Approaches to Slowing Cost Growth in Public Programs

1. Approaches to Slowing Cost Growth in Public Programs State Coverage Initiatives National Meeting August 5, 2010 Nikki Highsmith Center for Health Care Strategies

2. CHCS Mission To improve health care quality for low-income children and adults, people with chronic illnesses and disabilities, frail elders, and racially and ethnically diverse populations experiencing disparities in care. • Our Priorities • Improving Quality and Reducing Racial and Ethnic Disparities • Integrating Care for People with Complex and Special Needs • Building Medicaid Leadership and Capacity 2

3. Medicaid’s Challenges and Opportunities 3

4. States Need Sound Cost Containment Strategies • Eligibility cuts are not available • Across the board rate cuts secure immediate savings, but pose short- and long-term problems • Access • Quality • Legal • Delivery system and payment reforms offer opportunity to cut costs while improving quality and positioning states for health care reform • For Medicaid patients • For all patients 4

5. Targeting Complex Need Populations: Measurable Savings and Improved Quality • Top 5% highest-cost beneficiaries account for 57% of $$ • Among the most expensive 1% Medicaid beneficiaries (acute care only) 80% have 3 or more chronic conditions* • 49% of beneficiaries with disabilities also have psychiatric illness • The presence of psychiatric illness increases spending and hospitalization rates by as much as 75%* • Dual eligibles equal 18% of Medicaid enrollment, but drive 46% of $$ Most of these high-need, high-cost beneficiaries are in unmanaged fee-for-service 5 *Sources: RG Kronick et al., “The Faces of Medicaid III: Refining the Portrait of People with Multiple Chronic Conditions.” Center for Health Care Strategies, October 2009; C. Boyd, et al. “Clarifying Multimorbidity for Medicaid Programs to Improve Targeting and Delivery of Clinical Services.” Center for Health Care Strategies, Fall 2010.

6. Specific Opportunities for Improving Quality and Containing Costs • Identify “high-opportunity” primary care practices to provide innovative supports • Predictive modeling to identify high-opportunity patients and tailor interventions • Care management for high-risk pregnancy – ROI > $2 for every $1 spent • Care management for high-risk asthma – ROI > $6 for every $1 spent • Enhanced primary care case management to provide more intensive care management for adults with complex needs • Integrated physical and behavioral health services • Integrated care for dual eligibles • Utilization management via retrospective and concurrent reviews 6

7. Supports for “High-Opportunity” Practices • Policy Imperative: Small practices serve high volume of Medicaid beneficiaries, but often lack staff support/ resources to provide high-quality chronic care • View from the States: Identify “high-opportunity” PCPs — small practices with high Medicaid volume/ low performance — for innovative practice-site supports • Opportunity: Advance quality improvement infrastructure at small primary care practices, e.g.: • Provide practice-based nurse care managers and practice facilitators • Leverage Medicaid EHR incentive program and RECS to implement registries and EHRs • Form virtual networks of practices 7

8. Physical Health/Behavioral Health Integration • Policy Imperative: Current systems for delivering publicly financed physical and behavioral health services are “broken” • Most of Medicaid’s highest-need, highest-cost beneficiaries have physical and behavioral health comorbidity, yet care is not coordinated • View from the States: Considerable variation in the financing, organization, and delivery of care • Full risk, partial risk, and no-risk with care/utilization management • Managed behavioral health organizations, administrative services organizations, and community mental health centers • Opportunity: Integrate physical and behavioral health services and financing 8

9. Medicare-Medicaid Integration for Dual Eligibles • Policy Imperative: Dual eligibles are among Medicaid-Medicare’s highest-need patient subsets, yet receive fragmented and poorly coordinated care • Only 2% of the nation’s 8.8 million duals are in integrated programs that align Medicaid and Medicare financing and services • View from the States: Progress to integrate care has been slow due to financial misalignment (no incentive for states), administrative and operational challenges, and difficulties in taking proven models to scale • Opportunity: Integrate Medicaid-Medicare administration, services, and financing via special needs plans or emerging alternatives 9

10. Medicaid is Positioned to Lead National Efforts to Contain Costs and Improve Quality . . . • Over 60 million enrollees with enrollment growth at record levels • 16 million more Americans become eligible in 2014 • Medicaid is the nation’s single largest insurer ... If Medicaid Adopts Sound Payment Policies 10

11. Elements of Effective Payment Reform • Sound payment fundamentals • Reflect patient acuity • Encourage efficiency • Collect accurate clinical data • Facilitate measurement of quality and cost • Evidence-based payment reforms • Potentially preventable events • Medical homes • Episodic/bundled payments/ACOs • Alignment with other payers • Partnership with CMS 11

12. State Medicaid Programs Have Implemented Multiple Payment Reforms • 46 states have more than half their enrollees in managed care • Most spending still FFS • 30 states have advanced medical home initiatives • 11 states have adopted non-payment policies for hospital acquired conditions 12

13. Federal Health Reform Supports State Strategies to Improve Quality/Control Costs 100 percent FMAP to increase primary care rates for two years Health homes for enrollees with chronic conditions (90% FMAP for 2 years) Demonstrations for bundled payments and ACOs Grants/contracts for community health teams to support medical homes Grants/contracts for medication management for chronic disease Grants for state to provide incentives to Medicaid beneficiaries to participate in programs to prevent chronic disease Center for Medicare and Medicaid Innovation pilots to test payment and system reforms Federal Coordinated Health Care Office for dual eligibles 13

14. Visit CHCS.org to … Download practical resources to improve the quality and cost-effectiveness of Medicaid services. Subscribe to CHCS eMail Updates to learn about new programs and resources. Learn about cutting-edge efforts to improve care for Medicaid’s highest-need, highest-cost beneficiaries. www.chcs.org 14 14