It May Be Arcane, But It’s Also Vital

Almost everyone in the health care world knows how important the Medicaid waiver is to California — and really, to the nation.

As the first state to implement national health reform ideals on such a large scale, what happens in California by Oct. 31 with the $10 billion waiver is something that will affect how health care reform is put in place in many other states.

But not everyone in the health care world understands all of the complex give-and-take involved in so many rule changes and manipulations of the health care market.

So I’m going to tackle one of them, just to give an idea of how Gordian the health care knot can be.

Starting with the PPS rate. That’s the Prospective Payment System, which switches reimbursement from a cost-based standard for Medi-Cal services to a fixed, per-visit payment system. The PPS rate is used for Federally-Qualified Health Centers and Rural Health Clinics. And, it turns out, that PPS rate has helped community clinics stay afloat, and even achieve some financial stability, according to a California HealthCare Foundation study released yesterday, “Financial Health of Community Clinics”.

And now the state wants to eliminate the PPS rate under the new waiver.

Sounds troubling, doesn’t it? But here’s the thing: It likely won’t mean disaster for community clinics. And if it turns out to actually be a good thing for California, federal officials could still nix that part of the waiver.

Here’s the background: California’s Medi-Cal program gets matching funds from the federal government’s Medicaid program. The new waiver proposed by state officials shifts the funding responsibility to the counties. That makes sense, in part because counties currently pay for the uninsured, and when those patients join the expanded coverage group, the money spent caring for that group is freed up, so the counties don’t end up paying more.

The reason the state wants to eliminate PPS is that some California counties don’t like it. With the gradual enrollment of more and more Californians into a managed care plan as the state gears up for federal health care reform targets in 2014, some counties feel that the higher PPS rate could put them in financial trouble.

And to complicate the story a little more, the counties that do pay the higher PPS rate right now are not expected to drop that rate even if they could. For one thing, the feds take over payment in 2014, so it would be a temporary change. And since their systems work well now, counties like Alameda would likely continue to maintain PPS rates till 2014.

Lost yet? Just you wait. The final complication is that the federal government came up with the PPS idea, and it’s possible that it would not take kindly to the state’s dismantling of the requirement. So if the state wants to shift county responsibility and still receive matching Medicaid funds for its Medi-Cal program, it may not be able to excise the PPS requirement. And that’s a prospect that could make some counties balk at the notion of the county funding shift in the first place.

The scary part of all of this is that it’s a shorthand version of the situation. And it’s just one aspect of a waiver that addresses hundreds of these kinds of questions and dilemmas.

(For more on the waiver, see California Healthine feature “Medicaid Waiver Big, Innovative and Worth $10 Billion.” For more on how PPS affects clinics, see Sept. 16 Capitol Desk.)