Medicaid Modernization and Budget Update Brent Earnest, Deputy Secretary

1. Medicaid Modernization and Budget Update Brent Earnest, Deputy Secretary NM Human Services Department

2. Today’s Presentation • Medicaid Modernization – Why, What and When • Medicaid Budget – a little bit of ‘101’ and an FY13 update • Coordination of Long Term Services (CoLTS) and Personal Care Option (PCO) Update

3. Why Medicaid Modernization? • Medicaid was created in 1965 as an afterthought to the creation of the Medicare program.  • It was meant to be a small, health-insurance program • It was a commercial like benefit package and a relatively inexpensive way to help the families of workers who died without pensions. • Since its inception –over 45 years ago—the program has grown into a massive, unwieldy, complex behemoth that is used as a device upon which to hang one social program after another.

4. The making of the Medicaid behemoth 1965 – for widows and orphans – a commercial style plan

5. Why Medicaid Modernization? • The program has a benefit package larger than any other insurance package in the world!  • While Medicaid was constantly being expanded, Congress never bothered to stop and modernize the program to make it less complex and more efficient. • We are now poised to add hundreds of thousands of new members—up to 200,000 in New Mexico alone – to a 45- year-old system that has never been overhauled, just merely added to. • This approach is simply unsustainable at the national and state levels. 

6. Why Medicaid Modernization? • Modernizing our Medicaid program is a rational response to a difficult situation. • It makes sense that, before we add all these additional lives to the program, we take this time to do as much as a state can, under waiver authority, to streamline the program, review the benefits and cost structure and demand that the system produce better results at lower costs.

7. Medicaid Modernization’s Guiding Principles • Develop and Implement a Comprehensive, Coordinated Service Delivery System • Personal Responsibility • Pay for Performance • Administrative Simplicity

8. Medicaid Modernization – The Basic Approach • Use an 1115 global waiver to eliminate almost all of the 12 “siloed” waivers the Department now runs. • Reduce the number of MCOs from 7 to 3 or 4 • The MCOs will be responsible for the full spectrum of Medicaid services, including behavioral health services but excluding Developmentally Disabled Waiver services • Introduce delivery reforms using varying intensities of care coordination depending on level of need.

9. Medicaid Modernization – The Basic Approach • Implement payment reform to improve health care quality and improve outcomes. • Use a combination of incentives and disincentives to help encourage members to more wisely use health care resources.

10. Medicaid Modernization – The Process So Far External efforts: • Conducted public input meetings in Clovis, Farmington, Las Cruces, Roswell, Santa Fe and Albuquerque. • Conducted a tribal consultation in Albuquerque. • Conducted specific stakeholder group input sessions. • Conducted multi-stakeholder workgroup sessions around 3 of the 4 principles. • Presented at LHHS hearings in June and August.

11. Medicaid Modernization – The Process So Far Internal efforts: • Conducted “public” input session with HSD staff • Alicia Smith and Associates (ASA) working with HSD staff on specific topics • ASA collecting and analyzing data • Department’s actuaries (Mercer) working on budget neutrality calculations • ASA writing concept paper • We are about a month behind

12. Medicaid Modernization – Next Steps • Take concept paper and visit with CMS • Start writing waiver request • Start working on RFPs for new MCO contracts • Submit waiver late this year or early next year

13. Medicaid Budget – the Basics • Made up of federal and state funding. State funding is a combination of appropriations from the general fund, county funding, and other state program revenue and federal funds. • The federal funds are reimbursed to the state via various federal financial participation rates, the most significant is known as the federal medical assistance percentage, or FMAP. • FMAP is currently 69.36, falling to 69.07 in FY13. • Every 1 percent drop “costs” the state about $30 million.

14. Medicaid Budget – a little history • Total Medicaid budget in FY05 was $2.46 billion ($534.7 million from the general fund) • Total FY12 Medicaid Program budget is about $3.7 billion, with about $1.1 billion in state funding ($950 million from the general fund). • FY13 projection is for spending of $3.88 billion, $1.18 billion in state funding ($1.01 billion from the general fund) • Enrollment projected to grow about 2 percent over FY12 – a slower pace than in prior years – and a potential risk to the budget.

15. Medicaid Spending and Enrollment in Major Programs Note: Excludes spending and enrollment in fee-for-service and special programs; Salud and CoLTS Member are enrolled in the Behavioral Health MCO

16. Coordination of Long Term Services (CoLTS) -- Some General Background • In FY11, the disabled and elderly comprised 14% of Medicaid enrollees and accounted for 42% of total Medicaid program expenditures. • The national average for Medicaid expenditures on this population is closer to 50%. • In 2007, 61% of New Mexico’s total expenditures for long term services and supports (LTSS) – which includes nursing home expenditures - were for home and community based services (HCBS). • This makes New Mexico one of the best balanced states in terms of keeping its citizens in their communities.

17. CoLTS Background – The Numbers • Just under 40,000 New Mexicans are enrolled in CoLTS. • Enrollees are almost evenly split between the two CoLTS managed care organizations (MCOs), Evercare and AMERIGROUP. • CoLTS costs: • FY2010: $797.4 million • FY2011: $854 million (7.1% increase) • FY2012: $875.4 million (projected) (2.5% increase)

18. CoLTS Background Who is enrolled in CoLTS? • All Medicare and Medicaid “dual eligibles” and those who qualify for PCO • All Medicaid enrollees who meet nursing facility level of care and are in the CoLTS ‘c’ (formerly, D&E) waiver • Enrollees do not include those enrolled in the Developmental Disabilities (DD), Medically Fragile or AIDS waivers • Persons in the Mi Via waiver who are not DD waiver enrollees receive their physical health services through CoLTS.

19. CoLTS Background -- The Federal Waivers • CoLTS operates under a “combined” or “concurrent” 1915(b) and 1915(c) waiver. • The “b” waiver allows HSD to run a managed care program. • The “c” waiver allows HSD to pay for HCBS rather than have persons in an institutions.

20. CoLTS Achievements • CoLTS continues to rebalance its LTSS environment, keeping more people in the community (diversion) and reintegrating people from nursing homes into the community. • Since 2008, the CoLTS MCOs have helped almost 3800 people at risk for nursing home care stay in their communities. • Since 2008, the CoLTS MCOs have reintegrated 436 persons from nursing homes back to their communities. • CoLTS has reduced costs compared to the old fee-for-service program.

21. CoLTS – Improving Care Coordination • Improved Care Coordination – • Both MCOs use service coordination and case management to help prevent people from being institutionalized as well as to reintegrate people from institutions. • Both MCOs work hard to coordinate their members’ care across the full spectrum of care ( LTSS and medical care) but barriers exist. • The most important barrier is timely access to Medicare data for the dual eligibles. • The MCOs have had to get creative to identify when their members enter and/or leave hospitals

22. CoLTS – Improving Care Coordination Barriers to Improved Care Coordination: • Timely access to Medicare data for the dual eligibles. • It is difficult to coordinate care when a different health plan covers the member’s medical needs. • The MCOs have developed ways to identify when their members enter and/or leave hospitals, and when their members use the emergency room. • Fragmented System of Care: • NM Medicaid has SALUD, CoLTS and the Behavioral Health Statewide Entity covering the full spectrum of care. • Care coordination in this environment is difficult, even when everyone makes their best effort.

23. CoLTS – Going Forward • Improved Program Oversight • With the consolidation of the CoLTS program at HSD, we are able to more effectively align our efforts and goals overseeing the program. • Flattening the Cost Curve • CoLTS program costs grew quickly in its first two years. • Growth in the cost of the program has slowed and is more aligned with normal growth in enrollment and health care costs. • CoLTS is more cost effective than a fee-for-service program. • CoLTS is more effective in preventing institutionalization and promoting reintegration than the old fee-for-service program.

24. PCO Program Background • New Mexico Medicaid’s Personal Care Option (PCO) program began in 1999. • At that time, HSD estimated total enrollment in the program would be 1,800. • In SFY11, nearly 17,300 persons accessed PCO services. Of these, 700 were on the Coordination of Long Term Services (CoLTS) “c” waiver. The rest were Medicaid eligible and not in a waiver program.

25. PCO Program Today • We continue to see significant growth in the utilization of PCO services in CoLTS. • PCO services are the main cost driver in the CoLTS program. • We had to slow the growth in the costs of the PCO program.

26. PCO Program Today • To reduce the costs of the PCO program while preserving the benefits of the program, HSD implemented a series of changes to the program’s regulations over the past year. • HSD believes that the regulation changes will reduce unnecessary utilization of PCO services and still provide the services that PCO consumers need. • The regulation changes could reduce service hours for PCO consumers. • The regulation changes will reduce the costs of the PCO program while members still receive sufficient service hours.

27. PCO Program in the Future • No current plans for further regulation changes • PCO is a valuable and important program and has a place in the modernized Medicaid program that HSD is working on.

28. Questions?