Texas Health Care Reform

1. Texas Health Care Reform Health Care Access in Texas: Current and Future Solutions Maureen Milligan, Deputy Chief of Staff November 7, 2008

2. Health Care Reform • Background: The Current Situation • Approach to Reform • Reform Goals • Reform Status • Anticipated Time Line • Next Steps

3. Background • Texas is the second largest state (about 24 million) and has the fastest growing population (numerically) in the country – it is larger and more diverse that most other countries. 24 times Massachusetts; 174 times Rhode Island. • In part, because of its size, Texas is a strong local control state, with indigent care provided through an uncoordinated patchwork of local and state publicly funded programs. • Nearly 6 million people or 25% of the population are uninsured. Texas’ uninsured population is larger than the total population of most other states and many countries. Roughly half of Texas’ population is either enrolled in public programs or is uninsured.

4. Background • Compared to other states, Texas has lower wages, higher premiums, and fewer employers offering insurance making access to insurance particularly challenging. • About 47 % of Texas employers offer insurance compared to 54% nationally or 60 % in Massachusetts. • Only 31% of small firms with less than 50 employees in Texas offer health insurance compared to the national average (43%), California (44%), and Massachusetts (56%) • The average annual premiums for an individual enrolled in an employer-sponsored health benefit plan in Texas doubled between 1996 and 2004, from just more than $2,000 to more than $4,000; and doubled between 2001 and 2005 – ten times faster than incomes and the third highest increase in the country. • In 2005, the average single premium cost in Texas was $4,108 versus average U.S premium cost of $3,991. Texas has the fifth-highest individual and third-highest family premium costs due to the state’s costs of care for the uninsured. • A disproportionate number of Texans are poor (43 % have incomes below 200 % FPL; 21 % below 100 % FPL).

5. Texas Employer Premium Rates

6. Background • Not surprisingly, Texas has one of the highest rates of uncompensated care in the country. Hospital reported uncompensated care charges doubled from $5.5 billion to $11 billion between 2001 and 2006.

7. Health Care Financing Care for the Uninsured, if not paid by the individual, is paid for by local taxes, property taxes, hospital district taxes, tax offsets; commercial subsidies; and intergovernmental transfers (IGT) and federal match (Disproportionate Share Hospital (DSH) and Upper Payment Limit (UPL)) (5.5 million uninsured Texans) Privateinsurance paid by businesses, employees and tax offsets Public programs financed by federal taxes (Federal Funds Participation (FFP)), state taxes (sales and other), and Medicare enrollee premiums. Medicaid alone will cover an average of 2.8 million Texans per month in 2007.

8. Uninsured Privately Insured Publicly Insured Shifting Insurance Coverage • Increased premium costs and erosion of employer-based insurance leads to shift to uninsured and public programs • Increases number of uninsured and uncompensated care burden • Increases public insurance (which includes Medicaid) caseload • Drives the need for commercial subsidies, which increases private premium rates

9. Reform Goals Goals: • Transform the system for more efficient health care funding • Reduce the number of uninsured in Texas, by making it easier for working families to buy employer-sponsored health coverage • Restructure current federal funding to gain flexibility in federal funds expenditures to: • Redirect investments to focus on access to primary and preventive care • Reduce the number of uninsured individuals • Reduce uncompensated care cost trends

10. Transforming Access and Quality for Health Care to Uninsured Texans Current System Investment The uninsured tend to forgo primary and preventive care until a high acuity, high cost catastrophic health event occurs. • A Transformed System • Increased access to primary and • preventive care • Increased care management • Decreased need for more costly • emergency and inpatient care Cost Health Care Access Continuum Primary & Preventive Care Hospital Inpatient Care Acuity

11. Reform Status • Concept Paper submission – December 2007 • Waiver submission – April 16, 2008 • Regular discussions with CMS • HHSC request for expedited process – July 2008 • CMS response – August, 2008 • HHSC executive meetings with the U.S. Department of Health and Human Services Secretary’s office, Centers for Medicare and Medicaid Services (CMS), and Office of Management and Budget on September 3, 2008 • Discussion of high level principles and key waiver components as the basis for go-forward negotiations • Weekly staff meetings starting September 9, 2008

12. Reform Status • Outcomes of September meeting: • Obtained commitment from Acting Director for Medicaid and State Operations within CMS to accelerate discussions more formally and for higher level CMS involvement to identify and resolve components that need to be discussed and negotiated • Raised awareness and need for integrated, expedited negotiations and reviews at: • CMS • Secretary of Health and Human Services office • Office of Management and Budget • Established weekly staff calls with CMS to work through critical waiver components – funding, covered populations and benefits

13. Reform Status • Weekly calls have focused on: • Ability to use market based insurance coverage options, including employer-sponsored insurance where available, affordable and qualifying • Benefit package parameters and cost-sharing • Anticipate different requirements for two uninsured adult populations based on CMS’ differing treatment of them: Parents and those who are not parents (Childless adults). • Use and requirements for Unmatched State and Local Funds (also called Designated State Health Programs or DSHP) • Revising financing and budget neutrality • Delivery systems and eligibility functions

14. “Hypothetical Populations” • CMS treats uninsured adults differently; affects benefits, and financing • Parents – CMS defines them as an optional population; i.e., a state could choose to cover them under Medicaid and receive federal funding. They are “hypothetically” eligible. • Adults without dependent children (childless adults) – are not optional; can not be covered and receive federal matching funds under a state plan.

15. “Hypothetical Populations” • In the waiver – • Texas seeks new federal funds (match) for some parents – arguing that they are “hypothetically eligible.” • Provides access to significant new federal funds. • CMS has more requirements for the “hypothetical” population • E.g., CMS requires that the benefit meet “benchmark” criteria – actuarial equivalency. • For childless adults; no new federal matching funds. • Federal funding is from existing budgeted and negotiated funds: DSH, UPL. • More flexibility in regard to benefits and other requirements.

16. Waiver Funding Illustration • Federal funds: Pass-Through for optional groups for whom the federal share is provided if there is sufficient state share; Federal funding for Childless Adults must be identified from within existing federal funds negotiated as part of budget neutrality • State match: Existing state and local programs (federal buy-out of these programs provides for availability of state funds to draw down new pass-through or redeployed DSH, UPL, if approved), etc. • The approved waiver will authorize significant new federal funding for Texas health care to begin transforming the system.

17. Illustrative Subsidy Options by Target Population

18. Reform Status

19. Reform Status

20. Reform Status

21. Anticipated Reform Time Line

22. Implications for Multi-share Programs • Seeking ability to use ESI subsidies for multi-share programs • Anticipate CMS criteria for use of funds that may be in the areas of: • Benefits and cost-sharing • Member appeals and other protections • Out of network care • Program authority and responsibility – public entity? • Status of claims if claims experience exceeds program funding • Other

23. Information • HHSC will continue to provide regular updates throughout the waiver process • For more information: • Sign up for updates and notification at www.hhs.state.tx.us • Visit our website at: http://www.hhs.state.tx.us/medicaid/reform.shtml • Text of waiver: http://www.hhs.state.tx.us/medicaid/Waiver_041708.pdf • For questions, e-mail medreform@hhsc.state.tx.us