Health Providers Scramble to Keep Remaining Staff Amid Medicaid Rate Debate

Health Providers Scramble to Keep Remaining Staff Amid Medicaid Rate Debate

Andrew Johnson lets his clients choose what music to play in the car.

As an employee of Family Outreach in Helena, Montana — an organization that assists developmentally disabled people — part of his workday involves driving around, picking up clients, and taking them to work or to run errands.

“What’s up, gangsta?” Johnson said as a client got in the car one day in March.

The pair fist-bumped and Johnson asked what type of music the client liked.

“Gangsta stuff,” came the response. Rap, mainly.

Snoop Dogg played in the background as Johnson and his client drove to McDonald’s, where Johnson helps his client work. The duo washed dishes for two hours in the back of the fast-food restaurant, where it smelled like maple syrup and sulfur.

About two weeks earlier, Johnson testified at a hearing at the Montana Capitol in support of a bill that seeks to raise health providers’ Medicaid reimbursement rates to levels aligned with the average cost of the care they provide. The bill is informed by a 2022 study that recommended benchmark rates after its authors found that Montana Medicaid providers like Family Outreach were being significantly underpaid.

“The provider rates need to be funded so people that work in this field or that work in adjacent fields can have solid ground, a place where you can build a career,” said Johnson, who makes $16.24 per hour in his position as an individual living specialist.

Republican Gov. Greg Gianforte and legislators agree that Medicaid rates need to rise; where they disagree is by how much. The proposals range from the bill Johnson testified for — Democratic Rep. Mary Caferro’s bill to raise rates to the study’s benchmarks — to Gianforte’s plan to fund 91% of that benchmark in 2024 and 86% in 2025.

Meanwhile, the Republicans leading the House Appropriations Committee, a key budget panel, are proposing an average increase of 92% for fiscal year 2024 and 97% in 2025.

Andrew Johnson says his friends think he’s crazy for deciding to work in human services. He knows he made the right career choice for himself, but he still wants to be able to afford a house in Montana someday. (Keely Larson)

Providers and leaders who work in behavioral health, developmental disability, long-term care, and family support services have attended the multiple hearings on rate adjustments, saying thanks for the proposed increases but asking for more. Many providers said the benchmark rates in the study are already outdated.

Providers across the United States say they haven’t seen significant reimbursement increases in more than a decade, according to Shawn Coughlin, president of the National Association for Behavioral Healthcare. Behavioral health can be an afterthought for policymakers, resulting in lower rates than for medical or surgical reimbursement, he said

Michael Barnett, associate professor of health policy and management at the Harvard T.H. Chan School of Public Health, said the supply of staff is inadequate to meet demand for behavioral health care across the U.S.

“And it’s not clear we’re going to meet any of that without paying people more,” Barnett said.

Some health providers have raised wages but still struggled to draw workers and keep the ones they’ve got. Family Outreach raised the wages of some direct care workers from $11 per hour to $12.20 per hour this year, and by more in places where the cost of living is higher, such as Bozeman. But even starting wages of $16 or $18 an hour aren’t attracting enough people to work there, Family Outreach Program Manager Tyler Tobol said.

“It’s a field that not a lot of people want to get into, so those that we can find, I think being able to pay a higher wage, a living wage, I think that would be the best benefit we get out of the rate increase,” Tobol said.

The organization went from 153 employees in 2020 to 128 today. The staffing shortage means employees now focus mainly on making sure clients have the basics — medications and meals — instead of providing additional community integration and activity support services.

At Florence Crittenton in Helena, where moms 18 to 35 with substance use disorders can live with their young kids while undergoing treatment, a mom entered the kitchen where women are taught life skills like learning to cook dinner. The woman told a staff member she was making juice for her child.

“This is where life happens,” said Daniel Champer, Florence Crittenton’s clinical and residential services director.

Executive Director Carrie Krepps said the organization’s two main sources of revenue are Medicaid reimbursements and fundraising. Fundraising, which used to account for 30% of revenue, now makes up between 60% and 70% of the money coming in.

“It’s the reason we’re still open,” Krepps said.

Florence Crittenton’s youth maternity wing has been closed since November 2021 due to staffing difficulties. Previously, teens ages 12-15 stayed in the apartments and received support services from Florence Crittenton. (Keely Larson)

Andrew Johnson says a lot of people with developmental disabilities go to Van’s Thriftway in Helena to get checks cashed. He describes Van’s as an inclusive grocery store. (Keely Larson)

At any given time, an average of 15 to 18 of Florence Crittenton’s 50 staff positions are vacant. If Medicaid rates don’t increase, she said, the organization will have to consider if it can continue operating the recovery home at its current capacity.

“The full rates would just barely cover where we are today,” Krepps said of raising Medicaid reimbursement rates to benchmark levels.

In 2021, Florence Crittenton closed a youth maternity home for pregnant youths and young moms ages 12 to 15, the only home in the state that took teens under 16. Krepps said Florence Crittenton didn’t take Medicaid fees there because the rates were too low.

“It’s heartbreaking,” Champer said. “It’s like clockwork on Monday morning. I come in and see the inquiries and referrals about moms who need treatment and we can’t function at full capacity because we don’t have staff.”

Dennis Sulser, the CEO of Youth Dynamics, which provides home support, case management, and community-based psychiatric rehabilitation across the state, said his organization is paying its staff more than it can afford. Even with the rate increase, he said, they’d only break even.

In the past three years, Youth Dynamics has lost 56 full-time employees. The covid-19 pandemic made people realize they could find other jobs that paid more and even allowed them to stay home, Sulser said.

Andrew Johnson transports a client from his group home to Family Outreach, where the client does janitorial work for the organization. Johnson described this client as his “soul animal,” referring to their similar taste in music. (Keely Larson)

Two years ago, the entry-level pay for Youth Dynamics was $10.70 per hour, and it now averages $13.70. Still, staffing shortages led to the closure of a group home in Boulder and one in Billings, shrinking the organization’s capacity from 80 to 64 beds statewide.

Ashley Santos, program manager for the organization’s three remaining group homes in Boulder, said she is trying to figure out how to attract enough staff to reopen the closed home there. An increase in pay supported by the provider rate increase could give her flexibility to provide extra incentives, she said.

But it’s hard to attract workers when Hardee’s has a starting wage of $18 per hour compared with Youth Dynamics’ $16, she said. And fast-food jobs don’t come with the emotional toll of working with kids who have a severe emotional disturbance diagnosis like PTSD or depression.

Back in Helena, Johnson made his last stop of the day for Family Outreach. He sat next to a client on the couch at the house where the client lives with his mom. Johnson called the number on the back of his client’s debit card to see how much money was left on it before they went out to run errands.

Johnson and the client then headed to a local supermarket. Trips like these give his client a chance to interact with other people, while his mom gets some time to herself.

“You look nice,” Johnson said to the client as they got into the car, the folksy music of Dougie Poole, the choice of Johnson’s previous client, playing in the background.

Keely Larson is the KHN fellow for the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Newspaper Association, and Kaiser Health News. Larson is a graduate student in environmental and natural resources journalism at the University of Montana.

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March Medicaid Madness

March Medicaid Madness

The Host

With Medicare and Social Security apparently off the table for federal budget cuts, the focus has turned to Medicaid, the federal-state health program for those with low incomes. President Joe Biden has made it clear he wants to protect the program, along with the Affordable Care Act, but Republicans will likely propose cuts to both when they present a proposed budget in the next several weeks.

Meanwhile, confusion over abortion restrictions continues, particularly at the FDA. One lawsuit in Texas calls for a federal judge to temporarily halt distribution of the abortion pill mifepristone. A separate suit, though, asks a different federal judge to temporarily make the drug easier to get, by removing some of the FDA’s safety restrictions.

This week’s panelists are Julie Rovner of Kaiser Health News, Alice Miranda Ollstein of Politico, Rachel Cohrs of STAT News, and Lauren Weber of The Washington Post.

Among the takeaways from this week’s episode:

  • States are working to review Medicaid eligibility for millions of people as pandemic-era coverage rules lapse at the end of March, amid fears that many Americans kicked off Medicaid who are eligible for free or near-free coverage under the ACA won’t know their options and will go uninsured.
  • Biden promised this week to stop Republicans from “gutting” Medicaid and the ACA. But not all Republicans are on board with cuts to Medicaid. Between the party’s narrow majority in the House and the fact that Medicaid pays for nursing homes for many seniors, cutting the program is a politically dicey move.
  • A national group that pushed the use of ivermectin to treat covid-19 is now hyping the drug as a treatment for flu and RSV — despite a lack of clinical evidence to support their claims that it is effective against any of those illnesses. Nonetheless, there is a movement of people, many of them doctors, who believe ivermectin works.
  • In reproductive health news, a federal judge recently ruled that a Texas law cannot be used to prosecute groups that help women travel out of state to obtain abortions. And the abortion issue has highlighted the role of attorneys general around the country — politicizing a formerly nonpartisan state post. –And Eli Lilly announced plans to cut the price of some insulin products and cap out-of-pocket costs, though their reasons may not be completely altruistic: An expert pointed out that a change to Medicaid rebates next year means drugmakers soon will have to pay the government every time a patient fills a prescription for insulin, meaning Eli Lilly’s plan could save the company money.

Plus, for “extra credit,” the panelists suggest health policy stories they read this week that they think you should read, too:

Julie Rovner: The New York Times’ “A Drug Company Exploited a Safety Requirement to Make Money,” by Rebecca Robbins.

Alice Miranda Ollstein: The New York Times’ “Alone and Exploited, Migrant Children Work Brutal Jobs Across the U.S.,” by Hannah Dreier.

Rachel Cohrs: STAT News’ “Nonprofit Hospitals Are Failing Americans. Their Boards May Be a Reason Why,” by Sanjay Kishore and Suhas Gondi.

Lauren Weber: KHN and CBS News’ “This Dental Device Was Sold to Fix Patients’ Jaws. Lawsuits Claim It Wrecked Their Teeth,” by Brett Kelman and Anna Werner.

Also mentioned in this week’s podcast:

To hear all our podcasts, click here.

And subscribe to KHN’s What the Health? on SpotifyApple PodcastsStitcherPocket Casts, or wherever you listen to podcasts.

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After People on Medicaid Die, Some States Aggressively Seek Repayment From Their Estates

After People on Medicaid Die, Some States Aggressively Seek Repayment From Their Estates

PERRY, Iowa — Fran Ruhl’s family received a startling letter from the Iowa Department of Human Services four weeks after she died in January 2022.

“Dear FAMILY OF FRANCES RUHL,” the letter began. “We have been informed of the death of the above person, and we wish to express our sincere condolences.”

The letter got right to the point: Iowa’s Medicaid program had spent $226,611.35 for Ruhl’s health care, and the government was entitled to recoup that money from her estate, including nearly any assets she owned or had a share in. If a spouse or disabled child survived Ruhl, the collection could be delayed until after their death, but the money would still be owed.

The notice said the family had 30 days to respond.

“I said, ‘What is this letter for? What is this?’” said Ruhl’s daughter, Jen Coghlan.

It seemed bogus, but it was real. Federal law requires all states to have “estate recovery programs,” which seek reimbursements for spending under Medicaid, the joint federal and state health insurance program for people with low incomes or disabilities. The recovery efforts collect more than $700 million a year, according to a 2021 report from the Medicaid and CHIP Payment and Access Commission, or MACPAC, an agency that advises Congress.

States have leeway to decide whom to bill and what type of assets to target. Some states collect very little. For example, Hawaii’s Medicaid estate recovery program collected just $31,000 in 2019, according to the federal report.

Iowa, whose population is about twice Hawaii’s, recovered more than $26 million that year, the report said.

Iowa uses a private contractor to recoup money spent on Medicaid coverage for any participant who was 55 or older or was a resident of a long-term care facility when they died. Even if an Iowan used few health services, the government can bill their estate for what Medicaid spent on premiums for coverage from private insurers known as managed-care organizations.

Supporters say the clawback efforts help ensure people with significant wealth don’t take advantage of Medicaid, a program that spends more than $700 billion a year nationally.

Critics say families with resources, including lawyers, often find ways to shield their assets years ahead of time — leaving other families to bear the brunt of estate recoveries. For many, the family home is the most valuable asset, and heirs wind up selling it to settle the Medicaid bill.

For the Ruhl family, that would be an 832-square-foot, steel-sided house that Fran Ruhl and her husband, Henry, bought in 1964. It’s in a modest neighborhood in Perry, a central Iowa town of 8,000 people. The county tax assessor estimates it’s worth $81,470.

Henry Ruhl, 83, wanted to leave the house to Coghlan, but since his wife was a joint owner, the Medicaid recovery program could claim half the value after his death.

Fran Ruhl, a retired child care worker, was diagnosed with Lewy body dementia, a debilitating brain disorder. Instead of placing her in a nursing home, the family cared for her at home. A case manager from the Area Agency on Aging suggested in 2014 they look into the state’s “Elderly Waiver” program to help pay expenses that weren’t covered by Medicare and Tricare, the military insurance Henry Ruhl earned during his Iowa National Guard career.

Coghlan still has paperwork the family filled out. The form said the application was for people who wanted to get “Title 19 or Medicaid,” but then listed “other programs within the Medical Assistance Program,” including Elderly Waiver, which the form explained “helps keep people at home and not in a nursing home.”

Coghlan said the family didn’t realize the program was an offshoot of Medicaid, and the paperwork in her file did not clearly explain the government might seek reimbursement for properly paid benefits.

Some of the Medicaid money went to Coghlan for helping care for her mother. She paid income taxes on those wages, and she said she likely would have declined to accept the money if she’d known the government would try to scoop it back after her mother died.

Henry keeps the ashes of his wife, Fran, in an urn on a side table in the home they shared for nearly 60 years. After he dies, the family will bury Henry and Fran together at the state veterans cemetery. (KC McGinnis for KHN)

Henry Ruhl of Perry, Iowa, lost his wife, Fran, in January 2022. A few weeks after her death, he was startled by a notice saying her estate owed more than $226,000 to Iowa’s Medicaid program for care she received. (KC McGinnis for KHN)

Iowa Medicaid Director Elizabeth Matney said that in recent years the state added clearer notices about the estate recovery program on forms people fill out when they apply for coverage.

“We do not like families or members being caught off guard,” she said in an interview. “I have a lot of sympathy for those people.”

Matney said her agency has considered changes to the estate recovery program, and she would not object if the federal government limited the practice. Iowa’s Medicaid estate collections topped $30 million in fiscal year 2022, but that represented a sliver of Medicaid spending in Iowa, which is over $6 billion a year. And more than half the money recouped goes back to the federal government, she said.

Matney noted families can apply for “hardship exemptions” to reduce or delay recovery of money from estates. For example, she said, “if doing any type of estate recovery would deny a family of basic necessities, like food, clothing, shelter, or medical care, we think about that.”

Sumo Group, a private company that runs Iowa’s estate recovery program, reported that 40 hardship requests were granted in fiscal 2022, and 15 were denied. The Des Moines company reported collecting money from 3,893 estates that year. Its director, Ben Chatman, declined to comment to KHN. Sumo Group is a subcontractor of a national company, Health Management Systems, which oversees Medicaid estate recoveries in several states. The national company declined to identify which states it serves or discuss its methods. Iowa pays the companies 11% of the proceeds from their estate recovery collections.

The 2021 federal advisory report urged Congress to bar states from collecting from families with meager assets, and to let states opt out of the effort altogether. “The program mainly recovers from estates of modest size, suggesting that individuals with greater means find ways to circumvent estate recovery and raising concerns about equity,” the report said.

U.S. Rep. Jan Schakowsky introduced a bill in 2022 that would end the programs.

The Illinois Democrat said many families are caught unawares by Medicaid estate recovery notices. Their loved ones qualified for Medicaid participation, not realizing it would wind up costing their families later. “It’s really a devastating outcome in many cases,” she said.

Schakowsky noted some states have tried to avoid the practice. West Virginia sued the federal government in an attempt to overturn the requirement that it collect against Medicaid recipients’ estates. That challenge failed.

Schakowsky’s bill had no Republican co-sponsors and did not make it out of committee. But she hopes the proposal can move ahead, since every member of Congress has constituents who could be affected: “I think this is the beginning of a very worthy and doable fight.”

Jen Coghlan outside the modest home where she grew up in Perry, Iowa. Her father, Henry Ruhl, plans to leave the home to her, but Coghlan expects she’ll have to sell it after he dies to help settle a large bill from Medicaid for the care of her mother, Fran, who died in January 2022. Coghlan says the family didn’t realize that her mother was on Medicaid and that they are responsible to pay the program back for her care. (KC McGinnis for KHN)

States can limit their collection practices. For example, Massachusetts implemented changes in 2021 to exempt estates of $25,000 or less. That alone was expected to slash by half the number of targeted estates.

Massachusetts also made other changes, including allowing heirs to keep at least $50,000 of their inheritance if their incomes are less than 400% of the 2022 federal poverty level, or about $54,000 for a single person.

Prior to the changes, Massachusetts reported more than $83 million in Medicaid estate recoveries in 2019, more than any other state, according to the MACPAC report.

Supporters of estate recovery programs say they provide an important safeguard against misuse of Medicaid.

Mark Warshawsky, an economist for the conservative American Enterprise Institute, argues that other states should follow Iowa’s lead in aggressively recouping money from estates.

Warshawsky said many other states exclude assets that should be fair game for recovery, including tax-exempt retirement accounts, such as 401(k)s. Those accounts make up the bulk of many seniors’ assets, he said, and people should tap the balances to pay for health care before leaning on Medicaid.

Warshawsky said Medicaid is intended as a safety net for Americans who have little money. “It’s the absolute essence of the program,” he said. “Medicaid is welfare.”

People should not be able to shelter their wealth to qualify, he said. Instead, they should be encouraged to save for the possibility they’ll need long-term care, or to buy insurance to help cover the costs. Such insurance can be expensive and contain caveats that leave consumers unprotected, so most people decline to buy it. Warshawsky said that’s probably because people figure Medicaid will bail them out if need be.

Eric Einhart, a New York lawyer and board member of the National Academy of Elder Law Attorneys, said Medicaid is the only major government program that seeks reimbursement from estates for properly paid benefits.

Medicare, the giant federal health program for seniors, covers virtually everyone 65 or older, no matter how much money they have. It does not seek repayments from estates.

“There’s a discrimination against what I call ‘the wrong type of disease,’” Einhart said. Medicare could spend hundreds of thousands of dollars on hospital treatment for a person with serious heart problems or cancer, and no government representatives would try to recoup the money from the person’s estate. But people with other conditions, such as dementia, often need extended nursing home care, which Medicare won’t cover. Many such patients wind up on Medicaid, and their estates are billed.

On a recent afternoon, Henry Ruhl and his daughter sat at his kitchen table in Iowa, going over the paperwork and wondering how it would all turn out.

The family found some comfort in learning that the bill for Fran Ruhl’s Medicaid expenses will be deferred as long as her husband is alive. He won’t be kicked out of his house. And he knows his wife’s half of their assets won’t add up to anything near the $226,611.35 the government says it spent on her care.

“You can’t get — how do you say it?” he asked.

“Blood from a turnip,” his daughter replied.

“That’s right,” he said with a chuckle. “Blood from a turnip.”

Fran Ruhl often left affectionate notes for her husband, Henry, in their home in Perry, Iowa. Several are still posted, a year after her death. (KC McGinnis for KHN)

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Surprise-Billing Law Loophole: When ‘Out of Network’ Doesn’t Quite Mean Out of Network

Surprise-Billing Law Loophole: When ‘Out of Network’ Doesn’t Quite Mean Out of Network

It was the first day of her family’s vacation in the San Juan Islands last June when Danielle Laskey, who was 26 weeks pregnant, thought she was leaking amniotic fluid.

A registered nurse, Laskey called her OB-GYN back home in Seattle, who said to seek immediate care. Staff members at a nearby emergency department found no leakage. But her OB-GYN still wanted to see her as soon as possible.

Laskey and her husband, Jacob, made the three-hour trip to the Swedish Maternal & Fetal Specialty Center-First Hill. Laskey had sought the clinic’s specialized care for this pregnancy, her second, after a dangerous complication with her first: The placenta had become embedded in the uterine muscles.

Back in Seattle, doctors at the clinic found Laskey’s water had broken early, posing a serious risk to her and the fetus, and ordered her immediate admission to Swedish Medical Center/First Hill. She delivered her son after seven weeks in the hospital. Though she was treated for multiple postpartum complications, she was well enough to be discharged the next day. Her son, who is healthy, went home a month later.

Laskey soon developed a fever and body aches, and she was told by her OB-GYN to go to Swedish’s emergency department. She said doctors there wanted to admit her when she arrived Aug. 20 and scheduled a procedure for Aug. 26 to remove a fragment of placenta that her body had not eliminated on its own.

Laskey, who had already spent weeks away from her 3-year-old daughter, chose to go home. She returned for the procedure, which went well, and she was home the same day.

Then the bills came.

The Patient: Danielle Laskey, 31, was covered by a state-sponsored plan offered by her employer, a local school district, and administered by Regence BlueShield.

Medical Service: In-patient hospital services for 51 days, plus a one-day stay that included a second placenta removal procedure.

Service Provider: Swedish Medical Center/First Hill, part of Providence Health & Services, a large, nonprofit, Catholic health system.

Total Bill: Swedish, through Regence, billed about $120,000 in cost sharing for Laskey’s initial hospitalization and about $15,000 for her second visit and procedure.

What Gives: The specialized clinic caring for Laskey before her hospital admission was in her insurance plan’s network. The clinic’s doctors admit patients only to Swedish Medical Center, one of the Seattle area’s only specialized providers for Laskey’s condition — which, given that connection, she assumed was also in the network.

So after being urgently admitted to Swedish, Laskey believed her bills would be largely covered, with the couple expected to pay $2,000 at most for their portion of in-network care because of her plan’s out-of-pocket cost limit.

It turned out Swedish was out of network for Laskey’s plan and, at first, Regence determined that Laskey’s hospitalizations were not emergencies. In November, a Regence case manager initially told Jacob that Laskey’s lengthy hospitalization was an emergency admission and out-of-network charges would not apply. But then she called back and said the charges would apply after all, because Laskey had not come in through the emergency department.

Both Washington state and federal laws prohibit insurers and providers from billing patients for out-of-network charges in emergency situations. The couple said neither Swedish nor Regence told them before or during the two hospitalizations that Swedish was out of network, and that they never knowingly signed anything agreeing to accept out-of-network charges.

Jacob, who works as a psychiatrist at a different hospital, said he mentioned the surprise-billing laws to the case manager, but she replied that the laws did not apply to his family’s situation.

It was only after Regence was contacted by KHN that the insurer explained its reasoning to the reporter: Regence said the Swedish hospital, while out of network for Danielle, had a broader contract with the insurer as a “participating provider” and so the insurer was not in violation of surprise-billing laws by approving Swedish’s out-of-network coinsurance charges.

The broader contract allowed Swedish to bill members of any Regence plan who receive out-of-network services there 50% coinsurance — the patient’s portion of the overall cost the insurer allows the provider to charge — with no out-of-pocket maximum for the patient.

What’s the difference between a hospital that’s “in network” and one that’s a “participating provider”? In this case, by contracting with Regence as an out-of-network but also participating provider, Swedish straddled the line between being in and out of network — designations that traditionally indicate whether a provider has a contract with an insurer or not.

Setting the terms with an insurer for providing its members emergency or other care appears to allow hospitals to sidestep new surprise-billing laws that prevent out-of-network providers from charging high, unpredictable rates in emergencies, according to government and private-sector medical billing experts.

Experts said they had not heard of out-of-network providers evading surprise-billing laws by being contracted as “participating providers” until KHN asked about Laskey’s case.

Ellen Montz, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare & Medicaid Services, said that under the federal No Surprises Act the definition of a “participating” emergency facility that’s subject to the law’s surprise billing protections depends on whether the facility has a contract with the insurer specifying the terms and conditions under which an emergency service is provided to a plan member.

Matthew Fiedler, a senior fellow at the University of Southern California-Brookings Schaeffer Initiative for Health Policy who studies out-of-network billing, said Laskey’s case seems to fall into a “weird” gray area of the state and federal laws protecting patients from out-of-network charges in emergency situations.

If there had been no contract between Regence and Swedish, the laws clearly would have prohibited those charges. But since there was a contract specifying a 50% coinsurance rate when Swedish was out of network for a particular Regence plan, those laws legally may not apply, Fiedler said.

After he declined to apply for the hospital’s financial assistance program, Jacob said Swedish also notified the couple in November that they had two months to pay or be sent to collections.

Natalie Kozimor, a spokesperson for Providence Swedish, said the hospital disagreed with “some of the details and characterizations of events” presented by the Laskeys, though she did not specify what those were. She said Swedish assisted Danielle with her appeal to Regence.

“We had no luck with Swedish taking any role or responsibility with regard to our billing or advocating on our behalf,” Jacob said. “They basically just referred us to their financial department to put us on a payment plan.”

A photo shows a woman taking care of an infant baby lying on a padded floor mat.
Danielle Laskey at her home just outside Seattle, with her infant son.(Ryan Henriksen for KHN)

The Resolution: In December, the couple appealed Regence’s approval of Swedish’s out-of-network charges for the 51-day hospitalization, claiming it was an emergency and that there was no in-network hospital with the expertise to treat her condition. They also filed a complaint with the state insurance commissioner’s office.

The office told KHN that the “participating provider” contract does not override the laws barring out-of-network charges in emergency situations. “Danielle had an emergency and Regence acknowledges it was an emergency, so she cannot be balance-billed,” said Stephanie Marquis, public affairs director for the Washington state Office of the Insurance Commissioner.

On Jan. 13, Regence said it would grant the Laskeys’ appeal to cover the first hospitalization as an in-network service, erasing the biggest part of Swedish’s bill but still leaving the family on the hook for the $15,000 bill for Danielle’s second visit and procedure.

On Jan. 27, two days after KHN contacted Regence and Swedish about Danielle Laskey’s case, a Regence representative called and informed her that her second hospitalization also would be reclassified as an in-network service.

Ashley Bach, a Regence spokesperson, confirmed to KHN that both stays now will be covered as emergency, in-network services, eliminating Swedish’s coinsurance charges. But in what appears to be contrary to the insurance commissioner’s stance, he said the bills had not violated state or federal laws prohibiting out-of-network charges in emergency situations because of the contract with Swedish covering all its plans.

“Under the Washington state and federal balance-billing laws, the definitions of whether a provider is considered in network hinges on whether there is a contract with a specific provider,” Bach said.

The Takeaway: More than a year after the federal surprise-billing law took effect, patients can still get hammered by surprise bills resulting from health plans’ limited provider networks and ambiguities about what is considered emergency medical care. The loopholes are out there, and patients like Laskey are just discovering them.

Washington state Rep. Marcus Riccelli, chair of the House Health Care and Wellness Committee, said he will ask the state’s public and private insurers what steps they could take to avoid provider network gaps and out-of-network billing surprises like this. He said he will also review whether there is a loophole in state law that needs to be closed by the legislature.

Fiedler said policymakers need to consider addressing what looks like a major gap in the new laws protecting consumers from surprise bills, since it’s possible that other insurers across the country have similar contracts with hospitals. “Potentially this is a significant loophole, and it’s not what lawmakers were aiming for,” he said.

Congress might have to fix the problem, since the federal agencies that administer the No Surprises Act may not have authority to do anything about it, he added.

Bruce Alexander, a CMS spokesperson, said the Departments of Health & Human Services, Labor, and Treasury are looking into this issue. While the agencies can’t predict whether a new rule or guidance will be needed to address it, he said, “they remain committed to protecting consumers from surprise medical bills.”

In the meantime, patients, even in emergencies, should ask their doctors before a hospital admission whether the hospital is in their plan network, out of network, or (watch for these words) a “participating provider.”

As the Laskeys discovered, hospital billing departments may offer little help in resolving surprise billing. So, while it is worth contesting questionable charges to the provider, it’s also usually an option to quickly appeal to your state insurance department or commissioner.

Bill of the Month is a crowdsourced investigation by KHN and NPR that dissects and explains medical bills. Do you have an interesting medical bill you want to share with us? Tell us about it!

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California Explores Private Insurance for Immigrants Lacking Legal Status. But Is It Affordable?

California Explores Private Insurance for Immigrants Lacking Legal Status. But Is It Affordable?

A doctor found cysts in Lilia Becerril’s right breast five years ago, but the 51-year-old lacks health insurance. She said she can’t afford the imaging to find out if they’re cancerous.

Becerril earns about $52,000 a year at a nonprofit in California’s Central Valley, putting her and her husband, Armando, at more than double the limit to qualify for Medi-Cal, the state’s Medicaid program for people with low incomes and disabilities. Private insurance would cost $1,230 a month in premiums, money needed for their mortgage.

“We’ve been resorting to home remedies to get through the pain,” Becerril said through a Spanish translator. Her husband has needed hernia surgery for 20 years. “It’s frustrating because we pay our taxes, but we can’t reap any of the benefits of where our taxes are going,” she added.

While many Californians who earn too much to be eligible for Medi-Cal can get subsidized coverage through Covered California, an estimated 460,000 residents aren’t allowed to buy insurance through state-run insurance plans under the Affordable Care Act because they lack legal status. One Democratic lawmaker says it’s a small but glaring gap and is crafting a bill that could test Democratic Gov. Gavin Newsom’s commitment to reach universal health care.

“We’re going to need to figure out how to provide universal coverage for all who call this state home,” said the bill’s author, Assembly member Joaquin Arambula. “It’s an area our state has not leaned into enough, to provide coverage for those who are undocumented.”

Arambula’s bill would direct the state to ask the federal government to allow immigrants living in the state without authorization to get insurance through Covered California. Arambula sees the move as the critical first step to expand coverage. If approved, the Fresno lawmaker intends to push for state subsidies to help pay for insurance.

Both elements are essential for immigrants lacking legal status, said Jose Torres Casillas, a policy and legislative advocate with Health Access California, a consumer health group working with Arambula’s office on the measure.

“Access is one thing, but affordability is another,” Torres Casillas said.

Since taking office in 2019, Newsom has approved expanding Medi-Cal to all qualified residents regardless of immigration status. In doing so, the politician continuously rumored to be preparing for a presidential bid described the state as moving “one step closer” toward universal health care. But in January, Newsom announced a $22.5 billion state deficit and made no mention of new proposals for the state’s estimated 3 million uninsured residents.

Newsom’s health secretary, Dr. Mark Ghaly, acknowledged the pressure to go further but he would not commit to a timeline.

“Up until now we’ve had so many other things to focus on,” Ghaly said. “This will become, frankly speaking, one of the most important next issues that we take on.”

California needs permission from the federal government to open Covered California to immigrants without legal residency because it is currently closed to them, and Arambula said he is in talks with Newsom administration officials about how to structure the bill.

Once the federal government opens Covered California up to all migrants, the state could set aside funding for subsidies. About 90% of enrollees in Covered California qualify for financial assistance, which is paid for with both state and federal funds. Since 2020, the state has spent $20 million a year on those subsidies, a fraction of the cost, because Congress has given states an infusion of money during the pandemic.

Previously, lawmakers had allocated roughly $300 million to lower insurance premiums for Covered California enrollees. Any financial assistance to people living in the state without authorization would likely have to come from state funds, and the costs could vary widely.

For instance, Colorado enrolled 10,000 such immigrants into a new insurance program designed solely for them at a cost of $57.8 million in state funds, said Adam Fox, deputy director of the Colorado Consumer Health Initiative. The program covered the full cost of insurance for enrollees.

In Washington state, immigrants who lack legal status can take advantage of a state fund next year to help all income-eligible state residents pay for insurance, said Michael Marchand, chief marketing officer for the Washington Health Benefit Exchange. State lawmakers have added $5 million to the fund for immigrants without legal authorization.

“It would serve as an incentive for additional undocumented immigration into our country,” said Sally Pipes, president and CEO of the Pacific Research Institute, a think tank that advocated against Medi-Cal expansion to immigrants without legal standing. “And put taxpayers on the hook for additional government health care costs and the inevitable higher tax bills to pay for them.”

California officials have previously considered allowing all immigrants to buy insurance from its state-run program before, submitting a request to the federal government in 2016. But the state rescinded its application after President Donald Trump took office, given his anti-immigration rhetoric and policies.

The Biden administration in December approved an exception to federal law for Washington state — a game changer in the eyes of immigration advocates, said Rachel Linn Gish, a spokesperson for Health Access.

“Seeing what other states have done and the waivers that are happening under Biden, it makes a huge difference in our approach,” she said.

But even if lawmakers pass a plan to open California’s insurance marketplace to all immigrants regardless of status, advocates said the state will have to wait until Jan. 1, 2024, to ask the federal government for permission, and it could take half a year or longer to get a response.

That means it could be years before Becerril can get coverage. Instead, she’s preparing for the worst.

“I’m paying for funeral coverage,” she said. “It’s more economical than paying the health coverage premium.”

A photo shows a woman working with yards of fabric outside.
Lilia Becerril broke her left wrist in 2020 but lacked health coverage to get the cast removed or undergo physical therapy. She earns too much from her job to qualify for Medi-Cal, the state’s Medicaid program for residents with low incomes and disabilities.(Heidi de Marco / KHN)

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A Bitter Battle Over the ‘Orphan Drug’ Program Leaves Patients’ Pocketbooks at Risk

A Bitter Battle Over the ‘Orphan Drug’ Program Leaves Patients’ Pocketbooks at Risk

A prescription drug that helps Lore Wilkinson walk and talk despite a rare muscle disease cost her so little for more than a decade that she didn’t even use her insurance to pay for it. But now, her Medicare insurance is shelling out about $40,000 for a one-month supply of the drug, and she fears she’ll be slammed with a $9,000 copayment.

“Who can afford that?” said the 91-year-old, who lives in Rochester, Minnesota. (Her first name is pronounced LOR-ee.)

Wilkinson, like millions of other people with rare diseases nationwide, is caught up in an ongoing legal and political debate about how the U.S. supports pharmaceutical companies and their research. The FDA made its latest move in the tug of war in late January by saying it would largely ignore a U.S. court ruling involving Firdapse, the drug Wilkinson needs.

Firdapse was approved in 2018 by the FDA as an “orphan drug,” a designation that rewards drug companies for developing treatments for rare diseases. When a drugmaker wins approval for an orphan drug, the company is entitled to seven years of exclusive rights to the marketplace, which means the FDA won’t approve another company’s application for a competitive drug for the same use during that period.

But after the 11th U.S. Circuit Court of Appeals denied a motion in early 2022, the FDA stopped reviewing applications for certain drugs or handing out exclusivity, agency spokesperson April Grant said. The delay left drugmakers in limbo.

Often, drugs granted exclusivity are among the highest priced in the U.S. market. For example, Zolgensma, a one-time treatment for spinal muscular atrophy, carries a $2.25 million price tag. Mary Carmichael, a spokesperson for its manufacturer, Novartis, said Zolgensma has treated more than 3,000 patients globally and nearly all U.S. patients taking the drug as approved by the FDA are covered by commercial or government insurance.

The company also continues to invest in research and development as well as clinical studies for the drug to reach more patients, Carmichael said. Most drugs enter the U.S. market armed with a variety of patents and intellectual property protections that stave off competition and allow drugmakers to set prices as they see fit. For drugs that treat rare diseases, the seven years of market exclusivity is part of that armor.

A year’s supply of Catalyst Pharmaceuticals’ Firdapse, which Wilkinson takes to treat her Lambert-Eaton myasthenic syndrome, or LEMS, sells for about $375,000 after discounts, said Catalyst spokesperson David Schull. He said the company has financial assistance programs and donates to charitable foundations to help those in need. The goal, Schull said, “is that no LEMS patient is ever denied access to medication for financial reasons.”

Catalyst was granted exclusive market rights for Firdapse in 2018, which meant that Wilkinson and other LEMS patients could no longer get a similar drug from another company free of charge.

A photo shows Lore Wilkinson opening a bottle of Firdarpse, her medicine.
Firdapse is the drug Wilkinson uses to treat her muscle disease.(Liam James Doyle for KHN)

In 2019, amid a patient uproar about the cost, which Sen. Bernie Sanders weighed in on, the FDA granted another company, Jacobus Pharmaceutical, the right to market a competitive product for a subset of pediatric patients.

Then Catalyst filed suit against the federal government, contending it had rights to be the exclusive provider for all LEMS patients, regardless of age. The case, Catalyst Pharmaceuticals Inc. v. Becerra, had potentially “far-reaching implications,” wrote Grant, the FDA spokesperson, in an email to KHN. The court’s decision also “raised several novel questions,” she said.

The 11th Circuit sided with Catalyst in September 2021. But the FDA’s recent move to effectively disregard the court’s decision is “in the best interest of public health, rare disease patients and rare disease product development,” Grant wrote.

Still, the multiyear saga highlights lingering questions about orphan drug exclusivity and how the FDA’s policies may influence drug prices. At issue is the Orphan Drug Act, a 1980s-era law that incentivizes drug companies to research and develop rare-disease drugs. And it’s not the first time the orphan drug program has raised concerns.

For decades, the FDA has overseen a two-step process: A drug is first granted an orphan designation because it shows promise to treat a rare disease or condition. Then, once the pharmaceutical company studies and develops the rare-disease drug, the FDA approves its use and awards seven-year market exclusivity, preventing competition.

That final step, granting exclusivity, was in the spotlight in Catalyst’s lawsuit against the FDA. Since the Orphan Drug Act was created, the FDA’s staff routinely handed out exclusivity to companies for orphan drugs that treat a subset of patients, such as pediatrics. The goal was to make sure pharmaceutical companies didn’t get total market control for a drug after doing studies on only the “smallest, easiest-to-study populations,” the agency wrote on its website.

The Catalyst court decision could hurt children, agency officials wrote.

George O’Brien, a partner at Mayer Brown who represents companies regarding the FDA and regulatory practices, said he agreed with the FDA’s decision and its long-term strategy of parceling out exclusivity because a drug’s sales “should be limited to what you studied and got approved.”

“Most people think the way the FDA has done it for years is a very sensible way to do it,” O’Brien said. “Good for patients, good for pharma, and good for the FDA.”

The FDA said that it will comply with the court’s decision regarding Catalyst but that it doesn’t apply to other companies or drugs. In response to the FDA’s January announcement, Catalyst said it would not be affected. In July 2022, Catalyst bought the rights to Ruzurgi, the Jacobus drug.

Now, there is no competitive drug on the market that treats Wilkinson’s disease.

Jacobus had provided Wilkinson with the active ingredient of its drug free of charge from 2004 to 2018: “The only thing I paid was shipping.”

A photo shows Lore Wilkinson walking on a treadmill.
Lore Wilkinson, who has Lambert-Eaton myasthenic syndrome, depends on an “orphan drug” to stay mobile. Without it, “I would be in a wheelchair” she says.(Liam James Doyle for KHN)

The FDA’s move to largely rebuke the Catalyst case will likely mean another company will sue the agency again, O’Brien said: “They are in a really tough spot.”

“My worry is there is just another lawsuit coming. And its uncertainty. Uncertainty is ultimately bad for patients,” O’Brien said.

Drugmakers have taken the FDA to court before over how the agency administers the Orphan Drug Act. In 2014, Depomed won a suit against the agency demanding an exclusivity label on its drug Gralise, which treated nerve pain.

The FDA had given Gralise an orphan designation and approval but declined to give it exclusivity because it said it was not clinically superior to another drug already on the market. Then-federal district court judge Kentaji Brown Jackson, who was appointed to the U.S. Supreme Court last year, required the FDA to grant exclusivity, blocking a generic.

That case was focused on the clinical superiority of a drug, rather than the scope of exclusivity. After the Gralise decision, the FDA eventually persuaded Congress to amend the law, which may be needed now, O’Brien said. Rachel Sher, a former director of policy at the National Organization for Rare Disorders who is now at Manatt, Phelps, & Phillips, said companies that would benefit from a broader award of exclusivity will sue to force the agency for the same reading of the Orphan Drug Act.

“Congress will need to act at some point,” said Sher, who also spent a decade on Capitol Hill as the FDA counsel for the House Energy and Commerce Committee.

Congress almost passed an amendment last year when it reauthorized the user fees that help fund the FDA. Then-Sen. Richard Burr (R-N.C.) argued to take the committee-added amendment out of the package, saying drugmakers would otherwise lack the incentives needed to develop drugs for rare diseases, according to Bloomberg Law.

Wilkinson, the patient advocate, has her own advice for Congress. The Orphan Drug Act itself — not just the exclusivity provision — needs to be fixed, she said.

“They have to change the law,” she said. Pharmaceutical companies should only win orphan drug status and be given exclusivity when they develop “a really new medication, not just by changing one molecule.”

Until then, Wilkinson said, she and others are still waiting: “I’m an old lady, and I don’t know if it is going to get fixed.”

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