ALTCI Actuarial Study — Final Results

1. September 14, 2005 ALTCIActuarial Study — Final Results

2. Actuarial Study Objectives • Determine key cost drivers • Identify financing options that promote the goals of ALTCI • Recommend a Medi-Cal rate structure that will best match payment to the risk of the enrolled population • Assess adequacy of Medicare reimbursement for ALTCI population

3. Key Considerations • Individual health plan risk is driven by a number of factors, including • Program design • Who will be eligible (population subgroups)? • What services will be covered? • Integration with Medicare? • Contracting approach • Mandatory vs. optional enrollment • Number of health plans competing • Operational Issues • Enrollment and screening/assessment process • Case management and care coordination requirements • Administrative responsibilities

4. Assumptions • For our analysis, we assumed • Mandatory enrollment (for completeness purposes only - i.e., so that the entire population would be subject to analysis, allowing creation of a reimbursement model that would work for a voluntary program) • All adult SPD eligibles (21 and older) • All services, except specialty mental health, dental, and DD waiver services • ALTCI participating health plans would also have to participate in Medicare

5. What’s New from the Previous Presentation? • Change in population definitions • Medicare Part B only population included in Medi-Cal only population group • Blended IHSS, MSSP, and Home Care together to create a rating category of Community At Risk • Chronic condition analysis for Medi-Cal community population • Medicare sufficiency analysis

6. Methodology • Review historical Medi-Cal and Medicare CY1998 – 2000 FFS data • Adjust data to include only populations and services expected to be covered under ALTCI • Project data forward to CY2007 by category of service • Adjust data for significant program changes including Medicare Part D

7. CY2000 Medi-Cal DataSan Diego County • Nursing Home Residents, DD, and At Risk account for 28 percent of the total ALTCI membership in San Diego, but 74 percent of the total San Diego Medi-Cal expenditures

8. San Diego CountyCY2000 Dually Eligible vs. Medi-Cal Only*ABD Membership * Includes recipients with Part B only coverage.

9. San Diego CountyCY2000 Dually Eligible vs. Medi-Cal Only*ABD Medi-Cal Expenditures * Includes recipients with Part B only coverage.

10. San Diego CountyCY2000Elderly vs. Disabled Membership

11. San Diego CountyCY2000Elderly vs. Disabled Medi-Cal Expenditures

12. Chronic Condition Analysis • Reviewed 23 chronic disease categories • Analyzed 3 years of data from CY1998 – CY2000 for 3 counties (Alameda, Contra Costa, and San Diego) to enhance credibility • Separate analysis for Community At Risk and Not At Risk • Reviewed cases with annual Medi-Cal costs in excess of $100,000 • Findings show highest cost condition overall for Medi-Cal is ventilator dependents • Of the cases in excess of $100,000 annually, 20% were ventilator dependent • Recommendation is to consider a separate risk adjustor for ventilator dependents in the community

13. Total $443 Total Setting NH $2,487 Community $261 NHC $2,487 At Risk $731 Not At Risk $157 DD $367 Frailty Medicare Status Medi-Cal Only* $4,230 Dual $26 Medi-Cal Only* $253 Medi-Cal Only* $438 Dual $2,099 Dual $542 Medi-Cal Only* $1,003 Dual $238 Disabled $238 Aged $2,240 Disabled $1,789 Aged $215 Aged $23 Disabled $28 Aged $513 Disabled $564 Category of Aid Aged $119 Disabled $304 Aged $3,188 Disabled $4,589 Aged $694 Disabled $1,135 Aged $1,998 Disabled $438 San Diego CountyCY2000 Medi-Cal ALTCI PMPM Costs *Includes Part B only recipients.

14. Pharmacy Physician Comm LTC Inst LTC Outpatient Inpatient Other Medi-Cal Only Dual Medicare Dual Medi-Cal San Diego CountyDually Eligible vs. Medi-Cal OnlyCY2000PMPM ALTCI Medi-Cal and Medicare Costs

15. Medicare Sufficiency Analysis • Used base data (1999 and 2000) to calculate estimated Medicare reimbursement for 2000 • Utilized 2005 Medicare Reimbursement Rules • Compared estimated Medicare reimbursement to actual Medicare FFS costs for 2000 • Reviewed by population subgroup

16. Medicare Sufficiency Findings • In 2000, Medicare reimbursement would have been sufficient for the ALTCI population in total (across all population subgroups) • Sufficiency of Medicare reimbursement is highly variable by population subgroup • See details on the next slide

17. All ALTCI Dual Eligibles 2000 Costs $725 Rate $730 Sufficiency 0.67% Total NH $1,366 $986 -28% Community $634 $694 9% Setting At Risk $1,115 $914 -18% Not At Risk $513 $641 25% DD $282 $495 76% NHC $1,366 $986 -28% Frailty Medicare Status Dual* $1,366 $986 -28% Dual* $1,115 $914 -18% Dual* $513 $641 25% Dual* $282 $495 76% Category of Aid Aged $1,120 $780 -30% Aged $1,100 $980 -11% Aged $438 $679 55% Disabled $580 $606 5% Disabled $1,463 $834 -43% Disabled $1,128 $857 -24% Disabled $280 $494 77% Aged $1,304 $1,082 -17% San Diego CountyCY2000 ALTCI Medicare Sufficiency *Includes only recipients with both Part A and B coverage.

18. Medicare SufficiencyOther Points • Need to update the analysis • Because Medicare beneficiaries would not be forced to select an ALTCI Plan, the mix of the population that chooses is important • Medicare still working on a frailty adjuster for non-PACE plans. This will not be implemented before 2007

19. ResultsKey Medi-Cal Cost Drivers • Identified 10 key rating categories • Setting — Nursing Home vs. Community • Frailty — Nursing Home Certifiable/At Risk vs. Not At Risk and DD • Medicare Status — Dually Eligible vs. Medi-Cal Only • Category of Assistance — Aged vs. Disabled • Chronic High Risk Conditions — Ventilator Dependents

20. Recommendations • Reimbursement needs to be sufficiently sophisticated to promote program goals • Utilize multiple capitation risk groupings • Include some risk adjustment mechanism • Incentives should be included to promote increased community based services • Savings achievable through more appropriate use of hospital, emergency room and nursing home services

21. Recommendations (continued) • Administrative costs should be reflected in rates with sufficient consideration of start up costs • Increased care management should be supported and funded • Implement early reinsurance or risk sharing • Capitated model should allow for flexibility of both Medi-Cal and Medicare funding sources • Reimbursement mechanisms should continue to be refined as the program matures