Texas Medicaid physician pay gets hike in new settlement

The Legislature must allocate the $700 million in state funds needed to implement the agreement, which awaits court approval.

By Amy Lynn Sorrel — Posted May 21, 2007

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Texas is poised to raise Medicaid reimbursement rates by 25% for physicians who treat children. The move, part of a settlement put to a federal judge in April, would draw to a close a 14-year-long dispute over alleged program deficiencies.

The agreement's price tag is estimated at $700 million. About $200 million of that would go toward the physician fee increase, and an additional $50 million would be designated for certain specialty services.

Although the pay increase is a small chunk of the settlement, "it's a necessary part, because you can't do the services without the doctors," said John R. Holcomb, MD, chair of the Texas Medical Assn. Select Committee on Medicaid. The TMA did not take a position in the case but made recommendations to both sides in settlement negotiations.

If approved, the agreement would resolve a case alleging that the state had failed to follow federal requirements to make sure low-income children have access to Medicaid early periodic screening, diagnosis and treatment services.

Several families sued the state in 1993 in a class-action lawsuit charging that the program did not have enough doctors to take care of children in Medicaid due to low pay, was not following up with families for necessary checkups, and did not adequately inform families on Medicaid that they were entitled to these services.

The case, Frew v. Hawkins, resulted in a 1996 consent decree designed to improve Medicaid services. But the state refused to follow the order. Officials argued that Texas complies with federal rules and that the consent decree was not enforceable. The families since have been fighting to force the state to follow the order.

State officials appealed the decree all the way to the U.S. Supreme Court, which upheld it in 2004. In January, the high court denied the state's request to review the case again. This brought the state to the table to settle.

The U.S. District Court for the Eastern District of Texas is scheduled to rule on the settlement at a July 9 hearing. Doctors and advocates hope that the agreement, if approved, will bring more physicians to the state to make sure that kids get the care they need.

"We have about 1.8 million children per year on Medicaid, and by sheer force of numbers, it's important for these children to get timely access to health care," said attorney Susan F. Zinn, who represents the families who brought the case.

The American Medical Association/State Medical Societies Litigation Center contributed to the families' legal expenses.

The Texas House and Senate have passed legislation to make way for the agreement's implementation by setting aside the necessary funds. Lawmakers now are working out differences in the two bills. The legislative session closes at the end of May.

In addition to bumping up doctors' pay, the settlement calls for: stipends to attract specialists to underserved areas; transportation reimbursements; a state study on whether children are receiving complete checkups; reduced appointment wait times; and updated referral listings. The agreement also would raise Medicaid reimbursement rates for children's dental care by 50%.

In a statement, Texas Solicitor General Ted Cruz said he hoped the settlement finally would put the long-running lawsuit to rest. "As a result of this federal lawsuit and the Legislature's initiative, Texas will make even more significant commitments to caring for our indigent youth," Cruz said.

The TMA's Dr. Holcomb said the decline in the number of physicians accepting Medicaid patients since the case began lent credence to the arguments the families made.

According to TMA surveys, 68% of physicians were accepting new Medicaid patients in 2002. But that number dropped to 37% in 2006, due in part to reimbursement cuts in previous budget shortfalls, Dr. Holcomb said.

"So even if these services were offered by the state, they would be insufficient," he noted.

Lawmakers push for closure

After the Supreme Court ruling in January, some lawmakers urged the state to settle because they worried that they might have to foot an even bigger bill with an unfavorable court ruling.

But more important, the lawsuit prompted much-needed changes to the state's Medicaid system, said Rep. Abel Herrero, who welcomed the decision.

It's going to be up to the Legislature to ensure that this doesn't happen again, he said. "We fulfill not only the obligations of the settlement to make up for past inadequacies, but we also fully fund those medical programs, so we provide children the foundation for healthy living into the future," said Herrero, who serves on the House Appropriations health and human services subcommittee.

Rep. Warren Chisum, chair of the House Appropriations Committee, said the settlement "absolutely" would be resolved by the end of the current session and that the Legislature has the necessary funds to meet its requirements without cutting other state programs.

If the settlement receives final court approval, the Medicaid fee increases would take effect Sept. 1. Other changes are expected to be phased in according to varying timetables.

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