Tag Archives: Medicaid

Changes to actuarial soundness requirements may or may not accompany changes to Medicaid funding

Proposals to change federal funding for state Medicaid programs using block grants or per capita caps could affect federal actuarial soundness requirements for Medicaid managed care capitation rates. In this article, Milliman’s Michael Cook discusses the following three scenarios that could play out if changes to Medicaid funding happen.

• The continuation of federal actuarial soundness requirements under revised federal funding is a plausible scenario.
• The establishing of individual state requirements if federal requirements are eliminated.
• The continued development of actuarially sound capitation rates by individual states even in the absence of any soundness requirements.

A tale of two national health plans

The United Kingdom’s National Health Service (NHS) and the United States’ Medicaid program both provide publicly funded medical services to a broad population. The general goal of both is to find a balance of quality and efficiency that promotes access to appropriate and financially sustainable medical care. This article written by Milliman consultant Jennifer Gerstorff and Northampton General Hospital’s Chris Pallot explains the history of both programs. The authors also compare and contrast how the programs are funded, how providers are contracted, and how innovations are changing each system.

Milliman releases annual analysis of Medicaid managed care financial results

Milliman today announced the availability of its annual research into the financial results associated with Medicaid managed care plans. These plans have become increasingly popular, which is due to the Medicaid expansion provisions in the Patient Protection and Affordable Care Act (ACA) and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the recent release of the Medicaid and CHIP Managed Care Final Rule (CMS-2390-F) by the Centers for Medicare and Medicaid Services (CMS). The CMS regulations require reporting and monitoring of Medicaid managed care medical loss ratios, and may be useful as the industry contemplates the financial consequences of the new regulation.

We are excited about this year’s iteration of the report because of its relevance with the recently finalized Medicaid managed care rule published by CMS. This is an area of intense focus for the industry as we look to quantify the various impacts of the new regulation. This report has become an industry standard, and it allows us to offer analysis as Medicaid continues to evolve.

Key findings from the analysis include:
• Average profit increased from 2.1% in calendar year (CY) 2014 to 2.6% for CY 2015
• Revenue captured by the study increased by 30%
• The medical loss ratio (MLR), using the CMS definition, was 90.2% in CY 2015, more than 5% higher than the minimum 85%

The financial results report is now in its eighth year of publication and is widely cited by the industry. An accompanying report related to Medicaid administrative costs is anticipated to follow the release of this report.

To see the Medicaid financial results report, click here.

Medicaid to pay more Medicare Part B costs

McCulla-IanPreliminary estimates suggest that Medicare Part B premiums and deductibles will increase for calendar year 2016. As a result, state Medicaid agencies may see sizeable increases in the Medicare Part B premiums and cost-sharing expenditures they pay on behalf of some dual eligibles. This NPR Marketplace article quotes Milliman’s Rob Damler discussing the disproportionate percentage of beneficiaries paying Part B’s costs.

Here is an excerpt:

…Two things tend to happen every year. First, Social Security benefits rise. Second, premiums for Medicare Part B — which covers inpatient treatment, the cost of doctors and certain drugs — also rise. But what makes this such an unusual year is that Social Security benefits are flat for 2016.

Robert Damler, an actuary with the consultant group Milliman, said that means a bunch of people by law are protected, or held harmless, from paying more for that Part B coverage.

“Seventy percent of the people will have zero percent increase, and then 30 percent of the population will have a 52 percent increase,” he said.

Given Medicare Part B enrollment, that’s like 15 million people picking up the tab for 50 million. Because many of the people facing increases are low-income, state Medicaid offices cover the premium hikes, which this year total $2.1 billion.

In this article, Damler and I explain the effect that several provisions from the Social Security Act are having on the current situation.

Two related requirements of Section 1839 of the Social Security Act have produced the current situation. In accordance with Section 1839, the revenue generated by Part B premiums is required to be 25% of the total cost of the program, which means that premiums rise and fall with the costs of the program, including normal adjustments for inflation. At the same time, another provision in Section 1839, known as the hold-harmless provision, precludes certain Social Security recipients from being required to pay more in Part B premium increases than their cost-of-living adjustment for that year.

Because the cost-of-living increase this year is expected to be 0%, anyone who pays Part B premiums through a deduction to his/her Social Security benefits must also see a commensurate 0% increase to those premiums. This affects about 70% of Medicare Part B beneficiaries. The remaining 30% are facing an increase in those premiums of 52% this year. This group includes higher income individuals who pay income-related premiums, individuals newly enrolled in Medicare Part B, and dual eligibles. Dual eligibles are not covered by the hold-harmless provision because they do not pay their Medicare Part B premiums through a reduction to their Social Security benefits; the premiums are paid on their behalf by Medicaid agencies.

The estimated higher than normal aggregate premium increase this year (15%) is related in part to passage of the Medicare Access and Children’s Health Insurance Program (CHIP) and Reauthorization Act of 2015 (MACRA), which revised some of the terms of Medicare physician reimbursement. In addition, evidence of higher than anticipated Medicare Part B program expenditures in 2014 and an increase in the healthcare cost trends projected by CMS contributed to the estimated increase.

Figure 1 illustrates a high-level estimate of the potential Medicare Part B premium increase that may be incurred by Medicaid programs nationwide. The calendar year 2016 estimated impact was developed from Federal Fiscal Year (FFY) 2013 reported expenditures. Therefore, the estimated increase is relative to a FFY 2013 expenditure basis.

2099HDP_Fig1

ACA implications for home and community-based services

The Patient Protection and Affordable Care Act (ACA) modifies Section 1915(i) of the Social Security Act to help states expand home and community-based services (HCBS) through Medicaid. States exploring this option need to understand the financial implications related to the implementation of Section 1915(i).

Milliman’s Rob Damler and Marlene Howard discuss several features and considerations of the 1915(i) state plan option in their Contingencies article entitled “Medicaid and the ACA.” Here is an excerpt:

One of the most significant modifications to Section 1915(i) was the addition of Section 1915(i)(7), which allowed states to define target populations for the delivery of the HCBS benefit package. This section waives the comparability requirement established in the DRA version of Section 1915(i). The CMS final rule proposed that the parameters for the target populations be defined by “diagnosis, disability, Medicaid eligibility groups, and/or age.”

The waiver of the comparability requirement allowed states to do the following:

• Define multiple target populations for 1915(i) and tailor multiple HCBS packages that could be individually allocated to each population; and
• Vary the amount, duration, and scope of a single 1915(i) service between various target populations.

…The ACA also expanded eligibility for the 1915(i) state plan option to individuals with incomes up to 300 percent of the Supplemental Security Income Federal Benefit Rate. If states choose to use this income eligibility definition for a 1915(i) service package, individuals must meet an institutional level of care as well as the needs-based criteria defined by the state. If states maintain the income eligibility threshold of 150 percent of FPL as established by the DRA, individuals do not have to meet an institutional level of care.

Fixed offer or competitive bid? Choosing the right Medicaid managed care contracting methodology for your state’s needs

Medicaid revenue to risk-based managed care plans has increased significantly in recent years, and there’s now mounting pressure on state Medicaid agencies to deliver quality care and contain costs. Agencies must consider the long-term stability of their Medicaid programs through changes in population, cost trends, and care practices. How Medicaid contracts are awarded to managed care plans can have a major impact on how well they support strategic outcomes and can have unintended consequences if agencies don’t carefully consider their specific markets and regulatory realities. This Medicaid briefing paper authored by Milliman consultants Jeremy Palmer and Rob Damler provides more perspective.

Ikaso Consulting’s Reiko Osaki and Tom Arnold also contributed to the paper.