Expanding publicly subsidized coverage for low income adults

1. Expanding publicly subsidized coverage for low income adults Maximizing use of Existing systems and infrastructure Public-private partnerships Federal funding

2. Focus on low income uninsured About 60% of Michigan’s uninsured population – 654,000 people* -- have incomes below 200% of the Federal Poverty level (FPL) * Rough numbers from 2005 CPS – need multi-year average

3. A Brief Summary of the Model • Increase access to federally subsidized coverage for low income • families • persons with disabilities, and • young adults (<21) • Makes scarce local and safety net resources available for those not able to be covered under federal programs • Reduce red tape and develop new opportunities for private contribution toward coverage for the uninsured to promote continuity of care (“pay in” option)

4. Use existing public –private partnerships, systems and infrastructure • Public agencies determine eligibility and coverage, process some fee-for-service claims • Private, managed care health plans deliver most services to individuals with full coverage • Private pharmacy manager handles fee-for-service prescription claims

5. Maximize federally-funded coverage Federal Medicaid match • Federal government pays for more than half (56.59%) of of costs • $1.00 in state funds buys $2.30 of medical care

6. Federal and State Contribution

7. Gaps in the safety net

8. Three strategies 1. Phased in expansion of coverage 2. Phased in reduction in out of pocket cost (deductibles or spend-downs) for those not fully covered 3. Allow “pay in” by those not fully covered

9. Strategy #1: Coverage expansions Cover low-income parenting adults in families with Healthy Kids- or MIChild-covered children (“the working poor”) Cover low-income persons with disabilities at the same income levels as parenting adults Cover low-income young adults (19- and 20-year olds) until they are 21 & more likely to have access to employer-based coverage

10. Phase 1: Cover parents and young adults with income below the federal poverty level

11. Phase 2: Cover all eligible adults up to 150% of federal poverty level

12. Phase 3: Cover all eligible adults up to 200% of federal poverty level

13. Effects of expansion on the uninsured – starting point: Rough numbers from 2005 CPS – need multi-year average

14. Phase 1 Parents & Young Adults up to 100% of FPL Rough numbers from 2005 CPS – need multi-year average

15. Phase 2 Parents, Adults with Disabilities, & Young Adults up to 150% of FPL Rough numbers from 2005 CPS – need multi-year average

16. Phase 3 Parents, Adults with Disabilities, & Young Adults up to 200% of FPL Rough numbers from 2005 CPS – need multi-year average

17. Strategy #2: Phased in reduction in out of pocket cost for those not fully covered Expand coverage under Medicaid with a Deductible (formerly known as “Spend-down” Medicaid) • periodic coverage for individuals with income in excess of the limit for full coverage • monthly deductible equals budgeted monthly income minus a “protected income level” (based on family size) • coverage begins only after verification that the monthly deductible is met

18. Monthly Spend-down/Deductible = Budgeted Income - Protected Income Level Example: Single person with a disability and $850 per month budgeted income Protected income level for an individual = $375 Monthly Deductible = $475

19. The “spend-down problem” • Protected income levels are much lower than income limits for full coverage • Doesn’t provide coverage until medical expenses have driven the enrollees deep into poverty 100% of Federal Poverty Level

20. The fix: increase income disregards for the medically needy • Federal law limits the amount of the Protected Income Level, based on historic family cash assistance levels • Income disregards may be used to reduce “budgeted” income by the difference between the income limit for full coverage and the Protected Income Level • Has the same effect as raising the PIL

21. Phase-in: Increase disregards as the income limit for full coverage is increased • Phase #1: Deductibles only require “spend down” to 100% of federal poverty level • Phase #2: Deductibles require “spend down” to 150% of federal poverty level • Phase #3: Deductibles require “spend down” to 200% of federal poverty level

22. Strategy #3: Allow purchase of coverage with premiums equal to monthly deductible Problems with Deductible (Spend-down) system: • No continuity of coverage – Medicaid is approved only for certain days of the month • Providers can’t bill Medicaid until weeks or months later - after DHS workers process paperwork submitted by recipient • Recipients cannot be enrolled in managed care plans

23. Strategy #3 (cont’d) “Pay-in” Option • Build on the existing MIChild system for processing premiums • Employers could pay premiums for low income employees • Reduces red tape and paperwork for enrollees and DHS • Allows for managed care enrollment • Gives providers certainty re payment source • Provides continuity of care

24. I. COVERAGE

25. Number of people covered Strategy #1 (Expansion of full coverage) • Phase 1: 60,000* parenting adults and 11,000 young adults with income below 100% of FPL • Phase 2: 45,000* parenting adults, 3,400 young adults, and 9,000 adults with disabilities with income below 150% of FPL • Phase 3: 53,000* parenting adults, 4,600 young adults, and 10,000 adults with disabilities with income below 150% of FPL TOTAL decrease in the number of uninsured: 196,000 adults Strategy #2 (Reduced Deductibles) - ??? Strategy #3 (Pay in Option) • Coverage for ???000 adults *Rough numbers from 2005 CPS – need multi-year average

26. Portability and continuity of coverage • Full portability: individuals remain covered as long as • income is within limits (or deductible/pay-in is met) and • non-financial criteria are met (age, parenting, disability) • Wrap-around coverage when employer-based coverage or Medicare becomes available • Good continuity of care, subject to • health plans’ geographic limits, and • limits due to shortage of fee-for-service providers when managed care is unavailable (e.g. private insurance or Medicare is primary, rural areas)

27. Physician visits Specialists Labs and diagnostic testing Prescription drugs and supplies Inpatient and outpatient hospital care Home help services Nursing homes* Current comprehensive benefits package available to Medicaid recipients Benefits • Mental health • Durable medical equipment • Vision • Hearing • Physical and occupational therapy • Dental • Podiatry • Chiropractic * Most current nursing home residents with incomes below 200% of FPL are already receiving Medicaid

28. Quality of care & effects on the delivery system • Quality under current programs varies and needs improvement overall • Shortage of fee-for-service providers and participating health plan providers in many areas (especially specialists and rural areas) due to low reimbursements • Increasing enrollment and creating a larger pool may increase the number of health plans willing to provide coverage in smaller, more rural counties

29. II. COST AND EFFICIENCY

30. Increased spending on a broad range of medical goods & services State administrative costs More enrollees (applications), more providers (claims) Modification and expansion of existing premium collection system, to administer the buy in option Need for increased payment rates to assure that coverage = access Resource and Budgetary Cost

31. Resource and Budgetary Savings • Lower cost, early intervention prevents or reduces spending on higher cost care when health conditions progress or deteriorate, including expensive hospital-based treatment • Reduced mortality and disability • Increased productivity and reduced absenteeism for employed enrollees • Continuity of care & use of managed care plans reduced costs • Increased bargaining power with pharmaceutical companies due to larger pool of enrollees • Reduced administrative costs at DHS, through buy-in option

32. Features that promote cost containment: Managed care Disease management Bargaining power of a large purchaser Features that hinder cost containment: Entitlement – number of enrollees will grow during economic slumps Federal law prohibits some types of limits on services Cost Containment

33. Implementation & Administration: Uses existing infrastructure and systems • Existing eligibility and enrollment system through DHS/MSA • Existing health plan choice/enrollment system through private contractors • Existing health delivery system through managed care health plans (with fee-for-service for auxiliary services and services for those with deductibles or other primary insurance); community mental health system

34. III. FAIRNESS AND EQUITY

35. Access to coverage and subsidies • Provides equity within families (i.e. expands coverage to parents of children who currently are eligible) • Increases equity among many adult populations (i.e. expands coverage to parents & young adults at same income levels as disabled/elderly who currently are covered) • Does not provide equity for childless adults with no total & permanent disability

36. Financing of costs • Increased public responsibility for subsidizing care to those with low incomes • Requires a tax-based mechanism for financing • Equity/fairness would depend on the specific taxes/funding mechanisms chosen • Potential to achieve greater equity and fairness • reducing the burden on those with commercial insurance to pay for the uninsured • taxing employers who do not cover their low-wage workers

37. IV. CHOICE AND AUTONOMY

38. Consumer choice of providers and health plans • Choice of health plans, where available • Current shortage in UP and some LP counties • Increased enrollment may attract more plans • Choice of providers within plans (limited) • Choice of providers with fee-for-service (limited) • Higher reimbursement needed to attract more providers

39. Provider autonomy • Same autonomy as private insurance (must accept the reimbursement allowed by health plan for enrollees in managed care or state, for fee-for-service enrollees) • Limits on clinical autonomy as in other managed care arrangements

40. Government compulsion or regulation • Regulated to a higher degree than private insurance • Same as in current Medicare, Medicaid • No compulsory enrollment

41. V. VARIATIONS (& their effects)

42. Adopt some strategies/phases and not others, to save on costs • EXPANSIONS - greatest beneficial impact on the very lowest income groups* • ADJUSTING DEDUCTIBLES - greatest beneficial impact on slightly higher, but still low-income groups* • BUY-IN OPTION - greatest beneficial impact on continuity of care and access for slightly higher, but still low-income groups* who have some degree of coverage – much less likely to be helpful if deductibles are not adjusted * Excluding the childless adults who cannot be covered with federal Medicaid dollars

43. Allow buy-in for higher income individuals • Allow uninsured individuals and employers of uninsured individuals who cannot afford private insurance rates to purchase coverage at the lower per capita Medicaid rate • Require that individuals be within a certain range of the Medicaid income eligibility limits