Medicaid Issues Webcast & Audio ConferenceHosted by the Winter Park Health FoundationSeptember 21, 2005

Issue Briefing:Florida’s Medicaid Waiver Application

Presenter: Joan Alker

Senior ResearcherGeorgetown Center for Children and

Families

What is a Section 1115 waiver?

• A Section 1115 waiver is a request to the federal government to “waive” certain sections of federal law.– Medicaid has many different kinds of

waivers • In exchange for this flexibility states

must agree to a budget neutrality agreement where the federal government limits its financial exposure

Waiver Process

• Closed negotiations between state and federal government– At federal level, Secretary of HHS makes the

decision

– Centers for Medicare and Medicaid Services (CMS) staffs the process for the Secretary

– Office of Management and Budget (OMB) is typically deeply involved in negotiating financing terms

– Not unusual for members of Congress to weigh in, but no formal process for their involvement

Waiver Pressure points

• CMS National and Regional Offices• Office of the Secretary of HHS• Congressional delegation• State legislators• State agency

Addresses for comments to state/federal government at the conclusion of the presentation

Florida’s Section 1115 Waiver

• On 8/31/05 the state released its application to the federal government

• The application has not been officially submitted; state law (SB838) requires posting on the Internet 30 days prior to submission

• The application provides important new info but also leaves many questions unanswered

Florida Medicaid Waiver Process

August 31 September 29

Public comments can be submitted

to state.

At least 28 days

?

Waiver negotiated and finalized.

Approved waiver must be published

in Florida Administrative Weekly before legislature

can act.

State postswaiver on internet

First possible submission date to federal government

Federal approval

?

?

What does the waiver application say?

• Questions to consider:– How will the provision and delivery of

Medicaid benefits and services change?

– What changes will occur to the way Medicaid is financed?

– How will these two issues interact?• What changes can the state make without

a waiver?

Who will be required to participate?

Phase 1• Virtually all children• Parents• Pregnant women

below 23% of FPL• SSI beneficiaries if

they are not dual-eligibles

Phase 2• Children with chronic

conditions• Persons with devt’l

disabilities• Dual-eligibles• Other groups can

choose to participate

What is the timeline?

• Implementation will begin in Broward and Duval and phased-in– State estimates that over 200,000 persons

will be enrolled in these counties from 4/06-6/07

– Enrollment will be expanded to Baker, Clay, Nassau in following year

– Full enrollment statewide by end of waiver period (if legislative approval is given) by 6/10

What benefits will people receive?

• Most children will continue to be eligible for EPSDT• Adults will face a radically new benefit design

– Benefits will be “actuarially equivalent” to current state plan package/historical Medicaid expenditures for the “average member of the population”

• Unclear if this amount will be inflated and if so how

– Beneficiaries will take premium amount and choose plan

– Payment based on average member of the population will be high for some, too low for others

– Payments will be risk-adjusted on an individual basis in a timely manner?

Adult Benefits continued

• Mandatory services must be covered but can vary in amount, duration and scope

• Inpatient care is an exception – 45 days will be covered

• Benefits subject to the sufficiency test

• Optional services need not be covered but included in actuarial value (?)

• State expects that most will be covered

• Those that are covered can vary in amount, duration and scope

Are there new costs for beneficiaries?

• Not for children and pregnant women and other groups exempt in federal law

• Adult beneficiaries subject to the waiver will face new copayments that do not exceed nominal levels

• Adults will face a maximum benefit limit. When this is reached care will be avoided or if received become uncompensated care, a financial liability for families or both.

Who is most at risk?

• Adults with disabilities and/or other chronic or episodic serious health conditions– Benefits package likely to be less comprehensive

• Waiver is only needed to reduce benefits not to add them

– Will likely face new restrictions on prescription drugs– Riskier to shift this population into managed care– Those with high services needs in any particular year

risk hitting the maximum benefit level– Copayments, even though nominal will have greatest

impact on high service users– Will premium be adequate esp. over time in context

of state desire to reduce spending

Enhanced benefits accounts

• Beneficiaries who participate in “healthy behaviors” receive points

• These could include check-ups, gym memberships, living wills

• Points can be redeemed for non-covered services

• Funding comes out of overall premium funding??

“Opt-out”

• State provides a voucher to families to purchase private coverage

• Federal and state Medicaid standards do not apply– EPSDT waiver being sought– Coverage for low wage workers

• Program is voluntary for families• Possible parent coverage a plus• Enrollment in other states has been low

Financing

• What does waiver tell us about how federal and state funding levels may change?

• Waiver application provides new insight into state thinking

• Information on final deal doesn’t exist yet so numbers are placeholder– UPL/Low-income pool dispute

Federal funding: What is budget neutrality?

• Feds require that no more federal $$ are spent under waiver than would have been spent without the waiver

• This is enforced through a cap – Usually a per capita cap– New feature of some waivers – global

• Budget neutrality enforced at the end of the five year period– State at 100% risk if costs exceed

projection

Regular Medicaid Financing and Waiver Financing Compared

Regular Medicaid financing

State receives federal matching payments for all Medicaid expenditures.

Open-ended federal matching funds; no cap. If actual costs exceed state projections, federal government shares those costs.

For groups covered under the waiver (children, parents, persons with disabilities) state receives federal matching payments for expenditures, but subject to a cap.

Cap limits federal funds paid to the state. Cap is computed by multiplying the number of people covered by the per-person cap(s) set in the waiver. The per-person cap(s) may grow each year (based on cost projections), but they are pre-set and written into the waiver based on projected, not actual, costs. If actual costs exceed the caps, federal government will not share the costs.

Medicaid Section 1115 waiver financing- per capita caps

Budget neutrality

• The scope of the budget neutrality agreement depends on the scope of the waiver request i.e. how many populations come under the waiver– Question as to why children are

included• Agreement will be based on a formula

that is developed and agreed to by state and fed officials – not an exact science

Waiver Budget Agreement Will Affect All Parts of the State

Percent of Florida's Medicaid Beneficiaries

Subject to Budget Agreement in '06/07

89%

11%

Subject to Budget Agreement

Not Subject to Budget Agreement

Percent of Florida's Medicaid Beneficiaries State Estimates Will Be Enrolled in Medicaid

Reform by End of '06/07

9%

91%

EnrolledNot Enrolled

Source: Georgetown University Center for Children and Families analysis based on Florida’s August 31, 2005 waiver application and enrollment data from Social Services Estimating Conference Medicaid Caseload data, February 24, 2005

105

130

155

1999 2000 2001 2002 2003

CBO 1998 Projections

Actual Expenditures

Congressional Budget Office (CBO)Federal Medicaid Spending Projections for

Fiscal Year 2003

Variance in actual 2003 expenditures vs. projections is $19.7 billion or 12.3% of all 2003 federal payments.

Source: Congressional Budget Office Medicaid Baselines, 1998-2004.

(billions of dollars)

What are some of the reasons Florida might exceed its cap?

• Health care costs for the individuals included are higher than expected

• Payments to HMOs/other providers must be increased to retain their participation

• Implementation does not occur as planned

What are some of the risks of budget neutrality agreements?

• Clearly depends on what kind of deal a state gets but fundamentally restructures the way federal Medicaid funding comes into the state

• Many state legislatures have had concerns about these agreements and as a result rejected waivers– CT, NH (concerns about global cap),

CO (concerns about any cap in light of waiver request)

State Funding: What does the waiver tell us?

• Governor has been clear about desire for “predictable” costs

• Waiver budget attachments suggest that state anticipates it can reduce spending sharply over the next five years.

• Reductions are larger at the end of the five year period

• Little information about how these reductions would occur

State Estimate of Total Medicaid Spending, With and Without Waiver

$8

$9

$10

$11

$12

$13

$14

2006-07 2007-08 2008-09 2009-10 2010-11

Bill

ion

s

Total 5-year reduction in

spending: $4.58 billion

Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from Florida Medicaid Reform Section 1115 Waiver Application, August 31, 2005.

With Waiver

Without Waiver

State Estimates of Annual Medicaid Cost per SSI Beneficiary, With and Without Waiver

$11,328

$12,324

$15,924

$14,604

$13,416

$14,796

$13,800

$12,876

$12,024

$11,232$11,000

$11,500

$12,000

$12,500

$13,000

$13,500

$14,000

$14,500

$15,000

$15,500

$16,000

2006-07 2007-08 2008-09 2009-10 2010-11

Without Waiver With Waiver

Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from Florida Medicaid Reform Section 1115 Waiver Application, August 31, 2005.

State Estimates of Annual Medicaid Cost per Family Member, With and Without Waiver

$2,952

$2,328

$2,508

$2,748

$3,180

$2,940

$2,448

$2,604

$2,772

$2,304

$2,000

$2,200

$2,400

$2,600

$2,800

$3,000

$3,200

$3,400

2006-07 2007-08 2008-09 2009-10 2010-11

Without Waiver With Waiver

Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from Florida Medicaid Reform Section 1115 Waiver Application, August 31, 2005.

Conclusion

• Many important issues at stake• Will premiums be adequate to finance

needed services in light of state’s desire to reduce spending?– Medicaid costs less than private

insurance• Unmet health needs will not go away but

costs will be shifted to families, providers, other payors in the system

Contact Information

State of Florida - www.myflorida.comAgency for Healthcare Administration

Federal GovernmentMr. Dennis Smith, DirectorCenter for Medicaid and State OperationsThe Centers for Medicare and Medicaid Services 7500 Security BoulevardBaltimore, MD 21244-1850

www.fdhc.state.fl.us/Medicaid/medicaid_reform/index.shtmlEmail: medicaidreform@ahca.myflorida.com

WINTER PARK HEALTH FOUNDATION www.wphf.org

• The Winter Park Health Foundation (WPHF) will release the fifth in a series of policy briefs designed to help educate consumers, stakeholders and policy-makers on the issues involved in the comprehensive reform proposed for Florida's Medicaid program. The brief is called Understanding Florida’s Medicaid Waiver Application and will be available soon at www.wphf.org.