Minnesota case study: How do cuts spread?

Friday, August 23, 2013

SAINT PAUL, Minn. – With the pricing for Round 2 of competitive bidding sending reverberations throughout various payer circles, nowhere is the threat possibly more powerful than one state Medicaid program.

While most states have some flexibility, in Minnesota, the pricing for Medicaid is “locked in” to the pricing for Medicare. So when the pricing for Medicare was reduced, on average, 45%, on July 1 as part of the program, the hands of state officials were pretty much tied, says Rose Schafhauser, executive director of the Midwest Association for Medical Equipment Services (MAMES).

“They have no choice but to use the new Medicare rates,” she said.

But in the 11th hour, during the last week of the legislative session in late May, stakeholders succeeded in getting an amendment passed as part of an omnibus bill that delays the implementation of competitive bidding pricing for one year, until July 1, 2014.

While this is good news, the pricing between Medicaid and Medicare is still locked and stakeholders must now sit down with state officials to negotiate what will happen next year. During previous negotiations, officials, realizing that providers can’t eat a 45% cut, have floated the idea of a 20% cut, Schafhauser says.

“We can’t afford a 20% cut, either,” she said.

At the same time, it’s no secret that states aren’t in any position to pass up potential savings. Earlier this year, the Office of Inspector General (OIG) scolded CMS for failing to collect $225.6 million in Medicaid overpayments.