Issue Briefing: Florida’s Medicaid Waiver Application Presenter:

1. Medicaid Issues Webcast & Audio ConferenceHosted by the Winter Park Health FoundationSeptember 21, 2005 Issue Briefing: Florida’s Medicaid Waiver Application Presenter: Joan AlkerSenior ResearcherGeorgetown Center for Children and Families

2. 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

3. 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

4. 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

5. 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

6. Florida Medicaid Waiver Process First possible submission date to federal government State postswaiver on internet Federal approval ? At least 28 days August 31 September 29 ? ? Public comments can be submitted to state. Waiver negotiated and finalized. Approved waiver must be published in Florida Administrative Weekly before legislature can act.

7. 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?

8. 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 Who will be required to participate?

9. 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

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?

11. 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 Adult Benefits continued

12. 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.

13. 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

14. 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??

15. “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

16. 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

17. 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

18. 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. Medicaid Section 1115 waiver financing- per capita caps 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.

19. 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

20. Waiver Budget Agreement Will Affect All Parts of the State 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

21. Congressional Budget Office (CBO) Federal Medicaid Spending Projections for Fiscal Year 2003 (billions of dollars) 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.

22. 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

23. 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)

24. 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

25. State Estimate of Total Medicaid Spending, With and Without Waiver Total 5-year reduction in spending: $4.58 billion 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.

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

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

28. 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

29. State of Florida - www.myflorida.com Agency for Healthcare Administration Federal Government Mr. Dennis Smith, Director Center for Medicaid and State Operations The Centers for Medicare and Medicaid Services 7500 Security Boulevard Baltimore, MD 21244-1850 Contact Information www.fdhc.state.fl.us/Medicaid/medicaid_reform/index.shtml Email: medicaidreform@ahca.myflorida.com

30. 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.