Study finds Montana underpays Medicaid providers by tens of millions

For Dave Eaton, hiring enough staff to help developmentally disabled clients in Livingston with day-to-day tasks is a constant, brutal cycle. Out of every 10 people who come to work at Counterpoint Inc., the small nonprofit he leads, Eaton estimates three leave within a year.

Eaton, the organization’s longtime executive director, attributes the high turnover to one key factor: finding people who want to work a tough job for less than $16 an hour isn’t easy.

“The work that we’re doing, it involves a lot,” he said. His employees help clients with essential parts of their lives, he explained, like shopping for groceries, applying for jobs and attending community events. Counterpoint’s starting wage is $15.72 an hour.

If he could, Eaton said, he would raise wages to stay competitive with other job options. But Counterpoint, like many other Montana health and social service providers, relies heavily on dollars from Medicaid, the state-administered, federally subsidized public health insurance program. While Montana is responsible for setting reimbursement levels for providers who accept Medicaid patients, money the state puts into its program is matched by federal dollars.

Eaton estimates Medicaid payments make up about three-quarters of Counterpoint’s revenue, but says they ultimately don’t come close to covering the true cost of its services. The nonprofit routinely resorts to soliciting donations to make ends meet — otherwise, Eaton said, his wages would be even lower.

“We’re competing with organizations, fast food organizations or whomever, to try to pay a living wage,” Eaton said. “And it’s really been impossible for us to do that, given the Medicaid reimbursement.”

A new study, commissioned by the Legislature and supported by Gov. Greg Gianforte’s appointed leadership at the state health department, affirms what providers like Eaton have been saying for years: that Montana Medicaid has underpaid providers for the care they provide to seniors in assisted-living facilities, people with disabilities, and children and adults with mental illnesses and addiction.

The 186-page report, authored by the international consulting firm Guidehouse Inc., found that Montana’s Medicaid rates for those types of providers are nearly 22% below what the consultants identify as “benchmark standards” for actual cost of care, based on provider records and comparable data from other states and health care organizations. For disability service providers like Counterpoint, Guidehouse calculated the state is underpaying by even more, nearly 26%.

The study says it would cost the state and federal governments an additional $82 million a year to bring Medicaid reimbursement rates up to par for child and adult mental health providers, addiction treatments, disability services and senior and long-term care facilities. The state’s share of that cost would be roughly $28 million annually. In comparison, lawmakers allocated about $856 million in state funds to the state health agency for the current fiscal year.

Department of Public Health and Human Services Director Charlie Brereton acknowledged the importance of the study’s findings in an emailed statement and said the health agency is considering the recommendations.

“As expected, the preliminary results of our provider rate study demonstrate significant disparities in Montana’s Medicaid reimbursement rates,” Brereton said. “DPHHS is eager to use these evidence-based findings to inform its budget request for the next biennium and support potential rate adjustments that will further develop Montana’s continuum of care.”

The final Guidehouse report is based on a detailed survey of provider expenses, input from months of work group meetings with different provider categories, feedback from union leaders, and public comment. The study’s $2.75 million price tag will be covered by federal pandemic relief funds.

Providers say the problems identified in the study predate the pandemic by several years. When the study was authorized by the Legislature last year, some stakeholders were pessimistic about launching into an expensive and drawn-out process that might only confirm what providers already knew, said Patrick Maddison, CEO of Flathead Industries and board president of the Montana Association of Community Disability Services (MACDS), in an interview this month. But with the results now in hand, Maddison said the study could provide the Gianforte administration and Legislature the hard data they need to prioritize fixing the issue.

“What the rate study really shows is how underfunded our system has been for over a decade,” Maddison said. “I’m very hopeful that the intent was really how to fix the problem and how to not kick the can down the road. Because I think this administration has inherited the can that’s been kicked down the road for a very long time.”

One of the earliest indications of the study’s impact will be whether Gianforte includes a proposal to increase Medicaid rates in his November budget draft before the 2023 Legislature begins in January. In an emailed comment, Gianforte press secretary Brooke Stroyke said the governor supports the state health department’s efforts “to modernize Montana’s provider rates, and looks forward to receiving the agency’s recommendations.”

Maddison, Eaton, and other providers said implementing the changes proposed by Guidehouse would help their struggling institutions stay afloat and continue providing critical services. In a MACDS poll of 35 disability service providers last summer, Maddison said, the average staff vacancy rate was 25%. Finding workarounds to adequately staff group homes and outpatient services is complicated, he said, and the wait-list of people seeking services just keeps growing.

“We are still expected to care for the same amount of people with a quarter less manpower that we need to do the job,” Maddison said.

At Counterpoint, Eaton said, those staffing struggles are familiar. But increasing rates in line with the study’s recommendations, he said, would be “a game changer for our field.”

“It would be a chance for Montana to really do what needs to be done,” Eaton said. “These are really, really necessary and vital services to the people we work for.”

Providers in other parts of the health care industry, including the Behavioral Health Alliance of Montana, shared similar sentiments. Matt Bugni, CEO of the statewide mental health and disability service provider AWARE, said the Guidehouse rate recommendations “will be a great start to shoring up this system of care that is teetering on collapse,” if adopted in the governor’s budget and the Legislature.

The study’s final recommendations have yet to be dissected in public hearings before interim legislative committees. Rep. Matt Regier, R-Kalispell, who chairs the bipartisan budget committee with oversight of the state health department, said he plans to set aside “a couple hours” to discuss the report during the committee’s upcoming Sept. 14 meeting.

The Montana Free Press is a Helena-based nonprofit newsroom. To read the article as originally published, click here.