Hot Issues in Health Care

1. <<!-- PICOTITLE= "The Public Side of Health Care – Focus on Medicaid and SCHIP" --> <!-- PICODATESET mmddyyyy=11252002 --> Hot Issues in Health Care The Public Side of Health Care Focus on Medicaid & SCHIP November 25, 2002 Martha King National Conference of State Legislatures (NCSL) Health Care Program Director 303/856-1448 martha.king@ncsl.org

2. Medicaid “Experts” “While I can explain the meaning of life, I don’t dare try to explain how the Medicaid system works.”

3. Medicaid Made Simple

4. Presentation Preview Focus on Medicaid & SCHIP • What? Why? • People covered & not covered • Services provided • How Colorado compares • New flexibility & options • Expenditures & budget shortfalls • Challenges & Opportunities

6. Medicaid: Why Should You Care? • 18.9% of Colorado’s GF budget (FY 2003) • Largest financing source for low-income (43% of federal allocations to states) • Pays half of U.S. nursing home costs • Covers 31% of U.S. population 85+ • Funds about 35% of U.S. births • Subsidizes care for the uninsured • Subsidizes graduate medical education

7. Medicaid at a Glance • Federal/state program (55 variations) • Title XIX of the Social Security Act • Optional—large financial incentive • Federal gov’t pays 50% of services • About $1.1 billion for Colorado FY ‘01 • Medicaid vs. Medicare 7 million “dually eligible”

8. Medicaid at a Glance Three programs in one: • A health insurance program for low-income parents (mostly mothers) and children • A funding source to provide services to people with significant disabilities • A long-term care program for the elderly “Medicaid makes Medicare work”

9. Medicaid Perceptions One view: A black hole Another view: A cash cow

10. Mandatory Populations(Examples) Entitlement: all who qualify are eligible • AFDC-related "Section 1931” populations (CO at 39% of poverty—$5,858 family of 3) • People receiving SSI (SupplementalSecurity Income) • PG women up to 133% of poverty & their infants • Children under age 6 up to 133% of poverty • Children 6-18 up to the poverty level • Children in adoption or foster care • Some payments for low-income Medicare recipients (e.g., premiums, co-payments)

11. Optional Populations(examples) • Additional people under “Sec. 1931” or Demonstration waiver populations (1115 waiver) (17 states—e.g., OR 100%; TN 400%) • Additional infants, PG women, and children (37 states cover additional) • "Medically needy” (35 states cover medically needy) • Home- and community-based waiver recipients (all 50 states; CO considered leader for MR/DD) • State Children's Health Insurance Program • “Ticket to Work” for people with disabilities

12. Who’s Not Covered? Everybody else . . . Anyone not in a “category” • 700,000+ uninsured Coloradans • Adults without children or SSI eligibility • Parents who makes more than $5,858/year (family of 3) in Colorado • Elderly or people with disabilities who don’t meet SSI or other criteria • High medical users who don’t meet criteria • etc.

13. SCHIP • State Children’s Health Insurance Program • Title XXI of the Social Security Act 1) Expand Medicaid 2) Create non-Medicaid insurance option 3) Combine the two options • Eligibility • Uninsured under 200% poverty • Under age 19 • Not eligible for Medicaid • Higher federal match (66% in CO)

14. SCHIP: Colorado Children’s Health Plan Plus (CHP+) • Non-Medicaid option • Federal allotment $38 million in FY 2003 • Covers kids to 185% poverty • Covers about 209,000 kids • Adding PG women

15. Using SCHIP to Cover More Uninsured • Can expand the eligibility group • Automatically to 200% of poverty • Higher through income disregards • E.g., Missouri to 300% of poverty • Can expand to add family coverage

16. Low-income population ( less than 200% poverty) Colorado U.S. Average % Nonelderly in Medicaid (or other state-funded program) 14.7% 23.5% 21.8% 34.5% % Adults in Medicaid (or other state-funded program) 10.4% 16.2% % Nonelderly uninsured 38.1% 34.8% State-federal “balance of pay- ments”/person (paid vs. rec’d) -$1,944 -$1,028 Colorado in Comparison(average 1998-2000) % Children in Medicaid (or other state-funded program) SOURCES: Urban Institute, June 2002; Public Policy Institute, 2002.

17. Beneficiaries and Expenditures(FY 2002 -- U.S. average) Enrollees44.6 million Expenditures*$191 billion

18. Medicaid Expenditures Per Enrolleeby Acute and Long-Term Care, 1998 $11,235 $9,558 $1,892 $1,225 SOURCE: Urban Institute estimates, 2000, Brian Bruen and John Holahan Note: Expenditures do not include DSH payments,accounting adjustments, or administrative costs.

19. Mandated Services • Inpatient and outpatient hospital services • Physician services • Dental services (medical and surgical) • Nursing facility (NF) services for individuals aged 21 or older • Home health care • Family planning services and supplies (90% federal) • Rural health clinic services • Laboratory and x-ray services • Pediatric and familynurse practitioner services (continued)

20. Mandated Services (continued) • Federally qualified health center services (FQHCs) • Nurse-midwife services • Early and periodic screening, diagnosis, and treatment (EPSDT) services for individuals under age 21, even if the treatment is an optional Medicaid service not otherwise covered in the state's Medicaid plan. Other service requirements: • Statewide • Comparable—equal for all in a group • Amount, duration & scope—achieve purpose • Freedom of choice (modified by Balanced Budget Act ‘97)

21. Optional ServicesMost Common • Prescription drugs* • Intermediate care facility/mentally retarded (ICF/MR)* • Clinic services* • Emergency hospital services* • Nursing facility services for the aged in an institution for mental diseases (IMD)* • Optometrist servicesand eyeglasses* • Prosthetic devices* • Dental services (nonmedical or surgical) • Hospice services* (RED* = Colorado covers; many have restrictions)

22. Optional ServicesOther Examples • Podiatrists*, chiropractors, other licensed practitioners • Psychological services* • Private duty nursing* • Personal care services* • Transportation (transportation req’d to and from care)* • Case management* • Diagnostic, preventive and rehabilitative* services • Inpatient psychiatric services (under 21 or over 64)* • Physical/occupational therapy, speech/language/hearing* • Dentures • Respiratory care--children on a ventilator • Primary care case management (CO covers under waiver*)

23. Optional ServicesHome- and Community-Based WaiversSection 1915(c) HCBS waivers cover certain individuals who are both eligible for Medicaid and eligible for institutional care as a result of their limitations in specified activities of daily living • personal care services • chore services • respite care services • adult day care • homemaker/home health aide • training for family members • nursing services

24. Medicaid: New Flexibility HIFA (Health Insurance Flexibility & Accountability initiative) —6 approved • Special 1115 demonstration waiver • Purpose: to expand health insurance coverage to the uninsured • Targeted to people below 200% of poverty • Simple application process & expedited review • Must be cost neutral

25. HIFA - Benefits • Benefits must remain the same for mandatory populations • Optional populations - similar to private sector coverage • Expansion populations - must include a minimum of basic primary care services • Premium assistance programs can subsidize employer insurance

26. Other Waiver Options • Comprehensive health reform 1115 waivers (e.g., DE, HI, MA, MN, OR, TN) • New twist: Utah’s 1115 waiver • Primary and preventive services only for adults to 150% of poverty • Specialized 1115 waivers • “Pharmacy Plus” — low-income senior prescription drug benefit (only) up to 200% poverty (IL, SC, WI approved) • “Discount-only” waiver — extend Medicaid drug price reductions to other populations (ME operating; court challenges) • Family planning services — extend post-partum time for family planning (and primary care)

27. Medicaid Expansions Pros and Cons Pros: • Federal share (50% in Colorado: $1 for $1) • Existing administration/provider network • New flexibility & options • “Better than nothing” for 700,000+ uninsured Cons: • Financing constraints (economy, TABOR, 6% limit) • Federal mandates (although getting better) • Potential “maintenance of effort” requirements • Colorado’s political climate: “less government”

28. Average Annual Growth Rates Annual Growth Rate 27.1% 12.8% 9.7% 9.0% 5.4% 3.2% SOURCE: For 1990-1999: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, 2000. For 1999-2001: Health Management Associates surveys for Kaiser Commission on Medicaid and the Uninsured, 2001 and 2002.

29. Sources of Growth in Federal Medicaid Expenditures, 2001-2002 Factors Behind Expenditure Growth for Beneficiaries $9.0 billion 38% 62% $2.3 billion $2.1 billion 48% 57% 52% 43% Total = $15.7 Billion Increase *UPL=upper payment limit SOURCE: Kaiser Commission on Medicaid and the Uninsured, analysis of CBO Medicaid baseline, March 2002.

30. Reasons for Medicaid Spending Growth in 2002 • Prescription drugs • 19.7% av. annual growth vs. 8.8% for all medical services (‘98-’00) • Components: more people & utilization, new drugs, price increases • Enrollment growth • Economic downturn, successful outreach efforts, eligibility expansions and simplifications • Medical inflation and utilization • Private insurance premiums at double digit • Long-term care • Increased growth in home care services SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, June 2002.

31. State Budgets • 36 states with shortfalls in ‘02 • 41 states project shortfalls in ‘03 • Appropriations lower than projected need FY ‘03 est. growth 13.4% vs. est. 5.3% av. appropriations • 36 states supplemented Medicaid in ‘02 • General revenue—23 states • Tobacco funds—6 states • Medicaid trust funds—6 states • Rainy day funds—5 states • Other programs—7 states Sources: NCSL Survey of National Association of Legislative Fiscal Offices, June 2002; and Health Management Associates survey of Medicaid officials for the Kaiser Commission on Medicaid and the Uninsured, June 2002.

32. Medicaid Cost Containment • Cut or freeze: • People (18 states in ‘03) • Services (9 states in ‘02; 15 in ‘03) • Provider rates (22 states in ‘02; 29 in ‘03) • Pharmaceuticals (40 states in ‘03) • Maximize federal funds (ID state-funded services; use “intergovernmental transfers”; upper payment limits; provider taxes; tobacco taxes; DSH funds) • Prudent purchaser (prevention, utilization review, disease management—11 states in ‘02; 21 states in ‘03)

33. Cost Containment, con’t • Managed Care(10 states ‘02; 12 states ‘03) • Parents & children • Aged, blind, disabled • Home- and community-based services • Integrate acute care & long-term care • PACE: Program of All-Inclusive Care for the Elderly • Long-term care strategies(13 states in ‘03) • Fraud & abuse controls (16 states in ‘02; 19 in ‘03) • Co-payments(15 states in ‘03) SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, June 2002.

34. Prior Authorization Preferred Drug Lists & Formularies State Supplemental Rebates Expand Use of Generics Drug Utilization Review Caps & monthly limits Step Therapy/fail-first Ingredient formulas Higher co-payments Rx Dispensing Fees Use of PBMs Use of Managed Care Fraud & abuse control Disease Management Over-the-Counter? Pharmacy Counseling Rx Cost Strategies

35. Beware Unintended Consequences • Eligibility cuts may increase # of uninsured • Pharmaceutical cuts may result in adverse health conditions & resulting costs • Provider rate cuts could mean decreased access & increased emergency room visits • Cuts may result in cost-shifting (e.g., other programs without match, providers, local gov’t, insurance premiums) • Medicaid is a big contributor to the medical services economy

36. Medicaid’s Role in the Health System, 2000 Total National Spending (billions) $1,130 $412 $422 $92 $122 SOURCE: Heffler, S. et al., 2002. Based on National Health Care Expenditure Date, Centers for Medicare and Medicaid Services, Office of the Actuary.

38. Prudent Purchaser: Prevention • D.C. Hospital Association Survey (1988) 36% of uninsured admissions (not maternity or trauma) due to preventable conditions if given primary care • Wisconsin measles outbreak (80% Medicaid) (3 deaths & $1.5 million in hospital costs—Mg’d care contract didn’t require 2nd measles vaccine) • Prenatal care (good “business sense”) Haggar Clothing (1988—26 premature infants at average of $26,000; 1992—3 premature infants) Prevention/Education/Screening e.g., unintended pregnancies—38% in Colo. • Healthy Behaviors (e.g., smoking cessation, diet, exercise, reduce risky activities, etc.)

39. Prudent Purchaser • Disease Management • 5% of CO Medicaid clients = 45% of costs (source: RMN quoting Karen Reinertson, 7-22-02) 1% of people spend 30% of dollars Top 10% of people spend 70% of dollars Bottom 50% of people spend 3% of dollars (Source: Scott Leitz, Economist, Minnesota Department of Health) • New pilot initiative for 400 with diabetes, asthma, or schizophrenia • Colorado Community Health Centers project (Serve 25% of Medicaid patients) • Virginia: 25% reduction in emergency room visits; substantial savings • Florida: mixed results (admin. costs & contracting problems)

40. Opportunities & Challenges • What are your goals? • Universal coverage? Universal access? • Healthy population? • More personal responsibility? • What is the appropriate role of government? • The private sector? • Individuals? • Are you getting what you pay for? • Services, quality, health status improvements? • How can you control (not shift) costs?

41. Combination Initiatives E.g., Oregon • Government’s role: • Insure the uninsured up to the poverty level • Provide subsidies for some others • Employer’s role: • Cover employees with incomes above poverty via “play or pay” requirement • Other: Prioritize publicly funded health services