Introduction

Through the Omnibus Budget Reconciliation Act (OBRA) of 1989, Congress made significant expansions in the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program. The central mandates under EPSDT are health screening, vision, hearing, and dental services at regularly scheduled intervals that meet professionals standards. States also must be prepared to offer screening and services as indicated without regard to predetermined schedules. Further, OBRA provided that states shall offer necessary care or treatment to "correct or ameliorate defects and physical and mental illness and conditions discovered under the screening services whether or not such services are covered by the state plan" (P.L. 101-329, Sec. 6403(a)).

The requirements and benefit options of EPSDT are of interest to Compact Administrators because Title IV-E adopted children are among the eligible population. EPSDT must be available for Medicaid recipients considered categorically needy individuals who are under age 21. In general, members of this group base their eligibility on receipt of or a link to a cash assistance programs, i.e., Aid to Families with Dependent Children (AFDC) or Supplemental Security Income (SSI). Children who are adopted pursuant to Title IV-E adoption assistance are classified as categorically needy because of their pre-adoption connection to AFDC or SSI.

At the 1992 Annual Meeting of the Association of Administrators of the Interstate Compact on Adoption and Medical Assistance (AAICAMA), a workshop was held (5/30/92) on the subject of EPSDT. The presenter was Jane Horvath, director of the Medicaid Unit of the American Public Welfare Association. This session was one of the highlights of the meeting. Ms. Horvath discussed a number of important developments in connection with EPSDT, e.g., rule-making and recent litigation. Rather than attempt to summarize her comments and the nature of the questions and answers that followed, the Secretariat decided to present them as an Issue Brief. This decision is in keeping with the Association's intent to devote time and energy to staying abreast of developments and information on EPSDT.

Workshop Presentation:

EPSDT -- Participation Goals and Other Matters

In terms of EPSDT, what I am going to talk about today are some court cases that I think are important. One case involves access to obstetric services, and this case revolves around statutory language similar to EPSDT and children's services. The other case is clearly directed at EPSDT services. Just to let you know what I think is going to be a trend in all states, I am also going to touch on regulations that are going to be forthcoming and on the things that I see as changes since the last time I spoke to you. And, I will talk about the potential impact of two lawsuits.

· Regulations

In terms of regulations, we've been hearing that they are going to be out sometime this summer, but nobody knows exactly when they will be published. The moratorium that the Bush Administration has continued on regulations will probably extend until October, 1992. The impact of this moratorium on the publication of EPSDT regulations is unclear at this time. No one in the administration has said we are not going to publish these rules as a result of the moratorium but their fate is a little uncertain.

I think there are two important issues that will be clarified in the forthcoming regulations. The first is clarification with respect to the treatment of conditions that are discovered by a "screen." There has been a question as to what does statutory language "discovered by a screen" mean? If a child truly has a pre-existing condition that everyone has known about, is the state obligated to pay for treatment of that condition? And I think that the regulations are going to say that yes, the states' do have to pay for pre-existing conditions and coverage of treatment for pre-existing conditions. In addition, I think that "discovered" will not be interpreted to mean a state has an obligation to pay for treatment only when a new condition is discovered. This is going to be very important for children with severe and chronic problems. In fairness, most states have already decided to take a broad interpretation of statutory language and therefore pay for treatment of all conditions cited in an EPSDT screen, whether or not they are pre-existing.

The other point of clarification that I think is important, and which I believe the regulations are going to address, is that while the state has to cover every service provided under the Medicaid statute it does not necessarily have to provide payment for every treatment setting allowed under federal law. So, for instance, if a child needs psychological counseling it does not mean the state must pay for a private psychologist, the state can specify that this counseling will only be covered in a clinic setting. Another example would be if the parents want the child put in an institution, and the state determines that home-based care is equally or more cost-effective and the treatment outcome is expected to be the same, the state can choose the less expensive service. I think the rules are going to say that the state cannot make a universal policy statement that it will never cover institutional care or never cover institutional care when care in the community is available. I believe that the states will be obligated or required, under the regulations, to make case-by-case decisions looking at each child and each requested treatment modality versus an alternative, while considering the history and the condition of the child. I would imagine that to make such a system work, states would have to develop a prior authorization system for certain high cost services and/or services/setting not normally recognized under the state plan.

· EPSDT Based Lawsuits

Pennsylvania is being sued by a number of advocacy groups and provider organizations on behalf of the class of individuals whose children did not receive any or all needed EPSDT screening or services (Scott v. Snider, No. 91-CV7080 (E.D. Pa. filed Nov. 14, 1991)).

Basically the case revolves around EPSDT enrollment goals and is tied up with the OBRA requirement that states pay providers/physicians (i.e., family practitioners, pediatricians, and obstetricians) at a rate sufficient to ensure access. Access in the statute is defined as access commensurate with that of the general population in a geographic area. The suit charges that Pennsylvania Medicaid does not pay enough for an office visit to ensure adequate access. The plaintiff specifically charged that Medicaid reimbursement for an office visit is well below comparable rates paid by Blue Cross/Blue Shield and Medicare. Plaintiffs maintain that the rates Medicaid should pay for an office visit to a pediatrician, an obstetrician, or a family practitioner should be 90% of what is usual and customary for the state.

The Health Care Financing Administration (HCFA) has allowed states three methods by which to prove that their rates insure access. The first method has the state demonstrating that the state Medicaid program reimbursement rates are 90% of the going private rate. The second method has the state demonstrating that 50% of the providers in any area (county, or other service area) participate in the Medicaid program; or the infamous third option the state demonstrates access any other way it can.

Most states have chosen the 50% participation standard. States generally have not selected the 90% of usual and customary (90% of market) method. Many states looked at this option when the federal guidance first came out, but they found that insurance companies were not willing to give them private property information on payment schedules so states could not have the private sector data to compare with the Medicaid reimbursement rates. This has been a problem for the majority of states.

Pennsylvania had chosen the 50% participation standard and their state plan amendment has not been approved. The fact that the state's plan amendment demonstrating access remains unapproved clearly leaves the state in a weakened position vis-a-vis this law suit. The suit also charges that the state has failed to enroll a sufficient number of EPSDT providers. Pennsylvania has historically limited providers certified to provide EPSDT services to those who provide both screening and treatment services. And, the suit alleges that the state needs to be more flexible in their definition of who is an EPSDT provider. Plaintiffs want the state to enroll `partial' EPSDT providers who would do screening services and not necessarily provide treatment services. This would open up EPSDT to the schools as providers of screening services.

The second major feature of the lawsuit is the alleged failure to enroll more children in the EPSDT program itself. The state data on enrollment and participation in EPSDT indicated that in 1990 the state had an 18% participation rate, that is 18% of all children enrolled in the Medicaid program participated in EPSDT. By 1991, the state documented a participation rate of 25%. The plaintiffs want 90% participation not just among the children enrolled in the Medicaid program, but 90% participation among all children who currently are potentially eligible for Medicaid. And they think that that should happen immediately. I believe the plaintiff's demand should be judged against the HCFA participation rules. HCFA has required the states to have 80% participation of all Medicaid enrolled children by 1995 (see attachment). So clearly, we can say that the plaintiffs are way ahead of the curve in terms of where states obviously are and where HCFA expects them to be by 1995.

The suit also charges that Pennsylvania has failed to adequately train eligibility workers for outstationing at federally qualified health centers. This is also an OBRA requirement. Plaintiffs further charge that the state has failed to notify all who are potentially eligible about the recent federal Medicaid eligibility expansions. And, lastly the suit charges that the state has failed to completely redesign its EPSDT system to conform with changes in OBRA.

This suit was brought in November 1991 and has not yet been resolved. I know that there were some considerations for attempting to settle this out of court. This case obviously has a lot of implications for other states if the plaintiffs are successful. I don't think there is any state that is reaching out to 90% of all potentially eligible Medicaid children. It is an expensive proposition and it is an administratively complicated proposition.

By way of background, it is interesting that the Pennsylvania model for EPSDT was rather unique a couple of years back, before there was a big focus on EPSDT in the federal and state law. Pennsylvania had hired a private contractor to run EPSDT. The contractor was responsible for enrolling children, scheduling screening, operating the prior authorization process, and approving bills submitted by the providers. It is ironic that other states and observers viewed the Pennsylvania program as a model system for the operation of EPSDT.

The other lawsuit, which was initiated in December of 1991, is in Tennessee and it does not directly bear on EPSDT but I think the two lawsuits are related and I think they both bear serious implications for the states (Sheila Brewster et. al. v. Russell White, No. 3-91-1066 (M.D. Tenn. filed Dec. 30, 1991)). The Tennessee lawsuit also revolves around the OBRA 1989 statutory provision for adequate payments to ensure access. While the Pennsylvania suit focused on adequate payments for family physicians and nutritionists (because of an emphasis on child health), the Tennessee lawsuit focuses on adequate payment for obstetricians. And, the plaintiffs charge that there is insufficient access to obstetrical services because the rates are insufficient. The Tennessee state plan amendment to show provider participation employs the 50% participation standard. Tennessee is another state without an approved state plan. HCFA did not approve the state's methodology for showing 50% provider participation. The plaintiffs are charging, in brief, that Tennessee counted obstetricians who have not billed Medicaid in over two years and among those who participated in Medicaid. They charge that this does not constitute access or participation. They also are charging that Tennessee has failed to provide transportation service to obstetric and pediatric services for clients in rural counties. This suit also is not resolved.

Actually, if these suits are successful we will see more of these suits in the states. I think that it is also a concern because Congress gave states a short time to implement this legislation. Ensuring access involves a great deal of coordination among the Medicaid program, public health agencies and local and state governments. This is not an easy process. And, states are now being sued because they have not fully implemented the legislation. I believe the demand, particularly in Pennsylvania, that the program achieve 90% participation among all those potentially eligible for Medicaid, if successful, would have dramatic implications for other states. That would be a fairly quick turnaround for any state to achieve in that goal. It is also a concern because states are out there implementing these provisions without regulations nor sufficient guidance so they are even more vulnerable to suits. For instance, HCFA has not settled on what constitutes provider participation. For example, how often does a provider have to bill Medicaid to be considered participating in the program? HCFA has not specified this and states have made their own decisions that may not hold up in court without some federal backup in the form of regulation. I think the suits, like the OBRA 1989 legislation itself, presume higher payment rates will resolve the problem of Medicaid provider participation. I personally think that just is not true. I think there is a lot of provider discrimination against the poor out there which payment will never account for. There are some states that pay their obstetricians at rates pretty equal to market with minimal net positive effect. They have been able to just maintain ground, not lose providers, but the market rates have not brought new providers into the program. Does that mean that Medicaid must pay more than the private market just to get doctors to treat poor people?

The second presumption here is that higher rates mean access for everybody and that is not true either. Higher rates will not resolve problems of access in rural areas or urban inner cities where there are simply too few or no providers (Medicaid participating or otherwise). Medicaid payment rates are only one piece of the equation and lawsuits that look at rates as the sum total of the question and the answer represents a very troubling trend.

Question and Answer Session

Question:

When I talk to providers, the concern isn't so much the lousy rates as the payment schedules. It can take anywhere from six and nine months to get paid for services provided. Providers say if they received payment in a timely fashion they would be more willing to participate. Is there anything mentioned in the Pennsylvania suit in terms of timing of payments versus just amount of payment?

Ms. Horvath:

Timeliness of payment is, in general, getting to be more and more of an issue as Medicaid takes up such a huge portion of state budgets and you definitely see it at the end of the year. When the states run out of money, they slow down the billing cycle. The cash flow of states is a real problem. I do not know how all of this will get resolved. Aside from budget factors, states are looking at implementing electronic claims systems. They view this as a way of addressing provider concerns about the paperwork -- never knowing if a claim was submitted correctly -- waiting six to nine months for a claim to find out if you marked the wrong box. These systems are all connected to state programs; providers are given computers or are built on the systems that doctors already have.

An electronic bill format appears on the screen. You find out automatically if you have enough numbers on your provider ID code, i.e. if the code entered is accurate. If the numbers are correct, the claim will be accepted, if not, the computer will reject the claim. When the computer accepts the claim, it is a de facto statement that the claim is filled out correctly. So, automatically the doctor knows once the claim has been accepted electronically it is correct. The doctor will not get the claim back because it has been filled out incorrectly. After submitting an electronic claim, it is transmitted within 20 seconds to the Medicaid program for payment. Most states are not implementing on-the-spot payment, but they are batch-processing claims. They will process the claims every two weeks, which is still faster than processing paper claims. The providers in states where this has been implemented, mostly as pilot projects, prefer submitting electronic claims. And most of the time when an electronic claims system is available on a statewide basis it is for pharmacists, because they are the most computerized providers. Ninety-five percent of all pharmacies have computers.

Question:

How do you assess state movement in terms of EPSDT implementation?

Ms. Horvath:

In terms of what states are doing, the upside of this is that there are many states who are really trying to take advantage of EPSDT. The feeling is if there are no limits on EPSDT in general, and EPSDT has broadened it is base of services, they [states] are really going to take advantage of this. A lot of states have begun to enroll school systems, especially in low-income areas, as EPSDT providers. And Medicaid has been paying the schools to deliver screening services. The purpose of using schools as providers is 1) to mainstream the Medicaid clients and 2) to be able to meet the EPSDT participation goals, because schools see the kids where they are all the time. By using schools, states are not counting on the parents to bring the kids to the screenings at a particular time. There are either schools as EPSDT providers or the public health service setting up school-based clinics for kids in elementary and junior and high schools under the rubric of EPSDT. The 1989 amendment has really caused the states to sit down and think about how they can maximize EPSDT and turn it around; and use Medicaid money. The question states seem to be asking is, if Medicaid is going to take more and more of the budget, how can we get Medicaid into more and more of the state programs. EPSDT has allowed all this and has really spurred a whole wave of thinking in the states about how to maximize Medicaid to improve child health. I think we are going to see more and more of that. I know New Jersey, Louisiana, Missouri, Arkansas and others are really moving on this.

Question:

I want to ask you a little about covering every service. What we are finding is that if we have a particular priority such as therapy, we need to indicate that we will pay for a certain number of hours of therapy. We are finding that our families are coming in with statements from psychologists, social workers, psychiatrists, saying that this child needs this specific time in therapy, and it can only be provided in a particular setting which often is one that costs thousands of dollars more than the agency can afford. And, when it comes before administrative law judges, we lose. I think that is going to be problematic if the regulations are not worded right.

Ms. Horvath:

It took a lot to get HCFA thinking about areas where Medicaid money was being used. One of them was in the particular situation you describe. Briefly, HCFA is starting to look at the problem and they worked with the regulatory language. I think the regulations will allow states to decide what service settings it will cover. I understand the regulation will require states to cover all services but not require them to cover all settings in which a service can be delivered. It appears states will be allowed the latitude to determine cost effectiveness of service setting on a case-by-case basis. When you go before an administrative law judge with the final regulation that says that states have the authority to determine the service setting and rules have the force of law. You will have a better way to handle these issues. Right now there is no basis for such determinations because we have no regulations.

Question:

My thinking, though, is that we're going to have experts on the other side of the issue that can say they know this child. I can see us getting into these real struggles, and again, our costs are going to be pretty expensive.

Ms. Horvath:

You may need experts. In general, where regulation or law is clear and state discretion is described in that regulation or law, then administrative law judges and courts can, and do, defer to regulations. If state discretion is stated in the regulations, judges do defer to the state's authority to make this determination because there is no reason to second guess them. But, where state discretion is not clearly intended, the state will always lose. The courts will say there is no basis for this discretion. So, I agree the regulation will have to be carefully worded.

Question:

In our state the child welfare agency has to pay for many services over and above things that are not "Medicaid federal dollars" -- they are state dollars. The problem we are running into concerns the issue of medical necessity of the services; and what constitutes a medical necessity. We are going crazy with this matter. Unless the Medicaid office can see a very clear outcome to the treatment (e.g., this is a pill that cures an illness), they are going to deny the treatment. An example concerns a case where the child has serious problems and a specific tricycle for motor coordination and hip rotation has been requested. But it was denied, because a tricycle was not deemed to be a medical necessity. So we are fighting that decision through the hearing process. Would you comment on this?

Ms. Horvath:

Well, I know from the Medicaid directors that they are getting a lot of requests for special toys and equipment. In some cases Fisher Price toys are requested to help children develop. There have been requests for total rehabilitation of houses, and requests to pay for the purchase of specially-equipped vans for families. Private-duty nursing, so that the child can get special 24-hour care, has also been requested. As far as where to draw the line on these claims, it is particularly problematic. Medical necessity in an in-patient setting is very specific, you need a heart-transplant, the length of hospital stay is determined. There is a range of reasonableness around that, but in an out-patient setting, what constitutes a medical necessity? Determining medical necessity of non-medical services, there is nothing to guide you in your deliberations. The courts are going to decide, and the states are going to lose. You have the medical director of the Medicaid agency saying something is not medically necessary, and then you have Dr. Jones saying that it is. The courts will timely defer more to the doctor's judgement than to that of the state.

There is just no literature on out-patient medical necessity. I know one state that attempted to develop some guidelines for what was medically necessary for social-related health services. They worked at it for two or three weeks and yet the ten or twelve doctors on the panel could not agree. Consequently, they gave up. Ultimately, I think the courts are going to decide this issue. I am surprised that many of these claims have been denied and there has not been a suit yet. But I am sure there will be.

Question:

I recently attended a public assistance and public health meeting. I am wondering how EPSDT ties into managed care. What are all the types of managed care that states are working on? Are managed care systems the way to go?

Ms. Horvath:

Actually, I have been spending the vast majority of my time working on managed care issues. We're working with Senator Daniel Patrick Moynihan to get a bill introduced. The legislation would allow Medicaid-managed care in all its forms: case management, primary care, risk-based services, and traditional managed care (HMO) as a range of state plan options. States are really interested in managed care for several reasons.

There are a couple of kinds of case-management you can do under Medicaid. In general, Medicaid targeted case management funds a professional (not a medical person) to coordinate a range of services needed by a client. For instance, if you have a developmentally disabled child who needs special education, you have a case manager to coordinate all of the social, health, and education services to insure that the child is properly using services. The case manager is bringing up the level of utilization. States are using this kind of case management, targeting specific populations (i.e., high-risk pregnant women, TB children, chronically mentally ill persons), and have been for some time. I think many states are, with reference to children, seeing much a higher level of utilization for children because of case management, which is what they want. Then there is this primary care case management, which states are moving into. This program, which typically enrolls doctors just your basic community physicians and clinics as primary care case managers. The doctor agrees, by contract, to provide 24-hour access to care and to be responsible and accountable for the client's utilization of services. The providers must arrange primary care and refer to specialty care. The goal in this type of program is to get Medicaid clients to start developing a rapport with one doctor who knows the patient's history so that the clients are not just floating from doctor to doctor. A program goal is to lower emergency room utilization, because obviously that is pretty expensive and that really not very good care. The purpose is also to get people in for preventive care and the impetus behind that was better birth outcomes for pregnant women. As incentive to doctors, the state pays an extra $3 to $5 per client per month as a flat fee for case management for all their Medicaid clients. States that have primary care case management for pregnant women have seen their infants needing less neonatal intensive care. The women get more prenatal care. The states monitor their primary care case management providers. States review client utilization, both under- and overutilization of services and then provide feedback to doctors when utilization appears amiss. For example, if there is pregnant woman who does not have the proper number of claims for her pre natal care, the State will look into this. The states monitor for overutilization also. For example, if a client is doing pharmacy-hopping and getting codeine from various pharmacies, the case manager is not doing his or her job. So states are using it both ways to bring up utilization in some cases and bring it down in others, as necessary.

And then there is just regular managed care such as HMOs. The hope is to give clients a medical home. And there is the added benefit that states can definitely hold providers in the plan more accountable for care and service in that kind of system as opposed to regular fee for services. There have been problems in Medicaid risk-based care.

Workshop Follow-Up

The last two questions posed to Ms. Horvath concerned state responsibilities under EPSDT when the children involved are the subjects of Title IV-E adoption assistance agreements from other states. Ms. Horvath said state Medicaid manual instructions suggests the residence state would be responsible for providing the service. She said the "state is not obligated to develop a specific service (e.g., organ transplants) but they have to pay for it if it is not available in their state."

This statement prompted more questions about resident state obligations and making enrollment in EPSDT a requirement to be met by the adoptive family under adoption assistance agreements. As a consequence, the membership asked the Secretariat to obtain information from HCFA on state responsibilities under EPSDT in interstate situations.

ISSUE BRIEF XXII

© August 1992