Health Reform: What the States are Doing Now October 17, 2012, 2:00 - 3:00 pm ET

1. Health Reform: What the States are Doing Now October 17, 2012, 2:00 - 3:00 pm ET • Matt Salo • Executive Director • National Association of Medicaid Directors • Jack Meyer, Ph.D. • Managing Principal • Health Management Associates • Laurel Sweeney(moderator) • Senior Director • Global Health Economics & Reimbursement • Philips Healthcare Welcome to Philips Healthcare’s “Reimbursement Simplified” Webinar Series

2. Medicaid Reform: Views from the States Philips Healthcare Webinar October 17, 2012 Matt Salo Executive Director National Association of Medicaid Directors

3. National Association of Medicaid Directors • NAMD created in 2011 to support the 56 state and territorial Medicaid Directors. • Core functions include: • Develop consensus on critical issues and leverage their influence with respect to national policy debates; • Facilitate dialogue and peer to peer learning amongst the members; and • Provide best practices and technical assistance tailored to individual members and the challenges they face.

4. Medicaid 101 • Public health care coverage program – Administered by states within a federal regulatory framework – Jointly financed by the federal government and states with an average federal share of 57% • Currently covering more than 62 Million enrollees • Currently spending more than $420 Billion per year

5. Medicaid’s Complexity • Due to state decisions compounded over 45 years, the program looks markedly different in practically every state – Who is covered, what services are offered, how services are delivered, as well as how and how much providers are reimbursed • Within any given state, Medicaid’s role is multi-faceted: – Coverage for the poor, but not all people in poverty – 40% of the nation’s births – The majority of all long term services and supports – The majority of mental health funding, HIV/AIDS funding, etc.

6. States Face Several Major Challenges Ongoing state budget challenges Medicaid not producing optimal quality health outcomes Implementation of the Affordable Care Act (ACA) requires transformational changes to the program Supreme Court decision turns decision to expand program over to the states November elections bring uncertainty Federal deficit reduction efforts could complicate efforts at reform

7. Budget constraints (cont) • Worst economy since the Great Depression • State revenues have YET to return to 2008 levels • Balanced budget requirements force tax increases or spending cuts • Political appetite for tax increases nonexistent • Options for cutting Medicaid are slim or unappealing • MOE prohibits eligibility changes • Provider reimbursements already too low • Optional services include Rx and LTC

8. Star Trek Solution: Kobayashi Maru When faced with an untenable, impossible choice: think outside the box. Taxes cannot be raised enough and benefits cannot be cut enough Reframe the question!

9. Medicaid’s Primary Problem? • It is merely a reflection of the broader U.S. health care system • 17% of GDP produces third world country outcomes • The system is dysfunctional and inefficient • The fee-for-service (FFS) delivery model cannot work in a fractured, silo driven environment • Physical vs behavioral vs pharmaceutical vs long term care • Medicare vs Medicaid • Payment incentives are badly aligned and drive unnecessary utilization and spending

10. Solution? Reform the Whole System! • Move away from FFS (or “fend for self”) towards more managed, coordinated care • Can be capitated or not (PCCM) • Frail seniors and younger adults with disabilities have the most to gain • Re-align dysfunctional Medicare/Medicaid relationship for dual eligibles • Create new payment incentives that financially reward keeping patients out of hospitals and other intensive settings • Medicaid cant go alone – other payers need to be at the table – see Arkansas

11. Implementing the ACA • In many ways, the foundation of the 2009 health reform law is built upon Medicaid. • States responsible for implementation of Medicaid provisions in health reform • Conducting outreach and enrollment • Integrating Medicaid enrollment with the Exchanges • Applying new income standards • Building provider networks and ensuring access to care

12. SCOTUS Decision and What it Means In a surprise decision, the Roberts court ruled that the mandatory expansion was unconstitutional as written. This is unprecedented! Will state’s have a binary option (yes or no) or will they have greater ability to dictate what the expansion looks like? We don’t know for sure…yet.

13. What Do We Know? • HHS guidance has trickled out in various forms – Only the expansion itself is optional – all other Medicaid-related components of the ACA still apply ◦ DSH cuts ◦ Excise tax ◦ Temporary provider reimbursement rate increase ◦ Overhaul of how Medicaid eligibility is calculated – States may start later than 1/1/14, but the window for the 100% FMAP is unchanged – States may choose at any time to sunset the expansion

14. The Big Remaining Question • Can a state do a partial expansion – up to 100% FPL, or some other level? – Federally subsidies for private exchange coverage begin at 100% FPL

15. Factors to Consider in Weighing the Options • Political • Outcome of November elections • Role of state legislature and state hospital associations • Ideological/Policy • Is expanding Medicaid the best way provide coverage to 17 million new individuals • Does holding out give a state more leverage to obtain greater flexibility in how the new or existing program is run? • Financial • What is the short and long term benefit/risk to states of the expansion

16. November Elections and Beyond • Less than 12 months away from open enrollment: • “Repeal and Replace” or “Business as Usual”? • Federal Deficit Reduction/Entitlement Reform • Bipartisan support for major changes in how Medicaid is financed • Block grants/per capita caps? • FMAP reductions (including to enhanced match of expansion) • Provider Tax reductions • Delay of Medicaid/Exchange expansion?

17. States, Providers Prepare for Exchanges and Health Care Delivery/Payment Reforms Jack Meyer, Ph.D. Health Management Associates October 17, 2012 17

18. States Are Making Progress 15 states plus DC have established Exchanges 3 states are pursing partnership Exchanges 7 states have declared that they will not play Another 16 states have not committed but are continuing planning efforts 9 states have not shown significant planning activities Source: Kaiser Family Foundation

19. Building Two New Markets • American Health Benefits Exchanges • SHOP Exchanges for employees of small firms • Fundamental shift away from the traditional model of turn downs, rate-ups for health conditions, gender, age (unlimited), etc. • In new model, plans and providers succeed by real care management, better quality, safety • These new markets must be user-friendly

20. Functions Under Construction • Screen and enroll; done through federal hub • Determine eligibility for subsidies • Set up different categories of cost sharing • Determine the essential benefits package • Implement wide range of insurance reforms • Implement risk adjustment and reinsurance • Qualify health plans, MLR and rate review • Achieve financial self-sustainability by 2015

21. Don’t Think All or Nothing • Most states are getting ready to do several tasks but will need federal help on other tasks • States lagging can learn from states leading • Leaders include MD, CA, and TN • About ten states will be ready on 1-1-14 • Successive waves over 2014/2015 • CHIP developed this way; so did Medicaid • Most states do not want a federal exchange • Big question is: will the feds be ready?

22. Major Problems in US • US $2.8 T; $8,233 per capita; France, $3,974, Germany $4,338 • 48.6 m uninsured; 25+ million underinsured • Life expectancy 81.1; France, 84.7;Germany 83 • Medicare & Medicaid, tax breaks on autopilot • Care delivery remains very fragmented • Moving from paper to electronics too slowly • Malpractice system unfair, inefficient • Only 3-5% of health spending on prevention

23. Other key Problems Population aging: chronic illness key challenge Prices for health care goods and services higher in US than in other countries Huge variations in spending and quality Scary patient safety problems Lack of effective technology assessment Epidemic of obesity Fee-for-service underwrites all of this

24. Challenges, Opportunities for Providers • Use team-based care • Must follow the patient across settings of care • Work with payers to reduce avoidable ER use, hospital admissions, and readmissions • Work to change reward system from volume to performance; gain-sharing is key • Use EHR incentives; achieve meaningful use • Address, modernize scope of practice limits

25. Other Challenges, Opportunities • Support more competitive markets • Develop “coverage with evidence development” for advanced technology • Join in demos for episode of care bundling, etc • Support tax exclusion caps, sin taxes • Support sensible changes in public programs • Reduce health care fraud

26. Threats and Opportunities • Physicians and hospitals that cling to the fragmented care delivery system, FFS, the “paper chase,” and volume-based rewards will lose out in the new climate • By contrast, those who practice coordinated care, preventive medicine, care management, and performance-based rewards based on cost, quality, and safety will thrive

27. We would like to hear your views on today’s webinar. Go to http://www.surveymonkey.com/s/JVYFZB5For more information on reimbursement, please visit the Philips Healthcare Reimbursement Website at www.philips.com/reimbursement Questions?Please type your questions into the video player window.The moderator will pose questions to the panelists.

28. Speaker Bios Matt Salo Executive Director National Association of Medicaid Directors Matt Salo was named Executive Director of the National Association of Medicaid Directors (NAMD) in February 2011. The newly formed association represents all 56 of the nation’s state and territorial Medicaid Directors, and provides them with a strong unified voice in national discussions as well as a locus for technical assistance and best practices. Matt formerly spent 12 years at the National Governors Association, where he worked on the Governors’ health care and human services reform agendas, and spent the 5 years prior to that as a health policy analyst working for the state Medicaid Directors as part of the American Public Human Services Association. Matt also spent two years as a substitute teacher in the public school system in Alexandria, VA, and holds a BA in Eastern Religious Studies from the University of Virginia.

29. Speaker Bios Jack Meyer, Ph.D. Managing Principal Health Management Associates Jack Meyer, Ph.D. is a Managing Principal with Health Management Associates in the Washington, D.C. office, conducting health care research, policy analysis, and strategic planning. He works for grant-making foundations, health industry leaders, and state and federal agencies. Dr. Meyer also holds a joint appointment as a Professor at the University of Maryland School of Public Policy and School of Public Health. Dr. Meyer is assisting states and the federal government in the planning, design, and implementation of Health Insurance Exchanges established under the Affordable Care Act. This involves helping states make key design choices and build the infrastructure necessary to facilitate enrollment and choice of health plans. Dr. Meyer’s current research also includes designing care management programs that address the complex medical needs of lower-income people who will be newly eligible for Medicaid under national health reform. This includes studying their utilization patterns and clinical conditions, including primary diagnoses and co-morbidities. He was the lead author on a study of the rate of return on interventions to reduce ER visits and hospital readmissions and improve health outcomes for people with chronic medical conditions. Dr. Meyer has also participated in studies sponsored by the Commonwealth Fund that identify the ingredients of high-performing hospitals. This involved identifying hospitals with both excellent clinical outcomes and lower-than-average costs and visiting them to determine the programs and policies they followed to achieve good results. He is the lead author of a ten-year review of the transformation of the health care system in the District of Columbia, sponsored by the Brookings Institution and the Rockefeller Foundation.