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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 Medicaid “Experts”.

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hot issues in health care

Hot Issues in Health Care

Focus on Medicaid & SCHIP

April 2, 2005

Martha King

National Conference of State Legislatures (NCSL)

Health Program Director



Medicaid “Experts”

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

medicaid why should you care
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
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),

medicaid dominates the health debate
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

Medicaid’s Role in the Health System,











SOURCE: Heffler, S. et al., 2002. Based on National Health Care Expenditure

Date, Centers for Medicare and Medicaid Services, Office of the Actuary.

medicaid at a glance
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 glance1
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
Medicaid Perceptions

One view:

A black hole

Another view:

A cash cow

people services
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
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
Beneficiaries and Expenditures(2002 -- U.S. average)

Enrollees51 million

Expenditures*$210 billion

medicaid expenditures per enrollee by acute and long term care 2002
Medicaid Expenditures Per Enrolleeby Acute and Long-Term Care, 2002





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

waiver options
“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
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
Medicaid Expansions Pros and Cons


  • Federal share (50-80%)
  • Existing administration/provider network
  • New flexibility & options
  • “Better than nothing” for uninsured


  • Financing constraints (economy & budgets)
  • Federal mandates (although getting better)
  • Potential “maintenance of effort” requirements
  • Political philosophy re less government role
cost saving strategies
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
Only so much to cut




cost saving strategies1
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 consultation1
  • Medicaid oversight committees
    • MassachusettsHouse created a Medicaid committee
    • Wyoming's subcommittee on Medicaid cost control & content
    • OregonSenate special committee on the Oregon Health Plan
    • KentuckyMedicaid Managed Care Oversight Committee

  • 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

evaluation oversight consultation2
  • 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.”

    • WashingtonState Institute for Public Policy
    • Washington commissioned a Lewin Group study.

  • Additional resources:

understanding the costs
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
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
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
Transitioning to community care
case study maine
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
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
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
For More Information

Maine Resources:

  • Maine’s HCBS System

  • Pre-Admission Screening Program
  • State and Medicaid LTC Expenditures:
  • LTC status report, Dec. 2002:
case study minnesota
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
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:

case study wisconsin
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:

ltc other ideas
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
Chronic Illness & Disabilities

How much could be prevented/reduced?

  • Access to insurance Medicaid “Ticket to Work” Buy-in
  • 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
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 management1
Disease Management

Cost savings?

  • Not a panacea, could help with longer-term costs
  • ER visits for patients reduced
  • Hospital costs reduced overall for participants


  • “Contracting for Chronic Disease Management: The Florida Experience”

preventive primary care
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
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
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”
prescription drug savings1
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
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
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
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 for a list of the states and few details of the programs.

case study utah s primary care network 1115 waiver program
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
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
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
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
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
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
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:

combination initiatives
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
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?

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
FY 2006 Proposed Health Budget
  • President’s FY 2006 Budget Proposal for Selected Health Programs

  • 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
Proposed Administrative Changes
  • Payment Reforms
  • Program Administration
  • Prescription Drug Program Reforms