Containing Costs in Medicaid: State Approaches

1. Containing Costs in Medicaid: State Approaches Donna Folkemer National Conference of State Legislatures August 17, 2010

2. Content of Presentation • How is Medicaid changing in the future? • What factors are influencing Medicaid now? • What approaches have states considered to improve care and contain costs? 2

3. Looking Ahead at Medicaid • The Patient Protection and Affordable Care Act expands and modifies Medicaid in 2014. • Eligibility is revamped: All individuals with incomes at or below 133% of the federal poverty level ($14,400 for one person) will be eligible. • In most cases, eligibility will be based on income, not income and assets. • Adds new mandatory categories of eligibles: Single, childless adults; parents; former foster care children. 3

4. Enhanced Federal Share for New Eligibles • Year Federal Match • 2014 100% • 2015 100% • 2016 100% • 2017 95% • 2018 94% • 2019 93% • 2020 forward 90% 4

5. Maintenance of Effort Provision • Temporary Maintenance of Effort/Eligibility • Prohibits eligibility changes more restrictive than those in place on date of enactment (March 23, 2010) • Expires in 2014 when health care exchanges become effective. • Between January 1, 2011 and January 1, 2014, a state is exempt from the maintenance of effort for optional non-pregnant, non-disabled adult populations above 133 percent of the federal poverty level if the state certifies to the Secretary that the state is currently experiencing a budget deficit or projects to have a budget deficit in the following state fiscal year. The state may make the necessary certification on or after December 1, 2010. 5

6. Implications for States • Lots of work to do that requires time and money. Both are in short supply in most states. • Examples: • Systems upgrades for eligibility and for connecting with new exchanges • New staffing to accommodate growth • Health care workforce recruitment and reimbursement • Marketing and outreach 6

7. Implications for States • Lots of attention to quality, prevention, and delivery system changes in PPACA. These provide some opportunities. • Examples from law. Details to be developed. • As of 7/1/2011, Medicaid dollars won't pay for treatment of infections acquired while in the hospital. As of 10/1/2010, Medicaid must cover tobacco cessation for pregnant women. • Medicaid demo project in up to 8 states on bundled payment methodologies. • Medicaid demo project in up to five states to pay large safety net hospital or networks on a global basis. • States can set up pediatric accountable care organizations . • Option to provide chronically ill beneficiaries with patient-centered medical home. • Appropriates some funds beginning in January 2011 for wellness programs in Medicaid. • Many options and incentives in long term care focused on building up community care system. 7

8. Medicaid Now • States are grappling with historically difficult budget conditions due to the recession. • Monthly Medicaid enrollment growth has been accelerating in each six-month period since the recession began in December 2007 and has increased in every state. • State revenues unlikely to return to pre-recession levels for several years. 8

9. NCSL puts it this way: "The current state fiscal situation is mixed. While many states appear to be in a more stable situation--the revenue freefall has abated--they are far from clearing the hurdles wrought by the recession. The revenue chasm was so deep that climbing out if it is going to take some time. …State budgets are in transition, apparently improving as state revenues stabilize and begin their slow march to pre-recession levels. But many uncertainties lurk, with their impact poised to hit state budgets next year. FY 2011 many turn out to be the calm before the next fiscal tempest."--NCSL State Budget Update, July 2010. 9

10. More on Medicaid Now • "Almost all Medicaid directors reported that their states continue to face substantial budget shortfalls going into SFY2011 and given Medicaid's large share of state budgets, Medicaid would be expected once again to contribute to the budget cuts needed to close the gaps. Cuts…are neither easy to adopt nor to implement, because of the way they impact individuals who need health care. [States] have already adopted options to generate program efficiencies and made other cuts that try to avoid directly affecting beneficiaries…"--Vern Smith and colleagues in "State Medicaid Agencies Prepare for Health Care Reform While Continuing to Face Challenges from the Recession." August 2010 Issue Paper from the Kaiser Commission on Medicaid and the Uninsured. 10

11. More on Medicaid Now • The National Governors Association and the National Association of State Budget Officers said this: "About three-quarters of the states are planning to contain Medicaid costs in proposed fiscal 2011 budgets…..Proposals for fiscal 2011 include reducing provider rates (28 states) and freezing provider rates (20 states), limiting benefits , limiting prescription drugs, eliminating benefits , expanding managed care, delaying expansions states, and instituting new or higher copayments.""--The Fiscal Survey of States. NGA and NASBO. June 2010. 11

12. State Recommendations to Improve Care and Contain Costs • States are exploring new strategies for improving care and containing costs. • For this presentation, reviewed analytical work done by Medicaid study groups, committees, or analysts in Kansas, Missouri, Nebraska, Ohio, and Utah during past five years. • Identified common themes in state approaches and identified examples of recommendations on issues. 12

13. Some Basic Findings Based on State Analyses • Recommendations are derived from data and trend analysis from the particular state. • Many approaches to institute cost-effective care are multi-year in nature. • Different issue areas require different approaches. • There are no magic bullets. • Adequate information system essential to track change. 13

14. Themes Across States • Eliminate inefficiencies to reduce costs and improve quality • Better management • Better delivery of care • More appropriate services • Improved administration • Tie pay to performance • Make integral part of rate setting • Create more unity in Medicaid budgeting and management • For example, bring together management of Medicaid-funded programs in various agencies 14

15. State Recommendations • Care Management • States want more of it to promote appropriate use of services. • Examples include: • Making capitated health plans available to a broader part of the population. • Assuring that persons with highest costs have access to care manager. • Assuring that persons with specific chronic diseases such as asthma have access to care manager. • Assuring care managers follow national quality standards. 15

16. State Recommendations • Pharmacy • States want to be better purchasers and assure access. • Examples include: • Ramp up e-prescribing. • Set specific goals for use of generics. • Continually revise Preferred Drug Lists based on evidence. • Add psychotropic drugs to Preferred Drug List. 16

17. State Recommendations • Finance, Structure and Management • States want to look at new approaches to setting rates and to assure appropriate use of Medicaid funds. • Examples include: • Increase rate-setting done prospectively. • Give more attention to making Medicaid payer of last resort. • Give more attention to capability to find fraud and abuse. • Move quickly to paperless claims. 17

18. State Recommendations • Long Term Care • States wants to move toward a broader mix of community choices and promote stronger preventive efforts. • Examples: • Give attention to chronic care management to delay functional limitations. • Provide more information to consumers and help them use it. • Provide more unified planning of long term care within the state. • Look at any and all options for connecting with Medicare to support dual-eligibles. 18

19. Contact Information: Donna Folkemer NCSL 202.624.8171 19