Retroactive claims and administrative burden

In Fuck The Poor, Mayhew On Insurance by David Anderson

Last week, Kentucky announced that the state Medicaid program would start paying for dental and vision benefits again after those benefits were cut in a snit-fit when a federal judge noted that the point of Medicaid is to pay for medical expenses.  Normal benefits will resume on August 1.  Claims will be paid for services rendered in July.

My days as an insurance company plumber forced me to cringe.  Paying retroactive claims after a blanket denial is a good way to light administrative money on fire.  A well run claim system can process a regular claim that does not need to be touched by a person for under a $1.00 per claim.  As soon as a claim needs to be manually reviewed, the cost to process a claim jumps to at least $5.00 per claim.  Complex interventions on a claim can drive costs even higher.

Assuming that the Kentucky claims systems are anything like what I am familiar with, these back-ups, reversals, resubmissions and repayments can probably be batched and sent through fairly easily.  But it is still a good way to light money on fire for no productive purposes.

Bruce Japsen at Forbes is looking at the administrative costs of validating work requirements:

“In its biennial budget, Kentucky’s Medicaid administration costs increased more than 40%, or $35 million, from prior biennium to $116 million, which Fitch partially attributes to implementing Medicaid work requirements,” Eric Kim, the lead analyst for Fitch on the report, “Medicaid Waiver Actions Limit U.S. States’ Cost Controls,” wrote. “In addition to systems development and ongoing monitoring for the roughly 200,000 Medicaid enrollees, Kentucky estimates could be subject to the work requirements and could also contribute to the higher administration costs…. “Work requirements require tracking systems that few, if any, states have.””

Arkansas spent millions to build a Medicaid premium collection system that collected 5% of the system build-out expense.

Medicaid can be an efficiently run program when its structure is allowed to pay claims and coordinate care. Doing anything else is a good way to light money on fire.