Deficit Reduction Act: Considerations for Changing Medicaid Benefits and Cost-Sharing SCI National Meeting New Orlea

1. Deficit Reduction Act: Considerations for Changing Medicaid Benefits and Cost-Sharing SCI National Meeting New Orleans, January 25-26 Amanda Folsom Senior Manager AcademyHealth

2. Deficit Reduction Act of 2005 (DRA) • Includes a number of significant changes to Medicaid policy intended to reduce federal spending • Gives states new options to change benefits and cost-sharing within certain federal statutory and regulatory parameters

3. Benefit Provisions in the DRA • Allows states to use benchmark or benchmark-equivalent plans for certain groups • State Employees plan • FEHBP – Blue Cross Blue Shield PPO • Largest commercial HMO in state • Secretary-approved • Enrollment of individuals with disabilities or long-term care needs in benchmark plans must be optional • Maintains EPSDT wrap-around for children • Does not apply to expansion populations – population must have been enrolled on or before February 8, 2006

4. Cost-Sharing Provisions in the DRA • Gives states new option to charge premiums for certain enrollees >150% FPL and cost-sharing for some individuals >100% FPL • 5% aggregate cap • New options for cost-sharing on non-preferred Rx and inappropriate emergency room use • Allows states to make premiums and co-payments “enforceable” • Mandatory children and pregnant women generally exempt • CBO estimated 80% of savings attributable to decreased utilization

5. States Using New DRA Flexibility • Four states have received approval for Medicaid reform proposals under DRA: • West Virginia • Kentucky • Idaho • Kansas • Other states evaluating options (e.g., Wisconsin) • Kaiser Budget Survey indicated 9 states were re-thinking previous plans to use waiver in light of the DRA

6. States Using New DRA Flexibility • Common themes so far: • States using DRA primarily to redesign and tailor benefits packages • Benefits limited or scaled back for certain populations and enhanced for others • Fairly modest increases in cost-sharing so far • New incentive accounts or enhanced benefits to encourage healthy behaviors and personal responsibility

7. Medicaid Reform in West Virginia • Two different benefit packages: • Basic Plan: Covers all mandatory and some optional services • More limited than previous Medicaid benefits package – e.g., 4 drug limit • Enhanced Plan: • Enhanced Plan available for individuals who have signed a member agreement (a personal responsibility contract) • Comparable to previous Medicaid benefit package • Healthy Rewards account for cost-sharing expenses

8. Medicaid Reform in Kentucky • Four different benefit packages tailored to different populations: • Global Choices • Family Choices • Optimum Choices • Comprehensive Choices • Increased cost-sharing and benefit limits • Preventive services and children & pregnant women are exempt • Get Healthy Benefits: additional benefits (vision, dental, smoking cessation, nutrition) available for participating in disease management • New ESI subsidy option

9. Medicaid Reform in Idaho • Three different benefit packages tailored to different populations • Basic Plan • Enhanced Plan • Medicare-Medicaid Coordinated Plan • New “Preventive Health Assistance” benefit to encourage tobacco cessation, weight management, well-child checks, and immunizations

10. Medicaid Reform in Kansas • Benchmark benefit for Working Healthy Ticket- to-Work Medicaid Buy-In: • State Plan Medicaid package plus personal assistance, needs assessments, independent living counseling, and assistive services • DRA flexibility allowed Kansas to avoid modifying its existing Home and Community-Based Services waivers while ensuring CMS’s personal assistance requirements were met

11. Considerations Going Forward • Given federal and state interest in using new DRA flexibilities, what should states consider when looking at new benefit designs and cost-sharing arrangements? • A number of previous state experiences can inform decision-making and program design…..

12. Benefit Design Considerations • Traditional Medicaid principles: • “Safety net” available to low-income and medically needy individuals • Comprehensive coverage • Limited cost-sharing • New strategies emerging: • Basic benefit plans • e.g. West Virginia, Kentucky, Idaho • Limited benefit plans • e.g. Utah, Maryland • Defined contribution plans • e.g. Florida and South Carolina, Health Opportunity Accounts

13. Benefit Design Implications:Utah Primary Care Network (PCN) • PCN enrollees got more needed care than before enrollment • BUT most used or needed services beyond what was covered • PCN enrollees were more likely to report missing or delaying care than Medicaid enrollees (36% vs. 12%) • Similar to national rates for uninsured adults <150% FPL • 4 in 10 PCN enrollees said medical expenses had a major impact on their family • Majority also reported difficulties paying for basic needs Artiga, S. et al. The Impact of Recent Changes in Health Care Coverage for Low-Income People: A First Look at the Research Following Changes in Oregon’s Medicaid Program, Health Affairs, March/April 2006.

14. From Xu Wu Presentation, SCI Summer Meeting, June 28-29, 2004.

15. Benefit Design Implications: Just Coverage Project in N. California • Identified what constitutes “basic” coverage for 800 community members • “The floor below which no one should fall” • Was not intended to apply to Medicaid or Medicare • Priority given to coverage for: • Catastrophic care • Prevention and treatment of chronic conditions • Restorative (e.g., rehab therapy) • Quality of Life category excluded from coverage • Care for problems that have little impact on activities of daily living • Tolerance for tighter coverage criteria and restrictive provider networks Ginsburg M. et al. Health Affairs, Nov./Dec. 2006

16. Benefit Design Questions • Coverage gaps? • Consider needs of sicker and more vulnerable populations • Provider networks’ and health plans’ ability to meet member needs? • Consider stability of managed care market and strength of provider networks • Consumer engagement? • Consider designs that may increase consumer engagement, e.g.: • Incentives for treatment compliance and healthy living • Consumer decision-making tools • Limiting cost-sharing on preventive services • Tiering providers based on quality and efficiency

17. Cost-Sharing Considerations • Over recent years, states have used premiums and cost-sharing as they expanded Medicaid and implemented SCHIP to: • Align with private coverage • Encourage personal responsibility • Prevent crowd-out • Contain costs

18. Cost-Sharing Implications:RAND Health Insurance Experiment • Key Lessons: • Price Sensitivity: Co-insurance rate has great impact on enrollee’s use of care • As co-insurance increases, utilization decreases • Higher co-insurance does not lead to adverse outcomes for average person but can have negative implications for sick populations

19. Cost-Sharing Implications:Oregon Experience • New premiums ($6-$20/mo.) for adults in Oregon Health Plan in 2003: • Enrollment fell by ½ (approx. 50,000) in less than a year • Most affected those with lowest incomes • 75% became uninsured • 1/3 of those remaining had unmet health needs • 80% had unmet mental health needs Mann, C. and S. Artiga, The Impact of Recent Changes in Health Care Coverage for Low-Income People: A First Look at the Research Following Changes in Oregon’s Medicaid Program, June 2004.

20. Impact of Increased Cost Sharing in Oregon Reasons for not obtaining care among those who reported unmet need: Could Not Get Appointment Insurance Not Accepted No Transportation From R. Rudowitz Presentation, Deficit Reduction Act Cyber Seminar, June 7, 2006. Source: Carlson, M. and B. Wright, “The Impact of Program Changes on Enrollment, Access, and Utilization, in the Oregon Health Plan Standard Population,” March 2005.

21. Cost-Sharing Implications:Vermont Experience • Vermont Medicaid 2003 conversion to premiums from other forms of cost-sharing • Modest enrollment impact (4% decline) • Lower-income (VHAP) and pharmacy enrollees said new premium was primary reason for disenrolling • Higher-income Dr. Dynasaur enrollees had other insurance • Significant adverse selection among VHAP and pharmacy enrollees Vermont Department of Prevention, Assistance, Transition and Health Access, Impact of Premiums on the Medicaid Program, April 30, 2004.

22. Cost-Sharing Implications:Rhode Island Experiences • Rhode Island RIte Share sliding-scale premiums ($61-$91/mo.) for families 150%-250% FPL • 2002 Survey: • 4/5 able to make timely payments • Of 1/5 who did not make timely payments and lost coverage: • ½ reported that premium was not affordable • ½ found other sources of coverage RI Medicaid Research and Evaluation Reports, Issue Brief #4, January 2003.

23. Cost-Sharing Implications:Wisconsin Experience • Wisconsin BadgerCare sliding scale premiums (3% of income in 2002) for families >150% FPL • 2002 Surveys: • 83% thought premiums were reasonable • Premiums did NOT decrease program enrollment or satisfaction • BUT, increased probability of disenrolling • Premium was most frequent reason for disenrolling • 40% attributed disenrollment to affordability Nathan West Presentation, AcademyHealth Annual Research Meeting, June 6-8, 2004.

24. Cost-Sharing Implications:Maryland Experience • Maryland Children’s Health Program (MCHP) $37/month premiums for families 185-200% FPL • 2004 Survey: • ¼ of enrollees disenrolled in first 2 months • Most common reason was gaining other insurance • 55% of disenrolled children had gained other insurance • Fewer than 20% said the premium was the reason • 63% of disenrollees said premium was affordable Maryland Department of Health and Mental Hygiene, Maryland Children’s Health Program: Assessment of the Impact of Premiums, April 2004.

25. Cost-Sharing Questions • Target population – what income levels? • Premiums vs. co-pays? • Cost-savings goals? • Impact on access? • Enrollment/”churning” • Temporary forgiveness or grace periods? • Getting needed care • Impact on providers? • Collection of co-pays/enforceability • Uncompensated care • Use of emergency departments • Administrative infrastructure?

26. Final Thoughts…. • DRA gives states opportunities to be more creative in program design • But need to proceed cautiously • Lots to learn from other states’ experiences • Need to continue to evaluate impact of new cost-sharing arrangements and benefit re-designs, especially with DRA changes

27. Questions? More information on states’ experiences on www.statecoverage.net Amanda Folsom 202-292-6752 amanda.folsom@academyhealth.org