Hot Issues in Health Care

1. 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

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

3. Medicaid Made Simple

4. 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

5. 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

6. 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

7. State Budgets & Health Costs

8. Medicaid’s Role in the Health System, 2000 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.

9. 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)

10. 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”

11. Medicaid Perceptions One view: A black hole Another view: A cash cow

12. 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)

13. 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.

14. Beneficiaries and Expenditures(2002 -- U.S. average) Enrollees51 million Expenditures*$210 billion

15. Medicaid Expenditures Per Enrolleeby Acute and Long-Term Care, 2002 $12,764 $11,468 $1,948 $1,475 SOURCE: Kaiser Commission on Medicaid and the Uninsured, January 2004

16. “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)

17. 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

18. 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

19. 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

20. Only so much to cut People Providers Services

22. 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”

23. Evaluation/Oversight/Consultation

24. Evaluation/Oversight/Consultation • 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 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

25. 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/ • WashingtonState Institute for Public Policy 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://www.le.state.ut.us/lrgc/briefingpapers/medicaid.pdf

26. 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?

27. 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

28. 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?

29. Transitioning to community carehttp://www.ncsl.org/programs/health/longcare.htm

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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)

38. 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”

39. 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

40. 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 • “Contracting for Chronic Disease Management: The Florida Experience” http://www.chcs.org/usr_doc/CDM-report.PDF

41. 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)

42. 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+

43. 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”

44. Medicaid Preferred Drug Lists

45. 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

46. 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)

47. New Federal Flexibility • Most reforms intended to expand coverage • 1115 Waivers • HIFA Waiver (a new 1115 type) • Premium assistance programs • Modified benefit packages

48. 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.

49. 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

50. 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]