Healthcare Town Hall

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 Affordable Care Act, 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

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

When it comes to Medicaid costs, a single percentage point can have billion-dollar implications. Medicaid managed care premiums increased only 1.0% to 2.0% on average in recent years. This increase in premiums amounts to $36.5 to $41.9 billion over 10 years in total, with the state governments funding $13.0 to $14.9 billion. Reducing costs by even a tenth of a percent has significant implications for Medicaid, which is why increased behavioral health deserves consideration.

Milliman’s Stephen Melek’s new research paper, Bending the Medicaid healthcare cost curve through financially sustainable medical-behavioral integration, recommends providing more behavioral healthcare services to Medicaid beneficiaries, not fewer, through integrated medical-behavioral healthcare programs.

The paper also presents some data to assess the value opportunity for doing this integration, discusses the language of integrated/collaborative care, addresses the challenges in achieving financially sustainable integration models, and looks at recent innovations and pilot programs that are focused on delivering better healthcare, attempting to achieve better clinical and financial outcomes, and providing input for the case that medical-behavioral integration innovations can work well.

The entire research paper can be downloaded and read here.

Also, for more Medicaid insight from our experts, see here.

Medicaid behavioral health, cost curve, Medicaid, Mental health, Stephen Melek

Today’s post in our “Ten strategic considerations of the Supreme Court upholding PPACA” blog series looks at the sometimes hidden healthcare cost dynamics that move costs from one party to another.

The current system includes various examples of cost shifting. Uncompensated care pushes the cost of the uninsured onto other payors, and many providers cite low Medicare and Medicaid rates as an excuse to push higher costs onto the employer-sponsored insurance market. While cost shifting is not inevitable, it bears watching. If PPACA’s efforts to cover the uninsured are successful, the uncompensated care cost shifting will decrease. But with Baby Boomers increasing the number of Medicare enrollees and at least some Medicaid expansion ongoing, there will be added pressure to cost shift—unless providers can find the efficiency to keep their costs in order.

Costs will also shift on the consumer level. The changing rules around age rating and medical underwriting will create subsidies funded by young and healthy people to lower costs for older and less-healthy people. Consumers who receive care in this market may not always understand why their costs are going up—especially young people and young men in particular—who will be subsidizing other more expensive populations thanks to limited age, gender, and health ratings.

For more on cost shifting, check out reports here and here. You may also be interested in this report, ”Why hospital cost shifting is no longer a viable strategy.”

Reform cost shifting, Medicaid

Today, our “Ten strategic considerations of the Supreme Court upholding PPACA” blog series brings us to the topic of state exchanges. With the court’s decision minimizing uncertainty, there may be increased incentive for states to fast-track exchange planning.

Some states have pushed forward aggressively with implementing a state health insurance exchange, while others have resisted. Will the Court decision set exchange efforts in motion in the states that were not already proceeding?

Given the often political nature of this resistance, and the outstanding question of the presidential election and whether a Republican victory could bring about a repeal of PPACA, in many states the delay may continue. With states empowered to opt out of Medicaid expansion, states that have pushed back against exchanges have another front on which to not participate with PPACA.

But states with efforts already under way now have more wind at their backs. The 2014 deadline is becoming imminent, creating an incentive to get moving. And states also face a deadline on January 1, 2013, at which time the federal government will assess whether states have the infrastructure in place to proceed with an exchange. For some states these two deadlines may be enough to begin implementation efforts.

For more insights into state exchanges click here. If you work in healthcare and would like to join Milliman’s State Health Exchange Work Group on LinkedIn, go here.

Reform Medicaid, state exchanges

We continue our blog series, “Ten strategic considerations of the Supreme Court upholding PPACA,” with a look at the potential implications of the Supreme Court health reform ruling on employer-sponsored insurance coverage.

Employers grapple with new options and plan requirements. Employers need to consider how the employer-sponsored insurance (ESI) model fits in their future. Many employers are intent on maintaining such benefits, recognizing a distinct recruiting and retention mechanism. Reports of ESI’s demise are premature as of this date. Employers will continue to review and amend their plans in efforts to control costs, and there are distinct advantages and cost pressures brought on by PPACA. There may also be new incentives for pursuing a self-funded approach, even by certain small employers. And the law does include some disruptive elements for ESI that bear watching. For example, many feel that the summary of benefits and coverage statements that employers must send to employees are burdensome and won’t be sufficiently useful to employees.

The change to Medicaid expansion could also complicate matters for employers. Under PPACA, employers with over 50 employees may be subject to additional plan affordability penalties for employees under 133% FPL—unless these individuals are Medicaid eligible. If a state does not expand Medicaid, employers above 50 lives may be subject to more plan affordability penalties than they would be were their state to pursue Medicaid expansion. In this sense, a state’s decision to expand Medicaid may have cost implications for employers. How will the anticipated healthplan costs for employers change now that low-income employees may not be able to qualify for Medicaid in certain states?

Learn more about employer-sponsored insurance here.

Reform employers, Medicaid, Strategic considerations

As part of Milliman’s blog series, “Ten strategic considerations of the Supreme Court upholding PPACA,” we consider the Supreme Court’s decision to allow states to opt out of Medicaid expansion and how it creates dynamic changes across the healthcare system.

Medicaid expansion just became a far more complex and variable proposition. The Supreme Court decision gives states the option not to participate in Medicaid expansion. In states that opt not to participate, there are big questions about how their Medicaid programs will function and how all this may affect the population that would have been Medicaid-eligible through the expanded coverage.

If a state does not participate in the Medicaid expansion, to what extent will those below the 133% federal poverty level (FPL) threshold qualify for premium tax credits and cost sharing subsidies?

Is a partial expansion possible? Are states that opt out of Medicaid expansion able to receive any portion of the enhanced federal funding available under PPACA through a partial expansion using waivers or a state plan amendment?

Are provisions of PPACA that are not explicitly tied to Medicaid expansion still in effect for states that opt out of the expansion? For example, will states have to abide by the primary care physician fee schedule increase that is scheduled for 2013 and 2014?

With the court upholding the exchanges and other components of the law, the interaction between Medicaid and these components creates a maze of issues for states, insurers, employers, and the uninsured.

For more comprehensive insight into Medicaid, click here.

Reform Medicaid, Strategic considerations

Milliman today released analysis of the Supreme Court’s 5-4 decision upholding the Patient Protection and Affordable Care Act (PPACA). With the court effectively ruling the individual mandate and other elements of the law constitutional—with the notable and complex exception of certain aspects of Medicaid expansion—healthcare stakeholders can turn their attention to implementing healthcare reform.

“Since 2009, Milliman has been working with its clients to prepare for and implement the healthcare reform law,” said Clark Slipher, Milliman Health Practice Director. “With the law’s constitutionality bound up in court, it’s been an uncertain time for our clients, which include insurers, employers, providers, and state and federal governments. This ruling clarifies the road ahead for American healthcare, and while it is reassuring to know where we are going, healthcare stakeholders face many strategic challenges that will require innovation and sound financial planning in the years ahead.” 

Strategic considerations facing healthcare stakeholders include:

1. Adverse selection may still be a challenge. Even with the individual mandate in place, the success of many insurers under PPACA will depend on their ability to minimize adverse selection.
2. Medicaid expansion just became a far more complex and variable proposition. The court’s decision to allow states to opt out of Medicaid expansion creates dynamic changes across the healthcare system.
3. Employers grapple with new options and plan requirements. While reports of the demise of employer-sponsored insurance coverage are premature, these plans still face many potential changes.
4. What is the effect on early retirees? The role of the employer in covering those between 55 and 65 may change under PPACA.
5. Rate review scrutiny and no risk selection: Something’s got to give. Keeping rate increases under 10% may become more challenging with many of the traditional cost-control mechanisms no longer available to insurers.
6. Which states will get on the exchange bandwagon? With the Court decision minimizing uncertainty, there may be increased incentive for states to fast-track exchange planning.
7. Minimum loss ratios (MLR) pose an ongoing challenge for insurers. Insurers have struggled to comply with the MLR requirements, and increased volatility in medical costs potentially brought on by adverse selection may compound the difficulty for insurers.
8. Risk adjustment is essential. A new reform calculus is required with traditional risk selection techniques such as medical underwriting no longer allowed.
9. Will cost shifting hold steady, increase, or decrease? Subsidies, rating restrictions, and an effort to achieve universal coverage all introduce new cost dynamics for insurers, providers, and policyholders.
10. The cost problem persists. What can be done about it? Certain aspects of PPACA have the potential to affect costs, but this potential needs to be actualized in order to moderate annual cost increases that regularly exceed other consumer spending.

 
For more detail on each of these strategic considerations, see the full article. To receive regular updates on Milliman’s healthcare perspective, visit our healthcare reform library or follow us on Twitter.

Reform ACOs, adverse selection, Clark Slipher, Cost, cost shifting, early retirees, employers, Medicaid, Minimum loss ratios, rate review, risk adjustment, state exchanges, Supreme Court