Milliman webinar: Medicaid pass-through payment guidance

Join Milliman’s Christine Mytelka and Andrew Gaffner for the webinar “Medicaid pass-through payment guidance” on Tuesday, May 24, at 12 pm EST. They will provide an overview of pass-through payment provisions in the new Medicaid managed care regulations. This is the first in a series of Milliman articles and webinars focused on the new Medicaid managed care rule. To register, click here.

Reduce healthcare’s long-tail problem with telemedicine

Technology has enabled many industries to reduce or eliminate the long-tail problem. Similarly, telemedicine offers the healthcare industry a solution to its long-tail problem—access barriers to healthcare services. A new article entitled “Telemedicine and the long-tail problem in healthcare” by Milliman’s Jeremy Kush and Susan Philip explores the benefits of telemedicine as a mode for healthcare delivery. The authors also analyze current levels of telemedicine utilization and identify five factors limiting adoption.

Pass-through payment guidance in final Medicaid managed care regulations

As managed care has replaced fee-for-service (FFS) in the Medicaid market, states have often sought to replicate fee-for-service supplemental provider payment programs in managed care. Supplemental payment programs, sometimes called upper payment limit (UPL) programs, constitute a major source of revenue for providers in many states. Pass-through payments are the primary mechanism currently used to retain supplemental payment funding in managed care.

Final Medicaid managed care regulations, released April 25, 2016, confirm that pass-through payments will be restricted in the near future and ultimately eliminated. In this paper, Milliman’s Andrew Gaffner, Carmen Laudenschlager, and Christine Mytelka provide an overview of pass-through payment provisions in the new regulations, including the rationale and phase-out timing of the Centers for Medicare and Medicaid Services (CMS). They also discuss some of the difficulties the loss of pass-through payments will cause for states and providers and suggest a number of potential changes states can consider to mitigate the impact on managed care programs.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS verification of ACA premium tax credit claims during the 2015 filing season
The Treasury Inspector General for Tax Administration (TIGTA) released “Affordable Care Act: Internal Revenue Service verification of premium tax credit claims during the 2015 filing season.” The report analyzes more than 2.6 million tax returns with a premium tax credit (PTC) claim that were filed between January 20, 2015, and May 28, 2015. The analysis found that the Internal Revenue Service (IRS) accurately determined the allowable PTC on more than 2.4 million (93%) returns. TIGTA is continuing to work with the IRS to determine the cause for calculation differences in 150,385 of the remaining 182,884 tax returns. Computer programming errors resulted in an incorrect computation of the allowable PTC for 27,827 tax returns.

To download the entire report, click here.

Post-acute care integration should be a priority for your hospital

Hospital and health system leadership teams now recognize the importance of a thorough post-acute care (PAC) integration strategy. Many of them are developing networks that integrate physicians and investing in population health analytics, positive steps towards value-based delivery. However, many of these organizations will not see the meaningful financial and patient care benefits of these initiatives for several more years. Given current market conditions, PAC integration is likely to immediately enhance the value of patient care and have a positive impact on hospitals’ financials in the near-term. Milliman’s Ed Jhu and Sean Slattery and Kurt Salmon’s Ross Armstrong offer more perspective in a recent Becker’s Hospital Review article.

What are the key financial considerations for providers when evaluating the Next Generation ACO Model?

The Department of Health and Human Services (HHS) is striving to link 50% of Medicare payments to alternative payment models by 2018. One of the primary alternative payment models offered to Medicare providers is the Next Generation Accountable Care Organization (NGACO). Due to the potential large risk exposure for organizations considering this model, they should work with an actuary to understand the critical elements driving financial success (or failure). In this article, Milliman’s Charlie Mills, Cory Gusland, and Noah Champagne identify five key financial considerations that all ACOs should review before committing to the program. The considerations are ranked by the authors’ perceived importance, with one being the most important.

5. ACO’s CY2014 experience is the baseline for the first three performance years
4. Risk score changes are capped at 3% from the baseline year to each performance year
3. First dollar savings and losses
2. The 2016 benchmark trends are likely understated
1. In order to achieve savings, participants must outperform trended baseline less discount

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS issues the 2017 inflation-adjusted deduction limitations for annual contributions to HSAs
The Internal Revenue Service (IRS) released Revenue Procedure 2016-28, which provides the 2017 inflation-adjusted deduction limitations for annual contributions made to a health savings account (HSA) under section 223. These deduction limitations are updated annually pursuant to section 223(g) to reflect the cost-of-living adjustments.

For more information, click here.

Guide for electronically filing ACA information returns for software developers and transmitters
The IRS released “Publication 5165: Guide for electronically filing Affordable Care Act (ACA) information returns for software developers and transmitters (processing year 2016).” The report outlines the communication procedures, transmission formats, business rules, and validation procedures for returns transmitted electronically through the ACA Information Returns (AIR) system. To develop software for use with the system, software developers, transmitters, and issuers should use the guidelines provided in this publication along with the extensible markup language (XML) schemas published on the IRS website.

To read the entire report, click here.

The CRS publishes employer shared responsibility report
The Patient Protection and Affordable Care Act (ACA) creates shared responsibilities for both employers and individuals with regard to health insurance coverage. The ACA expands federal private health insurance market requirements and requires the creation of health insurance exchanges to provide individuals and small employers with access to insurance. A new Congressional Research Service (CRS) report examines the new employer responsibilities.

To read the entire report, click here.

Plan design strategies in the ACA marketplace: A review of Unified Rate Review Template data

What patterns in plan design offerings have been seen in the marketplace during the first three years after the implementation of the Patient Protection and Affordable Care Act (ACA)? Individual market member projections exhibited a preference for lower-cost plans with health maintenance organization (HMO) plans and plans at the lower end of the allowable actuarial value (AV) range being the most popular. In contrast, small group membership projections shifted toward higher AV ranges within metallic tiers, which illustrates different preferences in the small group market.

By looking at trends in plan offerings, even at a macro level, insurers may be able to gain insight from emerging patterns in the market to help frame marketplace strategies in future years. Milliman’s Abigail Caldwell and Jordan Paulus offer more perspective in this paper.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

New ACA implementation FAQs: Preventive services, mental health parity, and women’s health
The U.S. Departments of Treasury, Labor (DOL), and Health and Human Services (HHS) published frequently asked questions (FAQs) about the Patient Protection and Affordable Care Act (ACA) implementation (Part 31). The FAQ covers:

• Coverage of Food and Drug Administration (FDA)-approved contraceptives
• Rescissions
• Out-of-network emergency services
• Coverage for individuals participating in approved clinical trials
• Limitations on cost-sharing under the ACA
• Mental Health Parity and Addiction Equity Act of 2008
• The Women’s Health and Cancer Rights Act

To read the entire FAQ, click here.

Reserve considerations

Pantely-SusanHealth actuaries have been estimating incurred but not paid (IBNP) claim liabilities for decades. As claim payments moved from manual to electronic methods, payments processing has become quicker. This has caused IBNP to decrease as a percentage of total incurred claims. However, it is still critical to estimate total incurred claims before all claims are paid in order to evaluate profitability and set future premiums.

Typically, the IBNP estimate is based on completion factors developed from historical payment patterns. This methodology, however, can be volatile for the most recent months, with minimal runout. For recent months, a per unit trend analysis is typically used (such as monthly cost per member, per employee, per hospital day, etc.).

In order to improve accuracy of IBNP claim estimates, additional information can be used to inform the trend analysis for the recent months. This includes:

Working days. Working days in a month varies based on when weekends and holidays fall, impacting the availability of care as well as the claim processing capability of carriers. The impact on incurred services varies by setting. Hospitals empty out over holiday periods and specialists may work fewer hours on holidays and weekends. Prescription drugs have a pattern as well that varies by weekday, weekend days, and holidays. However, Medicaid nursing homes may be paid on a monthly basis regardless of the number of days or holidays in the month.
Claim payment pattern indicators. Traditionally, these include claim inventory, preauthorization, real-time reports from hospitals on inpatient days and/or admissions, and reported high-dollar claims.
Tracking the flu season. Wall Street investors follow the flu season to see the impact on health insurers. Higher-than-typical numbers of flu cases will lead to increased claims and vice versa. Some organizations track the flu at more granular levels, such as regional flu counts for high-risk members.
Weather. Snow days, flooding, and other weather-related events should be measured. These events can have an effect on incurred claims similar to additional holidays, and also can produce a pent-up demand impact later.
One-time events. Items that may impact claim processing such as system conversion or the transition to ICD-10 have the potential to impact claim payment patterns. System conversions often create significant claim backlogs and the potential for overpayments until corrections work through the system edits.
Seasonality. The seasonal curve for typical commercial business keeps getting steeper, with larger deductibles and maximum out-of-pocket expenses. This impacts the timing of incurred claims and the resulting IBNP significantly throughout the year, but typically it’s most exaggerated at year-end and the first quarter. Some specialty blocks or employer groups exhibit clear seasonal patterns. Dental plans, Medicare Supplement, school groups, and other cohorts present very different claim costs by month.
Benefit changes and risk scores. January 1 can cause major changes for Medicare, business related to the Patient Protection and Affordable Care Act (ACA), and some large plans. Benefit changes may have significant impact on cost-sharing and seasonality as noted above. A review of the change in risk score or monthly premium can help determine if the risk profile of membership may also be materially different from the prior month. These items could influence incurred claims and resulting IBNP estimates in the first quarter.
Comparison of prior completion factors. More sophisticated organizations will look not only at averages but at percentiles. Completion factors falling into higher/lower percentiles relative to prior months should be reviewed with more scrutiny.
Staffing changes. Looking at the number of claim payers working per claim submitted may be a useful metric for smaller plans that adjudicate their own claims.
Large claimants. It is often useful to estimate hospital costs on a contract-by-contract basis, taking into consideration stop-loss provisions and other hospital-specific items. Some plans perform analytics to determine if there is backlog in some key facilities, increased claim denials that are due to new policies put into place, and any changes in the claim adjudication process that can throw off prior relationships between inventory and actual claim payment.

Reserving can sometimes feel more like art than science. Many of these factors can improve your estimates, but what is good for some blocks of business does not always improve the estimates for others. A successful valuation team will also incorporate frequent monitoring, communication between pricing and forecasting personnel, input from claim payment personnel, and evaluations of the reasons for deviations from the expected.