Medicaid & Managed Care A Safety Net

Medicaid & Managed CareA Safety Net Larry Hurst Government Affairs

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Presentation Overview • Background of Medicaid • Federal Rules (Balanced Budget Act) • State Challenges • Proven Solutions

U.S. Medicaid Enrollment (A Federal Perspective) • The largest health insurance program in the United States. • Provides coverage for more than 50 million poor and disabled Americans. • Spending is in excess of $300 billion a year. • Accounts for 20 percent of national health care spending. • Without it, the ranks of America’s uninsured would swell to more than 90 million, 1 of every 3 citizens. Source: Managed Care. The Future of Medicaid. What Should Medicaid Look Like in 2010? August, 2004

Medicaid • Enacted as Title 19 of the Social Security Act in 1965 along with the Medicare Program. • A very different structure than the Federal Medicare Program because it is a joint program financed between the Federal Government and the State Governments. • The structure of the program was that each state was to opt into the Medicaid Program if they wanted to participate and receive Federal matching funds, • there were categories of individuals that could be covered, benefits that could be covered and in return, the state could get Federal matching assistance, • so it’s basically a partnership in which there are rules about which dollars the Federal Government is willing to match for individuals and for services. • It does today provide comprehensive low-cost health insurance coverage for 35 million people in low-income families, predominately children and pregnant women.

Medicaid • It is a supplement to Medicare providing prescription drugs and long-term care services for over 6 million low-income Medicare beneficiaries, a group commonly called dual-eligibles because they are eligible for both Medicaid and Medicare. • It operates as a guaranteed entitlement to states and to individuals. • States are entitled to Federal financing when they cover the populations eligible for coverage for whatever services they expend state dollars for on behalf of that population, and it is an entitlement to individuals because if you match one of he categories. • If you’re at the right income or if you fall into a group of pregnant women under a certain percentage of income, everyone in that category is covered and entitled to that coverage. • There are no enrollment caps or limits on the coverage. • Today accounts for 43-44% of all the Federal dollars that go to the states in the form of grants and aid.

State Facts • A person who is eligible for Medicaid in one State may not be eligible in another State, and the services provided by one State may differ considerably in amount, duration, or scope from services provided in a similar or neighboring State. • State legislatures may change Medicaid eligibility, services, and/or reimbursement during the year.

Eligibility • Must meet the requirements for the Aid to Families with Dependent Children (AFDC) program that were in effect in their State on July 16, 1996, or--at State option--more liberal criteria. • Children under age 6 whose family income is at or below 133 percent of the Federal poverty level (FPL). • Pregnant women whose family income is below 133 percent of the FPL (services to these women are limited to those related to pregnancy, complications of pregnancy, delivery, and postpartum care). • Supplemental Security Income (SSI) recipients in most States (some States use more restrictive Medicaid eligibility requirements that pre-date SSI). • Recipients of adoption or foster care assistance under Title IV of the Social Security Act. • Special protected groups (typically individuals who lose their cash assistance due to earnings from work or from increased Social Security benefits, but who may keep Medicaid for a period of time). • All children born after September 30, 1983 who are under age 19, in families with incomes at or below the FPL. • Certain Medicare beneficiaries

Waivers & Managed Care Growth • Managed care programs seek to enhance access to quality care in a cost-effective manner. • Waivers may provide the States with greater flexibility in the design and implementation of their Medicaid managed care programs. • Waiver authority under sections 1915(b) and 1115 of the Social Security Act is an important part of the Medicaid program. • Section 1915(b) waivers allow States to develop innovative health care delivery or reimbursement systems. • Section 1115 waivers allow Statewide health care reform experimental demonstrations to cover uninsured populations and to test new delivery systems without increasing costs. • Finally, the BBA provided States a new option to use managed care. • The number of Medicaid beneficiaries enrolled in some form of managed care program is growing rapidly, from 14 percent of enrollees in 1993 to 58 percent in 2002.

The Balanced Budget Act of 1997 • Subtitle H – Medicaid • The law contains a dramatic expansion in state authority with respect to the use of managed care. • It enables states to require most Medicaid beneficiaries to enroll in managed care organizations (MCOs) without obtaining a waiver.

Medicaid Background • The Medicaid program is one of the largest social programs in the federal budget, and one of the largest components of state budgets. • Although it is one federal program, Medicaid consists of 56 distinct state-level programs created within broad federal guidelines and administered by state Medicaid agencies. • Each state develops its own Medicaid administrative structure for carrying out the program. • It also establishes eligibility standards; determines the type, amount, duration, and scope of covered services; and sets payment rates. • Each state is required to describe the nature and scope of its program in a comprehensive plan submitted to CMS, with federal funding depending on CMS’s approval of the plan.

Medicaid Funding Match • In general, the federal government matches state Medicaid spending for medical assistance according to a formula based on each state’s per capita income. • The federal contribution ranges from 50 to 77 cents of every state dollar spent on medical assistance in fiscal year 2004. • For most state Medicaid administrative costs, the federal match rate is 50 percent. • For skilled professional medical personnel engaged in program integrity activities, such as those who review medical records, 75 percent federal matching is available.

Nevada Medicaid Enrollment (A State Perspective) • Medicaid enrollment is at 244,362 • The Medicaid population consists of four main groups of recipients: children, adults with children, the disabled, and persons over age 65. • Children make up the largest portion of the population, adults with children, the disabled, and persons over age 65 (dual eligibles). • The elderly and disabled recipients in Medicaid are a fraction of the total enrollment, but account for 75% of total expenditures. • In addition, the elderly and disabled populations account for the most increase in expenditures, but accounted for only a small increase in total enrollment.

Nevada Medicaid Enrollment

Medicaid ExpendituresA Medicaid Crisis In Nevada • Medicaid has experienced significant increases in expenditures and enrollment over the past three years. • Medicaid is jointly funded by the states and the federal government based on the Federal Matching Assistance Percentage. • Nevada’s Medicaid Program is funded by the Federal government and by the State. • The majority of the State match is funded by the State.

An Explanation of the Federal Fiscal Relief to States • In May 2003, Congress enacted and President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27), which included a provision to give states $20 billion in temporary federal fiscal relief in FY 2003 and FY 2004. • This $20 billion included two components: $10 billion in general fiscal relief through payments to states for unrestricted purposes, and an estimated $10 billion through a temporary increase in the federal share of Medicaid spending, known as the Federal Medical Assistance Percentage (FMAP). • The Medicaid provision increased each state’s matching rate by 2.95 percent, which is calculated on top of the higher of the state’s FY 2002 or FY 2003 scheduled matching rate.

Cont. • As a condition of receiving this increase in the federal matching rate, states must maintain the eligibility levels in their Medicaid programs that were in effect as of September 2, 2003. States that reduce eligibility below that level cannot receive the increased FMAP. • The fiscal relief applied only for the last two quarters of federal fiscal year 2003 and the first three quarters of federal fiscal year 2004. The fiscal relief will expire on June 30, 2004.

Nevada Federal Medical Assistance Percentage (FMAP) • Assistance ended June 2004. • SFY 2003 – 57.9% • SFY 2004 – 54.30% • SFY 2005 - 56.03%

Fiscal Year Expenditures

Nevada Human Services Budget • The State administers a number of human service programs, each serving a defined population. • The largest such program is Medicaid. • By FY 2005, Medicaid caseloads are expected to total over 200,000 (more than double their level from as recently as FY 1999). • Increases of 18,000-20,000 per year are expected in the 2003-2005 biennium. • TANF recipients are also forecast to continue rising at a pronounced clip. • Annual caseload gains of 5,000-6,000 are expected.

Increasing Enrollment • Both Medicaid and TANF recipients are increasing faster than the rate of population growth in Nevada. • In FY 2000, its most recent low point, the number of Medicaid recipients per 1,000 residents has increased from 49 to an estimated 72 in FY 2003. • TANF recipients have increased from 8 per 1,000 residents to 14 over the same period. • Both Medicaid and TANF recipients are expected to continue rising relative to the population as a whole.

Recent Federal Actions • Federal GAO placed the Medicaid Program on the 2003 list of programs at high risk for fraud, waste, abuse and mismanagement. • The GAO specifically recommended Congress curb state financing schemes, such as Intergovernmental Transfers (IGTs).

IGTs • Intergovernmental transfers (IGTs) involve a transfer of funds among or between different levels of government. • Under statutory authority, state-owned or operated facilities or “units” of local government (city, county, special purpose district or other governmental unit within a state) can make an IGT. • In the case of Medicaid, one of these “units” of government transfers funds to the state Medicaid agency, which then uses the money to draw down the federal match for payment to a publicly owned provider for Medicaid services. • The federal government’s match is based on the state’s federal matching rate.

Medicaid & The Impact on Business • There is a growing impact on the General Fund. • The impact is significant because it means far fewer resources available for other state funded programs that are essential for commerce and economic growth. • Medicaid siphons dollars from education and transportation • Economic multiplier effect.

Medicaid & The Impact On Your Health Insurance • National trends propose eligibility limits and/or reducing providers rate of payment. • Both approaches increase the amount of uncompensated care and costs are allocated to private health insurance premiums through cost shifting. • The affordability of providing health care benefits to employees in the private sector creates a burden on business.

Proven Initiatives • Strongly support steps that will reduce health care costs and make health care affordable to business. • Medicaid can no longer be perceived as an entitlement program with unlimited resources. • Medicaid must be aggressively managed to ensure that beneficiaries are provided the care and the services they need at the highest value for each dollar expended. • The State must clarify the purpose and the goals of the program by coming up to speed with current national solutions.

Proven Solutions • Public and private sector must align forces to jointly meet the challenges of aggressively managing Medicaid costs. • Medicaid managed care is ‘management of care’ to achieve the greatest value for the most efficient use of resources. • Use a systems approach to the management of health care for Medicaid recipients. • Expand aged, blind, and disabled Medicaid populations into a managed care system.

Lewin Group Key Managed Care Study Findings • Managed Care models are more cost effective than traditional Medicaid creating costs savings up to 19 percent. • Greatest opportunity for cost savings with management of care for disabled population. • For low-income pregnant women and children, HMO model only slightly more cost effective than PCCM. • For disabled populations, HMO model is more cost effective than traditional Medicaid or PCCM. • State policymakers are moving towards managed care to ease fiscal pressures as the alternative path of tax increases and/or cutting benefits, eligibility, and payments is troublesome.

Medicaid Managed Care Program Successes • Health plans have a distinguished record of meeting the healthcare needs of Medicaid beneficiaries through the implementation of quality and cost-effective treatment and prevention programs. • These programs, have shown measurable impact in addressing quality of care issues, such as continuity and coordination of care, use of preventive screening, and management of chronic conditions. • Moreover, health plans are uniquely positioned to bring patients into the mainstream of care cost-effectively. • By tracking patient care and outcomes and identifying opportunities for improvement, health plans demonstrate their special capability to tailor programs to the specific needs of the populations they serve.

Medicaid Managed Care Program Successes • Managed care is the prevalent delivery system in Medicaid, with 59 percent of beneficiaries receiving some or all care through managed care instead of fee-for-service. • Forty-eight states, the District of Columbia and Puerto Rico operate Medicaid managed care programs, with about 23.1 million beneficiaries enrolled in 2002, an increase of over two million since 2001. • Enhancing access to providers and emphasizing preventive and routine care, health plans have successfully improved the quality of care received by enrollees in the Medicaid managed care program.

Medicaid Managed Care Program Goals • Establish a medical home for Medicaid clients through a Primary Care Provider (PCP) • Emphasize preventive care • Improve access to care • Ensure appropriate utilization of services • Improve health outcomes • Improve quality of care • Improve client and provider satisfaction • Improve cost effectiveness

Medicaid Managed Care Member Benefits • Traditional Medicaid benefit package • Prescription drugs • Annual adult well checks • Removal of limit for length of stay for hospitalization • PCP provider directories • Access to 24-hour, 7-day/week health care through PCP • 24-hour nurse helpline (through their health plan) • Member services helpline (through their health plan) • Member handbooks and health education • Case management for members with special health care needs

Medicaid Managed Care - Lessons Learned • Educate and inform providers and stakeholders to help ensure a successful transition to managed care. • Simplify administrative processes to improve provider satisfaction. • Care Coordination key for integrating acute and LTC services. • Care Coordinators are useful in reducing the challenges of coordinating care for dual eligibles (Medicare/Medicaid). • Prompt enforcement of HMO and PCCM contract provisions is crucial. • Nursing facility admissions will decrease as members choose community-based alternatives.

Federal Requirements • Federal Requirements, detailed in Medicaid Managed Care Rule, relate to four main areas of managed care: • Quality Assurance Requirements • Grievance Requirements • Scope of Service Requirements • Rate Setting Requirements

Quality Assurance • General Requirement: • All managed care organizations must give priority to quality assurance and engage in activities and efforts that demonstrably improve their performance.

Quality Assurance • Specific Requirements: • Performance Improvement: • MCO must conduct performance improvement projects that achieve, through ongoing measurement and intervention, demonstrable improvement in aspects of clinical care and non-clinical services that can be expected to have a beneficial effect on health outcomes and enrollee satisfaction. • MCOs must conduct an annual performance assessment using standardized measures specified by the State.

Quality Assurance • Corrective Action • MCOs must take timely action to correct significant systemic problems that come to its attention through internal surveillance, complaints, or other mechanisms. • State must arrange for annual external quality review of the managed care program. • State must report measures of consumer satisfaction and clinical performance of MCOs. • State must monitor MCOs’ standards for utilization review and management (authorization of services).

Grievance Requirements • Each managed care organization must have a system in place for enrollees that includes a grievance process and access to the State’s fair hearing system. • The State must act on each enrollee grievance within 90 days from the day the MCO received the grievance or as expeditiously as the enrollee’s health requires.

Scope of Services • States must cover at least the following services (covered by Fee-For-Service Medicaid): • Nursing Homes • Inpatient and outpatient hospital • Physicians • Laboratory and x-ray services • Home health services • Rural health clinics • Family planning services • Early and periodic screening, diagnostic and treatment services (known as HealthCheck in Wisconsin) • Nurse mid-wife and nurse practitioner services • Pregnancy-related services, including prenatal care coordination and postpartum care • Inpatient and outpatient mental health and substance abuse evaluation and treatment

Scope of Services • States must cover at least the following services: • Ambulatory services, as defined in a state’s plan, for individuals under the age of 18 and groups of individuals entitled to institutional services • Oral interpretation services • State must ensure the MCO provides the following information to enrollees: • Procedures for obtaining care in emergencies • How to access benefits and transportation including prior authorization procedures • Required Information to Enrollees: • Specific information about participating MCOs (e.g. network, grievances, disenrollment, etc.) • Written notice of any significant change in an MCO’s network or procedures 30 days prior to the change

Scope of Services • States must assure that MCOs meet the following requirements regarding access to services: • MCOs must monitor and maintain a provider network with written agreements that is sufficient to provide access to all services covered by the State/MCO contract. • Geographic location, number of providers, specialization of providers, and providers accepting new patients must match the needs of the population. • Hours of operation must be adequate for the populations served. • Female enrollees must have access to a women’s health specialist. • MCO must have procedures to obtain second opinions, out-of-network referrals and care when necessary. • MCO must provide contracted services 24/7 when medically necessary.

Rate Setting Requirements • Basic requirements: • All payments under risk contracts and all risk-sharing mechanisms in contracts must be actuarially sound. • The contract must specify the payment rates and any risk-sharing mechanisms, and the actuarial basis for computation of those rates and mechanisms.

Rate Setting Requirements • Specific Requirements: • Data must be derived from Medicaid population. • Rate cells must be sensitive to age, gender and case mix. • Rates must include appropriate adjustments for medical cost trends, administration, and incomplete data.

Medicaid A Safety Net Larry Hurst Director, Government Affairs larryh@imxinc.com

Medicaid & Managed Care A Safety Net