Medicare or Medicaid? Which Pill Should I Swallow?

Sci-Fi fans will recall the scene from the Wachowski brothers’ 1999 classic “The Matrix” where Morpheus is offering civilization’s great hope, Neo, a choice—take the red pill or the blue pill. Neo, played by Keanu Reeves (who thankfully had very few speaking lines in this movie), chooses the red pill and the rest is cinematic history.

 

Those of you electing to demonstrate meaningful use face a red-pill/blue-pill choice as well (although the consequences are not quite as profound). Should you pursue the Medicare fee for service (FFS) path to meaningful use? Or should you take the Medicaid path? The 3rd path (Medicare Advantage) seems out of reach for most nephrologists.

 

At issue here is the Medicaid program, as most nephrologists (having avoided the hospital-based exclusion) are eligible for the Medicare program. Why contemplate the Medicaid program? There are several reasons:

 

1. The financial incentives in the Medicaid program are more lucrative than the Medicare track ($63,750 over 6 years vs. $44,000 over 5 years).
2. You are eligible for the incentive payment in year 1 if you are adopting, implementing or upgrading Certified EHR Technology (unlike the Medicare track which requires the technology to be in place in order to demonstrate meaningful use).
3. You can participate in the e-Rx incentive program and the Medicaid EHR incentive program concurrently.
4. The Medicaid program offers substantially more flexibility.

 

What hurdles stand between you and the Medicaid path? There are several. First and foremost, is your state ready? To date, registration is only available in the following 11 states: Alaska, Iowa, Kentucky, Louisiana, Oklahoma, Michigan, Mississippi, North Carolina, South Carolina, Tennessee and Texas.

 

Second, at least 30% of your patient volume during a representative 90-day period last year must be attributable to patients receiving Medicaid. There are at least two ways in which patient volume may be calculated (perhaps more as individual states are permitted to submit their own counting method to HHS). One involves looking at individual patient encounters while the other involves counting patients on a Medicaid panel (perhaps most appropriate for the primary care provider).

 

The final hurdle involves the concept of “net average allowable costs.” The statute indicates an EP may receive 85% of a maximum net average allowable cost in the first year of $25,000. (This is the origin of the oddball figure $21,250 in the first year of the Medicaid program.) ONC was tasked with determining the average cost for an EHR. After reviewing four referenced studies, ONC determined the average allowable cost for the first year is $54,000 per eligible professional. This figure includes the cost associated with “the purchase, initial implementation, and upgrade of certified EHR technology, including support services, and integral related training.” Basically, the math here implies that a Medicaid provider may receive up to $29,000 towards the acquisition of an EHR from sources other than state and local government and still receive the $21,250 figure during their first year in the EHR incentive program. If, however, some kind soul legitimately donates a penny more to cover the expense of your EHR, your net average allowable cost figure declines by that penny.

 

Stated another way, suppose your local hospital will pony up $30,000 per doc towards the purchase of a remarkably expensive EHR. $54,000 minus $30,000 brings your net average allowable cost figure to $24,000. Recall that the statute caps the incentive at 85% of this figure, so in this scenario your first year Medicaid incentive would be $20,400.

 

Clear as mud, right? Those of you taking the Medicaid path very likely will be required to attest to the math above in order to receive the full $21,250 figure year one. Each state will be compelled to audit a small subset of their Medicaid providers to insure compliance. (Incidentally, the same arithmetic applies to subsequent years but the figures are lower. Average allowable costs in subsequent years equals $20,610, with the Medicaid provider eligible for a maximum net average allowable cost capped at $10,000. You will receive 85% of this figure in subsequent years unless you receive more than $10,610 from outside sources.)

 

The Medicaid arm of the EHR incentive program provides a larger financial incentive over time. Coupled with the ability to participate in the eRx incentive program and the added flexibility within the program, it may be worthwhile to take a closer look at the requirements, including those specific to your state. Exploring the Medicaid option is a reasonable exercise, although at the end of the movie, you may wish you had taken the blue pill instead of the red one. Thankfully, you are not locked into this initial choice as each Medicare and Medicaid provider may switch programs one time prior to 2015. If only Neo were so lucky.