Medicare Compliance & Reimbursement

New standards may already be underway

Who's next in the barrel for pay for performance? It might be states that seek more flexibility to design their Medicaid programs, according to comments made Feb. 2 by Centers for Medicare and Medicaid Administrator Mark McClellan.

In the same week that CMS announced the start of a P4P demonstration project involving large physician groups, McClellan suggested to reporters at a Washington policy conference that P4P could be a good way to revise Medicaid's structure to facilitate state flexibility. The idea seems to be that performance measures tied to reimbursement might replace aspects of the current waiver process as the regulatory mechanism by means of which states gain freedom to implement state-specific Medicaid innovations.

In his address to the conference sponsored by AcademyHealth and Health Affairs, McClellan noted that flexibility is a key missing ingredient in today's Medicaid. But "it's not just about flexibility. It's about flexibility that works," he told reporters after the speech.

While declining to offer details, he suggested that, in the future, the federal government "might pair up" offering states some federal funding on a P4P basis, with easing states' path to implementing innovative programs.

Under a P4P system, states would have to show that their programs met goals for quality and cost efficiency, McClellan suggested. The long history of state Medicaid waivers programs has already produced evidence about which mechanisms succeed in improving quality and holding down overall costs, he noted. McClellan indicated that CMS already has in development some performance standards for state Medicaid programs, although agency press officers said Feb. 2 that they are not aware of any such standards program specifically related to Medicaid.

Among initiatives that might be P4P candidates, McClellan mentioned disease management, replacement of some institutional long term care with home- and community-based services, and the use of Medicaid funds to buy employer-sponsored insurance for children whose families can't afford their employers' dependent coverage.

Inauguration of P4P for Medicaid would require legislation and, if enacted this year, would come in the context of budget-trimming legislation that is almost certain to require Medicaid spending to grow slower over the next decade.

So far, neither private nor public payers have had much success in implementing P4P programs without offering providers a little extra money, in the early going, to reward high performers without dinging those who don't score so well. However, with this year's emphasis on budget cutting, it's not clear where that extra money would come from.