Health Care Reform: The Patient Protection and Affordable Care Act (PPACA) Impact on Medicaid

1. Health Care Reform: The Patient Protection and Affordable Care Act (PPACA) Impact on Medicaid John G. Folkemer Deputy Secretary Health Care Financing May 6, 2010

2. Eligibility Changes Eligibility Maintenance of Effort (Effective March 23, 2010) • Medicaid eligibility, methodologies, and procedures cannot be made more restrictive until Exchange fully operational (unless waiver approved by HHS due to budget conditions) • CHIP eligibility, methodologies, and procedures cannot be made more restrictive until Sept. 30, 2019 State-Option to Expand Early • Option to cover individuals in the new eligibility category (parents and childless adults to 133% of FPL) after April 1, 2010 and before Jan. 1, 2014 • States may also phase-in enrollment based on income during early expansion period • Maryland currently provides full coverage to parents and partial benefits to childless adults to 116% of FPL

3. New Mandatory Benefits New Benefits • Mandatory coverage of freestanding birth center services (effective March 23, 2010) • Maryland already provides a higher physician or nurse midwife fee for births that occur in birthing centers (determining whether this meets the new requirement) • Mandatory coverage of comprehensive tobacco cessation services for pregnant women in Medicaid (effective Oct. 1, 2010) • Maryland already covers

4. Key Medicaid Pharmacy Changes • Minimum Drug Rebate Changes (Effective Jan. 1, 2010) • Minimum drug rebate level increased for brand-name drugs (15.1% to 23.1%) and for generic drugs (11% to 13%) • 100% of savings associated with rebates between 15.1% and 23.1% for brand-name and 11% and 13% for generics goes to the federal government • Results in a revenue loss for the state • Maryland’s average rebates are 32% of total drug expenditures, not including supplemental rebates • MCO Rebates Changes (Effective March 23, 2010) • HealthChoice MCO pharmacy benefits will now be eligible for federal rebate program • 100% of savings associated with rebates between 15.1% and 23.1% for brand-name and 11% and 13% for generics goes to the federal government • Results in additional revenues for the state

5. Key Program Integrity/Quality Provisions • Requires states to establish contracts with one or more Recovery Audit Contractors by December 31, 2010. These RAC contracts would be established to identify underpayments and overpayments • Requires states to report expanded set of data elements under MMIS to detect fraud and abuse, includes data submitted on or after Jan. 1, 2010 • Requires states to use the National Correct Coding Initiative (NCCI) for Medicaid claims filed on or after Oct, 1, 2010 • 180 days after enactment (Sept. 18, 2010), HHS will establish procedures for screening Medicaid and Medicare providers • HHS shall develop regulations prohibiting Medicaid payments for certain health-care acquired conditions (July 1, 2011)

6. New Demonstrations • Incentives for prevention of chronic diseases in Medicaid • HHS will award states grants starting Jan. 1, 2011 • Monies targeted to programs that focus on: • Ceasing the use of tobacco products • Controlling or reducing individuals’ weight • Lowering individuals’ cholesterol • Lowering individuals’ blood pressure • Avoiding the onset of diabetes or improving a diabetic’s management of his/her condition • Provide a health home to Medicaid enrollees with chronic conditions • Authority granted through the state plan, effective Jan. 1, 2011 • 90 percent federal matching rate during the first 8 quarters • Planning grants also will be available (require a state contribution) • Maryland has been developing a health home through the Maryland Health Quality and Cost Council

7. New Demonstrations • Medicaid Emergency Psychiatric Care Demonstration Project • Three-year demonstration, starting Oct. 1, 2011 • Up to eight states may be selected • Participating states would be required to reimburse certain (non-public) institutions for mental disease (IMDs) for services provided to Medicaid beneficiaries between the ages of 21 and 65 who are in need of medical assistance to stabilize an emergency psychiatric condition • Pay bundled payments to hospitals • Five-year demonstration, starting Jan. 1, 2012 • Focus on the use of bundled payments during an episode of care that involve a hospital stay • Allow pediatric medical providers to organize as Accountable Care Organizations • Five-year demonstration, starting Jan. 1, 2012 • Pediatric providers who meet savings targets will be eligible for incentive payments

8. Increased Incentives To Provide More Home and Community-Based Services • Community First Option (effective Oct. 1, 2011) • Provides a 6% enhanced federal matching rate for personal care and attendant services • Must meet nursing home level of care medical requirements • State must maintain or exceed the preceding fiscal year’s spending for individuals with disabilities or elderly individuals • Rebalancing Incentives (effective Oct. 1, 2011) • Provides an enhanced federal matching rate for home-and community-based services to states who spend less than 50% of their total long-term care expenditures on HCBS • Below 25% (5 percentage point increase in federal matching rate) • Between 25% and 50% (2 percentage point increase in federal matching rate) • States must increase the level of spending on HCBS over 4 years • Extends the Money Follows the Person Rebalancing Demonstration from 2011 to 2016 • Maryland will need to apply in order to receive additional funding

9. System Planning Needs • Significant system improvements are required • Establish procedures for enrolling individuals who are identified by the Exchange as Medicaid eligible • Establish eligibility web links to Exchange • Must not require any additional information from individuals to enroll in Medicaid or the Exchange • Must allow a transition period for individuals who are found ineligible for Medicaid due to the new modified adjusted gross income counting rule • Must continue to make children eligible for CHIP who are found ineligible as a result of elimination of an income disregard • Decisions need to made now to have systems ready by 2014 • Evaluate whether current plans for system changes are aligned with Health Care Reform • Identify the need for new changes