Health reform implementation: Challenges and tools for states

1. Health reform implementation: Challenges and tools for states State Coverage Initiatives Program August 4, 2010 Stan Dorn The Urban Institute Sdorn@urban.org 202.261.5561

2. Overview Selected highlights of the Patient Protection and Affordable Care Act (PPACA) The exchange Using PPACA to achieve state policy goals Note: This afternoon, we’ll discuss the goal of maximizing coverage and access to care

3. Preliminary comment: administrative resources Serious capacity limitations Options Foundations Federal grants Key: focus

4. More preliminaries This is the start of a conversation Much is outside this discussion, including LTC, workforce, and program integrity Focus is on state choices, not compliance with federal law

5. Part I Selected PPACA Highlights The world in 2014 PPACA’s theory of cost-control Close-ups on selected topics

6. What 2014 will look like Medicaid/CHIP New Medicaid coverage up to 138% FPL (MAGI) Childless adults receive 90-100% federal match MOE Adults, ends 1/14 Children, through 2019—but no CHIP allocations after FY 15 The exchange Run by the state or HHS Offers plans to small groups and individuals Tax credits and other subsidies for non-Medicaid eligibles without access to employer-sponsored coverage (ESI) up to 400% FPL Shared responsibility Individual mandate Possible penalties for companies with > 50 workers not offering ESI Increased Medicare payroll taxes for households with incomes above $250,000 ($200,000 for single tax filers) Insurance reforms

7. Theories of cost control Traditional argument From the right, demand-side management From the left, supply-side management Common assumption: health care is a fixed widget Third way: what if we change the widget? Intuition: we’re paying for things we don’t need The incentives are wrong Examples of success: Geisinger, Mayo

8. But how do we move from TO

10. Close-up #1: Center for Medicare and Medicaid Innovation (CMI) $10 billion appropriated through 2019 Authority to test and expand, starting in 2011 Any promising model, including PCMH Patient decision-support Fully integrating Medicare/Medicaid Care coordination for chronically ill

11. Close-up #2: Medicaid and the exchange A common form and eligibility determination system for Medicaid, CHIP, and subsidies in the exchange “No wrong door” “Behind-the-scenes” processing Data exchange system Medicaid can determine all eligibility, if The exchange wants to contract with Medicaid and The state Medicaid program meets federal standards HHS determines eligibility for subsidies in the exchange Year-end reconciliation if income changes MAGI is the same for all subsidies, but: Time frames differ

12. Part II The exchange

13. Should the state run the exchange? Advantages Powerful tool for accomplishing state policy goals Qualified plans can be excluded from exchange Potential for better coordination between Medicaid and subsidies in the Exchange Disadvantages New institutions Hard tasks Federal standards Exchanges self-financing starting 1/1/15 But if surcharges can be included in premiums, paid by federal tax credits

14. General approaches to exchange Market organizer “Craig’s list for health insurance” Selective contractor Only plans that meet state criteria can join Active purchaser State negotiates with plans to obtain concessions, in exchange for access to covered lives in the exchange

15. Part III Using PPACA to achieve state policy goals Making health insurance more like a classic market Holding insurers accountable Reforming health care to slow cost growth and improve quality Reducing state budget deficits

16. Making health insurance more like a classic market

18. Why isn’t health insurance a smoothly functioning market? Absence of consumer information Plans Providers Purchasers do not experience the consequences of their choices Employers decide, but employees feel the effects Insured consumers pay only their cost-sharing amounts

19. State information strategies Make information usable to consumers Put in one place Present in easy-to-understand format. Very challenging. Very important. Build on HHS methodological progress Fill information gaps Multi-payor strategies

20. PPACA information reforms General quality and efficiency measures Opportunity for states to piggy-back on HHS efforts, including Specific measures Strategies to tack hard methodological issues (like risk-adjusting outcome data) Medicare provider data Quality and efficiency measures for hospitals and physicians. “Hospital compare” and “Physician compare” websites. Other hospital data – readmission rates, standard charges Health plan information – lots!

21. Filling information gaps Plan-specific consumer out-of-pocket (OOP) cost-sharing amounts NH Physician charges Condition-specific costs and outcomes Risk-adjusted Medical Reimbursement Data Centers

22. Multi-payor information strategies Why? Powerful effects Easier for providers Performance with low-income consumers can affect private payments Why not? Herding tigers Differences between beneficiary populations What? Medicare calls the tune—OR Medicare dances to the state’s tune – CMI Either way, All-Payor Data Base How? Old news: public employee coverage, Medicaid, private insurance mandates, jawboning large private employers New tools Requirements for plans in exchange CMS Center for Innovation

23. The exchange as a consumer-driven market Consumer chooses, not employer Limit: employer picks AV Consumer pays marginal cost increases Consumer balances cost vs. product features Considerable plan variety Multiple AV levels Within AV, multiple benefit designs, room for innovation Limits on competing by avoiding risk Result: plans seek market share by giving consumers what they want at a cost they can afford

24. Making the exchange a consumer-driven market: plans Market-organizer approach maximizes plan participation Empirical issue: limits on consumer capacity for information processing Middle-ground strategies Some plans in exchange, others outside All plans in exchange, some are “recommended” Increase plan variety All AV levels Within AV levels, varied benefit design Encourage existing plans to fill gaps E.g., more limited provider networks Encourage new market entrants

25. Making the exchange a consumer-driven market: consumers Consumer participation Use agents and brokers Maximize firm eligibility Contributions from multiple employers? Work with firms to design effective procedures Outreach, public education Consumer information Particular facts E.g., formularies, providers accepting new patients Condition-specific costs and results Private information providers Key: easily understandable, “apples-to-apples” presentation

26. Holding insurers accountable

27. New legal duties on insurers Federal requirements Key concept: no discrimination based on health status or gender Many other requirements Medical loss ratio Appeals Etc. Variations Most important: grandfathered vs. other plans States can add to federal requirements Higher medical loss ratio Less premium variation based on age Limits on exchange plans

28. State options that go beyond standard-setting Accountability mechanisms State-based public plan to compete with private insurers in the exchange

29. Data to detect violations Past data uses: year-end audits Examples of new data uses High rates of denials of certain claims may show failure to cover essential benefits High rates of disenrollment among consumers with health problems may show discrimination Few claims from certain geographic areas may show gaps in provider networks State can supplement federal data requirements Focus data requests to make them usable Make redacted data publicly available for use by advocacy groups, reporters, researchers, purchasers

30. Other accountability mechanisms Access to the exchange as an incentive for exemplary plan performance “Selective contracting agent” or “active purchaser” role False Claims Act Health consumer assistance programs Health plan appeals

31. Administrative resources More dollars Through interagency agreement, insurance departments can certify plans as qualified to be offered in exchange Access to the exchange’s administrative funding Federal grants to build rate review capacity False Claims Act recoveries Insurance regulators may be able to offload some responsibilities Consumer assistance programs Exchange

32. Public plan Being pursued in CT – “SustiNet” Health insurance involves high barriers to market entry Public plan can surmount by using existing populations as members State employees and retirees Separate risk pool Medicaid/CHIP No reduction in benefits for these populations Incorporate state-of-the-art delivery system reforms Offer in the exchange, with standard commercial benefits Competition Can galvanize spread of successful delivery system reforms to other payors Must be state-licensed Can change state licensure laws

33. Reforming health care to slow cost growth and improve quality Reimbursement Health care delivery Prevention and wellness

34. Reimbursement – general concept We reward the wrong things What if we: Paid more for high-value performance? Penalized dangerously poor performance? Bundled payments for hospital procedures? Created Accountable Care Organizations that would share in savings? Shifted from fee-for-service to capitated or salary-based payments?

35. Medicaid Demonstrations 5 states, global fees to large safety net hospitals or networks, starting FY 10 Pediatric ACOs, starting FY 12 8 states, bundling demos, starting CY 12 Focus Medicare demonstrations on duals Community-Based Care Transitions Program, starting CY 11 ($500 million) Independence at Home, starting FY 10 ($30 million)

36. Medicare payment reforms Hospitals Financial penalties, high rates of preventable readmission, FY 12 Help for poor performers Value-based purchasing, FY 13 Bundling demo, CY 13 Financial penalties, hospital-acquired conditions, FY 15 Physicians ACOs, CY 12 Value-based modifier, phased-in CY 15-16 Preceded by confidential feedback, including resource use Demo: patient incentives to pick high-value physicians

37. Building on Medicare changes Old tools Public employee coverage Medicaid Private insurance mandates Jawboning large private employers New tools Exchange participation CMI: apply state policy changes to Medicare But is it a good idea? ACOs – state intervention may be needed to prevent high prices P4P – questions about desirability

38. Delivery system reforms General idea: care is fragmented, disorganized, non-accountable States can implement multi-payer initiatives with almost any reform E.g., home-based intervention to prevent rehospitalization of high-risk patients All-payer payment systems

39. Patient-Centered Medical Homes Concept Care coordination Patient education 24-7 access Locus for accountability and patient contact State strategies, beyond usual multi-payor tools Medicaid option Community health teams, HIT, training for providers Either appropriations or CMI Qualified plans in exchange

40. Comparative effectiveness research General concept PPACA Patient-Centered Outcomes Research Institute May not “include mandates” State implementation Pay for the lowest-cost, clinically equivalent service How? Opportunity for provider to make exceptions, with appeals process Consumers can pay for more costly services Who? Public employee coverage Permission for private insurers HIT decision support, recording reasons for exceptions

41. State options for prevention and wellness Community transformation grants $100 million for Medicaid incentives to participate in evidence-based programs aimed at obesity, diabetes, smoking, etc., CY 11 Medicaid option for adult preventive care, CY 13 10-state demonstration of wellness programs in individual market 30% premium discount Numerous grants States can buy adult vaccine at CDC rates New federal prevention fund

42. Reducing state budget deficits Public employee coverage Shifting costs from states and localities to the federal government Slowing Medicaid cost growth

43. Public employee coverage General delivery system reforms Focus on chronic illness, employees and retirees Potential for highly targeted efforts: Pre-diabetics Home-based prevention of rehospitalization PCMH, supported by HIT Federal reinsurance Now available Cutting cost for localities can lower pressure for states to provide local aid

44. Medicaid maximization Concept: services now provided to adults, using state or local money, can receive federal Medicaid dollars Now: standard match rates 2014: 100% match, dropping to 90% Candidates Payments for uncompensated care Useful adjunct: hospital-based presumptive eligibility Mental health Useful adjunct: demo for Medicaid payment of IMD GA-type health coverage Social services to parents

45. Medicaid minimization Concept: starting in CY 14, shift optional Medicaid-eligible adults above 138% FPL into federally-subsidized coverage Easier to do if implement Basic Health Program, with Medicaid-like coverage up to 200% FPL Federal dollars > full pmpm Advantages in terms of affordability and continuity Trade-off: reimbursement rates But can use extra federal money to raise reimbursement

46. Pregnant women – an example State-matched costs

47. Medically needy Current law Episodic Covered after incur share of cost Must spend down for each period 1 to 6 months Important pathway to long-term care Are tax credits available? PPACA: If eligible for Medicaid or Medicare, no tax credits What happens before spend-down has been met? “Medicaid ineligible,” so qualified for tax credits?

48. Suppose IRS says tax credits are available before spend-down is met States can encourage medically needy to shift to exchange or BHP Consumers may be better off: ongoing, rather than episodic coverage Depends on premium and OOP costs States better off: no Medicaid costs Long-term care still available Plans in exchange and BHP won’t cover much If need LTC, meet spend-down by OOP payment for uncovered services Eventually qualify for long-term care – but State saves money, because coverage in exchange or BHP delays start of spend-down

49. Slow cost-growth within Medicaid Delivery system reforms, prevention, etc. Integrated dollars and services for dual eligibles Rationale New CMS Coordinated Health Care Office CMI: authority to let states control Medicare dollars in integrated care systems for duals Very fragile population, need for great care Start with small geographic area, tune up, then scale up SNPs: boost in Medicare rate if full integration State can guarantee savings – BUT Serious risks

50. Conclusion Extraordinary opportunities to make progress Extraordinary effort will be required to make the most of these opportunities