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Future of Medicaid in a Time of Reform: Briefing for the AAMC

Future of Medicaid in a Time of Reform: Briefing for the AAMC Council of Teaching Hospitals & Health Systems. January 21, 2016. Context For Medicaid Reform Transformation in the States Q&A. Agenda for Today. The second part in this webinar-series will focus on:

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Future of Medicaid in a Time of Reform: Briefing for the AAMC

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  1. Future of Medicaid in a Time of Reform: Briefing for the AAMC Council of Teaching Hospitals & Health Systems January 21, 2016

  2. Context For Medicaid Reform Transformation in the States Q&A Agenda for Today • The second part in this webinar-series will focus on: • Case studies of state reform • Impact of Medicaid reform on AMC structures • Strategies for AMCs in Medicaid

  3. Context for Medicaid Reform

  4. Key Turning Points in the History of Medicaid Welfare Reform: Eligibility For Parents De-Linked from Welfare 1996 CHIP Created/ Medicaid Application Process Simplified for Children 1997+ Expansions for Children/De-Linked from Welfare 1988–1990 • Medicaid has also played a historic role of meeting care needs of special populations • With ACA, Medicaid shifts to broad-based coverage

  5. Foundational Part of Coverage Continuum Medicaid expansion for adults in voluntary with states 400% FPL Exchange Subsidies 241% FPL Medicaid/CHIP Children Varies by State Coverage gap in median non-expansion states 133% FPL 100% FPL 48% FPL 33% FPL Children Adults Other Adults Jobless Parents Working Parents Pregnant Women

  6. Status of Medicaid Coverage Decisions Six states are implementing alternative Medicaid expansion. • Washington • Maine • Vermont • North Dakota • Montana • Minnesota • Oregon • New Hampshire • Idaho • New York • Wisconsin • Massachusetts • South Dakota • Rhode Island • Wyoming Michigan Iowa • Connecticut • Pennsylvania • Iowa • New Jersey • Nebraska • Nevada • Delaware • Indiana • Ohio • Washington, DC • Utah • Illinois • West Virginia • Colorado • Maryland • California • Virginia • Kansas • Missouri • Kentucky • North Carolina • Tennessee • Arizona • Oklahoma • Arkansas • South Carolina • New Mexico • Georgia • Expanded Medicaid (30 + DC) • Texas • Not Expanded Medicaid (20) • Alaska • Alabama • Hawaii • Louisiana • Alternative Medicaid Expansions (6) • Mississippi • Developing proposal for expansion (1) As of January 12, 2016 Note: Pennsylvania is not implementing its approved waiver.

  7. Steady Growth in Medicaid Enrollment = Periods of Program Expansion = Periods of Recession Historic expansions to children, pregnant women CHIP ACA Enrollment grows by 15% Enrollment grows by 6.7% Enrollment grows by 9.8% Enrollment grows by 14.6% Fiscal Year Projected Source: OACT 2012 and 2013 Actuarial Reports http://medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Financing-and-Reimbursement/Downloads/medicaid-actuarial-report-2013.pdf US Business Cycle Expansions and Contractions, National Bureau of Economic Research

  8. Pressure on State Budgets is Significant Total expenditures on Medicaid are rising; impact on State General Funds varies Total State Expenditures by Function, FY 2014 Total General Fund Expenditures by Function, FY 2014 State general funds Medicaid expenditures expected to increase by 4.8 % in FY15 Medicaid expenditures expected to increase by 15% in FY15 Source: National Association of State Budget Officers State Expenditure Report

  9. Growth in Medicaid Role and Market Influence Medicaid is now single largest source of health insurance in the nation U.S. Health Insurance Enrollment by Source Exchanges 4% Other Private 3% Uninsured 7% Uninsured14% Medicare15% Medicare15% Other Private 6% Medicaid 16% Medicaid22% ESI47% ESI47% CHIP 1% CHIP 2% Projected in 2015 Pre-ACA in 2013 Source: National Health Expenditure Projections 2011-2021http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf

  10. Transformation in the States

  11. Medicaid Programs Undergoing Transformation • States are pursuing various combinations of reforms in their Medicaid programs that: • Tie Medicaid service payments to delivery of value/outcome rather than volume of services • Emphasize care management • Integrate care across the continuum, particularly behavioral health, LTSS integration • Align with broader healthcare reform efforts in the state • Utilize support from the Federal government and other entities where appropriate • Assure long-term Medicaid program sustainability Proactive Purchasing and Payment Reform Medicaid Coverage Expansion Elements of Transformation Federal Transformation Support Vehicles Delivery System Redesign

  12. Early Results from Expansion States • Robust Enrollment • Nationally, total Medicaid and CHIP enrollment grew by 19% between Summer, 2013 and January, 2015 (net of 11.2 million new enrollees). Expansion states experienced an average 26% increase. • Sharp Drops in Uninsured Rates • National surveys show all states experiencing ACA-related drops in uninsured rate, but expansion states had a 37.7% decline, as compared to 9% in non-expansion states. • Sharp Drops in Hospital Uncompensated Care Costs • In Arkansas, $1.1 billion reduction in hospital uncompensated care costs is expected between 2017-2021. • Economic Benefits to State Budgets • Arkansas projected a net positive impact on the state budget of $438 million from 2017 – 2021. • Kentucky has had a $300 million net positive impact on the State General Fund in two years. • In Nevada, state mental health costs are projected to drop by nearly 70% in 2015 as a result of expansion.

  13. Payment for Value Versus Payment for Services Shifting from funder to purchaser to leader Aligning public and private insurance; leveraging Medicaid to drive multi-payer reform Increased use of managedcare with expansion of covered benefits and high need populations; increased contracting requirements Shift from paying for volume to paying for value with focus on integrating care especiallyfor physical and behavioral health and social supports

  14. Continuum of Value-Based Purchasing Vehicles Quality Bonuses / Withholds • Smaller bonuses and withholds are lower risk • Larger bonuses and withholds are higher risk Bundled Payments • Risk corridors can lower risk • Excluding some services from the bundle or shortening time period can lower risk Less Risk Requires Less Coordination More Risk Requires More Coordination Shared Savings/Losses • Shared-savings-only arrangements are lower risk • Arrangements with small shared losses are medium risk • Arrangements with large shared losses are highest risk Global Budget • Risk corridors or stop loss provisions can lower risk

  15. Advancing New Delivery Models Patient Centered Medical Home Health Homes for Chronically Ill Accountable Care Organizations A group of providers take responsibility for improving the overall health status, care efficiency, and healthcare experience for a defined population Health Home providers coordinate continuum of clinical services for Medicaid beneficiaries with multiple chronic conditions PCPs assume responsibility for coordination of services for a population PCMH requirements in 43 states Medicaid ACO programs in 11 states Health Home programs in 19 states

  16. Accessing Transformation through Federal Initiatives State Innovation Models (SIM) CMMI Innovation Grants 1115 Demonstration Waivers & DSRIP 16 Testing Grants 107 Grants – Round 1 7 State DSRIPs 35 Design Grants 39 Grants – Round 2 $34.1 billion $900 million $1.2 billion

  17. Context for the Emergence of DSRIP DSRIP has evolved to provide temporary support to help states and providers implement delivery and payment reforms. Evolution of DSRIP as a Payment Vehicle Payments tied to self-sustaining delivery system improvement efforts  Creates accountability for states and providers to improve health outcomes over time  Long-term goal is to improve care/population health and achieve sustainability 

  18. Six Keys to DSRIP - The Why and What Goals Sustainable Transformation: Help support Medicaid providers to move along a path to value-based health care. Funding New Uses of Federal Funds: States are otherwise hard-pressed to secure funds for the infrastructure and other costs associated with delivery reform. Targets Super Utilizers: State specified targets for improving the quality of care delivered and the distribution and efficiency of Medicaid dollars spent. Emphasis Care Coordination: Ensure providers have the incentives and tools to coordinate care for Medicaid beneficiaries. Payments Performance Based: DSRIP is an incentive program, not a grant program; providers receive funding if they reach process and outcome goals. Measures Quality Counts: Participants in DSRIP initiatives must collect, assess, monitor, and report on quality measures. DSRIP is intended to be time limited, with investments leading to a self-sustaining, high-quality, efficient system of care for the Medicaid population

  19. Seven States are Implementing DSRIP Programs New York Approved in 2014 for $6.42b Washington Plans to implement in 2016, pending waiver approval Kansas Approved in 2013 for $100m, implemented in 2015 New Hampshire Approved in 2016 for $150m Illinois Waiver pending Massachusetts (DSTI) Approved in 2011 for $630m; extended for 2015-2017 for $690m California Approved in 2010 for $6.67b; renewed in 2015 for $7.46b New Jersey Approved in 2012 for $666m Texas Approved 2011 for $11.4b Approved Program Alabama Waiver pending Program in Development Sources: Kaiser Family Foundation, 2015. Key Themes from Delivery System Reform Incentive Payment Waivers in 4 States. http://kff.org/medicaid/issue-brief/key-themes-from-delivery-system-reform-incentive-payment-dsrip-waivers-in-4-states/; America’s Essential Hospitals, 2013. Medicaid Payments to Incentive Delivery System Reform. http://essentialhospitals.org/wp-content/uploads/2014/02/FINAL-DSRIP-Presentation-12-17.pdf; Department of Health and Human Services, 2015. https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/medi-cal-2020/ca-medi-cal-2020-ca.pdf; New York: http://www.health.ny.gov/health_care/medicaid/redesign/dsrip/ .

  20. Looking Ahead: DSRIP Fundamentals – New York Demonstrating financial sustainability and setting clear goals for moving to alternative payment methods will likely be paramount for CMS in considering DSRIP waivers. Formation of accountable, integrated provider networks participating in clinical projects that improve health in targeted areas Transformation of the Delivery System Managed Care DSRIP Support: 90% value-based payments in managed care contracts by Year 5 and commitment from MCOs to support DSRIP ongoing Statewide goal to reduce avoidable hospitalizations by 25% in 5 years Meaningful Cost-Efficiency Financial Sustainability Successful DSRIP Programs Successful DSRIP Programs

  21. Caution: Evolving Landscape for UC Pools • Nine states have UC pools as part of their 1115 Waivers. • In the past UC pool funds could be used to defray the costs of shortfalls resulting from: • Charity care for low-income and uninsured individuals • Bad debt • Medicaid payment shortfalls Florida’s Experience • Recently, CMS has put forth new principles in regards to both the size and use of future UC pools. • Permissible: Charity care for low-income individuals that would not be covered in a Medicaid expansion • Not Permissible: Bad Debt • Not Permissible: Shortfalls due to Medicaid provider payments • CMS developed a methodology that was used in Florida to develop a new federal funding level for the Low-Income Pool consistent with the articulated principles. As applied in Florida, these principles resulted in a 40% reduction in that state's UC pool (after a one year transition). Source: CMS Letter to Justin Senior, Deputy Secretary for Medicaid, State of Florida, April 14, 2015. Source: CMS Letter to Justin Senior, May 21, 2015; Texas Transformation and Quality Improvement Waiver, Medicaid.gov. Source: FL MMA 1115 waiver amendment. https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/fl-medicaid-reform-ca.pdf

  22. A New Angle in the Coverage Expansion Debate 1332 waivers focus on the private insurance market, but can overlap with Medicaid program reforms in potentially powerful ways 1115 Waivers 1332 Waivers • HHS and IRS Issued Joint Guidance in December, 2015 on 1332 Waivers: • Future administrations could revise this guidance • Departments are seeking comment but are under no obligation to respond to the comments or revise the guidance • Medicaid focused • Allows states to: • Enact delivery system & payment reform in Medicaid • Expand covered populations • Private insurance market focused • Allows states to: • Test approaches to marketplace coverage • ACA encourages 1332/1115 waiver coordination • 1115 / 1332 Overlap: Smoothing the coverage continuum, aligning quality and payment initiatives, other areas

  23. Overview of 1332 Waivers States may request waivers from HHS and the Treasury Department of certain requirements of the Affordable Care Act (ACA), effective 01/01/2017 1 2 Individual Mandate Employer Mandate • States can modify or eliminate the tax penalties that the ACA imposes on individuals who fail to maintain health coverage. • States can modify or eliminate the penalties that the ACA imposes on large employers who fail to offer affordable coverage to their full-time employees. 3 4 Benefits and Subsidies Exchanges and QHPs • States may modify the rules governing covered benefits and subsidies. States that reallocate premium tax credits and cost-sharing reductions may receive the aggregate value of those subsidies for alternative approaches. States can modify or eliminate QHP certification and the Exchanges as the vehicle for determining eligibility for subsidies and enrolling consumers in coverage. States may not waive non-discrimination provisions prohibiting carriers from denying coverage or increasing premiums based on medical history. States are precluded from waiving rules that guarantee equal access at fair prices for all.

  24. Statutory Guardrails A state waiver application must satisfy four criteria to be granted 1 2 Scope of Coverage Comprehensive Coverage The waiver must provide coverage to at least as many people as the ACA would provide without the waiver. The waiver must provide coverage that is at least as “comprehensive” as coverage offered through the Exchange. 3 4 Affordability Federal Deficit The waiver must not increase the federal deficit. The waiver must provide “coverage and cost sharing protections against excessive out-of-pocket” spending that is at least as “affordable” as Exchange coverage.

  25. States Pursuing or Contemplating 1332 Waivers Massachusetts Hawaii • Waiver seeks to preserve small group rules related to their pre-ACA merger of individual and small group markets • Considering a second broader waiver in 2017 • Waiver seeks to maintain the Hawaii Prepaid Health Care Act, the state’s unique 40-year-old employer mandate, which provides broader employer coverage than the ACA Minnesota • Legislature established task force on health care financing in May 2015 charged with, among other things, using 1332 waivers to improve continuum of coverage and delivery system reform • Recommendations report due to Governor and Legislature in January 2016 • Legislature will decide in March/May 2016 session whether to pass statute on MN reforms and 1332 authority

  26. Q & A

  27. Reference Materials • State Innovation Waivers (1332 Waivers) • 1332 State Innovation Waivers: HHS and Treasury Guidance • Review of the basics of 1332 waivers, and the impact of recent HHS guidance on 1332 waiver program implementation • 1332 State Innovation Waivers: Coordinating 1332 and 1115 Waivers • Part 1 and Part 2 discuss how 1115 and 1332 waivers overlap and be combined to support state health care transformation • Medicaid Expansion • Medicaid Expansion: A Webinar on Early Analysis of Budget Savings and Revenue Gains • Review of state-realized budget savings due to Medicaid expansion • The Impact of Medicaid Expansion on Uncompensated Care Costs: Early Results and Policy Implications for States • Research report on the impact on uncompensated care for states that have expanded Medicaid • Delivery System Reform Incentive Payment (DSRIP) Programs • “Key Themes from Delivery System Reform Incentive Payment Waivers in 4 States”

  28. Thank You! Melinda Dutton Partner mdutton@manatt.com Manatt, Phelps, & Phillips, LLP 7 Times SquareNew York, NY 10036 212.790.4522 Cindy Mann Partner cmann@manatt.com Manatt, Phelps, & Phillips, LLP 1050 Connecticut Ave NW Suite 600Washington, D.C. 202-585-6516 DATE/TIME FOR PART 2 TO BE ANNOUNCED

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