Illinois Medicaid Reform Bill Generates Optimism

July 5, 2019

Medicaid, now more than half a century old, is besieged by problems. Millions of Americans have been left without desperately needed healthcare coverage, because the system is bogged down by cost overruns, bitter political infighting, and seemingly endless controversies. The need for Medicaid reform is obvious because of the difficulty people have in enrolling in the program and the massive backlog of applications. Additionally, those already in the program face the possibility of losing their coverage in the course of the renewal process (known as redetermination) and a growing rate of claims denials. “Denials can be for seemingly insignificant, petty reasons,” says Attorney Tom Nash. “Recently I spoke with a client who has been waiting two years for a badly needed hip replacement, but the claim has been denied due to bureaucratic coding issues.”

Now, the Illinois legislature has taken some positive steps to reform, streamline, and increase the efficiency of the state’s Medicaid program. Before we dive into the reforms, it is helpful to understand the role of state government in Medicaid. Although the program is jointly funded by the federal government and participating state governments (and currently all 50 states participate), the states administer the program and have considerable leeway to determine who is eligible. Created as a health insurance program for low-income individuals, Medicaid currently serves more than 75 million adults and their children and individuals with certain disabilities nationwide, and nearly 3 million in Illinois.

In a rare display of bi-partisanship, both the Illinois House and Senate unanimously passed SB-1321, which calls for:

  • A complete review of the Medicaid redetermination process to identify changes that would let more members be renewed automatically.
  • The Department of Health and Family Services to set up a dispute resolution process and to serve as the arbiter in disagreements about payment disputes.

Currently, every year, individuals who receive Medicaid assistance must be found eligible again for this assistance to continue. Redetermination means that the eligibility process is repeated.
But for many Medicaid recipients, their circumstances probably haven’t changed from one year to the next. A person in a nursing home is but one example.. Nevertheless, according to Protect Our Care IL (POCIL), which actively participated in the bill’s development, more than a third of beneficiaries lose their benefits for some time at renewal. Many beneficiaries don’t even realize they have been taken off the Medicaid rolls until they go to a doctor, clinic, or hospital for treatment, and they are told that their Medicaid has been deactivated. POCIL developed procedures included in the bill which streamline the application and renewal process by using electronic eligibility data and limiting how much additional documentation is required.

Medicaid denial rates have come under fire from Medicaid beneficiaries and hospitals. The Illinois Hospital Association (IHA) says that one in every four claims is denied. In a statement, the IHA says that the growth of denials puts “extreme financial pressure on hospitals and jeopardizes access to care for all Medicaid beneficiaries.”

SB-1321 aims to decrease Medicaid claim denial rates by maximizing the communication between the Illinois Department of Healthcare and Family Services, managed care organizations (MCOs), and healthcare providers. In the current system, MCOs are paid a flat, per-patient monthly fee to manage the care of most Medicaid recipients. These MCOs are required to reimburse healthcare providers and make sure patients receive follow-up care. But some critics argue that MCOs are merely reducing their costs through excessive denials of claims and delayed payments. The MCOs, through their trade organization, maintain that the denial rate is 11 %. In many cases, claims are denied because recipients have lost coverage in redeterminations.

The bill requires the Department of Health and Family Services to set up a process to more quickly resolve claim disputes and to serve as the intermediary in disputes about payment disagreements. A provision in the bill will help the department to acquire the data needed to analyze claim denials.

SB-1321 is the result of months of negotiations among insurers, healthcare providers, government regulators and lawmakers. While it may not be a cure-all for what is ailing Illinois Medicaid, all sides expressed optimism that this is a step in the right direction.