Tag Archives: Medicaid

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.


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.

Medicaid risk-based managed care: Analysis of financial results for 2013

Most states require that contracted managed care organizations (MCOs) file annual statements with state insurance regulators. The statements are typically based on a standard reporting structure developed and maintained by the National Association of Insurance Commissioners (NAIC), with prescribed definitions enabling comparisons across reporting entities.

This report by Christopher Pettit and Jeremy Palmer provides a summary of benchmarking financial metrics for the calendar year 2013 based on these statements, including medical loss, administrative loss, underwriting, and risk-based capital ratios. The target audience includes state Medicaid agencies and MCO personnel responsible for reviewing and monitoring the financial results of risk-based managed care programs.

Tips for ensuring quality encounter data submission in Medicaid managed care programs

Naugle-AndrewOne area of data management within the healthcare industry that is getting new emphasis and interest from regulators is a focus on encounter data. Today, the majority of Americans receiving healthcare services funded through the Medicaid program are enrolled in some form of managed care. Under this scheme, states contract with managed care organizations (MCOs) that take on responsibility for providing Medicaid services in exchange for a fixed capitation payment. This approach is in contrast to the traditional fee-for-service (FFS) program where providers submit claims directly to the state for payment.

It is widely recognized that the FFS approach to provider payment creates perverse incentives for delivery of unnecessary services and uncoordinated care. Medicaid managed care gets away from this by providing a fixed capitation amount to the Medicaid MCOs, giving them incentives to more effectively manage care. The MCOs often pass along those same incentives by paying certain providers using capitation as well.

Notwithstanding the undesirable incentives that FFS creates, one area where FFS excels is the collection of timely and complete data about the services rendered to each patient and information about the price of those services. Because FFS claims are essentially invoices, this approach offers strong incentives for providers to submit claims in a timely manner (for prompt payment) and to ensure those claims are a complete reflection of services rendered (for complete payment).

Under capitation the payment mechanism is decoupled from the data collection process. In lieu of claims MCOs must collect encounter data from their providers and then submit that data to the states. Unfortunately, this takes away the direct financial incentives providers have for timely and complete data submission. As a result many states have struggled to collect credible information about the services delivered under Medicaid managed care. Such data is essential for important activities such as rate setting and program management.

Viewing submission of encounter data as an MCO function, many states have implemented strict contractual requirements coupled with tough performance guarantees and financial penalties to motivate MCOs to improve the quality and timeliness of the encounter data they submit. Failure to perform can have significant consequences for MCOs, including financial penalties, corrective action plans, bad press, and even contract termination. Based on our experience working with states and MCOs to help improve encounter data quality, we have identified a few things that can help improve the results:

1. Evangelize the importance of encounter data among providers. Once decoupled from the payment process it can be hard to convince providers of the importance of collecting and reporting encounter data. Ensuring that these constituents understand the value of encounter data and are submitting complete and timely information is key for MCOs to meet their contractual obligations to the state. Regardless of how strong the processes are within the MCO to ensure complete and timely submission, if the source information coming from providers is incomplete what goes to the state will also be incomplete. In addition to including encounter data requirements in their provider contracts, MCOs should include encounter data as a topic in their provider communication/education plans, and evangelize its importance whenever they can.

2. Develop clear submission requirements, definitions, and data specifications. In any situation where data is being submitted to a third party, lack of agreement and understanding of the actual submission requirements, definitions, and data specifications is a setup for downstream conflicts. Among states the requirements for submission often vary and sometimes change during the term of a contract. States and MCOs should engage in a collaborative process to ensure that all parties are working from the same guidance and interpretation of the submission requirements.

3. Establish an interdisciplinary team. Many MCOs view encounter data submission as one department’s responsibility—typically finance, operations, or information systems. In reality, it takes skilled and knowledgeable resources from throughout the organization to drive a high-quality process and result. MCOs should establish an interdisciplinary team that brings together the experts and makes everyone involved accountable for the outcome. That team may be led by someone from one of those primary departments but requires support from others.

4. Implement automated data validation and reconciliation processes. Submitting encounter data typically involves collecting data from multiple sources, transforming it into a new format, and then submitting it to the state. There are many opportunities for errors along the way. To provide an early warning of potential errors and to facilitate root cause assessment when errors are identified, MCOs should implement data validation and reconciliation processes that run parallel with the encounter submission preparation process. Often states will have internal processes they run on the data when they receive it; mirroring these processes can proactively reduce error rates. In addition, where possible, it makes sense to reconcile financial information against financial systems such as the general ledger, not just what’s in the claim system.

5. Track and resolve errors promptly and completely. When submitting encounter data some errors are unavoidable and thus both MCOs and states must have resources and processes in place to support timely and complete resolution of those errors. Errors can be caused by changes in the way data is collected within the MCO, changes in the state’s internal validation processes, or simply anomalies in the data. Regardless of the reason, each error should be tracked and resolved to completion. Root causes should also be identified to allow for error prevention.

As states have made the transition from FFS to managed Medicaid, the quality of utilization and cost data they receive has eroded. With the majority of Medicaid beneficiaries today receiving healthcare services through managed care plans it is more difficult for states to perform effective oversight of these programs. Multiple encounter data improvement initiatives have emerged as this has become an area of focus for both states and the federal government. MCOs should expect this scrutiny to continue, but should also recognize that through a systematic approach to managing and reconciling data and a collaborative posture with their state partners many of these challenges can be overcome.

This article first appeared at Milliman MedInsight.