Healthcare Town Hall

The model for delivering care to the developmentally disabled (DD) population is likely to undergo fundamental change, financially impacting the agencies and healthcare providers serving this market. One of the strategies New York state is developing in response to the high cost of Medicaid benefits for DD beneficiaries is the establishment of licensed managed care organizations that will coordinate care for this population on a capitated basis. These organizations will be called Developmental Disabilities Individual Support and Care Coordination Organizations (DISCOs).

In this paper, Milliman consultants describe the upcoming changes to the Medicaid benefit framework and some of the challenges facing the managed care organizations and providers serving this population. Here is an excerpt:

There has been much speculation about the financial structure of the DISCO program, and the state has not released many details. One possibility, consistent with New York’s other Medicaid managed care programs, is a system of capitation payments. Capitations are predetermined amounts paid to the managed care plans to cover the full amount of benefits, regardless of the amount of services a particular individual uses. These capitation payments are often risk-adjusted based on risk-assessment tools, in the case of the Managed Long-Term Care (MLTC) program,2 or based on members’ health claim diagnosis codes and other data, in the case of the Medicaid Managed Care program.

Although the state has been testing various risk-assessment tools over the past few years, there is currently no risk-adjustment mechanism for DD Medicaid beneficiaries in New York. Without a proven risk-adjustment tool, DISCOs may incur a great amount of risk because benefit costs vary widely among individuals, as seen in Table 1. Until such a mechanism can be developed, some experts suggest that DISCO premium rates should be based on member characteristics such as age, residential needs, and other factors that will more accurately predict their benefit costs. A major drawback of this approach, however, is that too many premium variations (or rate cells) could provide little incentive for DISCOs to truly transform the system.

A risk corridor program is another approach that could mitigate the risk for DISCOs until a risk-adjustment mechanism is in place. This approach has been used as part of the New York’s MLTC program for new members under mandatory enrollment. CMS is also using risk corridors as part of the individual and small group exchange programs in the commercial market. A typical risk corridor program establishes a per-member-per-month
(PMPM) budget, and if a plan’s actual costs are less than the budget, the plan retains a percentage of the savings, and the remainder is paid back to the state (or CMS). If actual costs are greater than the budget, then the state (or CMS) will share a portion of the losses with the plan.

Capital requirements for DISCOs are also a matter of speculation, given the high average cost of benefits per member. In New York, both start-up and ongoing capital requirements for Article 44 managed care plans are based on a percentage of premium or capitation revenue. In the case of MLTC plans, the capital requirement is set at a fixed rate of 5% of premium. However, other managed care plans are required to hold 5% of premium in the initial year of operation, and the required percent of premium increases by one percentage point each subsequent year until reaching 12.5%. The state has hinted that the capital requirement for DISCOs may be less than other types of managed care plans, but actual details have not been released.

Medicaid, Reform developmentally disabled, DISCOs, Jane Suh, Medicaid, Melissa Fredericks, Rob Parke

The U.S. Department of Health and Human Services (HHS) has approved Iowa’s proposed Medicaid expansion plan. The plan will provide subsidies for adults earning up to 138% of the federal poverty level to buy health insurance on the state exchange.

Iowa is the second state to have this type of alternative Medicaid expansion model approved. The HHS signed off on a similar plan proposed by Arkansas in September. For more perspective on the financial implications of these expansion models, read Rob Damler’s article “Considerations for Medicaid expansion through health insurance exchange coverage.”

Medicaid Arkansas, Healthcare Reform, HHS, Iowa, Rob Damler

Expanding state Medicaid eligibility under the Patient Protection and Affordable Care Act (ACA) will introduce new populations of parents and childless adults to state Medicaid roles. These populations will have a significant impact on the demographic profiles of states that are expanding their Medicaid programs.

In his article “Medicaid expansion under the Affordable Care Act,” Rob Damler highlights various issues that states will encounter related to the enrollment of these new populations in Medicaid. Here is an excerpt from the article:

• Eligibility Changes: Under the ACA, many of the current Medicaid-eligible populations will have different eligibility rules regarding income and assets. Income will be converted to a Modified Adjusted Gross Income (MAGI) standard for all states. Medicaid eligibility for the children, parent and childless adult populations will no longer have an asset test. In addition, the Medicaid program will receive referrals from the health insurance exchanges. All of these eligibility changes may create enrollment delays as individuals are navigating the new eligibility rules.

• Presumptive Eligibility: Many current Medicaid programs provide presumptive eligibility for pregnant women. Presumptive eligibility provides immediate coverage based on the individual meeting certain criteria. Under the ACA, presumptive eligibility is expanded beyond the pregnant women population. Hospitals may provide presumptive eligibility for individuals who meet certain eligibility criteria. The expansion of the presumptive eligibility provision may increase the average health care costs for the Medicaid populations since individuals will be receiving eligibility at the point of care.

• Pent-up Demand for Services: Individuals who are currently uninsured may have pent-up demand for health care services. In 2008, the state of Indiana implemented a Medicaid expansion program: the Healthy Indiana Plan. The Healthy Indiana Plan provided expanded Medicaid eligibility for parents and childless adults through an 1115 waiver. During the first year of the program, it was observed that individuals incurred overall health care costs 20 percent greater during the first three months of enrollment in the program, with hospital inpatient and outpatient services 20 to 40 percent higher. Pharmacy expenditures tended not to be greater during the earlier months of enrollment; however, the pharmacy expenditures increased after six months of enrollment.

• Access to Providers: On a national basis, the average physician reimbursement rate under the Medicaid program is approximately 60 percent of the Medicare reimbursement rate. Physician reimbursement varies significantly on a state-by-state basis. The ACA provides for increased physician reimbursement to qualifying primary care physicians for evaluation and management services during calendar years 2013 and 2014. While this provides for short-term enhanced funding to primary care physicians, the long-term funding issue remains for physicians under Medicaid. The newly eligible population may encounter issues related to physician access, especially as the newly eligible population ramps up into the system and more people seek care.

To read Damler’s report on the implementation of Indiana’s Medicaid expansion program, click here.

This article was originally published in Health Watch, October 2013 by the Society of Actuaries.

Reform Medicaid, Medicaid expansion, Rob Damler

Risk-based managed care is the current platform from which Medicaid recipients receive healthcare benefits, at least in part, in more than 30 states in the United States. Managed care organizations (MCOs) of all varieties contract with state Medicaid agencies to deliver and manage the healthcare benefits under the Medicaid program in exchange for predetermined capitation revenue.

This report authored by Jeremy Palmer and Christopher Pettit summarizes the calendar year (CY) 2012 experience for selected financial metrics of organizations reporting Medicaid (Title XIX) experience. The information was compiled from the reported annual statements. The primary purpose of this report is to provide reference and benchmarking information for certain key financial metrics used in the day-to-day analysis of Medicaid MCO financial performance. The financial results are summarized on a composite basis for all reporting MCOs. Additionally, this report explores the differences among various types of MCOs using available segmentation attributes defined from the reported financial statements.

Medicaid Christopher Pettit, Jeremy Palmer, managed care

Arkansas has proposed using Medicaid expansion dollars to provide subsidies so that eligible individuals can purchase health insurance through the exchange. The U.S. Department of Health and Human Services has indicated that it will consider approving such proposals.

The Arkansas proposal has various financial implications, especially with regard to provider reimbursement levels and various aspects of the Patient Protection and Affordable Care Act (ACA), including the minimum medical loss ratio requirement and the “3Rs” (reinsurance, risk corridors, and risk adjustment). This healthcare reform briefing paper by Rob Damler, “Considerations for Medicaid expansion through health insurance exchange coverage,” examines these key considerations for a state contemplating this approach.

Medicaid Arkansas, HHS, Medicaid, Medicaid expansion, Minimum loss ratios, Rob Damler

The UnitedHealth Center for Health Reform & Modernization has published a new report offering modernized healthcare approaches aimed at reducing Medicare and Medicaid spending.

Here is an excerpt from the report’s introduction:

A consensus emerged during the recent debates on national health care reform that fee-for-service payment mechanisms are at the root of the U.S. health care system’s problems with quality and efficiency. Yet of the roughly $1 trillion spent today on Medicare and Medicaid by federal and state governments, about 75 percent is funded in that way – including over two-thirds of Medicaid’s spending and nearly 80 percent of Medicare’s spending.

The structural problems in these programs are well documented: disparate funding streams; an inability effectively to influence geographical and other inappropriate variation; and a one-size-fits-all approach to managing costs through the crude lever of administered price controls.

We have over the last several years sought to contribute to the debate on how to modernize those programs in a series of Working Papers. The approaches we discussed were potential “win-win” options which would benefit both their enrollees and the taxpayers who fund them.

This working paper updates and combines those approaches in a single volume. In some cases, we have updated our original estimates for new developments in the policy arena.
In designing these options, we have made use of our data and insights from serving one in five seniors nationwide and our overall experience serving more than 75 million Americans, many of whom work for large employers who have been at the forefront of efforts to modernize health care. We have therefore been able to contrast some of their care patterns and programs with those currently available to seniors while incorporating the external research evidence on effective cost-containing strategies and techniques. For Medicaid, the estimates also draw on the track record of some of the most innovative states, as well as our own experience as America’s largest Medicaid health plan. Some approaches presented in this paper would require beneficiary participation in new models of care while some alternative options are based on voluntary and incentive-based designs.

…Taking into account overlapping effects, we estimate a strategic combination of these initiatives could yield $542 billion in federal savings over the 2013 to 2022 period, helping to reduce Medicare and federal Medicaid spending by about 4.4 percent. Of that amount, $437 billion would represent reductions in Medicare spending. States would also see savings from reduced Medicaid spending of $69 billion over the decade.

While much of the recent debate on Medicare and Medicaid savings has centered on either cutting consumers’ benefits or providers’ payments, the options we assess favor a different approach: better care coordination and support for beneficiaries so as to unleash greater value from the health care system.

Read the entire report here.

Quality of Care, Reform Cost, Healthcare Reform, Medicaid, Medicare, UnitedHealth

Today, there are more than 60 million Americans enrolled in Medicaid—but what is Medicaid and how is it financed? This video explains how Medicaid is funded and how it will change under the Patient Protection and Affordable Care Act (PPACA).

Medicaid Medicaid, Medicaid expansion, Understanding healthcare costs, video

A new article in a Wyoming blog about Medicaid expansion offers a helpful view of the decision facing states. Here is an excerpt from that article:

A report for the Wyoming Department of Health prepared by Milliman, Inc., an actuarial consulting firm, forecasts the added costs of the program at $116 million to $148 million between 2014 and 2020, based on their best estimate of 28,200 new enrollees. The report said the enrollment could be as low as 17,000 and might exceed 44,000. Under the best estimate, Milliman expects about 3,700 “woodwork” cases that the federal government would reimburse at only 57 percent.

In the same report, Milliman notes potential for significant savings. Some current state health programs would be at least partially subsumed under Medicaid, enabling the state to discontinue their funding and save money. But forecasting these savings — frequently called “cost offsets” — is much more difficult than predicting the cost of enrolling new patients in Medicaid.

“Detailed data was available for the Medicaid cost analysis,” said Jill Van Den Bos, a senior consultant at Milliman and the lead author of the study. The researchers used U.S. Census data and claims-data, among other sources, to predict costs.

“But it was harder on the cost-offset side,” Van Den Bos said. Eligibility for some free services offered by the state — such as colorectal cancer screening, and breast and cervical cancer treatment — is set at 250 percent of FPL. But it is difficult to know how many participants in those programs would fall under the eligibility limit of 133 percent of FPL.

“There is no hard data,” Van Den Bos said. “Assuming uniform distribution, it’s about half.” The state might also be able to reduce its bill for funding the Wyoming State Hospital, which took $60 million from the general fund and  “generated only $1.4 million in revenue from all third party payers,” including Medicaid, the report said. But once again, the savings are hard to pin down, since it is unclear how much Medicaid will pay for the indigent — for example, how many days of care per year — until more information arrives from Washington.

“The uber-person who had access to all of the data on Earth would still have a better data for the cost side than the cost-offset side,” Van Den Bos said.

This excerpt gets at two of the complicating factors surrounding this kind of analysis:

• First, a range is important. States want to know their full budget exposure, and thus need 100% enrollment scenario estimates, but also have to account for the behavioral vagaries of other enrollment scenarios.
• Second, the data supporting cost estimates is clearer than the data supporting cost offsets. This is compounded with each state having a unique Medicaid situation and its own local set of programs that may be subsumed by expansion, such as the payments to the Wyoming State Hospital mentioned here.

 
States face a complex decision as they wrestle with whether or not to expand their Medicaid program.

Reform Jill Van Den Bos, Medicaid expansion, Wyoming

A recent report by the U.S. Government Accountability Office (GAO) evaluated variations in states’ use of Medicaid managed care. The report clustered states into four groups that shared similarities in how services were provided and how participants were enrolled.

Here is an excerpt summarizing the GAO’s findings:

In summary, we identified four groups of states that differed in their use of Medicaid managed care on the basis of the 12 indicators we included in our analysis. A handful of these indicators—namely Medicaid enrollment in MCOs (managed care organizations) and PCCM (primary care case management) programs, HMO (health maintenance organization) penetration rates, and the concentration of low-income individuals that lived in urban areas—had significant influence on how states grouped. In contrast, within the four groups, considerable variation existed among the other indicators we examined, such as states’ primary care capacity and commercial HMO market index. For labeling purposes, we typically describe the four groups on the basis of states’ enrollment of Medicaid beneficiaries in MCOs and PCCM programs—generally the predominant similarity among the states within each group:

• Group 1 states were PCCM predominant, enrolling a high percentage of beneficiaries in PCCM programs, but typically not in MCOs;

• Group 2 states typically enrolled beneficiaries in both MCOs and PCCM programs;

• Group 3 states were MCO predominant, enrolling a high percentage of beneficiaries in MCOs, but typically not in PCCM programs; and

• Group 4 states were considered “other” states in that although their enrollment of beneficiaries was similar to Group 3, they were outliers on other indicators, which differentiated them from states in the other groups we identified.

The study was conducted to gauge states’ use of Medicaid managed care as enrollment is expected to increase, which is due to the Medicaid expansion provision in the Patient Protection and Affordability Care Act (PPACA). The policy decision that states make on Medicaid may directly affect health exchanges.

For more information on state health exchanges, click here. For more on Medicaid, click here.

Medicaid Healthcare, Healthcare Reform, managed care, state exchanges

Risk-based managed care is the current platform from which Medicaid recipients receive healthcare benefits, at least in part, in more than 30 states in the United States. Managed care organizations (MCOs) of all varieties contract with state Medicaid agencies to deliver and manage the healthcare benefits under the Medicaid program in exchange for predetermined capitation revenue.

The primary purpose of this report is to provide reference and benchmarking information for certain key financial metrics used in the day-to-day analysis of Medicaid MCO financial performance. The financial results are summarized on a composite basis for all reporting MCOs. Additionally, this report explores the differences among various types of MCOs using available segmentation attributes defined from the reported financial statements.

Download and read the entire report here.

Medicaid, Research Healthcare, Jeremy Palmer, managed care, Medicaid