Alabama Medicaid Challenges and Choices November 14, 2012

1. Alabama Medicaid Challenges and ChoicesNovember 14, 2012

2. The following presentation has been a collaborative effort with feedback provided by the following companies: Amerigroup Amerihealth Mercy Centene Corporation HealthSpring Meridian Health Plan Viva Health Wellcare

3. Medicaid Challenges and Choices Weak economy is driving increases in Medicaid eligibles and enrollment State budget strained due to economic downturn and growing Medicaid enrollment Health reform considerations Whether or not to expand Medicaid? If expansion chosen Alabama could see enrollment in Medicaid grow by 400,000 to 500,000 If decision is to expand; when should expansion occur? Insurance Exchange Options and the opportunity that more membership could be added to the Medicaid program State Based Exchange State Partnership Exchange Federally-Facilitated Exchange How to deal with individuals eligible for both Medicaid and Medicare; relatively small population driving large spend. How to improve outcomes and quality in the most cost efficient manner?

4. Medicaid Challenges and Choices • How to achieve more integrated and coordinated care? • Not uncommon for Medicaid enrollees to have some portion of their health care dollars going to more than a dozen state or local agencies and/or programs. • Reform Medicaid via pilots and demonstrations vs. via state wide program. • Carve out some populations and services vs. include all populations and services. • Implement reform via Managed Care Organizations (MCO) • Capitated risk transfer • Implement reform via provider driven Community Care Organizations (CCO) or Accountable Care Organizations (ACO) • Fee for service, gain share or partial risk share • Expand the current Patient Care Networks of AL , Primary Care Case Management (PCCM) program beyond the pilot

5. National Medicaid Landscape • Total Medicaid Beneficiaries: 53.9 million • Enrollment in MCO-based programs: 26.7 million (50%) • Enrollment in PCCM-based programs: 8.8 million (16%) • Enrollment in traditional FFS: 18.4 million (34%) • 47 states (plus the District of Columbia) offer some form of Medicaid managed care • 20 states offer a combination of MCO and PCCM-based managed care • 16 states (plus the District of Columbia) offer MCO only • 12 states offer PCCM only • 2 states (Wyoming and Alaska) do not offer any Medicaid managed care Source: KCMU/HMA Survey of Medicaid Managed Care, Sept. 2011

6. Southern Medicaid Managed Care Environment 6

7. Enrollment and Expenditure Disparity Source: Georgetown Center for Children and Families analysis of March 2011 CBO Baseline

8. Developing Effective Managed Care Models Unmanaged and Unsustainable Managed, Sustainable and Accountable for Results Medicaid Managed Care TANF, CHIP, ABD Acute Accountable Care Organization Unmanaged FFS PCCM CM/DM Integrated Medicaid Managed Care Admin fee, some risk sharing; most are FFS Full capitation with risk adjustment Full capitation with risk adjustment, LTC Financing, dual integration Partial risk or Shared savings State Holds Risk Financing Local, Regional, Statewide (Patient Care Networks of AL) Regional or Statewide Regional or Statewide Individual practices, not connected Regional Geography Full UM, DM, CM, Rx Mgt., Prior Auth, may include BH/SA, dental, others Limited DM, CM, no UM Integrated CM, DM, UM Full UM, DM, CM, Rx Mgt, Prior Auth, Integrated LTC and waivers Integrated CM, DM, UM Clinical Model No public metrics QA, QI, NCQA Contractor and provider Incentives, NH diversion QA, QI, NCQA, contractor incentives QA, QI, NCQA Contractor Provider incentives Varies by Model Quality Minimal Moderate if shared savings required Cost Savings Potential Highest, contractor at risk, LTC utilization shift High, Contractor at risk None, State retains risk TBD. New for Medicaid

9. What We Recommend • Restructure provider financing/payment model to allow Alabama to benefit from managed care savings • Implement an MCO-based capitated Medicaid program • Would need to consider: Federal approvals required Implications for state agencies that would develop and manage the RFP process or otherwise be impacted by changes to Medicaid program Impact of these and other issues on the targeted start date of the program • Cover all populations and all services • Populations: TANF, CHIP, Aged, Blind, Disabled and Medicaid/Medicare Dual Eligibles • Services: Physical Health, Behavioral Health, Dental, Rx and Long Term Care (Nursing Home and Home and Community Based Services) • Require member enrollment into managed care programs • Fixed enrollment periods to help stabilize populations within plans • Select at least 3 plans in a competitive RFP process to provide member choice and create competitive environment to drive health plan performance and reduce complexity for providers and state agencies • Consider only awarding 2 plans in rural counties • Favor MCOs that bid on a statewide basis with extra points in the RFP scoring process

10. Why We Recommend MCO-Based Managed Care Approach • Budget Predictability • Capitation ensures predictable expense • Risk shifts to Managed Care Organizations • Sustainability • Managed care can reduce state Medicaid costs in the first year depending upon populations and services covered • Managed care can lower cost trend for future years • Systemic shift in reliance on costly services from ER, hospital and nursing home to primary and preventive care and community based services • Improved management of chronic conditions prolongs individual independence and reduces or delays the need for costly nursing home placement

11. Why We Recommend MCO-Based Managed Care Approach • Single Entity Accountable for Quality results for each member • Patient-centered care management program coordinating care across the entire care continuum • Quality programs aligned with state priorities • Evidence-based practice guidelines • Physician engagement and intervention • Outcomes tracking via HEDIS and CAHPS • Increased Access • Enhanced FFS reimbursement for essential providers • Care coordination fees for Patient Centered Medical Homes (PCMH) and Health Homes • Gain share opportunities for PCMH and Health Homes • Technology and care coordination support

12. Managed Care Potential:Louisiana SFY 2009 Data vs. UHC Averages Note: State of LA data was calculated by Mercer which was retained by LA Dept. of Health and Hospitals as consulting actuary using SFY 2009 data. UHC data was for the same time period and reflects our nationwide average. 12

13. Expansion of MCO-Based Medicaid Managed Care Since 2010 States implementing MCO-based Medicaid managed care or intention to do so since 2010

14. Appendix

15. Reference Links • New Mexico Medicaid Reform Initiative-Centennial Health Program • http://www.hsd.state.nm.us/pdf/Medicaid%20Modernization/Centennial%20Care%20-%20Final%20v1.2.pdf • Georgia Medicaid Reform Recommendations-Navigant Consulting • http://dch.georgia.gov/sites/dch.georgia.gov/files/imported/vgn/images/portal/cit_1210/38/6/180866433Navigant-Long-Executive-Summary-FINAL-1-23-12.pdf • Center for Health Care Strategies-8 Key Lessons Learned for Medicaid Managed Care • http://www.chcs.org/publications3960/publications_show.htm?doc_id=1261257 • Medicaid Managed Care Cost Savings–A Synthesis of 24 Studies-Lewin Group • http://blogs.chicagotribune.com/files/lewinmedicaid.pdf