Medicaid Cost Containment

Fact Sheet: Medicaid Cost Containment without Harming Beneficiaries
Given the current economic climate, there are a number of proposals by states to reduce Medicaid benefits and payments to providers and to increase cost-sharing by beneficiaries for services. The Kaiser Commission on Medicaid and the Uninsured?s annual review of the 50 states found that 20 states reduced benefits in fiscal year (FY)2010?the largest number of states reporting such restrictions in one year since the annual surveys began in 2001?and 14 states planned to implement service reductions in FY 2011. In addition, 39 states implemented provider rate cuts or freezes in FY2010, and 37 states planned to do so in FY 2011.

As states focus on cutting Medicaid benefits and provider payments, many have not adequately considered alternative measures that can be adopted to reduce costs in the program without harming Medicaid beneficiaries. This fact sheet identifies actions that, when taken correctly, can save states money without impacting eligibility, services or imposing harmful co-payments. It can be used by advocates as they engage in policy and litigation advocacy with state officials.

To maintain brevity, limited descriptive comments can be found after each item listed. If applicable, the initials of one or more states that implemented or considered the measure are included. Most of the items on the list only require administrative action to implement, and will not require a waiver or demonstration.
Cost-Containment Measures
Hospital care:
Medicaid accounts for 17% of all hospital spending.
  • Cost-saving measures for inpatient hospital services:
    • Require second opinions for specified procedures. (CO, IL, IN, NJ, OR).
    • Pre-surgical days limited to 1 unless medically justified. (DC, IL). In VA, any number of pre-surgical days before elective surgery must be medically justified.
    • Weekend admissions:
      • Weekend admissions must be medically justified. (DC, VA).
      • Non-emergency weekend admissions must have procedures same or next day. (PA).
      • Weekend admissions limited to hospitals providing full services every day. (WI).
    • Length of stay less than 24 hours considered outpatient except for newborns. (IN).
    • All Medicare benefits/days are exhausted before Medicaid billed. (ME).
    • Allow for 3 administrative leave days to facilitate transfer to less restrictive setting. (NC).
    • Check for double-billing, e.g., by hospital-based physicians and by pharmacies and hospitals for drugs at the time of discharge. (NY).
    • Perform diagnostic tests on outpatient basis prior to inpatient admission (except by prior authorization).
  • PA?s Medicaid managed care program saved money by using ?observation day? rates for low-acuity patients during short hospital stays (less than 2 days) rather than the higher rate normally used for inpatient care.
  • Reduce readmission rates: 16% of people with disabilities covered by Medicaid (excluding dual eligibles) were readmitted to the hospital within 30 days of discharge. Half of those readmitted had not seen a doctor since discharge. Using a nurse discharge advocate to arrange follow-up appointments and conduct patient education or make follow-up calls has yielded reductions in readmission rates. One CO project reduced its 30-day readmission rate by 30%.
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