one of 26 states that have filed suit against the Obama administration to get the health overhaul declared unconstitutional.
Pennsylvania Medicaid costs and enrollment has soared during the past decade, and today about one in six state residents receives Medicaid benefits.