September 27, RE: Medicaid Primary Care Rate Increase. Dear Administrator Tavenner:

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1 September 27, 2013 Marilyn Tavenner, Administrator Centers for Medicare & Medicaid Services Department of Health and Human Services Room 445 G, Hubert H. Humphrey Building 200 Independence Avenue SW Washington, D.C RE: Medicaid Primary Care Rate Increase Dear Administrator Tavenner: The California Medical Association (CMA) respectfully requests a review of the California Department of Health Care Services (DHCS) proposed method of implementation of the Patient Protection and Affordable Care Act s (ACA) Medicaid Primary Care Rate Increase (PCP rate increase). As further discussed below, CMA believes that DHCS s proposed methodology if adopted would result in physicians not receiving the benefit of higher payments intended by the PCP rate increase. The CMA is a non-profit, incorporated professional association for physicians with approximately 37,000 members throughout the state of California. For more than 150 years, CMA has promoted the science and art of medicine, the care and well-being of patients, the protection of public health, and the betterment of the medical profession. I. Background The ACA requires state Medicaid programs (Medi-Cal in California) to pay for primary care services furnished by specified physicians at rates not less than the Medicare rates in effect during that calendar year. The requirement began January 1, 2013 and ends December 31, On March 29, 2013 DHCS submitted its state plan amendment (SPA ) to implement this PCP rate incase. The Centers for Medicare & Medicaid Services (CMS) has not yet approved SPA Pursuant to the ACA, as amended by H.R Health Care and Education Reconciliation Act of 2010, Section 1202 provides that Medicaid agencies must reimburse primary care physicians with a specialty designation of family medicine, general internal medicine or pediatric medicine, at parity with Medicare for specified Evaluation and Management (E&M) and Vaccine Administration services. In relevant part, Section 1202(a)(13)(C) of the ACA provides that: [P]ayment for primary care services (as defined in subsection (jj)) furnished in 2013 and 2014 by a physician with a primary specialty designation of family medicine, general internal medicine, or pediatric medicine at a rate not less than 100 percent of the payment rate that applies to such services and physician under part B of title XVIII (or, if greater,

2 the payment rate that would be applicable under such part if the conversion factor under section 1848(d) for the year involved were the conversion factor under such section for 2009) (42 U.S.C. 1396a(a)(13)(C)). For purposes of Section 1202(a)(13)(C), primary care services is defined as follows: (1) evaluation and management services that are procedure codes (for services covered under title XVIII) for services in the category designated Evaluation and Management in the Healthcare Common Procedure Coding System (established by the Secretary under section 1848(c)(5) as of December 31, 2009, and as subsequently modified); and (2) services related to immunization administration for vaccines and toxoids for which CPT codes 90465, 90466, 90467, 90468, 90471, 90472, 90473, or (as subsequently modified) apply under such System. (42 U.S.C. 1396a(jj)(emphasis added). In order implement this rate increase, on November 12, 2012, the U.S. Department of Health and Human Services (DHHS) implemented a final rule titled Medicaid Program: Payments for Services Furnished by Certain Primary Care Physicians and Charges for Vaccine Administration Under the Vaccines for Children Program. The final rule makes it clear that the PCP rate increase statute is to be interpreted broadly to ensure that primary care physicians receive the benefit of higher payments in a timely manner. II. DHCS Must Implement the PCP Rate Increase In A Manner That Will Ensure Primary Care Physicians Receive the Maximum Allowable Increase In Reimbursements The CMA strongly disagrees with DHCS proposed implementation of the PCP rate increase on payments to California s Medi-Medi patients (crossover claims). DHCS anticipated reimbursement methodology would allow crossover claims to be reimbursed at lower rates than what we believe was the intent of the PCP rate increase. In an exchange on May 1, 2013 with DHCS Assistant Deputy Director of Healthcare Financing, the CMA was informed that even though the increase applies, it may not always affect final payment. That is because many claims include several CPT codes, some of which will fall within the range eligible for the increase (E&M codes ) and some of which will fall outside the range. We calculate the full amount Medi-Cal would pay for all the CPT codes on a claim and then compare to the amount Medicare paid and then pay the difference. The Medi-Cal amount will be the full Medicare rate for eligible physicians for eligible E&M codes in 2013 and In other words, pursuant to the DHCS methodology, in order to determine the payment amount, it will bundle all the CPT codes (including CPT codes that are not designated primary care under 42 U.S.C. 1396a(jj)) per episode of care or claim and compare the total reimbursement amount for all such bundled codes combined to the Medicare payment amount for the same bundled codes. The PCP rate increase statute and final rule do not support such a methodology. Not only is it inconsistent with the text of the statute, which explicitly delineates primary care services by CPT code, the DHCS approach violates the intent and spirit of the final rule, which consistently interprets the statute to maximize the rate increase for primary care services. Instead of DHCS

3 bundled code approach, the rate increase should be calculated by each specific CPT procedure code that is defined as primary care services pursuant to 42 U.S.C. 1396a(jj). Indeed, DHCS proposed bundled code methodology will consistently underpay physicians anytime they bill an eligible code with any ineligible code. Below is an example of how allowing DHCS to use their proposed bundled code methodology would thwart the intent of the PCP increase: Scenario 1 (line item reimbursement): If a physician sees a Medi/Medi patient, and bills CPT (eligible for increase) and CPT (not eligible for increase) and DHCS pays as secondary by CPT code methodology during PCP rate increase period, the physician receives $ from Medicare and $12.07 from DHCS for a total of $ Scenario 2 (DHCS s proposed bundled amount reimbursement): If a physician sees a Medi/Medi patient and bills the same codes as above and DHCS pays as secondary using their bundled methodology during PCP rate increase period, the physician receives $ from Medicare and $0 from DHCS for a total of $ As stated by CMS, primary care for any population is critical to ensuring continuity of care, as well as to providing necessary preventative care, which improves overall health and can reduce health care costs. Ensuring that a sufficient number of primary care physicians participate in the Medicaid program is critical to the successful expansion of the Medicaid program, which is why the PCP rate increase was adopted. Accordingly CMS, in the final rule concludes that We have considered the comments and suggestions in light of the clear intent of the statute to enhance Medicaid beneficiary access to care through higher physician payments. This intent would be thwarted by the DHCS methodology that would result in lower reimbursement rates for primary care physicians, which is inconsistent with the plain reading of the statute. III. Conclusion CMA respectfully asks that CMS review this issue and ensure DHCS compliance with the PCP rate increase, which seeks to maintain the current number of physicians in the Medicaid program as well as encourage primary care physicians to enter into the Medicaid program by increasing rates in calendar years 2013 and 2014 to Medicare rates. Sincerely, Francisco J. Silva General Counsel California Medical Association 1 For more detailed examples of how the DHCS methodology would consistently not pay physicians at the Medicare rate as intended by the PCP rate increase see the attached example.

4 Enclosure cc: Diana Dooley, Health and Human Services Secretary Toby Douglas, Department of Health Care Services Director

5 Pricing example from Mcal manual PROC CODE PROVIDER BILLED MEDICARE ALLOWED DEDUCT MEDICARE PAYMENT COINSUR BILLED TO MEDI- CAL MEDI-CAL ALLOWED Deduct From RA From RA From RA plus Medi-Cal price on file or Medicare Allowed, whichever is less. ( Medicare Allowed is adopted and shown on the RAD if no COMPUTED MEDI- CAL AMOUNT Medi-Cal Allowed minus Medicare Payment DEDUCT PLUS COINSUR Deduct Coinsur Medi-Cal price is on file.) plus PAID AMOUNT The lesser of Computed Medi-Cal Amount or Deduct plus Coinsur RAD CODE Coinsur (negative = 0) 73030TC TC Claim Totals Example 1: If physician sees Medi/Medi patient and DHCS pays as secondary by "CPT Code" methodology during PCP rate increase period, physician receives $ A B C D E F G H I J K Proc code Provided billed charge Medicare allowed Deduct Medicare Payment Coinsurance Bal billed to Mcal Mcal allowed Computed Medi-Cal a Deduct + Coins Mcal paid amt $ $ $ - $ $ $ $ $ $ $ $ $ $ $ $ $ $ (56.26) $ $ - $ Example 2: If physician sees Medi/Medi patient and DHCS pays as secondary using existing "bundled" methodlogy during PCP rate increase, physician receives $ A B C D E F G H I J K Proc code Provided billed charge Medicare allowed Deduct Medicare Payment Coinsurance Bal billed to Mcal Mcal allowed Computed Medi-Cal a Deduct + Coins Mcal paid amt $ $ $ - $ $ $ $ $ $ $ $ $ $ $ $ $ $ (56.26) $ $ - Total $ $ $ - $ $ $ $ $ (44.19) $ $ - * The CPT Code approach recognizes additional payment for eligible codes and treats non-eligible line item codes as a $0 payment resulting in $12.07 payment. * The "bundled" approach reflects a negative amount due on non-eligible line item codes, thus inappropriately reducing or completely negating additional payment due depending on which codes are billed. Following the example in the Medi-Cal provider manual (at top of this document), the DHCS formula for paying crossover claims (Medi/Medis) takes the total "computed Medi-Cal Amount" (column I), which is simply the Mcal allowable minus the Medicare payment. Then in Column K, the "Mcal paid amt" they take the lesser of column I or column J. If that number is a negative number, it equals $0. So if they are utilizing the "totals" method (example 2) the total in column I is a negative number, which means they pay nothing. But, if they were to run those formulas based on line items, it would result in a $12.07 payment. So in first example, Mcal will pay the lesser of$12.07 (column I) and $12.07 (column J), which = $12.07 on line 1. Then it's the lesser of -$ (column I ) and $36.77 (column J). Negatives are =$0 so it's a $0 on that line item. The physician nets $ In the second example ("Totals"), it's the lesser of the totals of -$44.19 (column I) vs. $36.74 (column J). Negatives are =$0 so the physician