trends in virginia medicaid and opportunities to shift …sfc.virginia.gov/pdf/retreat/2017...

SENATE FINANCE COMMITTEE

SENATE OF VIRGINIA

Senate Finance Committee

November 17, 2017

Trends in Virginia Medicaid and Opportunities to Shift the Cost Curve

SENATE FINANCE COMMITTEE 2

Presentation Overview

Medicaid Pressure on the State Budget

Overview of Virginia Medicaid

Medicaid Impact, Trends, Cost Drivers and the 2017 Forecast

Update on Medicaid Reforms

Medicaid Redesign and Innovations


Medicaid Pressure on the State Budget

3


Medicaid’s Share of the State Budget Has Grown

K-12 Education

36%

Higher Education

19% Medicaid

6%

Public Safety

9%

All Other 30%

FY 1985 Percent of General Budget by Major Area

Source: Chapter 221, 1986 Acts of Assembly and Chapter 836, 2017 Acts of Assembly.

K-12 Education

30%

Higher Education

10%

Medicaid 23%

Public Safety

9%

All Other 28%

FY 2018


Medicaid’s Growth Outpaces GF Revenue Growth Over the Long-Term

Note: Expenditures in FY 2011, FY 2012, FY 2015 and FY 2016 have been adjusted to reflect payment shifts between fiscal years in order to better reflect realistic expenditure patterns in the program.

6.0%

8.0%

13.5%

5.4% 5.7% 4.6%

3.4%

6.0% 5.7% 6.0%

1.3%

-9.2%

-0.7%

5.8% 5.4% 5.3%

-1.6%

8.1%

1.7% 3.6%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Medicaid General Fund Revenue

Avg. Medicaid Growth of 6.4% versus 2.0% for GF Revenue


4 agencies with the highest growth amount in general fund appropriations, FY08-FY17($M)

6

Medicaid has Largest Share of GF Growth

Agency FY 2008 FY 2017 GF Growth GF %

Growth % of Total

GF Growth

DMAS $2,567.2 $4,450.9 $1,883.7 73% 60%

Treasury Board 405.2 722.1 316.9 78 10

DBHDS 535.7 749.1 213.4 40 7

DOC 961.7 1129.4 167.7 17 5

Source: Adapted from JLARC’s Report “State Spending: 2017 Update, October 2017”.


• Relative to the overall state budget there are at least three ways to handle the issue: 1) Increase state revenues to fund other priorities, 2) Increase economic growth such that GF revenues at least match

Medicaid’s growth, and 3) Slow the growth of the Medicaid program.

• Otherwise, Medicaid’s share of the general fund budget will continue to grow, further limiting funding for other areas such as education.

• What can Virginia do to limit Medicaid’s growth?

The State Budget Issue: Medicaid


Overview of Virginia Medicaid

8


• Medicaid is a shared state/federal program to provide health insurance for certain low-income groups.

• Medicaid is essentially four programs: • Health insurance for low-income parents and children; • An insurance supplement for low-income seniors on Medicare; • Health insurance for low-income disabled individuals; and • A long-term care program for elderly and disabled individuals.

• Federal funds for the program are based on a state’s personal income, essentially a state’s ability to pay.

Medicaid is a Safety Net Program


Federal Match Rates Vary From 50% to 75.65%

Virginia 50%

Mississippi 75.65%

Source: Kaiser Family Foundation.


40%

18% 9%

8%

6% 6%

14%

FY 2017 Expenditures (Total Funds)*

Managed Care

Waiver Services

Nursing Facilities

Mental Health

Hospital Services

Medicare Premiuims

All Other

$9.2 billion

FY 2017 Spending by Service and Enrollment

* Does not include payments to state facilities operated by the Department of Behavioral Health and Developmental Services.

Aged, Blind and

Disabled 27%

Children 47%

Pregnant Women

2%

Low-Income Adults 24%

November 1, 2017 Enrollment = 1,045,465

Note: Half of the low-income adults are only eligible for the limited benefit family planning program (Plan First).


Income Thresholds for Medicaid Vary by Group

219%

143% 143% 100%

80% 48%

0% 0%

50%

100%

150%

200%

250%

Elderly andDisabled (Long-

Term Care)

PregnantWomen

Children SeriouslyMentally Ill*

Elderly andDisabled

Parents Childless Adults(Not Eligible)

Fede

ral P

over

ty L

evel

Medicaid Children's Health Insurance Program

* Adults with serious mental illness are covered under the GAP waiver, which provides a limited benefit.


Adults and Pregnant Women

Adults and Pregnant Women

Children

Children

Aged, Blind and Disabled

Aged, Blind and Disabled

0%10%20%30%40%50%60%70%80%90%

100%

Expenditures Enrollees

FY 2017 Medicaid Expenditures versus Enrollees

24%

68%

Aged, Blind and Disabled are the Highest Cost

Source: FY 2017 DMAS Databook.

Avg. Annual Cost

$22,026

Avg. Annual Cost

$3,784


• Medicaid is not like Medicare, which is a federal program that provides national health insurance to all Americans, regardless of income, beginning at age 65.

• The Affordable Care Act (ACA) directed states to expand Medicaid (with an enhanced federal matching rate) to increase health care coverage to lower-income individuals.

• Essentially, the ACA changed the nature of Medicaid to national health insurance as opposed to a safety net program for vulnerable populations, which is partly the reason Medicaid Expansion has been debated since the ACA passed.

• The Supreme Court decision resulted in a choice for states. Is the goal of the Medicaid program:

• Caring for only the neediest citizens, or

• A broader health insurance program for all low-income individuals.

Affordable Care Act Changed Medicaid


Medicaid Impact, Trends, Cost Drivers and 2017 Forecast

15


1 in 8 Virginians rely on Medicaid

Medicaid is the primary payer for behavioral

health services

Medicaid covers 1 in 3 births in Virginia

33% of children in Virginia are covered by

Medicaid & CHIP

2 in 3 nursing facility residents are supported by

Medicaid

62% of long-term services and support spending is in

the community

Medicaid is a Vital Part of the Safety Net

16


$5.3

$9.4

6.0%

8.0%

13.5%

5.4% 5.7% 4.6%

3.4%

6.0% 5.7% 6.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Bill

ions

Expenditures Percent Growth

Expenditures Impacted by the Economy

Note: Expenditures in FY 2011, FY 2012, FY 2015 and FY 2016 have been adjusted to reflect payment shifts between fiscal years in order to better reflect realistic expenditure patterns in the program.

10 Year Avg. =6.4%


Enrollment and Utilization

Inflation

State and Federal Policy Changes

Three Primary Drivers of Medicaid


226 232 240 249 257 263 266 270 275 279

434 463 524 555 578 615 623 667 716 732

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Tho

usan

ds

Fiscal Year Aged, Blind or Disabled Adults and Children

Medicaid Enrollment Trends Medicaid enrollment has grown 53% since FY 2008

Average growth per year = 4.5% Over 1.0 million

Source: Staff analysis of DMAS data.


4.1% 4.7%

4.4% 4.4%

3.2% 3.7%

2.4%

3.8%

2.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Medical Inflation Remains Historically Low • Medical inflation averaged 4.3 percent prior to 2008 and since then

has averaged 3.1 percent.

Source: Bureau of Labor Statistics, CPI – Medical Care. * 2017 reflects first nine months only.

Recessionary Period


2017 Medicaid Forecast Reflects Moderate Growth

• FY 2018 requires additional funding of $86 million GF.

• The 2018-20 Biennial GF Forecast Need is $583 million GF.

• State spending is projected to increase:

• 6.5% in FY 2018;

• 2.3% in FY 2019; and

• 3.4% in FY 2020.

• Each 1% equals $100 million GF.

21

$4,917 $4,917 $4,917

$86 $199

$384

$4,000

$4,200

$4,400

$4,600

$4,800

$5,000

$5,200

$5,400

FY 2018 FY 2019 FY 2020

Mill

ions

November 2017 Medicaid Forecast

(Dollars in Millions)

Base Appropriation Forecast Need

21


• Enrollment: • Aged, blind and disabled are increasing 1.4% while children are at 1.0%. • Increase in low-income adults of 7.5% in FY 2018.

• Managed care changes: • Savings from the expansion of managed care. • Rate increases up to 3.8% across the two managed care programs.

22

• Hospital and nursing home inflation as required by regulation.

2017 Forecast Drivers

Provider FY 2019 FY 2020

Inpatient Hospital 2.8% $21.9 million GF

3.0% $48.3 million GF

Nursing Homes 2.9% $10.9 million GF

3.0% $23.4 million GF


Managed Care Rates Have a Significant Impact • Adding long-term care and behavioral

health services to managed care shifts one-third of total program expenditures by FY 2020.

• Managed care rates assume savings in behavioral health and consumer-directed services.

• DMAS’s actuary has used aggressive savings assumptions which will require close monitoring.

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

FY 2017 FY 2018 FY 2019 FY 2020

Bill

ions

Expenditures by Delivery System

MCO Payments Fee-for-Services

MCO’s at 67% of total


Out-Years Difficult to Forecast • Medicaid forecast provides an estimate

for 3 years at a time.

• Forecast models tend to taper trends over time.

• The 2017 forecast includes the current fiscal year 2018, and the next biennial budget (FY 2019 and FY 2020).

• Result is typically a funding need in the amended budget.

2.9%

4.3%

7.8%

2015 2016 2017Forecast

Growth Rate for FY 2018 Across Forecasts


Update on Medicaid Reforms

25


Status of 2013 Medicaid Reforms

Coordinated Service Delivery

Dual Eligible Demonstration Pilot Foster Care Behavioral Health Commercial-like Benefit Package Limited Provider Networks and Medical Homes ID/DD Waiver Design All Non-Medicare EDCD Waiver Enrollees in Managed Care for Medical Needs All Inclusive Coordinated Care for Long Term Care Beneficiaries

Implemented Medicare-Medicaid Enrollee Financial Alignment demonstration (Commonwealth Coordinated Care) Implemented inclusion of children enrolled in foster care in managed care Expedited the tightening of regulatory standards, services limits, provider qualification, and licensure requirements for community behavioral health services Changed services and benefits to be the types of services and benefits provided by commercial insurers in managed care where feasible Implemented changes to support beneficiaries receipt of higher quality coordinated care through a limited network arrangement in Northern Virginia Implementing the redesign of the ID/DD waiver to provide more comprehensive and targeted service options Implemented changes and EDCD waiver enrollees are covered by health plans for medical needs (HAP) Implementing Commonwealth Coordinated Care Plus (CCC Plus) Implemented Commonwealth Coordinated Care and Initiated transition of all non-dual waiver recipients into managed care Implementing Commonwealth Coordinated Care Plus (CCC Plus)

Results Medicaid Reforms Accomplishment

Medicaid reforms outlined in the 2013 Appropriation Act:


Results Medicaid Reforms Accomplishment

Efficient Administration

Enhanced Program Integrity eHHR Coordinate Behavioral Health Quality Payment Incentives Parameters to Test Innovative Models

Enhanced Recovery Audit Contracting (RAC), data mining, service authorization, coordination with Medicaid Fraud Control Unit (MFCU), and Payment Error Rate Measure (PERM) Implemented new eligibility and enrollment information system for Medicaid and other social services Aligned and coordinated behavioral health services through the behavioral health services administrator (BHSA); implemented behavioral health homes Implemented financial incentives and high quality outcomes through the Medallion Care System Partnership and alternative payment methods to encourage accountability within the Medicaid provider and MCO program Implemented over 100 quality measures to evaluate pilot innovations such as behavioral health homes and streamlined care transitions. Payment withhold based on attainment of quality indicators

Beneficiary Engagement

Cost Sharing and Wellness

Developed programs to incent enrollee participation in health and wellness activities to improve health and control costs in managed care; increased patient responsibility by reinstating copayments for FAMIS

Status of 2013 Medicaid Reforms (con’t)

27


JLARC Recommendations are being Implemented

Recommended efforts to improve reliability for children; training and screening; ensure timely screening; and strengthen oversight of the process.

Long-Term Care Needs Assessment Instrument

Adjust rates to account for expected savings; allow negative historical trends to carry forward; rebase administrative rates for enrollment changes and deduct unallowable administrative expenses. Managed Care Rates

Require detailed MCO financial and utilization reporting; control of related party spending; excessive related party spending is not included in capitation; and underwriting gain returns above three percent.

Financial Oversight

Administer compliance review and sanctions, report on MCO performance and incentivize MCO performance improvement. Strengthen oversight of behavioral health and LTSS service delivery. Programs

Monitor MCO spending and utilization trends and analyze what is driving those trends. To include: identifying inefficiencies and adjusting rates and monitoring MCO utilization control methods. Trend Impact

Submit for CMS review, a proposal requiring cost-sharing based on family income for LTSS eligible individuals eligible through the optional 300 percent of SSI. Policy

Note: These recommendations are from JLARC’s December 2016 report “Managing Spending in Virginia's Medicaid Program”.


87,821 148,995

246,594

347,350

407,346

510,352

625,373 660,026

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

FY1998

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

Managed Care Enrollment FY 1998 – FY 2017

Shift to Managed Care Continues

Note: Data does not reflect enrollment in the Commonwealth Coordinated Care (CCC) program. Source: SFC Staff analysis.

74% of Current

Total Enrollment


Managed Care Transition Nearly Complete

Births, vaccinations, well visits, sick visits, acute care, pharmacy

Incorporating community mental health

Serving infants, children, pregnant women, parents

760,000 individuals

New procurement 2017 Building on prior experience Implement statewide 2018

Medallion 4.0 CCC Plus

Long-term services and supports in the community and facility-based, acute care, pharmacy

Incorporating community mental health

Serving older adults and disabled Includes Medicaid-Medicare eligible 216,000 individuals

Implementation started Aug 2017 Implement statewide by Jan 2018

Contract value approximately $30B over 5 years

Contract value estimated at $10B - $15B over 5 years


• Provides a more coordinated delivery system.

• Passes some financial risk to private health insurance companies.

• Managed Care is limited by Medicaid’s design: • Lack of recipient cost sharing; • Recipient turnover; • Few incentives to promote healthy behaviors; and • Difficult to address social determinants of health.

Does Managed Care Solve the Budget Problem?


Not in State’s Control State Control

Cost of Services Provider Reimbursement Rates

Demographics Program Benefits

Federal Match Rate Eligibility

State Revenue

What Control Does the State Have?


Medicaid Redesign and Innovation

33


State Options to Consider

Waivers

Value-Based Payment

Administrative Controls


Redesign Must be Broader than Clinical Care

Focus must be broader than just medical

care


• Section 1115 of the Social Security Act allows the Secretary of Health and Human Services to approve demonstrations.

• Allows a waiver of statutory Medicaid requirements.

• Must be budget neutral to the federal government.

• Approval for up to five years.

• Waivers allow states to innovate.

Waivers Provide State Flexibility


Two States have Global Medicaid Waivers

• Rhode Island was approved in 2009 for a waiver of their entire Medicaid program.

• Aggregate federal budget cap over five years.

• Vermont was approved in 2005. • New payment mechanisms. • Non-traditional Medicaid services. • Investments in programmatic innovations.


Provision States Premium assistance AR, IA, IN, MI, NH Premiums / Monthly contributions AR, AZ, IA, IN, MI, MT Healthy behavior incentives AZ, IA, IN, MI Waive required benefits IA, IN Waive reasonable promptness IN Waive retroactive eligibility AR, IN, NH Co-payments above statutory limits IN 12-month continuous eligibility MT

Other Approved State Waiver Provisions

Source: Kaiser Family Foundation Issue Brief (August 2017).


Provision States Work requirement AR, AZ, IN, KY Time limit on coverage AZ Limit expansion eligibility to 100% with enhanced match AR Monthly income verification and renewals AZ Lock-out for failure to timely renew eligibility IN, KY Tobacco surcharge IN

Pending State Waiver Provisions

Source: Kaiser Family Foundation Issue Brief (August 2017).


• Waiver of Affordable Care Act Provisions: • Not a Medicaid waiver;

• Began January 1, 2017;

• State can waive essential benefits, cost sharing, and eliminate the employer and individual mandates;

• Waiver must cover similar number of residents, similar level of benefits, and be at least as affordable; and

• Cannot increase the federal deficit.

State Innovation Waivers (Section 1332)


State Activity on Section 1332 Waivers

Source: Robert Wood Johnson Foundation

Approved Pending Withdrawn Applying Legislation Legislation Vetoed


Status of Section 1332 Waivers

State Proposal Status

Alaska Use federal pass through funding for state’s reinsurance program. Approved

California Allow undocumented immigrants to purchase coverage through the state’s marketplace without premium subsidies.

Withdrawn

Hawaii Retain the employer coverage provisions currently in place through the state’s Prepaid Health Care Act, which was enacted in 1974.

Approved

Iowa Create a Proposed Stopgap Measure plan that would be the only plan offered in the marketplace.

Withdrawn

Minnesota Create a new state reinsurance program. Approved

Oklahoma Create a new state reinsurance program. Withdrawn

Oregon Create a new state reinsurance program. Approved

States have focused on stabilizing the exchange market

Source: State Health Reform Assistance Network, Robert Wood Johnson Foundation.


• Referred to as the “Super Waiver”.

• A combined Affordable Care Act and Medicaid waiver could:

• Improve coordination of health insurance across programs;

• Improve premium subsidies and cost sharing; and

• Better align eligibility rules across programs.

Combining the 1115 and 1332 Waivers


• Virginia should consider establishing a Medicaid Redesign Initiative.

• Overseen by a team from the executive and legislative branches which includes health policy experts.

• Evaluate opportunities for a Global waiver or other 1115 Waivers.

• Consider enhancements to the GAP waiver as a vehicle for broader redesign of the program.

• Focus redesign on integration of medical and behavioral health.

• Explore opportunities to fund initiatives to address the social determinants of health and improve the overall health of the Medicaid population.

Redesign of Virginia’s Medicaid Program


• Not based on volume.

• Use of quality measures.

• Data and analytics are critical.

• Virginia should promote new value-based payment models through Managed Care contracts.

Other Options: Moving Toward Value-Based Payment

Value

Quality

Accountability Transparency


• Legislative Oversight Committee: • Ohio legislature’s response to Governor's expansion of Medicaid.

• Uses an actuary to establish a limit on the growth in per member per month costs.

• Governor must observe limits in his/her proposed budget. • Global Spending Cap:

• New York implemented in 2012.

• Limits Medicaid spending to 10-year rolling average of medical inflation.

• Monthly monitoring to intervene, if spending is on track to exceed cap.

Use of Administrative Fiscal Controls


• Virginia should consider developing target spending levels for Medicaid.

• Monthly monitoring of Medicaid spending.

• Early warning assessment of higher than expected growth.

• Development of proposals to address higher growth.

• Oversight of the Medicaid forecasting and Managed Care rate setting processes should increase.

• Enhance capabilities of agencies in consensus forecasting process.

• Use an independent actuary to evaluate assumptions and rates.

Other Options: Improving Administrative Controls


Key Takeaways • Medicaid’s share of the budget will continue to grow

absent changes to the current program.

• Managed Care is a major improvement.

• Waivers provide more flexibility to redesign Medicaid.

• Virginia needs to place a greater focus on health outcomes in the program.

• Oversight and monitoring are essential to managing the growth of the program.


Appendix

49


Four Primary Groups are Eligible for Medicaid

Group Financial Requirements Non-Financial Asset Limits

Children 143% of Poverty Citizenship and Residency None

Pregnant Women

143% of Poverty Citizenship and Residency None

Aged, Blind or Disabled

80% of Poverty or 300% of SSI for Long-Term Care*

Citizenship and Residency

$2,000 Individual / $3,000 Married

Low-Income Parents

24-48% of Poverty Citizenship and Residency None

* Supplemental Security Income (SSI) is $733 per month for an individual.

2017 Federal Poverty Limits

Family Size 80% 100% 133% 200% 1 $9,648 $12,060 $16,040 $24,120 4 $19,680 $24,600 $32,712 $49,200

Source: SFC staff analysis.


Virginia Medicaid Services

* The Medicare Savings Program is also mandated and requires the state to pay Medicare premiums and deductibles for certain lower-income elderly beneficiaries.

Cost Sharing Bullets

Federally Mandated Services* Optional Services

Inpatient and Outpatient Hospital Other Clinics (i.e. ambulatory surgical centers)

Physician Other Practitioners (i.e. Optometry)

Lab, Imaging and Screening Dental for Children

Community Health Centers Rehabilitation Services

Rural Health Clinics Prescription Drugs

Home Health Prosthetic Devices

Family Planning Hospice

Nurse-midwife Community Mental Health/Clinics/Clinical Psychologist

Nursing Facility Intellectual Disability Services

Transportation Inpatient Psychiatric for Children

Home and Community-Based Waivers

Source: SFC staff analysis.


Status of State Medicaid Expansion Decisions

18 States are not expanding 25 are expanding 7 states are using an alternative to traditional Medicaid expansion

Source: National Academy for State Health Policy.

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