2009-10 Budget Analysis Series: Health

DHCS—The Broker Model for Medicaid Nonemergency Medical Transportation

In order to help Medicaid enrollees obtain better access to health care services, the federal government requires state Medicaid programs to provide necessary medical transportation to and from health care providers, even if no emergency is present. This benefit is known as NEMT, and includes such services as trips to and from scheduled medical appointments, return trips from hospital emergency rooms, and transfers between hospitals. Our review indicates that Medi–Cal potentially could improve the availability and quality of its NEMT services while reducing costs by contracting with a transportation broker to manage a portion of its NEMT services. We recommend that the state conduct a pilot program by contracting with such a vendor for two years to evaluate the potential for improvement.


NEMT in California. In California, NEMT is available only to those enrollees who have a documented medical condition that prevents them from travelling via ordinary means of transportation, such as taxies or buses. For example, persons who are confined to wheelchairs may be unable to ride in cars or public buses. Even if no permanent physical limitation is present, patients still may be unfit to travel without assistance following some types of medical treatment. A common example of this circumstance is a person who routinely receives dialysis treatments, which tend to leave the recipient at least somewhat unsteady for some time following treatment. The Medi–Cal Program offers three forms of NEMT: a wheelchair van, a gurney van (also known as a litter van), and an ambulance. Each of these is suitable in different types of medical circumstances.

The NEMT benefit is available both to Medi–Cal enrollees in managed care plans and to enrollees who receive treatment through FFS providers. We estimate that Medi–Cal provides about $100 million ($50 million General Fund) in NEMT services through FFS arrangements. Comprehensive data regarding how much Medi–Cal managed care plans spend on NEMT is not available because these costs are embedded in the rates paid to the health plans.

Medi–Cal Restrictions on NEMT Use. In order to ensure that enrollees indeed have a condition that requires NEMT services, Medi–Cal requires the transportation provider to submit a treatment authorization request (TAR) to Medi–Cal. Program staff located in two Medi–Cal regional offices review the TARs and either approve, modify, or deny them. Providers must submit documentation along with each TAR, such as a prescription or order signed by a physician, dentist, or podiatrist, that confirms the medical reasons necessitating the use of NEMT. For certain chronic medical conditions that require routine service, such as kidney dialysis, the department will approve a TAR for one year of service.

Medi–Cal NEMT Shows Potential for Improvement

Our review indicates that Medi–Cal’s NEMT benefit is not functioning as well as it could. Burdensome administrative requirements for providers may be limiting the types of services available to enrollees.

TAR Process Is Cumbersome. Ideally, a provider would obtain a TAR decision from Medi–Cal prior to transporting the recipient, but in practice the TARs are almost always evaluated after the service has been rendered. The DHCS indicates that it approves 80 percent of NEMT TARs submitted, while the remainder are modified, denied, or deferred for further consideration. Discussions with industry participants indicate that most Medi–Cal NEMT recipients are dialysis patients. That is due in part to the administrative effort needed to obtain TAR approvals. The NEMT companies are more likely to make the effort for those requiring dialysis on an ongoing basis, since each approved TAR is good for up to a year of services.

Adjudicating TARs also requires a disproportionate share of manpower for DHCS. The NEMT benefit generates nearly 300,000 TARs annually that the department must process. Only hospital inpatient services generate more TAR submissions, with more than 400,000 TARs annually, even though NEMT benefit costs are less than 2 percent of hospital inpatient costs.

Access to NEMT Providers May Be Uneven Around the State. Our review of NEMT claims data indicates that the services are not distributed evenly around the state. Medi–Cal enrollees who are aged, blind, or disabled use nearly all of the FFS NEMT wheelchair van services. Roughly one–third of these enrollees live in Los Angeles County, but over one–half of all wheelchair van services in the state occur in Los Angeles County.

Transportation Brokers Could Manage NEMT More Efficiently

A number of other states have achieved Medicaid program improvements by contracting some or all of their NEMT services to a transportation broker, a concept that we believe could work for Medi–Cal as well. By managing the NEMT benefit more efficiently, such brokers can better match patients with appropriate providers, improve the quality of services provided, and reduce costs.

How Transportation Brokers Work. Brokers can offer a range of service levels, from handling only the administrative tasks of screening transport requests to managing the full scope of the NEMT benefit. Under the full–scope approach, the broker may be likened to a managed care plan specifically for NEMT. Brokers often contract on a per member, per month basis for their services, similar to more traditional managed care plans that provider comprehensive benefits. In exchange, the broker screens NEMT companies and subcontracts with vendors it chooses to establish a network of service providers. The broker also establishes a single point of contact for patients to call when they need transportation services. When a patient calls to request transportation, the broker determines whether a wheelchair van or other level of service would be more appropriate, depending on the patient’s individual circumstances. The broker then finds a provider that serves that patient’s area and arranges with the provider to pick up the patient.

Advantages of Broker Management. Closer management of NEMT benefits via the use of brokers, from provider enrollment through the arrangement of services for beneficiaries, could improve this Medi–Cal benefit in several ways:

Risks of Broker Management. Although the transportation broker model offers a number of advantages, it poses some potential risks as well. As with other managed care arrangements, brokers with capitation contracts benefit financially by providing fewer services to Medicaid enrollees, creating the incentive to deny more services than may be appropriate under program requirements. Also, some NEMT providers who serve FFS Medi–Cal may not wish to contract with a broker or may not meet the broker’s standards for quality of service. A switch to a broker may create disruptive situations for some Medi–Cal beneficiaries in cases in which a Medi–Cal enrollee’s customary FFS transportation provider is not part of the broker’s network.

Other States’ Use of Brokers. Our review indicates that 24 other state Medicaid programs were using brokers to manage at least some part of their NEMT services in 2008, including New York, Colorado, Florida, and Massachusetts. These brokerage arrangements vary significantly by state in terms of what specific functions the broker performs and what geographic area of the state the broker manages. Some states contract with different brokers in different regions of the state, while other states delegate NEMT to local governments, who may contract with a broker or manage the benefit in–house. Reasons cited by states for switching to broker models include improved NEMT cost management, improved access to NEMT services, and reduction of NEMT fraud and abuse.

LAO Recommendation

Improved Service Delivery and Cost Savings Possible. Our review indicates that Medi–Cal could achieve both improvements in the performance of its NEMT FFS benefit as well as lower state costs. Other states’ experiences suggest that savings ranging between 15 percent and 35 percent (net of brokerage fees) are possible on the cost of these services. For Medi–Cal, those savings percentages could yield General Fund savings ranging from $7 million to $15 million annually on a statewide basis for benefit costs. Significant administrative savings—amounting to about $1 million General Fund annually could also result from the elimination of NEMT TARs and other NEMT administration.

Contract With Broker on Pilot Basis. While we believe that both programmatic and fiscal benefits are likely under a broker model, we also recognize that the brokered model would represent a substantial shift in the way this service is delivered for FFS beneficiaries. Additionally, it is not clear whether a statewide FFS benefit or a regional contracting system operated by one or more brokers would be more cost–effective and best improve service delivery.

Therefore, we recommend that the state implement a pilot program to evaluate a NEMT broker model for two years. The pilot program should operate in several counties and include both rural and urban areas to allow the state to evaluate the model in both settings. The state could ensure that the pilot project costs no more than the present cost of these services to the Medi–Cal Program by limiting the total reimbursement to the broker to the amount budgeted for NEMT in the counties where this new approach would be tried.

Following a two–year pilot, the state could evaluate the broker’s performance to determine whether it would be cost–effective to expand the contract to include additional FFS regions or all FFS NEMT services statewide. In the longer term, the state could also explore the idea of allowing a wider range of options than the existing three modes of transportation—wheelchair van, litter van, and ambulance—in order to assist more enrollees in accessing services at a reduced cost. The Legislature should adopt a statutory framework to guide the pilot program and to ensure that it is appropriately evaluated.

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