Delaware meets new Medicaid rules

Delaware Department of Health and Social Services

Delaware met new federal rules for health insurance over a year ahead of schedule.

Delaware's new Medicaid system, which processes more than six million claims annually from healthcare providers, was recently certified by the federal Centers for Medicare and Medicaid Services (CMS) as fully complying with the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Delaware, whose state slogan is "The First State," may be the first state to be officially noted as compliant with the 1996 insurance law.

State officials received formal notification of compliance earlier this month from the federal government, but Delaware actually implemented its Medicaid Management Information System (MMIS) on July 1, 2002, adhering to the federal statute's privacy, security and transaction code sets rules, according to Kay Holmes, managed care and quality assurance administrator with the state Department of Health and Social Services.

That means Delaware accomplished compliance 15 months ahead of time, while most state governments are still racing to comply with the upcoming Oct. 16 deadline for the transaction code sets rule. The rule requires health care entities to use national, rather than local, codes for diagnoses, procedures and services in bills and claims for payment. Some government officials have said that eight to 10 states may not be ready by October, jeopardizing payments to healthcare providers.

Delaware's system also complies with federal security regulations, nearly two years before that 2005 deadline. "We've got the time to spend doing that and making sure that it's correct and that it works right," Holmes said.

Certification is an especially big deal from a financial point of view, because the federal government will pay 75 percent of transactions expenses made through compliant systems. For example, Delaware now has to cover 25 percent of claims processing costs, Holmes said. Without certification, the state would have had to pay 50 percent.

Delaware decided not to wait for final regulations under the 1996 insurance law, but instead implemented the interim ones, Holmes said, adding that other states and entities waited to see the final versions before beginning their process. Continuous communication between Delaware agencies and health care entities also helped, Holmes said.

In 1997, Delaware needed to upgrade its then 8-year-old Medicaid claims system anyway, because the system couldn't handle new developments, such as most of the state's Medicaid population moving toward a managed care environment, Holmes said. At the same time, the new federal insurance law was enacted that reshaped, among other things, how electronic data transactions would be handled.

The state decided to issue a request for proposal for both upgrading its Medicaid system and making it compliant with the new law, although the new federal needs weren't abundantly clear at the time. "It was less expensive for us to do it that way," she said. Dallas-based EDS Corp. won the $34 million contract.

Many states are now deciding to solicit vendor bids for a new Medicaid claims systems, but that takes a long time, Holmes said. Other states are trying to make their current systems compatible with the federal rules, which isn't much easier. "To redo an old system with a new format is a very difficult job, and I think that's what most states are finding very difficult to put together," Holmes said.

Training health care providers is also hard, Holmes said. Delaware gave many of them software to meet the federal requirements. "If your provider out there doesn't have a HIPAA -compatible billing system, it ain't gonna work," she said.

Delaware will keep making changes as new rules are released, Holmes said. The state is also waiting for final national provider identification number regulations from the federal government.