IRG Health Care Report

COMMON SENSE HEALTH CARE
REFORMS FOR WISCONSIN
Increasing Health Care Choice and

Competition for Wisconsin
A Policy Brief by Tomas J. Philipson, Stefano Bruzzo-Gallardo, and
Ruiquan Chang
Medicaid Reforms to Improve Service

and Protect Taxpayers
A Policy Brief by Chris Reader and Alex Ignatowski of IRG
MARCH 2023
A series of health care policy briefings presented by:

INTRODUCTION
The health care public policy debate has typically focused on the liberal agenda of
greater government involvement and control over the health care system and
expansion of government sponsored health coverage programs. While conservative
perspectives regarding consumer choice, transparency in pricing, and tax policy
mechanisms have been considered and partially enacted, the United States
continues methodically down a path toward government-run health care and
potentially a single payer system, as evidenced by the Affordable Care Act, various
pandemic-related policies, and the so-called Inflation Reduction Act of 2022.
Invariably, the conservative viewpoint has been on the defensive.
The reform recommendations outlined in this paper are designed to change this
dynamic by presenting compelling reforms that enhance consumer options,
increase the supply of health care, help address the severe health care workforce
challenges, and apply conservative principles to Medicaid and the insurance
exchange. They are presented under two parts.
Part I: Increasing Health Care Choice and Competition in

Wisconsin
Part one deals with increasing consumer choice and competition in health care and
was written for the Institute for Reforming Government by Tomas Philipson, the
Daniel Levin Professor of Public Policy Studies Emeritus at the University of Chicago
Harris School of Public Policy.
1. Expand the Scope-of-Practice (SOP) of Nurse Practitioners (NPs) in Wisconsin
Problem: Rigid agreements on the range of services health professionals such as NPs are
legally allowed to perform unnecessarily limits the overall supply of health care in
Wisconsin.
Policy recommendations:
I. Broaden the SOP of NPs and other professionals to allow them to utilize their full
skill set.
II. Eliminate requirements for rigid collaborative practices between different health
professions.
III. Evaluate emerging healthcare occupations to increase their access and thereby
drive down health care costs.
2. Grow the supply of Physicians (MDs) in Wisconsin
Problem: The state of Wisconsin is expected to face a shortage of 2,263 physicians by

2035, caused by an increase in the demand for health care, delays in increasing the
supply of health care, low acceptance rates at medical schools, and restrictions of
practice for physicians.
I. Increase the acceptance rates in medical schools to increase the total pool of
active MDs in the state.
II. Ease state-based licensing requirements to improve workforce mobility across
states.
III. Facilitate telehealth to improve patient access to health care.
IV. Ease restrictions on foreign-trained doctors.
3. Allow insurer networks in Wisconsin to be based on market needs
Problem: There are potential trade-offs between more flexible and rigid network
adequacy requirements. The state should apply the types of standards that are most
effective in the context of specific population and health needs.
I. More flexible networks in terms to facilitate competition and innovation among

providers and meet multiple needs for different populations and conditions.
II. More rigid networks in terms to reduce uninsured populations and generate
savings for taxpayers.
III. Pair with state-based amendment to current 1332 waiver under certain
requirements.
4. Allow site neutrality payments in the Medicaid Program in Wisconsin
Problem: The Medicaid program pays higher rates when procedures are performed in
HOPDs (Hospital Outpatient Departments) rather than at physician’s offices or ASCs
(Ambulatory Surgical Centers). There is little reason for such payment differentials when
the services offered are equivalent in the same office settings, and the patient’s health
status is similar, which could cause extra spendings to the government.
I. Embrace site neutral payment reform for State Medicaid program with
straightforward metrics.
II. Analyze financial benefits and health outcomes across different settings based on
comparable data.
III. Prioritize patients to ensure they receive individualized assessments of specific
care needs.
Part II: Medicaid Reforms to Improve Service and Protect
Taxpayers
Part two, authored by the Institute for Reforming Government policy staff and
fellows, under the guidance of and including Chris Reader, Executive Vice President,
and Alex Ignatowski, Director of State Budget and Government Reform, focuses on
reforms to Medicaid that will improve service and protect taxpayers.
1. Transition Medicaid childless adult (CLA) population to the Exchange
Problem: Wisconsin’s Medicaid program has seen an increasing number of CLAs added
to the program over the course of the public health emergency (PHE), from
approximately 158,000 in 2019-20, to 283,000 in August 2022.
Policy Recommendation:
I. Transition the CLAs to the Exchange. This requires a federal waiver or change in
federal law.
2. Integrate Direct Primary Care (DPC) into the Medicaid Program
Problem: Wisconsin’s Medicaid program utilizes managed care organizations (MCOs) or

health maintenance organizations (HMOs) to maintain responsibility for the care
provided to Medicaid members. Wisconsin contracts with 14 MCOs in the BadgerCare
Plus program (children, parents and caregivers, pregnant women, childless adults), and
supplemental security income (SSI) program, typically with 2-3 MCOs in each region.
Without a financial incentive to choose a particular primary care provider, many
members forgo their ability to choose a primary care provider from the allowed network,
and MCOs then often assign members to primary care providers. That means the cost
management benefit provided by DPC is not realized in the state system.
Policy Recommendation:
I. Require the Wisconsin Medicaid program to establish a pilot program to
integrate a DPC model for a select population within the Medicaid program.
3. Reassess Nursing Home Bed Limit
Problem: Long term care, including nursing home services, accounts for $4 billion of
Wisconsin’s $9.7 billion Medicaid program (SFY 2020). Wisconsin has a statutorily
imposed limit on the number of licensed nursing home beds, stifling competition and
impacting the spectrum of care.
Policy Recommendations:
I. Evaluate the impact of raising or eliminating the bed limit towards increased
competition, quality improvement, and balance in the continuum of care.
4. Increase Medicaid MCO Accountability, Quality, and Competition
Problem: Wisconsin’s Medicaid program utilizes fourteen managed care organizations

(MCOs) to ensure the care provided to Medicaid members, typically with 2-3 MCOs in
each region, determined through a “certification” process, with limited competitive
dynamics or new market entrants.
I. Wisconsin Medicaid should pursue more aggressive withhold and P4P strategies
with HMOs/MCOs.
II. The State should explore a more aggressive certification system, with enhanced
quality standards aimed at Wisconsin-specific health concerns.
5. Conduct 3rd Party Analysis of Wisconsin Medicaid Rx Purchasing Efficiency
Problem: Wisconsin’s Medicaid program prescription drug expenditures have more than
doubled from SFY18 to SFY20, from $302 million to $632 million (after Medicaid Drug
Rebate Program dollars are included).
I. Require a third-party analysis of the Wisconsin Medicaid drug purchasing and
rebate processes.
II. Request a SPA from the federal government to allow outcomes-based
arrangements.
III. Evaluate the opportunities for value-based purchasing for “high cost” drugs and
therapies.
6. Establish Consumer-Friendly Transparency
Problem: “Transparency” in health care and health insurance has been debated for
decades. Multiple Wisconsin legislatures, the federal government, and private providers
and insurers have attempted to bring clarity to the issue.
I. Adopt one or more models of more consumer actionable transparency, including
models from other states.
II. Establish regulatory mechanisms in Wisconsin to enhance compliance with
federal requirements.
The recommendations in part one and part two can be taken independently or in any
combination by lawmakers. Some of the items have been proposed in Wisconsin but not
yet enacted into law or implemented administratively. As demonstrated above, the list is
comprehensive and tackles challenges from different angles. Once enacted, these
reforms will set Wisconsin apart as a leading state in health care reform.
ABOUT THE AUTHORS
Tomas J. Philipson is the Daniel Levin Professor of

Public Policy Studies Emeritus at the University of
Chicago Harris School of Public Policy and directs the
Becker Friedman Institute’s Program on Foundational
Research in Health Care Markets and Policies within
the Health Economics Initiative. He is also an associate
member of the Department of Economics and a
former senior lecturer at the Law School. His research
focuses on health economics, and he teaches master's
and PhD courses in microeconomics and health
economics at the University. Tomas has advised a
bipartisan collection of federal officials on health care
matters, including serving as acting Director of the
White House Counsel of Economic Advisors under
President Trump and on the steering committee of
Vice President Biden’s Cancer Moon Shot Initiative.
Chris Reader, Executive Vice President at the Institute

for Reforming Government, was previously the Senior
Policy Director at Wisconsin Manufacturers and
Commerce (WMC), the statewide chamber of
commerce and manufacturers association. Chris
directed health care policy for WMC for eight years,
and represented employers on the Wisconsin
Worker’s Compensation Advisory Council
Alex Ignatowski is the Director of State Budget and

Government Reform at the Institute for Reforming
Government. Prior to IRG, Alex was the legislative
policy advisor for Waukesha County and held multiple
positions in Governor Scott Walker’s administration,
including serving as legislative advisor at the
Department of Health Services, Assistant Deputy
Secretary at the Department of Financial Institutions,
and advisor to several Public Service Commission
commissioners.
TABLE OF CONTENTS
Part I:
Increasing Health Care Choice and Competition in Wisconsin
A Policy Brief by Tomas J. Philipson, Stefano Bruzzo-Gallardo, and Ruiquan Chang
Executive Summary 2
Expand the Scope-of-practice (SOP) of Nurse Practitioners (NP) in Wisconsin 5
Grow the supply of Doctors of Medicine (MD) in Wisconsin 8
Allow insurer networks in Wisconsin to be based on market needs 14
Allow site neutrality in the Medicaid Program in Wisconsin 18
Part II:
Medicaid Reforms to Improve Service and Protect Taxpayers
A Policy Brief by IRG Policy Staff, Chris Reader and Alex Igantowski
Executive Summary 26
Transitioning Medicaid childless adult (CLA) population to the Exchange 27
Integrate Direct Primary Care into the Medicaid Program 29
Reassess Wisconsin’s Nursing Home Bed Limit 32
Increase Medicaid MCO Accountability, Quality and Competition 34
Conduct 3rd Party Analysis of Wisconsin Medicaid Rx Purchasing Efficiency, 37

and adopt Outcomes-Based Purchasing for Gene Therapies and Other High Cost
Drugs and Therapies
Establish Consumer-Friendly Transparency 40

Part I
Increasing Health Care

Choice and Competition in
Wisconsin
A Policy Brief by:
Tomas J. Philipson
Stefano Bruzzo-Gallardo
Ruiquan Chang
The University of Chicago
March 2023
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EXECUTIVE SUMMARY
This policy brief contains a set of recommendations for improving access and
competition in the state of Wisconsin’s health care system. These recommendations
are based on how current state and federal reforms apply to Wisconsin. The brief is
focused on four main problems, the evidence that effects them, and the
recommendations that the evidence suggest.
1. Expand the Scope-of-Practice (SOP) of Nurse Practitioners (NPs) in Wisconsin
Problem: Rigid agreements on the range of services health professionals such as NPs
are legally allowed to perform unnecessarily limits the overall supply of health care in
Wisconsin.
Evidence:
• Several states temporarily expanded the SOP for NPs during the COVID-19
pandemic, reducing the number of COVID-related deaths due to the increase
in the supply and services of NPs.
• NPs typically expand access to primary care for vulnerable groups and
underserved areas.
• The expansion of other health care professionals’ SOP typically increases the
overall supply of health care services in the state.
I. Broaden the SOP of NPs and other professionals to allow them to utilize their
full skill set.
II. Eliminate requirements for rigid collaborative practices between different
health professions.
III. Evaluate emerging healthcare occupations to increase their access and
thereby drive down health care costs.
2. Grow the supply of Doctors of Medicine (MD) in Wisconsin
Problem: The state of Wisconsin is expected to face a shortage of 2,263 physicians by

2035, caused by an increase in the demand for health care, delays in increasing the
supply of health care, low acceptance rates at medical schools, and restrictions of
practice for physicians.
Evidence:
• The current unmet demand for health care is driven by the shortage of
primary care physicians, the slow growth of new professionals in the area, and
the retirement of the current workforce.
• Increasing the supply of primary care physicians and MDs can reduce
mortality, deconcentrate the health care market and potentially lower the
prices of health care in Wisconsin.
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• Increasing the availability of physicians and MDs can be achieved by
increasing acceptance rates in medical schools and by removing barriers of
practice in the state.
I. Increase the acceptance rates in medical schools to increase the total pool of
active MDs in the state.
II. Ease state-based licensing requirements to improve workforce mobility across
states.
III. Facilitate telehealth to improve patient access to health care.
IV. Ease restrictions on foreign-trained doctors.
3. Allow insurer networks in Wisconsin to be based on market needs
Problem: There are potential trade-offs between more flexible and rigid network
adequacy requirements. The state should apply the types of standards that are most
effective in the context of specific population and health needs.
Evidence:
• Rigid network adequacy requirements lower the costs for enrollees, where the
monthly premium of a health plan with narrow networks is 6.7% less than a
plan with broad networks.
• Flexible network adequacy requirements will:
o Offer enrollees adequate choice and access to providers.
o Allow health plans to meet the needs of heterogeneous populations
and account for different program characteristics, degrees of rurality,
and constraints with workforce supply.
o Encourage providers from competing on price and quality to attract
patients.
I. More flexible networks in terms to facilitate competition and innovation
among providers and meet multiple needs for different populations and
conditions.
II. More rigid networks in terms to reduce uninsured populations and generate
savings for taxpayers.
III. Pair with state-based amendment to current 1332 waiver under certain
requirements.
4. Allow site neutrality in the Medicaid Program in Wisconsin
Problem: The Medicaid program pays higher rates when procedures are performed
in HOPDs (Hospital Outpatient Departments) rather than at physician’s offices or
ASCs (Ambulatory Surgical Centers). There is little reason for such payment
differentials when the services offered are equivalent in the same office settings, and
the patient’s health status is similar, which could cause extra spendings to the
government.
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Evidence:
• At the national level, HOPD services are projected to grow 8.3 times higher
than physician fee schedule through 2032.
• Midwest region has the highest share of physicians employed by hospitals
and physician practices owned by hospitals, where payment rate disparities
are more serious.
• For Wisconsin, site neutrality in the Medicaid program can reduce cost-
sharing burden to a large extent:
o The fee-for-service spending for outpatient services in Wisconsin’s
Medicaid program is 7.6 times higher than the spending for physicians’
offices in 2021.
o Wisconsin is the top 10 states with highest state share of Medicaid
spending (38.4%).
I. Embrace site neutral payment reform for State Medicaid program with
straightforward metrics.
II. Analyze financial benefits and health outcomes across different settings
based on comparable data.
III. Prioritize patients to ensure them to receive individualized assessments of
specific care needs.
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1. Expand the Scope-of-practice (SOP) of
Nurse Practitioners (NP) in Wisconsin
1.1 Background
According to the American Association of Nurse Practitioners (AANP), Nurse
Practitioners (NPs) with full autonomy are authorized to “evaluate patients;
diagnose, order and interpret diagnostic tests; and initiate and manage treatments”
(AANP, 2022).
In each state, scope-of-practice (SOP) regulations primarily define the services a

health professional is legally allowed to perform. While 22 states and the District of
Columbia currently support NP full SOP, the remaining stares either reduce or
restrict NP SOP by requiring NPs to have collaborative or supervisory relationships
with physicians to practice. Such restrictions are, for example, that NPs are not
allowed to practice independently or prescribe medications without a physician’s
cosignature (Barton Associates, 2017). An additional 11 states do not allow advanced
practice registered nurses (APRN) full practice authority but impose fewer
restrictions than Wisconsin.
These inconsistent patterns in NP regulations lead to wide variations in the

independent practice of NPs across the states and potentially affect the ability of this
workforce to help the country to meet the growing need for health-care services, by
limiting the supply of NPs in needed areas (Poghosyan & Carthon, 2017).
Figure 1: Nurse Practitioners practice level by state
Source: American Association of Nurse Practitioners (AANP), State Practice

Environment, 2022.
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The pandemic-related changes also provide an opportunity to alter the assumption
that SOP cannot be expanded without extensive evidence of safety. Given the COVD
waivers (Chung, 2020), however, the presumption should be that regulatory changes
should remain unless there is evidence of harm (Weiner, 2021).
1.2 Problem
These regulations in the NP’s SOP may impose unnecessary restrictions on provider
supply and, therefore, competition. Oftentimes, SOP restrictions limit provider entry
and ability to practice in ways that do not address demonstrable or substantial risks
to consumer health and safety (U.S. Department of Treasury, 2015; Cox and Foster,
1990, FTC, 2014). When this happens, these undue restrictions are likely to reduce
healthcare competition, the overall supply, and harm consumers (FTC, 2014; Xue et
al., 2019).
Recently, Wisconsin’s Governor Tony Evers has vetoed a bill that would have granted
APRNs the legal ability to practice independently. The governor’s action was
supported by the American Medical Association (AMA) and the Wisconsin Medical
Society1, and revokes Senate Bill 394, which would have removed physician
supervision or collaboration requirements for nurse practitioners, nurse anesthetists
and clinical nurse specialists after 3,840 clinical care hours in their respective APRN
role with a physician or dentist.
Extremely rigid collaborative practice agreements and other burdensome forms of

physician and dentist supervision are generally not justified by legitimate health and
safety concerns (FTC, 2014; Xue et al., 2019). For example, restrictive physician
supervision protocols for APRNs impede fully collaborative care because they limit
what health care professionals and providers can do to adapt to varied health care
demands and constrain provider innovation in team-based care, while increasing
healthcare costs and constraining innovation in health care delivery models (FTC,
2014).
Thus, many states have granted full practice authority to Advanced Practice
Registered Nurses, but there is significant room for improvement in other states and
for other professions, given that only 22 states grant full practice authority to them
(AANP, 2022). Emerging healthcare occupations, such as dental therapy, can
increase access and drive down costs for consumers, while still ensuring safe care.
1.3 Evidence
Current evidence shows that expanding the SOP can have a positive impact in the
overall supply of NPs, equity, and access to healthcare services in the state of
Wisconsin.
Reduction of COVID-19 deaths
1
Wisconsin’s Governor Evers vetoes APRN independent-practice bill. https://www.ama-
assn.org/practice-management/scope-practice/wisconsin-s-gov-evers-vetoes-aprn-independent-
practice-bill
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During the COVID-19 pandemic, in order to address the health workforce shortage, a
number of states temporarily expanded the SOP of highly trained personnel, such as
nurse practitioners (NP). It is shown that in the Midwest states that adopted this
measure, COVID related deaths were potentially reduced by 10 cases per day
between March and April of 2020 (Chung, 2020). At the same time, if Illinois (one of
the only two Midwest states which did not expand the SOP for NP, along with Ohio)
had expanded the SOP, it is estimated that 8% fewer COVID-19 deaths would have
occurred in the Cook County, the most affected area in the state (Chung, 2020) (data
not available for Wisconsin).
Equity and access to healthcare services

The expansion of the services NPs are allowed to perform has the potential to
expand the access to primary care for vulnerable groups. Since NP workforce is well
distributed and growing in low-income and rural areas, this measure would
counterbalance the maldistribution of the physicians supply, benefiting many racial
and minority patients who live in geographically underserved areas (Gaskin, et al.,
2012; Xue et al., 2019).
At the same time, there’s evidence that states with less restrictive NP SOP
regulations had a 2.5-fold greater likelihood of patients receiving primary care from
NPs than states with restrictive SOP laws (Kuo et al., 2013). Thus, evidence is
supportive of removing the regulatory restrictions on NP SOP to enhance access to
high-quality primary care.
Expansion of other specialists’ SOP

Advanced Practice Registered Nurses (Institute of Medicine, 2011), physician
assistants (U.S. Congress, 1986), pharmacists, optometrists (Bureau of Consumer
Protection, 1977), and other highly trained professionals can safely and effectively
provide some of the same healthcare services as physicians, in addition to providing
complementary services. Similarly, dental therapists and dental hygienists can safely
and effectively provide some services offered by dentists, as well as complementary
services (FTC, 2013).
For example, evidence from 10 years of experience in Alaska shows that dental
therapists have made a positive difference, for both children and adults, with the
same quality of care as dentists, improving outcomes like more preventive care,
fewer teeth removed, and fewer dental emergency visits (Chi et al., 2018).
Analogously, for physical therapists, for which all states allow direct access, but
insurers require a physician referral, there’s evidence that attending to a physical
therapy first instead reduces the risk of subsequent opioid use in patients (Sun et al.,
2018).
1.4 Policy Recommendations

According to the presented evidence, the suggested measures to expand the scope-
of-practice in order to increase the availability of Nurse Practitioners are as follows:
I. The state of Wisconsin should consider changes to broaden their scope-of-

practice for Nurse Practitioners (NP) and other profession’s statutes to allow
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all healthcare providers to practice to the top of their license, utilizing their full
skill set.
II. Similarly, Wisconsin should consider eliminating requirements for rigid
collaborative practice and supervision agreements between physicians and
dentists and their care extenders (e.g., physician assistants, hygienists) that
are not justified by legitimate health and safety concerns.
III. Furthermore, Wisconsin should evaluate emerging healthcare occupations,
such as dental therapy, and consider ways in which their licensure and scope
of practice can increase access and drive down consumer costs while still
ensuring safe, effective care.
"Credentialing" functions within hospitals and health plans is another barrier that
adds cost and time to the hiring process. Is this something to address, and is there
any data on the issue?
2. Grow the supply of Doctors of Medicine

(MD) in Wisconsin
2.1 Background
While Medical Schools applications in the USA have been steadily increasing in the
last 20 years, the number of acceptees has been stagnant, dropping the national
acceptance rate from 52% in 2002 to 38% in 2021 (Association of American Medical
Colleges, 2021). As Figure 2 shows, after the 2020 pandemic, the number of
applications spiked, yet the number of acceptees did not increase proportionally,
drastically lowering the acceptance rate in medical schools despite the rise in
applicants.
Figure 2: U.S. Medical School Total Applications and Acceptees, 2002-2021
70,000 62,443 60%

60,000 50%
52%
50,000
40%
40,000 33,623
38% 30%
30,000
20%
20,000
23,711
10,000 17,592 10%
- 0%
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Applicants Acceptees Acceptance rate
Source: Association of American Medical Colleges, 2021.
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Currently, in the state of Wisconsin, the Medical College of Wisconsin has an
acceptance rate of 7.0% (353 admitted and 271 matriculants for 2022) for the Doctor
of Medicine (MD) program, while the University of Wisconsin-Madison has a rate of
5.2% (287 admitted and 175 matriculants for 2022).
Table 1: Acceptance rates and matriculants in MD programs in the state of

Wisconsin, 2021
Acceptance Rate Applicants Admitted Matriculants Rate of matriculants/admitted2

Medical College of
7.0% 5,041 353 271 76.8%
Wisconsin
University of
5.2% 5,474 287 175 61.0%
Wisconsin-Madison
Source: University of Wisconsin School of Medicine and Public Health, Medical
College of Wisconsin websites (retrieved in August 2022).
Due to this low acceptance rate, as of 2021, Wisconsin had 1,796 students enrolled in
MD granting schools, for a rate of 30.8 MD students per 100,000 habitants, below the
national median (38.6 students) and positioning the state on number 33 in a national
states rank (Association of American Medical College, 2021) (see Table 2).
Table 2: Wisconsin’s current state of students enrolled in MD granting schools with

current acceptance rate (2021)
Students Enrolled in MD
Year State Population Rate per 100,000 National Rank National Median
granting schools per year
2020 5,822,434 1,796 30.8 32 38.6
2018 5,813,568 1,770 30.4 32 32.7
2016 5,778,708 1,703 29.5 28 32.7
2014 5,757,564 1,602 27.8 31 30.4
2012 5,726,398 1,594 27.8 - 29.1
At the same time the amount of MD students is stagnant, due to aging, population
growth, and a greater insured population following the Affordable Care Act (ACA),
physician availability to patients has been recognized as one of the top barriers to
meet the healthcare needs of patients in the US: the Bureau of Labor Statistics
predicts that 91,400 physician jobs will be needed nationally; this is a 13% increase
from 2016 to 2026 (Bureau of Labor Statistics, 2019). It is expected that by 2030, 36
states will have a shortage of physician workforce (Zhang et al., 2020), and in a recent
study, the Association of American Medical Colleges (AAMC) predicted that by 2030,
the demand for doctors will outstrip the supply and that the United States of
America will experience a shortage of up to 121,000 physicians (Association of
American Medical Colleges, 2018).
2
This rate is presented because it is used for later calculations (see Table 3), but there is no specific
rationale for the difference in this rate between the two schools.
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Additionally, according the AAMC, as of 2020 45% of practicing physicians are over
55. This means more than 2 of every 5 active physicians will be over 65 in the next
decade, suggesting that nearly half of all physicians who are currently practicing will
be retired by 2030 (Association of American Medical Colleges, 2020). Moreover, 30%
of physicians retire between the ages of 60 and 65 and 12% retire before the age of
60 (AMA Insurance, 2018).
2.2 Problem
Wisconsin is expected to face a shortage of 2,263 physicians by 2035 (Zhang et al.,
2020), and 745 primary care physicians (PCP) by 2030, which is equivalent to 16% of
the overall supply predicted by that year (Wisconsin Council on Medical Education
and Workforce, 2021). The unmet need, however, was previously identified to
potentially range from a surplus of 24.4% to a deficit of 93.7% depending on the
Hospital Service Area (Wisconsin Council on Medical Education and Workforce, 2018)
(data not available for 2021), as indicated in Figure 1.
Figure 1: Projected Primary Care Physician Deficits, percent of all unmet need
(predicted for year 2035)
Source: Wisconsin Council on Medical Education and Workforce, 2018.
This forecast considers that while the population is expected to increase 12%
statewide, demand is expected to increase by over 20%, with the supply of PCPs
projected to increase by approximately 4%, and around 40% of Wisconsin’s supply of
PCP is expected to retire by 2035 (Wisconsin Council on Medical Education and
Workforce, 2018).
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Furthermore, in the last decade, hospital and physician organization markets
became increasingly concentrated in the US, where concentration among primary
care physicians increased the most, partially because hospitals and health care
systems acquired primary care physician organizations and workforce (Fulton, 2017;
Health Care Cost Institute, 2019). This means that healthcare services in the US are
served by few providers, which concentrate a large share of the market, a
concentration that is accentuated by the shorter supply of physicians and doctors.
These high levels of market concentration are usually associated with higher prices
in healthcare (Schneider et al., 2008; Gaynor et al., 2015; Gaynor et al., 2012).
Still, the current and projected shortage of primary care physicians and specialists in
the US and in the state of Wisconsin is driven by the present bottleneck in physician
supply and training at the level of graduate medical education, caused by medical
school enrollment caps (average acceptance rates of 5% nationwide and 6.1% in
Wisconsin in 2022) and a large portion of the physician workforce nearing traditional
retirement age (Association of American Medical Colleges, 2021).
Altogether, it is expected for the country and Wisconsin to face a considerable

shortage of physicians, led by an unmet increasing demand, the slow growth of new
professionals in the area and the retirement of the current workforce. This shortage
is expected to cause both a decrease in the amount of healthcare services provided
and an increase in the concentration of providers, with a consequent increase in
healthcare prices and, therefore, lower chances for the population to access quality
services in the state.
2.3 Evidence
In order to meet the increasing demand of healthcare services, current evidence
points towards 2 directions: (i) Increasing the supply of primary care physicians and
MDs; and (ii) removing barriers of practice for physicians. These measures are
associated with increasing the overall supply of healthcare services in the states and
deconcentrating the healthcare market, which can potentially lower the prices of
healthcare.
Increasing the supply of primary care physicians and MDs

It has been documented that increasing the primary care physician supply is
associated with improved efficacy in healthcare (Starfield, 2012) and health
outcomes, including all-cause, cancer, heart disease, stroke and infant mortality; low
birth weight; life expectancy; and self-rated health (Gulliford, 2002; Macinko et al.,
2005, 2011; Starfield and Shi, 2002; Starfield, 2012). Particularly in the US, other
findings suggest that the increase of one primary care physician per 10,000
population can be associated with an average mortality reduction of 5.3 percent, or
equivalently, 49 less deaths per 100,000 people per year (Macinko et al., 2007).
Additionally, as described in the previous section, high levels of market

concentration are usually associated with higher prices in healthcare (Schneider et
al., 2008; Gaynor et al., 2015; Gaynor et al., 2012). Moreover, higher concentration in
health care markets are also associated with higher physician prices: It has been
found that an increase in 10% in the market concentration of physicians
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organizations3 is associated with 1% to 4% higher physician prices (Schneider et al.,
2008), suggesting that increasing the supply and competition, and thus lowering
the market power concentration, could lower the prices of healthcare in the states.
Table 3 shows a simulation based on the data provided in Table 2, considering a

slightly higher acceptance rate of 15% for each school (currently 7.0% and 5.24% for
the Medical College of Wisconsin and the University of Wisconsin-Madison,
respectively). Under these conditions, the state of Wisconsin could potentially
increase the total students enrolled in MD programs, and consequently increasing
the rate of MDs per 100,000 habitants, positioning them above the national median,
and in a higher rank at national level (a higher ranking position -lower number-
indicates a higher rate of enrolled students per 100,000 habitants).
Table 3: Wisconsin’s MD students estimation with 15% acceptance rate for both
schools
New Acceptance Rate (15% for both schools)

Year Students Enrolled in MD granting schools per year New Rate per 100,000 habitants New National Rank
2020 2,432 41.8 21
2018 2,406 41.4 20
2016 2,339 40.5 19
2014 2,238 38.9 17
2012 2,230 38.9 -
Source: State Physician Workforce Data Report (2021, 2019, 2017, 2015), Association of
American Medical Colleges.
This estimation considers a constant rate of 76.8% and 61.0% of matriculants over
admitted students respectively for both schools and constant amount applicants
over time (see Table 1), so we can estimate the increase in total students enrolled in
MD programs.
Under this estimation 636 additional students could potentially be enrolled in

Wisconsin’s medical schools each year, showing a glance of how the state could
potentially increase their MD supply by increasing the acceptance rate of their
medical schools.
Increasing availability of MDs by removing barriers of practice

The “Reforming America’s Healthcare System Through Choice and Competition
analysis” (U.S. Department of Health and Human services, Department of the
Treasury, and Department of Labor, 2017) document has also identified 3 critical
dimensions which can increase the supply of Medical Doctors in the states:
Workforce Mobility
3
Measured as the Herfindahl-Hirscham index (HHI) of concentration, a standard method for measuring
market concentration (Viscusi et al., 1996), that goes from 0 to 10,000, where an HHI of 10,000 indicates
an industry or market consists of a single seller.
- 12 -
State-based licensing requirements, by their nature, inhibit provider mobility.
Licensing rules are in most cases state-based, establishing licensure requirements
and enforcement standards of practice for health providers, including physicians,
nurses, pharmacists and other types of practitioners (U.S. Department of Health and
Human Services, 2010). These requirements add time and expense when healthcare
providers seek to move or work across state lines, whether or not appropriate
standards of care do not differ from state to state.
Consequently, markets cannot be as responsive to economic change when workers

cannot easily move to meet the demand for their services (FTC, 2017), a
phenomenon that is created by the difficulty for qualified healthcare professionals
licensed in one state to work in another state, even while having same education
background, training programs and certifications (U.S. Department of Health and
Human Services, 2010).
Telehealth services
Telehealth, the use of telecommunications to provide healthcare services, has been
hailed as a significant innovation in healthcare delivery (Lustig, 2012). Examples of
healthcare services that have been proved to effectively provided by telehealth
include mental health services (Hilty et al., 2013), dermatology (Coates et al., 2015),
ophthalmology (Fierson et al., 2015) specialist-to-provider consultations in neurology
and pathology (Schwamm et al., 2009) and direct-to-consumer services for minor
conditions (Mehrotra et al., 2013).
In particular, telehealth was proved to be particularly efficient during the COVID-19

pandemic. The advantages of having a non-in-person service rely on the feasibility of
preventing, diagnosing, treating, and controlling diseases without physically visiting
a physician, a key element to prevent spreading during COVID-19 outbreak
(Abraham et al., 2020; Monaghesh & Hajizadeh, 2020). Beyond that, since the
pandemic changed the landscape of health care delivery, many health care
providers have shifted to virtual care delivery in order to maintain the continuity of
care during this time (Haque, 2021).
Moreover, telehealth often increases the virtual supply of providers and extends their
reach to new locations, promoting beneficial competition. By doing so, telehealth
healthcare services can enhance price and non-price competition, reduce
transportation expenditures, and improve access to quality care in underserved
locations (Committee on Pediatric Workforce, 2015, Haque 2021).
Restrictions on Foreign-trained Doctors

Currently, any physician trained outside the United States or Canada must obtain an
Educational Commission for Foreign Medical Graduates (ECFMG) certification,
complete a United States residency program, and apply for a state license, which is
an extensive process. This burden varies across physicians but represents an unduly
entry barrier into the profession that lowers entry for physicians on the margin.
Yet, international medical graduates (IMGs) have already helped meet the growing
need—over 25% of current physicians in the US were trained abroad (Carroll, 2017);
and a high percentage of them cover densely populated, low-income communities
- 13 -
with sicker residents and low physician density (Kaushal et al., 2022). Moreover,
existing evidence suggests that the quality of patient care provided by IMGs is at
least as good as that provided by US medical graduates (Mick & Comfort,
1997; Tsugawa et al., 2017), suggesting that excessive concerns that IMGs presence
compromises the quality of medical care are unwarranted (Desbiens & Vidaillet,
2010; Norcini et al., 2010).

According with the evidence presented, our recommendation for the state of
Wisconsin are the following:
I. Increasing Acceptance Rate in Medical Schools to increase the total pool of

active Medical Doctors (MD) in the state: A higher supply of MDs would
increase the overall supply of physicians in the state along with reducing the
market concentration of healthcare services by expanding the total available
supply of healthcare providers. This can be achieved by increasing the
number of accepted applications by Medical Schools in the state and has the
potential of increasing competition between providers and lowering the
overall prices of healthcare services in the state.
II. Improve Workforce Mobility: The state of Wisconsin should consider adopting
interstate compacts and model laws that improve license portability, either by
granting practitioners licensed in one state a privilege to practice elsewhere,
or by expediting the process for obtaining licensure in multiple states.
III. Facilitate Telehealth to improve Patient Access: Facilitate and promote
telehealth consultations, by increasing the virtual supply of providers and
primary care services, extending their reach to new and underserved locations
and promoting competition between providers.
IV. Ease restrictions on Foreign-trained Doctors: The state of Wisconsin should
create an expedited pathway for highly qualified, foreign- trained doctors
seeking licensure who have completed a residency program equivalent to an
American Graduate Medical Education (GME) program.
3. Allow insurer networks in Wisconsin to be

based on market needs
3.1 Background
Network adequacy refers to a health plan’s ability to deliver the benefits promised by
providing reasonable access to a sufficient number of in-network primary care and
specialty physicians, as well as all health care services included under the terms of
the contract (National Conference of State Legislatures, 2018). Starting with the 2018
plan year, the Trump Administration ended direct federal oversight of qualified
health plan (QHPs) networks and deferred them to state oversight. Though states
have enacted laws to ensure that provider networks are of adequate size, federal
oversight is scheduled to resume for the 2023 plan year. In place of previous
- 14 -
mandatory time and distance standards, CMS suggests several alternative
quantitative standards that states may elect to use (KFF, 2022; CMS, 2022):
• Time and distance standard: this standard is used to determine whether

participating providers are geographically accessible to plan enrollees.
Beginning in 2023, CMS has proposed time/distance standards for various
types of providers and facilities, where at least 90 percent of enrollees must
live within the maximum distance to at least one provider of each type.
• Provider-to-enrollee ratio standard: this standard establishes minimum

provider-to-enrollee ratios. Under Medicare Advantage plans (Part C), plans
must contract with at least 1.67 primary care physicians per 1,000 beneficiaries.
Under the Medicaid program, CMS does not require minimum ratios. For
example, the minimum ratio of primary care providers to enrollees in
Wisconsin 1:1500 (State of Wisconsin Department of Health Services, 2020).
• Appointment wait time standard: this standard sets maximum wait times for
certain types of services. CMS conducts compliance reviews in response to
complaints and random audits, where issuers would attest that 90% of
contracted providers meet the wait-time standard. Medicare Advantage plans
currently are not required to meet appointment wait time standards;
Wisconsin’s Medicaid program varies standards based on times and services.
• Other standards: qualified health plans (QHPs) are required to contract with a
minimum number of available essential community providers (ECPs).
Beginning in 2018, the Trump Administration reduced the percentage of
available ECPs from 30% to 20%. For 2023, CMS has proposed to increase the
threshold to 35%. In addition, other standards are under consideration. CMS
proposes to seek comment in 2023 on whether and how telehealth availability
might be incorporated into network adequacy standards.
3.2 Problem
While most states (89.7%) report time and distance standards for network adequacy
that considers local populations and geographies (Zhu et al, 2022), there remains
considerable variation in access standards across health insurance. For example,
since the CMS loosened requirements for Medicaid managed care final rules in 2020,
more states are using alternative quantitative standards above in conjunction with
the traditional time and distance standards.
Currently, the state of Wisconsin applies multiple network adequacy requirements

for different service types of Medicaid4. Providers for services such as AODA services,
mental health services, and adult day care and habilitation services, etc. shall meet
the standards for both time and distance and provider to member ratios. Providers
for community support programs, personal care, skilled nursing services, and
4
Wisconsin Department of Health Services, Division of Medicaid Services (2020). Managed Care
Organization (MCO) Provider Network Adequacy.
https://www.dhs.wisconsin.gov/publications/p02542.pdf
- 15 -
personal emergency response systems services will meet the standards for provider
to member ratios, the wait time to recipient, or both. However, there are potential
trade-offs between flexible and rigid network adequacy requirements. More
investigation is needed to understand the types of standards that are most effective
in the context of specific population and health needs.
3.3 Evidence
Benefits of rigid network adequacy requirements
Greater rigidity in network adequacy requirements can lower the premiums for
enrollees, reduce the number of uninsured people, and generate savings for
taxpayers. Health plans with a narrow network had a monthly premium that was 6.7
percent less than a plan with a broad network (Polsky et al, 2016). Another study
shows premiums for narrow network plans are 13 to 17 percent lower on average
than those with broad networks (Ginsburg, 2014). This could be achieved through
several mechanisms. First, a narrow network can reduce health care costs of
beneficiaries by removing high-cost providers from the network (Ho, 2005). Second,
a narrow network could reduce costs by negotiating lower reimbursement rates
with providers in exchange for greater volume of patients to them (Polsky et al,
2004). Third, by removing high-cost providers, the plan could establish favorable risk
selection because healthier and lower-cost beneficiaries would be more likely to
select it (Shepard, 2022).
In addition, narrower provider networks are a feasible tool to contain costs and foster
improved quality when Any Willing Provider Laws (AWP) are present. Including
Wisconsin, a total of 27 states now have AWP statutes. Specifically, the law in
Wisconsin applies to health care professionals, services, facilities, and organizations
(Medtrade, 2020). According to Ginsburg (2014), AWP laws lead to higher state
healthcare spending and interfere with meeting consumer and employer demand
for lower-priced plans. Healthcare providers are spurring great efforts to pass such
laws in order to protect themselves from further competition, which will become
more disruptive to financing such that the costs to consumers, employers and
taxpayers could be even larger than in the past. Rigid network adequacy
requirements can offset the potential negative impacts of the AWP laws by simply
excluding providers who do not meet the quality standards.
A narrow network is particularly beneficial to lower-income consumers who tend to

be price sensitive and are more interested in the size of the premium relative to the
breadth of the network (Finkelstein, 207). This is much less of an issue for Medicaid
beneficiaries due to the heavy federal subsidies under the recent Inflation Reduction
Act. As part of the Inflation Reduction Act, the Senate passed a three-year extension
of enhanced subsidies for people buying their own health coverage on the
Affordable Care Act Marketplaces, which are estimated to reach $64 billion through
2025 (CRFB, 2022).
Benefits of flexible network adequacy requirements
- 16 -
Offer enrollees adequate choice and access to providers.
A narrow network may have insufficient capacity to serve all enrollees within a
health plan because the providers may be too geographically dispersed to be
reasonably accessible, leading some enrollees with only the option of more
expensive health care from out-of-network providers (Hall et al, 2017). These issues
pertain to private insurance as well as Medicaid managed care and Medicare
Advantage plans, where insurers generally contract with a limited number of
providers. The economic burden of receiving out-of-network care is substantial. This
is especially true for lower-income populations because the cost-sharing reductions
that the ACA provides are not available out-of-network. Therefore, flexible
requirements can give enrollees more choices and access to providers by ensuring
that provider networks are adequate in size and scope of coverage.
Allow health plans to meet the needs of heterogeneous populations and account for
different program characteristics, degrees of rurality, and constraints with workforce
supply.
According to Zhu et al (2022), current standards largely rely on single travel time or
distance dimensions of access, without adequately reflecting availability and
acceptability. For example, Medicaid managed care allows each state to determine
the criteria to be applied to telehealth providers and how such providers would be
considered when evaluating network adequacy beginning in 2020 (CMS, 2020). In
this context, the traditional time and distance standards may not be an appropriate
criterion, particularly if telehealth access occurs at the expense of necessary in-
person care or if telehealth has inequitable uptake across communities. Therefore,
broader network adequacy requirements allow states to consider new modalities for
which traditional time and distance standards do not apply.
Encourage competition in price and quality to attract patients.

Narrow networks give insurers leverage in their negotiations with providers over
lower reimbursement rates that are detrimental for enrollees. In addition, narrow
measures used to determine network adequacy may discourage innovative ways to
meet enrollee’s preferences. For example, only using proximity measures may
discourage insurers from developing telemedicine capabilities and utilizing regional
or national care centers outside the residency area (Urban Institute, 2016). Moreover,
network adequacy requirements forcing insurers to contract with outside providers
will undermine the vertically integrated health systems that promote delivery-
system innovation and care coordination (Howard, 2014). To bolster more
competition and innovation, network adequacy standards should place greater
emphasis on network outcomes while giving states flexibility to meet their specific
needs (U.S. Department of Health and Human Services, 2020).

On the basis of boons and banes for flexible or rigid network adequacy
requirements, the government should establish policies which benefit more
consumers and protect the interests of providers based on actual market needs.
I. To facilitate competition and innovation among providers, meet

heterogenous needs for different populations, and provide more choices for
- 17 -
enrollees, Wisconsin should consider loosening network adequacy standards
and avoid stringent requirements that are not conducive to innovation and
modern medicine.
II. To reduce the number of uninsured people, lower the economic burdens for
low-income populations, and generate savings for taxpayers and state
spending, Wisconsin should restrict network adequacy requirements to
control health care costs.
III. It is also plausible to pair the state-based amendment to the current 1332
waiver5. While the ACA provides states with flexibility to alter certain
provisions using 1332 waiver authority, it establishes guardrails that limit the
extent of the changes states may make. The current law requires state waiver
applications to demonstrate that coverage that is at least as comprehensive in
covered benefits; at least as affordable; cover at least a comparable number of
state residents; and not increase the federal deficit. The Kaiser Family
Foundation (2020) provides the status of 1332 waivers requested by states.
4. Allow site neutrality in the Medicaid

Program in Wisconsin
4.1 Background
Health insurance beneficiaries can receive services in different settings and from
different type of providers under the fee-for-service reimbursement, and the same
services can be offered in more than one setting in some cases (Health Affairs, 2014).
For example, a beneficiary could receive chemotherapy in either a physician’s office
or a hospital outpatient department. Over the past decade, for the same medical
services that are equally safe and effective, the Medicare and Medicaid program pay
higher rates when they are performed in Hospital Outpatient Departments (HOPDs)
than at physician’s offices or Ambulatory Surgical Centers (ASCs) (Health Savers
Initiative, 2021). Conceptually, physician reimbursement for ambulatory services has
two components: the professional component, which covers the physician time, and
the technical component, which covers the cost of the office, equipment, and
auxiliary staff’s time. For the Medicare program, though the professional part is paid
under the physicians fee schedule (PFS) regardless of site of services, the technical
part is much higher in the HOPD than in a physician’s office or ambulatory surgical
center (U.S. Department of Health and Human Services, 2018).
Site neutral payment is the concept of paying the same amount for rehabilitation
regardless of whether the patient is treated in an inpatient rehabilitation hospital or
nursing home (Center for Medicare Advocacy, 2021). Proposed by President
Trump, this policy has bipartisan support and has been recommended by the
Medicare Payment Advisory Commission to eliminate differences in payment rates
between inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs)
for selected conditions (MedPAC, 2015). Aiming to address payment differences
5
CMS (2021). Section 1332: State Innovation Waivers. https://www.cms.gov/CCIIO/Programs-and-
Initiatives/State-Innovation-Waivers/Section_1332_State_Innovation_Waivers-
- 18 -
between sites of service, the reform allows patients to choose the setting that best
meets their needs among safe and clinically appropriate options and generates
large savings in Medicare and Medicaid premiums and cost-sharing for clinic visits
provided at an off-campus hospital outpatient department (CMS, 2018).
4.2 Problem
CMS implements the law providing general parameters for how each type of
provider is paid and develops detailed elements of different payment systems. The
core elements of the systems are generally the same: payment is based on a set rate
payment, which is calculated from the average cost of providing a unit of service
across providers; and updated annually through an inflation rate that has specific
features for different system (i.e., hospital market basket index under outpatient
prospective payment system for hospital outpatient, medical economic index under
physician fee schedule for physicians’ offices, and consumer price index under
ambulatory surgical center payment system for ambulatory surgical centers).
In some cases, the payment differential between HOPDs and ASCs are quite large.
According to MedPAC’s report to the Congress (2022), Medicare payment rates for
surgical services performed in HOPDs are almost twice as high as in ASCs. The
rationale for higher payments to HOPDs is based on differences relative to
freestanding physician offices and ASCs in regulatory requirements, comprehensive
licensing, and the complexity of services provided (AHA, 2021a). However, the truth is
that many outpatient departments now are located off-campus, where hospitals
purchase previously independent physicians’ offices and change their designation in
order to take advantage of the higher rate available. In this case, the exact same
services can be delivered but with a higher cost for the payers, only because they are
hospital owned. As reported by MedPAC (2022), the shifts in billing from freestanding
physician offices to HOPDs raises the total Medicare payment amount by over 105%,
from $92 to $189.
Evidence has shown the growing trend of hospital-employed physicians and

hospital-owned physician practices. Due to the COVID-19 pandemic in the last half of
2020 and throughout 2021, this trend has even accelerated. According to the
Physician Practice Acquisition Study (PAI, 2019; 2022), the share of hospital-owned
physicians continues to increase between 2012 and 2022. Nationwide, over 52% of
physicians are now employed by hospitals. Besides, the share of hospital-owned
physician practices has doubled from 2013 to 2018, and still maintains a relatively
high level of 26% although the situation got better after CMS empowered and
ensured site-neutral payment in proposed rules for the Medicare program in 2018
(CMS, 2018). The increase in hospital-employed physicians and hospital-owned
practices will no doubt accelerate the shifts in payment from physician offices to
hospitals, and thereby raise the total program payment due to the higher payment
rates to HOPDs.
- 19 -
Figure 1: Growth of Hospital Employment of Physicians and Ownership of Physician
Practices, 2012-2022
55%
50%
45%
40%
35%
30%
25%
20%
15%
10%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
% of Hospital-Employed Physicians % of Hospital-Owned Practices
Source: Physicians Advocacy Institute, 2022
Situations are even worse in the Midwest region including Wisconsin. As of January
2022, 63.5% of all physicians in the Midwest are employed by hospitals with a 9%
growth rate between 2019 and 2022, which is far above the national average level
(52%). Besides, the Midwest has the largest percentage of hospital-owned practices
with 37.9%, far exceeding other regions and national average (26%), as shown in
Figure 2a and 2b (PAI, 2022).
Figure 2a: Percent Hospital-Employed Physicians by Region: Midwest vs. Other

Regions
Source: Physicians Advocacy Institute, 2022
- 20 -
Figure 2b: Percent Hospital-Owned Practices by Region: Midwest vs. Other Regions
Source: Physicians Academy Institute, 20226.
In addition, evidence shows that the actual and projected payments for HOPDs are
significantly higher than for ASCs or physicians’ offices. At the national level, it has
been projected that fee-for-service payments to HOPDs will grow much faster than
to physicians’ offices and ASCs over the next decade in the Medicare program (CBO,
2022a), as shown in Table 1. HOPD services will grow by 115.6% through 2032, which is
the second fastest growing factor after Part D prescription drugs; by comparison,
physician fee schedule will only increase by 13.9%. At the state level, the payment
disparity could still exist in the Medicaid program as the fee-for-service section
accounts for nearly 30% of the total care benefits (CBO, 2022b). Specifically, the fee-
for-service including acute care and long-term care accounts for 43.2% of the overall
Medicaid spending in Wisconsin in FY 2021 (KFF, 2022), where the FFS spending for
outpatient services is 7.6 times higher than the spending for physicians’ offices, as
shown in Table 2.
Table 1: Growth in Fee-For-Service Payments in Medicare by Sector, US, 2022, $

Billions
Components of Benefits Payments (Billion) 2022 2032 Percent Increase
Part D Prescription Drugs $ 119 $ 258 116.8%
Hospital Outpatient Services $ 64 $ 138 115.6%
Other Services $ 108 $ 196 81.5%
Hospital Inpatient Services $ 145 $ 200 37.9%
Home Health Agencies $ 17 $ 23 35.3%
Skilled Nursing Facilities $ 28 $ 32 14.3%
Source: CBO Baseline Projections, 2022
Note: Spending on ASCs is included in ‘Other Services’
6
Physicians Academy Institute (2022).
http://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-
Research/PAI%20Avalere%20Physician%20Employment%20Trends%20Study%202019-
21%20Final.pdf?ver=ksWkgjKXB_yZfImFdXlvGg%3d%3d
- 21 -
Table 2: Distribution of Medicare Spending by Service, Wisconsin, 2021, $ Million
Category Sub-category FY 2021
Inpatient Hospital $ 471.2
Physician $ 60.4
Outpatient Services $ 459.4
Prescribed Drugs $ 540.9
Other Services $ 1,005.1
Acute Care Total $ 2,536.9
Long-Term Care Total $ 1,947.1
Managed Care & Health Plans Total $ 5,384.8
Payments to Medicare Total $ 384.1
DSH Payments Total $ 138.1
Grand Total $ 10,391.0
Source: Urban Institute estimates based on data from CMS (Form 64), as of August
2022
In conclusion, there is little reason for significant payment differentials between

HOPDs and ASCs or physicians’ offices when the services offered are equivalent in
the same office settings, and the patient’s health status is similar (Health Savers
Initiative, 2021). What’s more, it is especially urgent for Midwest states including
Wisconsin to establish reforms to reduce the disparity of fees between HOPD
services and physician office services as these states continue to have the highest
percentage of physicians employed and physician practices owned by hospitals.
4.3 Evidence
Site neutral payment reform can address the disparity by lowering premiums and
out-of-pocket costs for beneficiaries, and generate federal-level and state-level
savings. Beginning from 2018, CMS has empowered and ensured site-neutral
payment in proposed Medicare rules (CMS, 2018). According to Health Savers
Initiative (2021), assuming different levels of private sector spillover savings, site-
neutral policy in Medicare could reduce total national health expenditures (NHE) by
a range of $436 to $672 billion, and reduce projected federal budget deficits by $217
to $279 billion over the next decade (2021-2030), as shown in Table 3. Among these, a
total of $10 billion could be saved for the Medicaid program through 2030, including
$6 billion in federal Medicaid spending and $4 billion in state Medicaid spending.
- 22 -
Table 3: Estimated Savings from Adopting Site-Neutral Payments in Medicare, 2021-
2030, $ Billion
Savings (2021-2030)
Federal Spending $175
Federal Revenue $31 - $90
State Medicaid Spending $4
Private Sector $140 - $466
Medicare Beneficiaries $137
National Health Expenditure $346 - $672
Total Federal Budget Deficit Reduction $217 - $279
Source: Committee for a Responsible Federal Budget, Health Savers Initiative, 2021
Note: Total Federal Budget Deficit Reduction = Revenue + Spending + Interest
Savings
The difference between Medicare and Medicaid fee-for-service reimbursement is

that each state controls its own Medicaid program, making it more difficult to
compare Medicaid FFS payments to hospitals and nursing facilities due to the
variation in how states pay these providers (MACPAC, 2021). Research comparing
Medicaid FFS hospital payments across states and to Medicare find that Medicaid
has paid a greater percentage of costs than Medicare once supplemental payments
are considered (MACPAC, 2017; AHA, 2016). In addition, according to CMS and Urban
Institute estimates (KFF, 2022), Wisconsin is the top 10 states with the highest state
share of Medicaid spending, having an average percentage of 38.4% over recent five
years, as shown in Table 4. Therefore, Wisconsin could reduce premiums and cost-
sharing burden to a greater extent by embracing site neutrality in the Medicaid
program. Furthermore, there would be less incentive for hospitals to purchase
physician practices to convert to HOPDs, which will lead to a much lower private
sector prices for beneficiaries.
Table 4: Federal and State Share of Medicaid Spending, Wisconsin, 2017-2021, $

Billion
Year Federal State Total State Share
2017 $ 4.8 $ 3.4 $ 8.2 41.2%
2018 $ 5.2 $ 3.6 $ 8.8 40.9%
2019 $ 5.5 $ 3.7 $ 9.2 40.3%
2020 $ 6.2 $ 3.3 $ 9.4 34.6%
2021 $ 6.8 $ 3.6 $ 10.4 35.0%
Source: Urban Institute estimates based on data from CMS (Form 64), as of August
2022
However, there are also potential issues for site neutral payment. According to
American Hospital Association (AHA, 2021b), Medicare beneficiaries treated in
hospital off-campus provider-based departments are more likely to be poorer and
have more severe chronic conditions than those who receive care in independent
physician offices (IPOs). Specifically, patients who received care in HOPDs are 31%
more likely to be non-White, and have a median household income of $3,000 lower
than beneficiaries treated in IPOs. However, site-neutral reimbursement may
threaten access to health cares in HOPDs for the most at-risk patients. Vulnerable
- 23 -
beneficiaries may risk being diverted into a less intensive and less appropriate
rehabilitation setting simply because it is less expensive (Revcycle Intelligence, 2021).

Based on our analysis, we therefore recommend Wisconsin to reform the state’s
Medicaid Program that reimburse hospital outpatient departments at the same rate
as physician-owned medical practices for all equivalent outpatient services and
ensure patients are notified when hospitals acquire physician-owned medical
practices, in order to protect the taxpayers from paying substantially higher rates for
equivalent outpatient health services.
I. Wisconsin should embrace site neutrality in the Medicaid program as a goal

and reform their payment systems to pay for the value delivered where value
is defined according to a relatively limited, straightforward, and non-
gameable set of metrics. Additionally, metrics should not be designed and
proposed solely by the entities to which they will ultimately apply.
II. Policies should be evidence-based with comparable data. Detailed data for
Medicaid program is needed in order to make policies not only based on
costs, but on patient care and health outcomes, such as projected state
savings due to the reform, and the total economic value of health outcomes
for Medicaid enrollees. However, typically Medicaid program data do not
contain substantial health outcomes data but is mainly focused on costs.
Supporting Materials May Be Found in the Document’s Appendix
- 24 -
Part II
Medicaid Reforms to
Improve Service and Protect
Taxpayers
A Policy Brief by:
The Institute for Reforming Government Policy Team
Chris Reader, Executive Vice President
Alex Ignatowski, Director of State Budget and Government Reform
- 25 -
EXECUTIVE SUMMARY
The health care public policy debate has typically focused on the liberal agenda of
greater government involvement and control over the health care system and
expansion of government sponsored health coverage programs. While conservative
perspectives regarding consumer choice, transparency in pricing, and tax policy
mechanisms have been considered and partially enacted, the United States
continues methodically down a path toward government-run health care and
potentially a single payer system, as evidenced by ObamaCare, various pandemic-
related policies, and the so-called Inflation Reduction Act. The conservative
viewpoint has been on the defensive.
The Medicaid and market reform recommendations outlined below are designed to
change this dynamic by presenting compelling reforms that reduce dependence on
government programs, enhance consumer choice, increase transparency, manage
costs, and apply conservative principles to health care broadly. The reforms
presented in this report consist of:
1. Transitioning Medicaid childless adult (CLA) population to the Exchange
2. Integrating Direct Primary Care into Medicaid (DPC)
3. Reassessing the nursing home bed limit
4. Increasing Medicaid MCO accountability, quality, and competition
5. Conducting third Party analysis of Wisconsin Medicaid Rx purchasing efficiency
6. Establishing consumer-friendly cost transparency
- 26 -
1. Transitioning Medicaid childless adult
(CLA) population to the Exchange
1.1 Background
Since 2013, Wisconsin has operated its Medicaid program under waiver authority
articulated in s. 1115 of the Social Security Act, authorizing the Secretary of the federal
Department of Health and Human Services (DHHS) to approve experimental, pilot,
or demonstration projects that promote the objectives of the Medicaid and
Children’s’ Health Insurance Programs. Under this authority, the Secretary may
waive certain provisions of the Medicaid law to give states extra flexibility to design
and improve their programs (WI Department of Health Services, DHS).
Under this waiver, Wisconsin provides Medicaid coverage for individuals and families
earning up to 100% of the federal poverty level (FPL), which translates to $13,590 for
an individual, and $27,750 for a family of four.
While Medicaid provides coverage for a variety of populations, from low-income

pregnant women to severely disabled individuals, it also provides coverage for
individuals with no dependents and no apparent health-related barriers to obtaining
employment. This is the so-called “childless adult” population (CLAs). The federal
Affordable Care Act (“ObamaCare”) included provisions for states to expand
Medicaid to this population, but only if that coverage extended to such individuals
earning up to 138% of the FPL. As noted, Wisconsin requested, and received, a
waiver allowing the income threshold to be established at a maximum of 100%
FPL. This population also often “churns” in and out of Medicaid as income fluctuates.
The waiver was initially approved for five years (through 2018), followed by a five-year
renewal, extending the program through the end of calendar 2022. Governor Evers,
while repeatedly calling for full Medicaid expansion per the Affordable Care Act
(repeatedly rejected by the Legislature), recently submitted a formal request to
DHHS to once again extend the program an additional five years, through 2028. The
Governor’s request includes no substantive modifications to the waiver as first
requested by Governor Walker nearly a decade ago.
1.2 Problem
The table below illustrates the growth of Medicaid enrollment for Wisconsin’s
childless adult population. As illustrated, there was a more than threefold increase
resulting from the waiver, and a nearly doubling of this population over the course of
the public health emergency (PHE), formally declared in March 2020:
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CHILDLESS ADULTS MEDICAID ENROLLMENT
2013-14 (Pre-waiver) 2018-19 (Pre-PHE) 2021-22 (November 2022)

39,000 149,000 291,000
This population, as mentioned earlier, is generally considered able to gain

employment, even if such employment does not reach the 100% FPL
threshold. During the PHE and this extended period of historically low
unemployment, there is even less rationale for such a large population to remain on
Medicaid. Moreover, the transition to the Exchange does not need to disrupt
coverage, as most Medicaid managed care organizations also offer plans on the
Exchange. In fact, exchange offerings have been expanding since Wisconsin
launched its 1332 waiver, the WI Healthcare Stability Plan. This plan has been
referred to by the current Wisconsin Insurance Commissioner, Nathan Houdek, as “a
bipartisan success story for providing more affordable health care coverage options
for Wisconsin residents across the state,” (Office of the Commissioner of Insurance
Press Release, December 5, 2022).
It is anticipated that Medicaid enrollment will fall nationwide by between 5.3 million
and 14.2 million when the PHE ends and continuous enrollment ends. In Wisconsin,
this is expected to translate to “hundreds of thousands” (Milwaukee Journal Sentinel,
March 15, 2022). Further information regarding specific categories of eligibility and
enrollment impacts are expected in coming months. However, many experts expect
the most vulnerable Medicaid populations, such as long-term care patients,
pregnant women, and severely disabled, will not see dramatic disenrollment.
1.3 Evidence
This population generates the second-highest annual cost for the State ($7,500 per
2021 LFB info paper 43; funded approximately 60% by the federal government and
40% by the State) and the State would see a large reduction in Medicaid enrollment
as well as a significant state cost savings by shifting them to the Exchange, where
coverage resembles the commercial market – which is where this group would
generally be covered when “churning” off of public assistance.
The average premium cost on the Exchange for the lowest cost Silver Plan” (largely
paid for by the federal government for this group under this initiative) is $5,040
(Kaiser Family Foundation, “Average Marketplace Premiums by Metal Tiers, 2018-
2022”).
In addition, the federal “Inflation Reduction Act” enacted earlier this year includes a
three-year extension of generous federal subsidies (initially enacted in the “American
Rescue Plan Act”) for many individuals and families purchasing coverage on the
Exchange. These subsidies apply to populations earning up to FOUR times the FPL.

Transition the CLA category to the Exchange. This is unlikely to substantively impact
the cost of coverage for individuals in this group, as federal subsidies for the lowest
cost silver plan may result in zero monthly premiums and only minor cost
- 28 -
sharing. Such cost sharing could be offset by State assistance, although this would
be a policy and fiscal choice of the Governor and Legislature. However, a more
thorough actuarial and financial analysis should be conducted to provide an
accurate assessment.
As Governor Walker expressed, public assistance is meant to be a trampoline rather

than a hammock. This initiative applies this philosophy while still ensuring excellent
coverage for CLAs and maintaining the current benefits and programmatic
structure provided for other, more vulnerable, Medicaid populations.
It should be noted that this initiative likely requires an amendment to the current
1115 waiver (after it is presumably extended by DHHS). However, a change in federal
law may be required, particularly given the unlikelihood of the Biden Administration
approving a waiver that reduces the dependance on government programs.
2. Integrate Direct Primary Care into the

Medicaid Program
2.1 Background
Wisconsin’s Medicaid program utilizes managed care organizations (MCOs) or health
maintenance organizations (HMOs) to maintain responsibility for the care provided
to Medicaid members. Wisconsin contracts with 14 MCOs in the BadgerCare Plus
program (children, parents and caregivers, pregnant women, childless adults), and
supplemental security income (SSI) program, typically with 2-3 MCOs in each region.
In turn, these MCOs establish networks of providers, pursuant to contractual and

regulatory requirements (federal and state). As referenced above, Medicaid
members have a choice of two or three MCOs within their region. However, many
members – anecdotally reaching two-thirds in some years – do NOT make a
choice. These members are then assigned to a particular MCO through an
algorithmic program within Medicaid (in other words, a computer chooses for them,
based on certain criteria).
2.2 Problem
This dynamic of members foregoing their opportunity to choose often extends to
selection of a primary care provider (PCP). In these cases, MCOs will typically (and
often are contractually required) assign members to a PCP. While this addresses the
question of, “who is my provider”?, it does not directly address patient choice and
appropriate engagement of a PCP for general health concerns and management of
a specialist, if needed.
The importance of primary care is paramount. The Institute of Medicine defines

primary care as “[t]he provision of integrated, accessible health care services by
clinicians who are accountable for addressing a large majority of personal health
care needs, developing a sustained partnership with patients, and practicing in the
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context of family and community.” (Defining Primary Care: An Interim Report, 1994,
1.)
Therefore, a lack of engagement with a PCP can lead to poor management of

chronic conditions and more common health care issues. In turn, this can drive
preventable utilization of health care services, avoidable emergency department
visits, and the corresponding costs of delayed care for manageable
conditions. According to the Bipartisan Policy Center (Advancing Comprehensive
Primary Care in Medicaid, July 2020), “…a number of federal policy barriers limit the
spread and scale of effective primary care. Effective primary care services have the
potential to result in better healthcare outcomes and cost-savings, while reducing
disparities. Medicaid is the primary source of coverage for millions of low-income
and vulnerable Americans, yet many beneficiaries still lack a relationship with a
primary care doctor. When low-income adults have both health insurance and
access to a regular care provider they are “less likely to report cost-related access
problems, more likely to be up-to-date with preventive screenings, and report
greater satisfaction with the quality of their care.”
2.3 Evidence
On the private side, many commercially insured families (and the businesses paying
a large portion of the insurance premium) utilize direct primary care. According to
the American Academy of Family Physicians, “the Direct Primary Care (DPC) model
is a practice and payment model where patients/consumers pay their physician or
practice directly in the form of periodic payments for a defined set of primary care
services. DPC practices typically charge patients a flat monthly or annual fee…in
exchange for access to a broad range of primary care and medical administrative
services. The DPC practice framework includes any practice model structured
around direct contracting with patients/consumers for monthly or annual fees
which serve to replace the traditional system of third party insurance coverage for
primary care services…Such services may include real time access via advanced
communication technology to their personal physician, extended visits, in some
cases home-based medical visits, and highly personalized, coordinated, and
comprehensive care administration.”
In other words, DPC is designed to address general health needs and provide
prompt access for patients in exchange for a monthly or annual fee. Generally, DPC
providers will limit the number of patients to ensure reasonable, prompt
access. From a provider perspective, DPC arrangements are alternatives to the often
administratively burdensome fee-for-service or insurance environment.
DPC models have demonstrated improved clinical care and management of

costs. According to the American Journal of Lifestyle Medicine, Direct Primary Care:
A Successful Financial Model for the Clinical Practice of Lifestyle Medicine (April
2021), DPC “…has been shown to be economically and financially sustainable.
Furthermore, it has the potential to fulfill the Quadruple Aim of health care in the
United States. LM practiced in a DPC model has the potential to transform health
care delivery.”
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Interestingly, Johns Hopkins Health System includes DPC as part of its benefit
structure for its own employees. The results? According to Steve Kravet, president
of Johns Hopkins Community Physicians, the organization responsible for the
practice, this structure continuously receives among the highest patient experience
scores of all primary care practices in the nation.
“Our vision was to fundamentally change the way we deliver primary care,” Kravet
says. “Further, through enhanced patient-provider relationships, DPC has decreased
unnecessary urgent care, emergency care and specialty visits. During COVID-19, DPC
was readily able to adapt to the increased reliance on telemedicine, as this was
already a fundamental part of the program.” (Direct Primary Care at Johns Hopkins
Medicine).
In Wisconsin, the DPC model has had a challenging legislative path. In the 2017-18
session, Representative Joe Sanfelipo introduced AB 798 (17-1619/1)
(legis.wisconsin.gov) to require the Medicaid program to integrate a DPC model on a
pilot basis. This legislation received bipartisan support and favorable committee
action but was never sent to then-Governor Walker by the full Legislature. At the
time, the state Medicaid program was pursuing multiple initiatives to transition
Medicaid towards a more consumer-based, commercial insurance program. This
may have complicated the DPC issue.
During the 2021-22 session, the Legislature passed Assembly Bill 26 to authorize the
DPC model in the commercial sector (without the previous Medicaid
provisions). However, Governor Evers vetoed the legislation, in part due to concerns
regarding hypothetical patient discrimination by some practitioners. However,
commercial insurers expressed additional concerns that the consumer protections
within the DPC model may be insufficient, while also arguing it doesn’t make
financial sense for those who have coverage.
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"For many individuals the math just isn’t going to work. If you purchase both a direct
primary care arrangement and a comprehensive insurance plan, you’re going to be
paying twice for a broad swatch of services," said Tim Lundquist, director of
government and public affairs for the Wisconsin Association of Health Plans.
Wisconsin Public Radio, (Direct Primary Care Arrangements Offer New Way To Pay
For Routine Health Care, November 23, 2018)

The Legislature should require the Wisconsin Medicaid program to establish a pilot
program to integrate a DPC model for a select population within the Medicaid
program. This pilot program could provide resources for a subset of Medicaid
members to engage with direct primary care providers and establish metrics to
indicate the impacts of the pilot, as well as direct the Medicaid program to address
the “paying twice” dynamic described above. Integrating a DPC model within
Medicaid may require federal approval through the Center for Medicare and
Medicaid Services.
3. Reassess Wisconsin’s Nursing Home Bed

Limit
3.1 Background
The State of Wisconsin imposes a “Nursing Home Bed Limit'' across the health care
field, regardless of the payers (Medicaid, Medicare, Commercial, self, pay, etc.). This
limit was apparently established in the 1980s, due to concerns regarding the
“institutionalization” of patients when many could be better served in the
community. This philosophy has grown in the decades since, as the goal of many
home and community based services (HCBS) and long term care (LTC) programs has
been to address patient and family needs in the home and community, to the
degree possible. Wisconsin’s FamilyCare and IRIS (“I Respect I Self-direct”) programs
are constructed around this philosophy.
This bed limit is governed by ch. 150.31 Wisconsin Statutes. This chapter articulates
how the limit is determined and governed. This section, originally created in 1983,
has been amended over the decades to address very narrow situations, such as the
closures of various types of facilities, or conversions of facilities from one type of
service provider to another.
The bed limit is further governed by substantive administrative rules promulgated

and enforced by two divisions within the Department of Health Services (DHS): the
Division of Medicaid Services and the Division of Quality Assurance (DQA). This
regulatory structure is complex and leaves the industry and stakeholders with
uncertainty regarding the bed limit and possible adjustments. For example, DMS
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administers the actual bed limit, deciding on the reallocation of beds and formally
managing the count of such beds in the state. However, DQA manages the
licensing side of nursing homes. As such, when a potential buyer of a nursing home
is working with DMS to manage the allocation of beds, that same buyer must work
with DQA on licensing issues.
3.2 Problem
Long term care, which includes nursing home services, accounts for $4 billion of
Wisconsin’s $9.7 billion Medicaid program (SFY 2020). The elderly, blind disabled
(EBD) population has a per member annual cost of $26,000 (2021 LFB info paper 43),
the highest in the program. As noted above, the State has a statutorily imposed
limit on the number of nursing home beds permitted to be licensed.
The data above is limited to the Medicaid program; it does not include the additional
billion spent by the private/commercial sector.
The last two biennial state budgets have pumped over $325 million into nursing
home reimbursement increases, under the guise of addressing staffing shortages
and raising reimbursements that – allegedly - fail to cover costs. The pandemic has
enhanced workforce pressures, and there is no end in sight to the financial
demands. Simultaneously, there is a lack of accountability regarding the use of such
funds: are these funds really solving the problems cited by the industry, and are
these funds contributing to maintaining (increasing) the quality of care.
Even if the funds referenced above are being used appropriately, they do not
address overall capacity of the nursing home system. This is a related but different
problem discussed below.
3.3 Evidence
Moreover, from a clinical perspective, a shortage of nursing home space results in
patients remaining in often higher cost facilities, such as outpatient hospitals, longer
than is clinically – and financially - appropriate. This phenomenon has downstream
effects on overall system capacity, filtering right down to individual patients facing a
double whammy: lengthy delays in clinically necessary procedures, and potentially
nowhere to be discharged to after hospital care has been completed (longer lengths
of stay). These problems are only exacerbated by the Public Health Emergency and
the various “waves” of Covid-19.
This is due in part to the capacity problem within the nursing home industry. As
capacity has fallen, patients in hospitals needing additional care, but in a more
appropriate setting, are forced to stay in the hospital. They can’t be discharged
without an open nursing home bed to accept them. In turn, hospitals are seeing
longer lengths of stay, a key metric indicating quality of care and financial health of
hospitals.
Nursing home bed capacity was a problem before the pandemic. However, the
pandemic has clearly worsened this dynamic: over 400,000 health care workers
- 33 -
have left the field since February 2020 (Bureau of Labor Statistics), making the
problem even more acute (pun intended).
According to Erik Swanson, senior vice president of data analytics at Kaufman Hall, a
leading national health care consulting firm, “We’ve seen continual growth in length
of stay since the beginning of the pandemic up to now.” Large, nonprofit hospital
and health care systems are reporting higher lengths of stay and lower
discharges. These systems include such brand names as Providence, Intermountain,
Sutter, Mass General Brigham and Advocate Aurora. For-profit systems are reporting
similar results, including HCA Healthcare and UHS. (Healthcare Dive, “How tight
nursing home capacity is bottlenecking hospital operations”, October 4, 2022)
These longer lengths of stay impact the bottom line, as Medicare and many
commercial insurance policies are paying a flat rate or bundled payment for certain
conditions and procedures, regardless of the length of stay or the reasons for it. This
eventually translates into “deteriorating” financial ratings for these large systems
(Healthcare Dive, “Outlook for nonprofit hospitals is ‘deteriorating,’ Fitch says”,
August 17, 2022), which increases the costs of borrowing. All of these impacts bring a
similar result for the consumer: higher costs.

Revisit the rationale and continued relevance of the bed limit. Evaluate the impact
of raising or eliminating the bed limit to foster competition, quality improvement,
and balance in the continuum of care.
While it is not clear that such a policy initiative would quickly alleviate the very real
labor shortages in the health care field broadly and nursing homes specifically, this
recommendation could provide greater flexibility for hospitals to address the
problem in different ways. This includes building and staffing their own facilities,
partnering with other healthcare stakeholders, or modifying the relationship with
the nursing home industry.
Such a solution may not have been considered just a few years ago. However, there
is a critical need to allow market forces and competition to constructively disrupt the
field and allow new approaches. This can only occur if state laws and regulation are
modernized to recognize the need for new solutions.
4. Increase Medicaid MCO Accountability,

Quality and Competition
4.1 Background
Wisconsin’s Medicaid program utilizes managed care organizations (MCOs) or health
maintenance organizations (HMOs) to maintain responsibility for the care provided
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to Medicaid members. Wisconsin contracts with 14 MCOs in the BadgerCare Plus
program (children, parents and caregivers, pregnant women, childless adults), and
supplemental security income (SSI) program, typically with 2-3 MCOs in each
region. This is done through a “certification” process, rather than an RFP process
common in other states.
These MCOs are held to quality standards in six major areas (four for SSI, as
indicated), per the Wisconsin Department of Health Services HMO Report Card:
• Staying Healthy: reflects immunization for children, breast cancer screening

for women;
• Living with Illness: reflects controlling blood pressure, and testing and
controlling HbA1c levels for diabetic patients;
• Mental Health Care: reflects care for depression, alcohol and other drug
dependence, tobacco counseling, and follow‐up care provided after discharge
from hospital for mental health;
• Pregnancy & Birth‐related Care (BC+ only): reflects timely care provided to
women before and after birth;
• Emergency Department Visits: reflects visits members made to the ER (fewer

visits are better);
• Dental Care (BC+ only): reflects dental care for children and adults provided
through HMOs in southeastern Wisconsin.
DHS includes a “Pay-For-Performance (P4P) Withholds in its Medicaid program. This

means each HMO faces a potential loss of up to 2.5% of premium revenue from the
State if it fails to achieve various quality benchmarks. However, the BadgerCare Plus
HMOs have earned back “at least 74% of the P4P withhold from 2011 to 2019 in
aggregate,” (WI DHS, Calendar Year 2022 Capitation Rate Development, December
15, 2021). This same document indicates that the State actuary, Milliman, believes
“the P4P withholds are reasonably achievable by the HMOS during the 2022 contract
period.”
In addition, DHS implemented a “potentially preventable readmission” (PPR)

incentive payment program in 2018 that continued in 2022, offering a maximum of
5% of the capitation rate for achieving certain standards. This mechanism is
designed to foster collaboration with providers and the HMOs. As such, for any
incentive earned by an HMO, 85% must be shared with providers.
Each HMO is then assigned a “star rating” from one to five stars, with five being the
best. Below is a screenshot of the 2019 version (latest available on DHS website):
- 35 -
4.2 Problem
The MCOs typically remain constant, with few, if any, new entrants into the
market. It is unclear if the current withhold and quality standards are driving
improved performance or greater market competition.
4.3 Evidence
Market consolidation through mergers and acquisitions and partnerships have
increased the difficulty of entering the market while fostering an environment
where the providers and insurers are often owned by the same entity. These factors
have reduced competition and contribute to an environment of limited quality
improvement and increasing costs.

Wisconsin Medicaid should pursue more aggressive withhold and P4P strategies
with HMOs/MCOs. While there are actuarial limitations to such strategies, the State
should explore greater mechanisms for holding HMOs/MCOs accountable for
improved patient care and population health. This could be achieved through
greater “downside” risk combined with further incentives. However, such programs
should be structured to achieve a “zero sum” competition among MCOs/HMOs,
- 36 -
particularly if the State intends to continue the certification system currently
employed.
In addition, the State should explore a more aggressive certification system, with
enhanced quality standards aimed at Wisconsin-specific health concerns, such as
diabetes, children’s and adult mental health, substance use disorder, health equity,
and potentially Social Determinants of Health Care.
This mechanism could be utilized to reduce the number of HMOs/MCOs in the

Medicaid program. However, simply reducing the number of HMOs/MCOs is unlikely
to improve quality and/or reduce costs unless it is coupled with specific, targeted
quality improvement and financial strategies.
While a full procurement with a formal request for proposals (RFP) process could be
pursued to similarly reduce the number of MCOs/HMOs, such processes can be
lengthy and costly. In addition, the “losers” in such procurements often file appeals –
and occasionally legal challenges. These factors add uncertainty regarding
implementation and program direction.
5. Conduct 3rd Party Analysis of Wisconsin

Medicaid Rx Purchasing Efficiency, and adopt
Outcomes-Based Purchasing for Gene
Therapies and Other High Cost Drugs and
Therapies
5.1 Background
Prescription drugs are an optional benefit under Medicaid, meaning states can
choose NOT to include prescription drugs in the Medicaid benefit package. However,
all states provide such coverage for a number of largely obvious reasons. Medicaid
programs also receive the “best price” from manufacturers, administered through
the Medicaid Drug Rebate Program (MDRP). In turn, every drug approved for use by
the federal Food and Drug Administration (FDA) is covered by Medicaid.
While prescription drug expenditures receive significant media and stakeholder

attention, under the assumption that prices and expenditures are steadily rising.
The table below indicates NET expenditures growing at a significant rate in a short
time, from state fiscal year 2018 (SFY18) to SFY20:
- 37 -
Gross Expenditures Manufacturer Rebates NET EXPENDITURES
SFY18 $1,139 million $837 million $302 million
SFY20 $1,355 million $723 million $632 million
This increase can be driven by new drugs coming to market. For example,
antidiabetics spending (before rebates) grew by 53% from 2015 to 2019, driven by
spending on newer, non-insulin antidiabetic drugs (Kaiser Family Foundation,
Utilization and Spending Trends in Medicaid Outpatient Prescription Drugs, 2015-
2019. Similarly, per the same study, Opioid prescriptions used to treat pain declined
41% over the same period, while prescriptions to treat opioid addiction and overdose
increased.
State Medicaid programs utilize varying mechanisms to purchase prescription drugs

(National Council of state Legislatures, “Medicaid Prescription Drug Laws and
Strategies”, August 2021). These include:
• “carve-in”, where the managed care organizations (MCOs) purchase the drugs
and the cost is addressed in the per-member-per month (PMPM) rate-setting
structure (most states);
• “carve-out”, where such purchases are managed by the State rather than the
MCOs (WI, MO, TN, WV);
• “carve-in” with exceptions, where states generally utilize the MCOs, but carve
out certain drugs or categories of drugs (IN, MI, SC, WA, MD).
The Wisconsin “carve-out” system has been sustained over decades and across
administrations of both parties. Given the shifting foundation of drug and therapy
development and overall cost pressures that are likely to become more acute, it
should no longer be assumed that Wisconsin is getting the most out of its
prescription drug/therapies dollars.
Simultaneously, new gene therapies are being developed and approved for the
market for certain rare conditions, including hemophilia, spinal muscular atrophy,
and certain cases of vision loss. However, such treatments can cost in the millions of
dollars, even as they replace traditional drugs and offer revolutionary patient
improvements. Such clinical advancements need corresponding financial and
analytical methodologies.
To maximize value both for the patient and for taxpayers supporting Medicaid
programs, some states are pursuing “outcomes-based arrangements” (OBAs) or
value-based purchasing for higher cost drugs and therapies. However, such
arrangements are complicated by federal regulations. According to the Campaign
for Transformative Therapies (CTT), “Oucomes-Based Arrangements: A Sustainable
Financing Option for Transformative Therapies and a Review of State Activity”
(March 2022), 11 states have addressed this challenge by requesting permission from
the federal Centers for Medicare and Medicaid Services (CMS) to enter into such
arrangements with manufacturers through Medicaid State Plan Amendments
(SPAs). These SPAs are less complicated than federal rules regarding VBC. However,
it should be noted that both the Trump and Biden Administrations have
- 38 -
implemented regulatory changes to ease the process, even as more states pursue
SPAs.
5.2 Problem
Prescription drug prices continue to climb. One-half of all drugs covered by
Medicare in 2020 had price increases above the rate of inflation. More specifically,
33% of those drugs saw price increases of up to 7.5%, while 17% of those drugs saw
price increases exceeding 7.5% (Kaiser Family Foundation, Prices Increased Faster
Than Inflation for Half of all Drugs Covered by Medicare in 2020, February 25, 2022).
However, federal policy in general has been to impose price controls, including
recent changes to Medicare enacted in the so-called Inflation Recovery Act (The
White House, Inflation Reduction Act Fact Sheet, October 14, 2022):
• $35 monthly maximum per monthly insulin prescription;
• $2,000 maximum out-of-pocket for prescription drugs; and
• Additional mandatory rebates from drug manufacturers that raise prices

more than inflation.
Such measures fail to address the costs of research and development of new drugs
and treatments. According to The Hill, US Drug Prices Higher Than Rest of the
World, Here’s Why (January 19, 2018), “only 1 out of every 12.5 potential drugs ever
reach patients, the average drug takes 11-14 years to develop, and the costs of
bringing a drug to market range from $1 to $2.6 billion”.
Further, several studies (including the National Library of Medicine, National Center
for Biotechnology Information, “US Pharmaceutical Policy in a Global Marketplace”)
suggest that the benefit of lower prices today is offset by the forgone value created
by drugs that never reach the market. According to one estimate, if the U.S. were to
adopt European-level price controls, the reductions in U.S. prices today would result
in 0.7 years lower longevity for future cohorts of Americans and Europeans due to
fewer new drugs.
Notwithstanding the market dynamics, Medicaid programs must confront the

challenges of numerous new drugs and gene therapies coming to market in the
next few years, some with prices in the millions. Wisconsin’s Medicaid program has
not yet addressed these high-cost situations, choosing be default to manage such
serious situations on a case-by-case basis. This is sustainable in the short term only.
5.3 Evidence
As referenced, Wisconsin is one of four states that largely “carve out” the prescription
drug benefit from its managed care program, preferring to purchase prescription
drugs “on its own”, with the advice of pharmacy management consultants and some
pooling arrangements. This might be effective, but it is a dated model with little
transparency, particularly as more expensive genetic and other therapies are
- 39 -
brought to market, and as value-based purchasing gains acceptance by
manufacturers, the federal government, and Medicaid programs nationally.
In addition, while complex, federal rules regarding value-based care are evolving, the
issue has become largely bipartisan. This is encouraging, as it demonstrates the
federal government recognizes at least some of the scientific and market dynamics
in play on such issues. In fact, the federal Centers for Medicare and Medicaid
Services (CMS), has indicated it plans to take a “…’hands off’ approach to the VBP
arrangements between states and manufacturers…” (Government Contractors
Navigator, The Medicaid Drug Rebate Program and Value-Based Purchasing”,
March 29, 2022).

Require a third-party analysis of the Wisconsin Medicaid drug purchasing and
rebate processes, and evaluate the opportunities for value-based purchasing for
“high cost” drugs and therapies. While it is possible the current processes are
performing well, a third-party review will, at a minimum, apply up-to-date processes
and techniques while providing transparency that may encourage manufacturers to
come to the table in different ways.
In addition, Wisconsin should submit a SPA to CMS to enable outcomes-based

arrangements for unusually expensive drugs and therapies, as well as more
traditional therapies where other states and manufacturers have already
demonstrated constructive collaboration.
6. Establish Consumer-Friendly Transparency
6.1 Background
For decades, the liberal political philosophy has been the expansion of government-
sponsored health care coverage, such as Medicaid and Medicare. In recent years,
political initiatives such as “ObamaCare” and “Medicare for All” have dominated the
health care debate. More extreme versions of such initiatives are focused on a
“single-payer” system: essentially, the federal government managing all of our care,
determining coverages, paying providers, and determining prices.
Over those same decades, the conservative philosophy has been centered on
consumer choice, transparency of pricing and costs, tax mechanisms to encourage
the purchase of coverage (health savings accounts), and opposing the expansion of
government coverage programs.
From a practical perspective, government programs continue to dominate the

market, as coverage and payment trends in the commercial market generally follow
Medicare policy. This applies to new clinical services, drug pricing, and the facilities
where procedures are performed.
- 40 -
“Transparency” in health care and health insurance has been discussed and debated
for literally decades. Multiple Wisconsin legislatures have attempted to bring clarity
to the issue, such as 2009 Wisconsin Act 146, requiring reporting by insurers and
providers regarding certain charges. In addition, various federal initiatives have also
been debated and, on occasion, enacted through legislation or rule. This includes
new rules under the Trump Administration: the Calendar Year 2020 Outpatient
Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price
Transparency Requirements for Hospitals to Make Standard Charges Public Final
Rule, and the Transparency in Coverage Rule (similar to the rule for providers but
applicable to insurers). Alternatively, providers, insurers, and related state
associations have established their own versions, such as the Wisconsin Hospital
Association’s PricePoint.
The Wisconsin Institute for Law and Liberty (WILL), published a report in October
2022, “Empowering Patients: How Price Transparency Will Lower Healthcare
Costs”. This report included references to measures passed in other states. These
include items requiring insurers to provide out-of-pocket cost estimates upon
request within 7 days (Florida), or through a public website (Tennessee). Similarly,
Nebraska requires providers to provide cost estimates for uninsured and self-pay
patients.
6.2 Problem
Despite these efforts, consumers remain frustrated with health care costs, and
numerous polls in advance of the Fall 2022 election indicate such perspectives. For
example, a Gallup poll indicated 87% of Americans rate a candidate’s plan for
reducing health care prices as “very” or “somewhat” important. The same poll
indicated this issue can potentially drive voters to cross party lines, as 39% indicated
it is very or somewhat likely they would cross party lines on this issue.
Regardless of polling and politics, most consumers simply are unable to “shop
around”. Their coverage is determined by their employers, and their “choice” of
providers is limited to their health plan “options”, if any. For example, if an employer
selects a health plan for its employees, those employees can only see the providers
that are “in network” for that health plan, or face massive and unrealistic “retail” costs
for an out-of-network provider driven by consumer preference.
This limits the value of current transparency mechanisms and initiatives, even those
that are well-intended.
6.3 Evidence
These laws, rules, regulations, and private sector initiatives have at least partially
pulled back the curtain on provider and insurer pricing. However, these initiatives
have not succeeded in fostering enhanced competition among such entities, nor are
they truly allowing consumers (patients) to “shop around” as they do for groceries,
clothing, auto mechanic services, home repair, etc. While there are areas where
consumers can apply basic economic principles to their health care, they are
typically limited to non-urgent procedures and services, or items generally not
- 41 -
covered by insurance (high-end vision correction procedures, cosmetic procedures,
some high-level imaging services). Moreover, hospital and insurer compliance with
federal requirements has been low (Health Affairs, September 12, 2022).
For example, 2009 Wisconsin Act 146, according to the Wisconsin Department of
Health Services (DHS), “specifies requirements for hospitals, insurance plans, health
care providers, and the Department of Health Services (DHS) related to disclosure of
information about the cost and quality of health care services” 2009 Wisconsin Act
146 | Wisconsin Department of Health Services. However, this legislation focuses on
“billed charges”, exclusive of discounts typically applied when a person’s health
insurance is applied. Therefore, it is of limited value to a consumer on a day-to-day
basis. Notwithstanding this challenge, the legislation has helped foster an improved
culture of transparency and consumer empowerment in the health care field.
At the federal level, the Trump Administration rules referenced above were
considered groundbreaking by some, as these rules were designed to truly pull back
the curtain on hospital and insurer prices, and various contracting policies. These
rules, ironically, built upon an often-forgotten requirement of the ACA that hospitals,
“make public a list of the hospital’s charges”.
According to the American Legislative Exchange Council’s (ALEC) Brooklyn Roberts

(July 12, 2021), the Trump rules went a significant step further to define such
information as, “charges and information based on negotiated rates and for
common or shoppable items and services.” Further, such information must be
reported, “in an easy-to-understand, consumer-friendly, and machine-readable
format using…standards that will meaningfully inform patients’ decision-making and
allow patients to compare process across hospitals.” However, provider and insurer
compliance has been low: by April 2021, 32% of hospitals had not posted any of the
required data. Further, a Health Affairs study from March 2021 found 65 of the
largest 100 hospitals were “unambiguously non-compliant”. Regardless, the Biden
Administration has kept these rules in place.
Even the WHA PricePoint tool, which contains insightful and useful information
regarding prices as well as relatively simple methods of comparison, provides
consumers with limited data upon which to make decisions. Here is a screenshot of
the website illustrating a comparison for knee replacement at UW Hospital and at St.
Mary’s Hospital, both in Madison. While the data is fascinating and shows
identifiable and useful differences, very few consumers will utilize this tool if their
health plan only provides access to one provider, or the other.
- 42 -
Adopt one or more models of more consumer actionable transparency, including
models from other states. In addition, establish regulatory mechanisms in
Wisconsin to enhance compliance with federal requirements. This could include
penalties on hospitals and insurers that are failing to comply with the Trump/Biden
rules. Such penalties could be financial (and severe). Additional or alternative
penalties could include ineligibility to participate in Medicaid, the Exchange, and/or
state employee health programs.
Laws and regulations requiring hospitals and providers to offer out-of-pocket cost
estimates are valuable, and many insurers are already providing such tools for their
members. While such information does not directly lower the costs of health care
and correspondingly the cost of purchasing coverage, it does give consumers more
information and, therefore, more reason and motivation to discuss both the
necessary care, and cost of such care, with their providers and insurers.
- 43 -
APPENDIX
Section 1: Expand the Scope-of-practice (SOP) of Nurse Practitioners (NP) in Wisconsin

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- 44 -
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Section 2: Grow the supply of Doctors of Medicine (MD) in Wisconsin

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Section 3: Allow insurer networks in Wisconsin to be based on market needs

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Section 4: Allow site neutrality in the Medicaid Program in Wisconsin

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COMMON SENSE HEALTH CARE

REFORMS FOR WISCONSIN

Increasing Health Care Choice and

Medicaid Reforms to Improve Service

A series of health care policy briefings presented by:

Part I: Increasing Health Care Choice and Competition in

1. Expand the Scope-of-Practice (SOP) of Nurse Practitioners (NPs) in Wisconsin

2. Grow the supply of Physicians (MDs) in Wisconsin

Problem: The state of Wisconsin is expected to face a shortage of 2,263 physicians by

3. Allow insurer networks in Wisconsin to be based on market needs

I. More flexible networks in terms to facilitate competition and innovation among

4. Allow site neutrality payments in the Medicaid Program in Wisconsin

1. Transition Medicaid childless adult (CLA) population to the Exchange

2. Integrate Direct Primary Care (DPC) into the Medicaid Program

Problem: Wisconsin’s Medicaid program utilizes managed care organizations (MCOs) or

3. Reassess Nursing Home Bed Limit

Problem: Wisconsin’s Medicaid program utilizes fourteen managed care organizations

5. Conduct 3rd Party Analysis of Wisconsin Medicaid Rx Purchasing Efficiency

6. Establish Consumer-Friendly Transparency

Tomas J. Philipson is the Daniel Levin Professor of

Chris Reader, Executive Vice President at the Institute

Alex Ignatowski is the Director of State Budget and

Expand the Scope-of-practice (SOP) of Nurse Practitioners (NP) in Wisconsin 5

Grow the supply of Doctors of Medicine (MD) in Wisconsin 8

Allow insurer networks in Wisconsin to be based on market needs 14

Allow site neutrality in the Medicaid Program in Wisconsin 18

Transitioning Medicaid childless adult (CLA) population to the Exchange 27

Integrate Direct Primary Care into the Medicaid Program 29

Reassess Wisconsin’s Nursing Home Bed Limit 32

Increase Medicaid MCO Accountability, Quality and Competition 34

Conduct 3rd Party Analysis of Wisconsin Medicaid Rx Purchasing Efficiency, 37

Establish Consumer-Friendly Transparency 40

Increasing Health Care

A Policy Brief by:

The University of Chicago

1. Expand the Scope-of-Practice (SOP) of Nurse Practitioners (NPs) in Wisconsin

2. Grow the supply of Doctors of Medicine (MD) in Wisconsin

Problem: The state of Wisconsin is expected to face a shortage of 2,263 physicians by

3. Allow insurer networks in Wisconsin to be based on market needs

4. Allow site neutrality in the Medicaid Program in Wisconsin

In each state, scope-of-practice (SOP) regulations primarily define the services a

These inconsistent patterns in NP regulations lead to wide variations in the

Figure 1: Nurse Practitioners practice level by state

Source: American Association of Nurse Practitioners (AANP), State Practice

Extremely rigid collaborative practice agreements and other burdensome forms of

Reduction of COVID-19 deaths

Equity and access to healthcare services

Expansion of other specialists’ SOP

1.4 Policy Recommendations

I. The state of Wisconsin should consider changes to broaden their scope-of-

2. Grow the supply of Doctors of Medicine

Figure 2: U.S. Medical School Total Applications and Acceptees, 2002-2021

70,000 62,443 60%

Applicants Acceptees Acceptance rate

Source: Association of American Medical Colleges, 2021.

Table 1: Acceptance rates and matriculants in MD programs in the state of

Acceptance Rate Applicants Admitted Matriculants Rate of matriculants/admitted2

Table 2: Wisconsin’s current state of students enrolled in MD granting schools with

Source: Wisconsin Council on Medical Education and Workforce, 2018.

Altogether, it is expected for the country and Wisconsin to face a considerable