Medicaid in 5% corner

LITTLE ROCK — Zavier Bufford’s sweet smile is deceiving.

Angela Freeman, Zavier’s mother, said the tubes in her 3-year-old son’s neck and stomach that help keep him alive don’t stop him from wrestling his older brothers, ages 10 and 5.

“He’s a fighter. He thinks he can whup both of them,” Freeman said Thursday as Zavier circled an Arkansas Children’s Hospital waiting room, exploring its nooks and crannies as only a toddler can.

In August 2007, Zavier was born premature at Children’s Hospital in Little Rock - very premature. At 25 weeks, he weighed just more than a pound. A feeding tube was put in because he couldn’t eat. A tracheal tube was inserted later because of severe sleep apnea. He doesn’t talk yet. And he has been in and out of the hospital all his life- most recently with a bout of pneumonia.

Twenty years ago, many babies like Zavier wouldn’t have survived, let alone grappled with the big kids.

But Zavier’s success comes with a cost. Babies born prematurely or with birth defects are expensive.

In 2008-09, 2,775 babies between birth and 1 year old with severe medical problems cost the system $158,899,561, or $57,261 each. The cost to care for 9,269 of these special-needs children - birth to 5 - was $338,672,000 for the same fiscal year, according to Department of Human Services records.

A recent study found that the top 5 percent of the most-expensive Medicaid users cost the state and federal government about $1.3 billion in 2008-09.

The federal government picks up about 77 percent of the state’s Medicaid tab, but the costs associated with the most-expensive 5 percent of recipients typically consume about 50 percent of the program’s non-nursing-home-related costs.

This “5-50” group is one of the first areas that state health officials and Gov. Mike Beebe hope to tackle as they craft a plan to rein in rising Medicaid costs.

The average “5-50” patient uses about $35,000 in Medicaid each year compared with $3,000 for the rest of the beneficiaries, according to the Human Services Department.

If the cost curve is going to be bent, it will start with these high-cost patients - and the clock is ticking.

By July 2012, the state’s share of Medicaid is estimated to fall about $60 million short, increasing to about $200 million by the next year if nothing is done.

Arkansas isn’t alone. Across the country, states are wrestling with how to fund Medicaid, which in Arkansas covers about 771,000 of its poor and disabled. In recent years, the annual costs of Medicaid have increased by just under 7 percent.

And the system will only become more burdened by expensive patients in years to come.

If the federal health-care overhaul survives legal challenges and goes fully into effect in 2014, Medicaid will be available to everyone with an income at 133 percent of the poverty level - about $29,925 for a family of four in 2011.

Right now, state Medicaid overwhelmingly covers those who are disabled and poor.

Failing to address Medicaid’s fiscal crisis now is just setting the stage for future payments cuts to doctors, hospitals and other providers, a reduction in benefits or kicking recipients off the rolls, said Dr. William Golden, the Department of Human Services’ medical director for health policy.

“Whether we reform Medicaid now or we do nothing, the cost imbalances were going to shift payments in some fashion,” Golden said. “What we’ve been doing has to change.”

At Beebe’s direction, Golden, department Director John Selig, state Medicaid Director Eugene Gessow and others have been crafting a framework to address the coming fiscal crisis in Medicaid.

The idea is to determine a single payment for a particular illness - think asthma or diabetes - and bundle the money to be divided among a team of providers that would be grouped in a “medical home.”

Right now, Medicaid is a fee-for-service model, which means that providers are reimbursed for each test and procedure. Department officials say this model leads to inefficient care with duplicate tests and poor communication among providers. Providers say that the current system is one of the nation’s best and needs tweaks, not an overhaul.

Although a plan hasn’t been finalized, providers have already voiced their concern that the state, along with large commercial insurers such as Arkansas Blue Cross Blue Shield and QualChoice, will reduce payments.

One possible building block in a new model is the Medical Home Program at Children’s Hospital where Zavier Bufford has received care since his birth. The Medical Home Clinic, run by Drs. Patrick Casey and Robert Lyle, was conceived as a way to keep children like Zavier from falling through the cracks.

“These very complex kids are going out to the households, it’s very challenging to the primary-care physician and families and, of course, to Medicaid. They’re very expensive,” Casey said.

Early this year, Casey and Lyle, along with other clinic physicians, published a study in the Archives of Pediatrics and Adolescent Medicine showing that - over a twoyear period - their model showed significant cost savings by coordinating the care of 225 Medicaid children who had at least two chronic medical conditions. In other words, the sickest of the sick.

Although outpatient monthly costs rose slightly, expensive hospital stays dropped sharply. Overall monthly costs fell dramatically - by $1,179 per patient.

Costs were contained by catching problems early before they flared into emergencies.

“If you come to the ER inthe middle of the night with these complex conditions, you’re going to get admitted,” Lyle said.

The results caught the attention of the federal government. Department of Health and Human Services Secretary Kathleen Sebelius publicly recognized the clinic for its work.

The coordinated-care system set up by Casey and Lyle assigns a nurse coordinator to each child. That nurse manages appointments, troubleshoots emergencies and serves as a “captain” of the patient’s needs.

“The system is bulky enough that it doesn’t work without someone sitting down and doing this,” Lyle said.

The Medical Home Clinic, which is heavily subsidized by the hospital, is based on the fee-for-service model.

Casey said their study’s data shows that bundled care works for kids like Zavier, who are Medicaid’s most-expensive and hard-to-treat recipients. But most children are healthy and relatively cheap, he said, and no research has shown that it would save money for that population or even slightly less-expensive children, Casey said.

“The bundled idea is a very nice idea as long as the [payment] is reasonable,” he said.

Premature babies aren’t the only factor in ballooning Medicaid costs. Rare, expensive diseases like hemophilia also drive up costs.

Golden recently researched the state’s most expensive cases. A few years ago, the six most-expensive Medicaid recipients in the state were all hemophiliacs, whose annual care ranged from $500,000 to more than $1 million.

Hemophilia treatment consumes about $10-15 million a year. The hereditary condition can only be treated with expensive drugs, although the state wants to attempt to make sure the medicine is being used properly and not being “diverted” - having drugs prescribed to Medicaid recipients ending up in the hands of hemophiliacs not covered by Medicaid.

“A ‘diversion’ of one [hemophiliac dose] would be pretty expensive,” Golden said.

While not much can be done to escape big-ticket costs like hemophilia, paralysis or organ transplants, other areas might be more fertile ground for overhaul, Golden said.

Adolescent mental-health funding is one example. Between ages 6-20, about 8,500 of the state’s highest-cost recipients received about $351 million in total Medicaid services in fiscal 2009, according to the Human Services Department.

Much of that price tag is mental-health costs, Golden said.

And much of it is structural, said Dr. Steve Domon, the department’s medical director for the State Hospital.

A poor, rural state with about three dozen child psychiatrists who are mostly clustered in urban areas isn’t well-equipped to efficiently treat mentally ill teenagers, Domon said.

“Right now our system is overly dependent on inpatient treatment. Part of the reasonis the inadequacy of outpatient providers. Communication is not always as seamless as it needs to be, some docs’ outpatient practices are full; they simply don’t have the space,” Domon said.

That means the burden mostly falls on primary-care physicians, who are frequently already over-burdened and ill-equipped to give the required therapy.

More social workers and counselors are needed, Domon said.

It’s not all doom and gloom for Medicaid in Arkansas. The program’s pharmacy divisionhas been successful in lowering costs recently. In the last two fiscal years, prescriptions have declined from $328 million to $314 million, said Suzette Bridges, a department assistant director in charge of the pharmacy division.

This year, costs look flat, she said. Much of the credit can be traced to a 2005 overhaul that curbed off-label use and state pricing rules that steer patients toward generics.

A study released last month by the conservative, Washington, D.C.-based American Enterprise Institute, showed Arkansas had relatively little waste in its prescription-drug program, averaging just $1.31 per patient in 2009 - an average bested by just six states and the District of Columbia.

Bridges said that her staff keeps close track of when generics become available.

“We’d like to replicate this [pharmacy program], not just the costs, but the ongoing constant review” in other parts of Medicaid, said Julie Munsell, Human Services Department spokesman.

Back at Children’s Hospital, Angela Freeman said Zavier’s visits to the emergency room and his hospital stays have diminished greatly inrecent years.

She said the clinic has helped her care for Zavier, although her job at a pipe company in Pine Bluff gives her an income that periodically kicks her off Medicaid, disrupting her son’s therapy. But she doesn’t make enough to pay for the expensive treatments on her own.

Zavier hasn’t received any therapy since November. Casey told her during the clinic visit to meet with a clinic financial counselor to see if there was a way to get therapy covered. He also recommended that she meet with a nutritionist to help Zavier learn how to chew and swallow food so that the stomach tube can eventually be removed.

All the while, Zavier wheezed through his trach tube, his pneumonia audible though the tiny opening.

Although her mother helps her care for her sons, Freeman, 29, sometimes works 12-hour shifts up to seven days a week. When Zavier was hospitalized for the first six months of his life in the newborn intensive-care unit, she made the trip before or after work and stayed the night whenever possible.

It’s been a tough road, Freeman said, but she appreciates the support that she’s received from the clinic.

“They’ve done a lot.”