# Presentation: 408862

## Hot Issues in Health Care

- Focus on Medicaid & SCHIP
- April 2, 2005
- Martha King
- National Conference of State Legislatures (NCSL)
- Health Program Director
- 303/856-1448
- martha.king@ncsl.org

## Medicaid “Experts”

- “While I can explain the meaning of life, I don’t dare try to explain how the Medicaid system works.”

## Medicaid Made Simple

## Medicaid:  Why Should You Care?

- 22% of average state’s total budget
- Largest financing source for low-income   (43% of federal allocations to states)
- Pays half of U.S. nursing home costs
- Covers 31% of U.S. population 85+
- Funds about 35% of U.S. births
- Subsidizes care for the uninsured
- Subsidizes graduate medical education

## Distribution of the Average State’s Budget for Health Services, 2001

- Source: Milbank Memorial Fund, National Association of State Budget Officers and The Reforming States Group,
- 2000-2001 *State Health Care Expenditure Report* (New York: Milbank Memorial Fund, April 2003),
-  http://www.milbank.org/reports/2000shcer/index.html

## Medicaid dominates the health debate

- In 1985, Medicaid accounted for 8% of state budgets (total spending)
- In 2005, Medicaid accounts for 22% !!
- (16.5% of state general funds)
- 2/3 of spending is for optional people & services
- 42% of spending is for Medicare-covered recipients
- 35% of spending is for LTC services

## State Budgets & Health Costs 	

| Year | State 
Revenues | Medicaid |
| --- | --- | --- |
| 2001 | 1% | 12% |
| 2002 | -6.8% | 12% |
| 2004 | 3.4% | 9.5% |
| 2005 | ? | 11.5% |

## Medicaid’s Role in the Health System,

- Total
- National
- Spending
- (billions)

- $1,130

- $412

- $422

- $92

- $122

- SOURCE: Heffler, S. et al., 2002.  Based on National Health Care Expenditure
- Date, Centers for Medicare and Medicaid Services, Office of the Actuary.

- 2000

## Medicaid at a Glance

- Federal/state program (55 variations)
- Optional—large financial incentive
- Federal gov’t pays 50-80% of services
- 		(Dollar for dollar match)

## Medicaid at a Glance

- Three programs in one:
- A health insurance program for low-income parents (mostly mothers) and children
- A funding source to provide services to people with significant disabilities
- A long-term care program for the elderly
- 			“Medicaid makes Medicare work”

## Medicaid Perceptions

- One view:
- A black hole
- Another view:
- A cash cow

## People & Services

_**Entitlement:**_**  all who qualify are eligible**
**PEOPLE:  **_**Mandatory**_** “categories”  (e.g., children & PG women to 133% of poverty; SSI recipients)**
**	****	****   **_**Optional**_**  (e.g., additional children & PG ****	****	****	****women; “medically needy”)**
**SERVICES:  **_**Mandatory**_** (e.g., hospital, nursing facility,physician, rural health clinics)**
**	****           **_**Optional**_** (e.g., Prescription drugs, hospice)**

## Who’s Not Covered?

- Everybody else . . .
- Anyone not in a “category”
- 45 million uninsured Americans
- Adults without children or SSI eligibility
- Parents who makes more than about 40% of poverty
- Elderly or people with disabilities who don’t meet SSI or other criteria
- High medical users who don’t meet criteria
- etc.

## Beneficiaries and Expenditures(2002 -- U.S. average)

**Enrollees****51 million**

**Expenditures*****$210 billion**

## Medicaid Expenditures Per Enrolleeby Acute and Long-Term Care, 2002

**$1,475**

**$1,948**

**$11,468**

**$12,764**

- SOURCE:  Kaiser Commission on Medicaid and the Uninsured, January 2004

## “Waiver” Options

- Comprehensive health reform 1115 waivers
- (e.g., DE, HI, MA, MN, OR, TN)
- New twist:  Utah’s 1115 waiver
- Primary and preventive services only for adults to
-     150% of poverty
- Specialized 1115 waivers
- “Pharmacy Plus” — low-income senior prescription drug benefit (only) up to 200% poverty (IL, SC, WI approved)
- “Discount-only” waiver — extend Medicaid drug price reductions to other populations (ME operating; court challenges)
- Family planning services — extend post-partum time for family planning (and primary care)

## Medicaid:  New Flexibility

- HIFA (Health Insurance Flexibility & Accountability initiative) —6 approved
- Special 1115 demonstration waiver
- Purpose: to expand health insurance coverage to the uninsured
- Targeted to people below 200% of poverty

## Medicaid Expansions  Pros and Cons

- _Pros_:
- Federal share (50-80%)
- Existing administration/provider network
- New flexibility & options
- “Better than nothing” for uninsured
- _Cons_:
- Financing constraints (economy & budgets)
- Federal mandates (although getting better)
- Potential “maintenance of effort” requirements
- Political philosophy re less government role

## Cost-Saving Strategies 

- Most typical cuts
- Cut “optional” groups (CO has limited options)
- Cut or restrict “optional” services
- E.g., prescription drugs, hospice care, rehabilitative services, case management, etc.
- Freeze or cut provider reimbursements
- Eliminate the entire Medicaid program
- Caveats:
- Unintended consequences
- “Penny-wise and pound foolish”
- Cuts often shift burden: needs don’t disappear

## Only so much to cut

- People
- Providers
- Services

## Slide 21

## Cost-Saving Strategies 

- Other reform options
- Evaluate & understand program & options
- Study & reform long-term care
- Emphasize prevention
- Reduce prescription drugs costs
- Take advantage of federal flexibility
- Reduce fraud & abuse
- Use electronic records
- ID any services eligible for federal match
- Make Medicaid the “payer of last resort”

## Evaluation/Oversight/Consultation

## Evaluation/Oversight/Consultation

- Medicaid oversight committees
***Massachusetts**** *House created a Medicaid committee
***Wyoming*****'s **subcommittee on Medicaid cost control & content
***Oregon***** **Senate special committee on the Oregon Health Plan
***Kentucky***** **Medicaid Managed Care Oversight Committee
- _[http://www.lrc.state.ky.us/Statcomm/Medicaid/homepage.htm](http://www.lrc.state.ky.us/Statcomm/Medicaid/homepage.htm)_
- Legislative audits
***South Carolina’s*** Legislative Audit Council recommended $22.9 million in savings.
- Preferred drug list est. $12.8 mil
- Medicaid enrollment fee est. $1.4 mil
- _[http://www.state.sc.us/sclac/Reports/2003/Medicaid.htm](http://www.state.sc.us/sclac/Reports/2003/Medicaid.htm)_

## Evaluation/Oversight/Consultation

- External evaluation & consultants
***Idaho’s*** Office of Performance Evaluations 2000 report "Idaho's Medicaid Program: The Department of Health and Welfare Has Many Opportunities for Cost Savings.”
- _[http://www2.state.id.us/ope/](http://www2.state.id.us/ope/)_
***Washington**** *State Institute for Public Policy 	_[http://www.wa.gov/wsipp](http://www.wa.gov/wsipp)__[/](http://www.wa.gov/wsipp/)_*** ***
***Washington*** commissioned a Lewin Group study.
- _http://www.leg.wa.gov/senate/scs/wm/publications/_
- Additional resources:
- http://www.dpw.state.pa.us/omap/geninf/maac/022703CostContainment.asp
- _[http://](http://www.le.state.ut.us/lrgc/briefingpapers/medicaid.pdf)__[www.le.state.ut.us/lrgc/briefingpapers/medicaid.pdf](http://www.le.state.ut.us/lrgc/briefingpapers/medicaid.pdf)_

## Understanding the Costs

- Elderly & people with disabilities
- Qualify based on both income & disability
- Medicaid has become the nation’s LTC “program of last resort” (pays for 60% of N.H. residents)
- Medicaid serves as the nation’s “high risk pool” for low-income people with serious disabilities and chronic conditions
- What other options exist?

## Focus on Long-Term Care

- 80% of LTC provided by informal caregivers
- Does/should the state provide assistance?
- Can the state prevent or delay NH placements?
- “Personal care option”  (assistance with bathing, dressing, feeding, housekeeping, shopping, etc.)
- LTC insurance:  does/should the state promote?
- Federal law encourages community care
- Doubling of residential and assisted living options in last decade

## Long-Term Care

- Institutional vs. community-based care
- 25% vs. 75% of LTC recipients
- 70% vs. 30% of LTC spending
- (Source: Harrington & Kitchener, NCSL Annual Meeting, 2003)
- Screening programs
- Prevention initiatives (e.g., disease management, Meals-on Wheels, etc.)
- Asset transfers/estate recovery
- Family education/contributions?
- End-of-Life planning?

## Transitioning to community carehttp://www.ncsl.org/programs/health/longcare.htm

## Case Study: Maine

- Target nursing home admissions
- Medicare as first payer
- Legislative approval for nursing home capacity changes
- Stricter controls on asset transfer
- Expanded access to state and Medicaid-funded home care services

## 1995 MeCare program

- Universal LTC pre-admissions screening
- Assessment costs = 1% of LTC spending
- “Case-mix” reimbursement for nursing homes
- Nursing homes certify more Medicare beds
- Change in nursing facility reimbursement

## Maine’s Cost Savings

- Increased Medicare’s share of LTC (Medicaid’s share dropped 18% between 1995-2002)
- 44% decline in Medicaid length of stay
- 26% decline in total nursing home days
- # Nursing home beds:  10,207 (1994)     7,708 (2002)
- % of LTC clients in nursing homes:
- 1995, 50%
- 2001, 33%
- 12% decline in per-person spending

## For More Information

- Maine Resources:
- Maine’s HCBS System
- 	www.state.me.us/dhs/beas/ltc/
- Pre-Admission Screening Program www.state.me.us/dhs/beas/ltc/2001/mecare2001.htm
- State and Medicaid LTC Expenditures: www.state.me.us/dhs/beas/ltc/ltc_exp_97_01.htm
- LTC status report, Dec. 2002: www.state.me.us/dhs/beas/ltc/2002/ltc_2002.htm

## Case Study: Minnesota

- Pre-admission screening for nursing home care
- Community development grants NH alternatives
- Community services expansions
- Closure of excess nursing home beds
- Moratorium on new nursing home construction

## Minnesota Cost Savings

- Eliminated 1,089 nursing home beds between Aug. 2001 and Jan. 2003
- Reduced nursing home beds per 1,000 elderly from 68 in 2000 to 64 in 2002
- Decreased NH spending as % of public LTC spending from 86% in 2000 to 73% in 2002
- 	Minnesota’s Long-term Care Task Force:
- 	www.dhs.state.mn.us/agingint/ltctaskforce/default.htm

## Case Study: Wisconsin

- 1995 Family Care Pilot Program (integrates county-level LTC services through case management and managed LTC)
- Single entry point for LTC services (assessment, consultation, case management, individual service plans)
- Pre-admission counseling to LTC facilities
- Savings:
- LTC spending decreased by an average of $198/person/mo.
- (9.6% less per Family Care enrollee than a similar population in a fee-for-service environment)
- Family Care Program: www.dhfs.state.wi.us/LTCare/index.htm

## LTC:  Other Ideas

- Arizona, Texas, Arizona
- Managed LTC and integrated acute/LTC programs
- Oregon:  expanded home & community services; reduced NH beds (1981-95, Medicaid $ fell by 8.6%; nationwide increase of 19%)
- National Family Caregiver Program (funds to Area Agencies on Aging—86% participants say” enables home care for longer”)
- Bush Admin. Systems Change Grants & “Independence Plus Initiative”  (Demo for family or individual directed comm. Services)
- “Aging in Place” initiatives (e.g., GA & NH)

## Chronic Illness & Disabilities

- How much could be prevented/reduced?
- Access to insurance Medicaid “Ticket to Work” Buy-in http://www.ncsl.org/legis/health/medicaidbuyin.htm)
- Access to preventive & primary care
- Prenatal care & counseling
- Focus on wellness/health education
- Smoking (est. 12% of costs for Medicaid in ’99)
- Obesity (estimated $21 billion in obesity-related conditions)
- Disease Management/”Care Management”

## Disease Management

- Top 1% of people account for 30% of health spending
- Top 10% of people for 70% of spending
- Bottom 50% of people for 3% of spending
- 			(Source:  Scott Leitz, Economist,  Minnesota Department of Health)
- “Disease management” targets people with chronic illness and provides more intensive services
- Common targets:  asthma, HIV/AIDS, cardiac diseases, diabetes, hemophilia, depression
- Leaders: FL, MD, MS, NC
- “Care Management” focuses on people, not disease
- E.g., Lahey Clinic in Mass.:  50% of enrollees had 5+ conditions

## Disease Management

- Cost savings?
- Not a panacea, could help with longer-term costs
- ER visits for patients reduced
- Hospital costs reduced overall for participants
- Resources:
- _[http://www.ncsl.org/programs/health/diseasemgmt.htm](http://www.ncsl.org/programs/health/diseasemgmt.htm)_
- “Contracting for Chronic Disease Management:  The Florida Experience”
- 	http://www.chcs.org/usr_doc/CDM-report.PDF

## Preventive & Primary Care

- Appropriate preventive & acute care for Medicaid enrollees
- Plan/provider accountability
- Outreach/Treatment
- Screening/education
- Immunizations
- “Medical home” for kids (avoid ER use)
- (North Carolina Pilot Project)

## High-Value Preventive Services(for adults--Partnership for Prevention)

- Tobacco cessation counseling
- Vision screening age 65+
- Cervical cancer screening
- Colorectal cancer screening
- Hypertension screening
- Influenza vaccination
- Chlamydia screening
- Cholesterol screening
- Problem drinking screening & counseling
- Pneumococcal vaccination age 65+

## Prescription Drug Savings

- Rx accounts for 12% of Medicaid costs (U.S.)
- Rapidly rising costs (17.3% in ’01; est. 12.9% in ’04)
- Valuable cost-saving tool
- Prevent hospital & nursing home costs
- Most common cost containment strategies:
- Prior authorization
- Preferred drug lists:  30+ states
- Supplemental rebates:  14+ states
- Use of generics
- Caveat:  Don’t be “penny wise & pound foolish”

## Medicaid Preferred Drug Lists

## Prescription Drug Savings

- Other cost containment strategies:
- Step therapy or “fail first”
- Disease management
- Monthly Caps and limits
- Adjust dispensing fees & ingredient reimbursement
- Enrollee copayments
- Fraud & abuse investigations
- Pharmaceutical managers or administrators
- Multi-state bulk purchasing

## New Medicare Rx Benefit

- Medicaid has subsidized Medicare
- Est. 80-85% of Medicaid Rx costs for elderly & people with disabilities (many of whom covered by Medicare)
- January 2006:
- Medicare will cover outpatient Rx for Medicare/Medicaid “dually eligible”
- States will pay under “claw back” provision
- (90% of 2003 drug costs in ’06 & ’07)

## New Federal Flexibility

- Most reforms intended to expand coverage
- 1115 Waivers
- HIFA Waiver (a new 1115 type)
- Premium assistance programs
- Modified benefit packages

## Employer Premium Assistance Programs/Health Insurance Premium Payment Programs

- Public insurance subsidizes employer coverage for  low-income working beneficiaries:  Medicaid or SCHIP.
- 15 states have programs -- different in intent and scope.
- Can be done through Medicaid or SCHIP
- Savings significant in states with eligibility to families above 100% of poverty
- visit http://www.ncsl.org/programs/health/buyin03.htm for a list of the states and few details of the programs.

## Case Study:  Utah’s Primary Care Network (1115 Waiver program)

- First state to offer a very basic benefit package (limited to preventive & primary care) to an expansion population (adults up to 150%).
- Reduced benefits and increased cost sharing to some mandatory Medicaid clients (TANF parents) to help finance the program.
- Lessons for other states:
- Does investment in primary care reduce uncompensated care $$?
- Will people be interested in a very limited benefit package over time?  So far, enrollment steady over time with the number at 18,910 as of 1-8-05

## Utah’s Primary Care Network Benefits

- Primary/preventive care by physicians and mid-level professionals enrolled in the network
- Adult immunizations
- Urgent care & ER visits when appropriate
- Lab, x-ray, medical equipment, medical supplies, oxygen, ambulance
- Basic dental, hearing tests, vision screening but not glasses.
- Prescription drugs [Limit of 4 per month]

## Other State Medicaid Proposals

**Florida** and **South Carolina**
- Revamp to resemble private managed care plans
- Assign a “premium” per person (risk adjusted)
- Cap the “premium”
- Give Medicaid recipients HSAs
- Focus on prevention (reward it)

## Reducing Medicaid Fraud and Abuse

- Billing for services not rendered
- Billing for unnecessary services
- substitutions of generic drugs
- Kickbacks
- Double billing
- Other unauthorized billing such as charging a customer for service covered by Medicaid

## Case Study: Florida 

- Florida: 1996 enacted two laws to strengthen anti-fraud and abuse activities
- Identifies providers with aberrant billing patterns
- Conducts provider investigations
- Recommends administrative sanctions
- Permits Florida’s Medicaid Fraud Control Unit to become law enforcement officers
- Florida AG’s Office reports the Medicaid Fraud Control Unit recovered $17.5 million in cash and made 158 arrests in 2001

## Case Study: Texas

- 1995 Medicaid Fraud and Prevention Act
- AG’s office investigates and prosecutes Medicaid fraud
- Provider exclusion lists
- Inpatient screening criteria
- Medicaid fraud training to health care professionals
- Medicaid fraud and abuse reports
- In the second fiscal quarter of 2003,  1,435 fraud cases identified and $14.5 million was recovered
- Recently, 2 Rx companies paid $45 million to settle fraud charges (accused of falsely reporting inflated prices)

## Electronic Billing, Data Collection and Eligibility Determination

- Arkansas saved about $30 million in 17 months:
- Drop in emergency room use
- Reduced claims processing time
- Virtually eliminated collection expense
- Lessened claim denials
- Increased efficiency in data analysis and report production
- Arkansas Medicaid: _[http://www.medicaid.state.ar.us](http://www.medicaid.state.ar.us/)_

## Combination Initiatives

- E.g., Oregon
- Government’s  role:
- Insure the uninsured up to the poverty level
- Provide subsidies for some others
- Employers’ roles:
- Cover employees with incomes above poverty via “play or pay” requirement
- Other:  Prioritize publicly funded health services

## Opportunities & Challenges

- What are your goals?
- Universal coverage?  Universal access?
- Healthy population?
- More personal responsibility?
- What is the appropriate role of government?
- The private sector?
- Individuals?
- Are you getting what you pay for?
- Services, quality, health status improvements?
- How can you control (not shift) costs?

## SCHIP

- State Children’s Health Insurance Program
- Non-Medicaid insurance option
- More flexibility than Medicaid expansion
- Higher federal matching rate
- Cover kids under 200% of poverty
- Waivers possible

## FY 2006 Proposed Health Budget

- President’s FY 2006 Budget Proposal for  Selected Health Programs
- _[http://www.ncsl.org/print/health/06HltBgtProps.pdf](http://www.ncsl.org/print/health/06HltBgtProps.pdf)_

## Medicaid

- CMS revised baseline for annual Medicaid growth rate over next 10 years:  from 7.8 % to 7.6%
- Result:  $73 billion reduction in spending
- With FY06 Budget Proposals the baseline for growth would be 7.3%

## Proposed Administrative Changes

- Payment Reforms
- Program Administration
- Prescription Drug Program Reforms