Wisconsin’s Experience in Slowing Cost Growth In Medicaid

1. Wisconsin’s Experience in Slowing Cost Growth In Medicaid SCI Annual Meeting James Johnston, Wisconsin Medicaid CFO August 5, 2010

2. Agenda Impetus for Rate Reform Rate Reform Approach Rate Reform Process Highlights from Rate Reform Version 1.0 Rate Reform Version 2.0 and Beyond Lessons Learned Wisconsin Department of Health Services 2

3. Rate Reform Overview Wisconsin’s Rate Reform Project is Now Our Process for Continuous Quality Improvement and Program Reform. Wisconsin Department of Health Services • The Medicaid program was required to find $625 million (all funds) in savings (2009 Act 28) as a result of the 2009-11 State Budget Deficit. • Rather than achieving these savings by doing across-the-board cuts, DHS decided to take the opportunity to find real reform opportunities in the Medicaid program. • DHS’s Rate Reform approach includes: • A comprehensive examination of how MA purchases specific health care services • Identification of areas where true reform can be achieved in Medicaid and the program can achieve savings • Goal – to utilize the creativity of stakeholders to help identify ways to make Medicaid more efficient without harming the program. We invited all the provider and advocate groups to participate. Everyone had a seat at the table. 3

4. What Wisconsin could do to meet the legislative mandate to reduce Medicaid spending by $600 million AF • Across-the-board rate cuts of approximately 5.5% over the biennium; 19% if applied only to non-institutional services • Sweeping reductions in benefits and services. Samples of submitted ideas included: • Eliminating oral health coverage for BC+ Benchmark plan • Expanding use of provider assessments • Ending the expansion of Family Care • Eliminating SeniorCare • Dramatically increasing co-payments for expansion populations Wisconsin Department of Health Services 4

5. Context of Rate Reform: • ARRA Restrictions • Mandatory covered service requirements • Governor’s Priorities • Guiding Principles Wisconsin Department of Health Services 5

6. ARRA Restrictions Wisconsin Department of Health Services • The American Reinvestment & Recovery Act (ARRA) prohibits the imposition of stricter eligibility standards. • Wisconsin risks losing $1.2 billion in federal funding. • ARRA funding is up for a 6-month continuation; however, this funding comes with no guarantees and eventually will end. 6

7. Mandatory Services • The Federal Government requires that states cover: • Inpatient hospital services (other than IMD services) • Outpatient care and ambulatory services of RHCs and FQHCs • Laboratory and X-ray services • Nursing facility services (other than an IMD) for individuals 21 or older • Early and periodic screening, diagnosis and treatment (EPSDT) for individuals who are eligible under the plan and are under age 21 • Family planning services and supplies • Physicians' services and the medical services of dentists • Pregnancy-related services, including treatment of conditions which may complicate the pregnancy or threaten the safe delivery of the fetus, until 60 days after delivery • Nurse midwife and nurse practitioner services in states where they are licensed • Medicare cost-sharing for dual-eligible beneficiaries Wisconsin Department of Health Services 7

8. Governor’s Priorities Wisconsin Department of Health Services Wisconsin should continue to be a national leader in access to basic, affordable health care coverage We need to build on our achievements in providing healthcare coverage Budget savings will not be accomplished through stricter eligibility standards or reductions in benefits The state will have to trim back reimbursement rates for services such as medical care 8

9. Guiding Principals • Identify savings to reach targeted reduction levels • Look for both short-term solutions and long-term systemic changes • Ensure that no one provider group is singled out for rate reductions • Ensure access to care for MA patients • Align payments with value rather than volume • Build on previous MA quality improvement efforts including managed care P4P initiative • Implement care management/coordination strategies • Focus on high-intensity services • Cost containment now about “continuous improvement” Wisconsin Department of Health Services 9

10. Framework for Project • Very public process. • 200 stakeholders participating in multiple meetings. • On-line survey tool. • Process generated over 500 ideas. • Rate Reform Version 1.0 was completed June 2009. • State is now implementing the plan. • Process was well received. • Key was everyone was at the table and understood that something had to be done. Status quo was not an option. • So well in fact that we hope to continue into the future. • This is the way we should do business! Wisconsin Department of Health Services 10

11. Rate Reform Project Overview • All-Provider Kick-Off Call (3/23/09) • Round 1 Advisory Group Meetings (4/2/09-4/17/09) • Over 200 advisory group participants • Web survey to 30,000 portal users • Generated over 500 ideas • Highest volume of ideas for Pharmacy, LTC & PA-related changes • Package Development (4/20/09-7/1/10) • Balanced approach across all providers • State Budget Impact Need: SFY10-11 savings; target has grown • Round 2 Advisory Group Meetings (7/15/10-7/22/10) • Implement Recommendations (begin 8/1/10) Wisconsin Department of Health Services 11

12. Idea Analysis and Development Template completed for each idea • Ideas analyzed and prioritized based on: • Short & long term impact • Current spend & potential savings • Benefit considerations • Policy impacts • Regulatory parameters • Contract changes • Reviewed and triaged each idea internally • Developed list of short-term savings ideas for 2009-11biennium Wisconsin Department of Health Services 12

13. Savings Target • Original Target (March 2009): Governor’s SFY 10-11 Budget • $140 million GPR $415 million AF ------------------------------------------------------------------------------- • Revised Target (May 2009): Joint Finance Committee • $191 million GPR $581 million AF ------------------------------------------------------------------------------ • Final Target (June 2009): Conference Committee • $205 million GPR $625 million AF ------------------------------------------------------------------------------- Separate Savings Items: • Hospital assessment • $300 million GPR (over three fiscal years) • Increase in hospital assessment • $93 million GPR (over three fiscal years) • New ambulatory surgical center assessment • $21 million GPR (2009-11 biennium) • Increase in nursing home assessment • $23 million GPR (2009-11 biennium) Wisconsin Department of Health Services 13

14. Highlights of Specific Proposals • SE Wisconsin Managed Care RFP – New focus on quality. • Reimburse Physicians based on cost effectiveness. • Create an incentive for nursing homes to avoid preventable adverse health conditions (e.g. pressure ulcers) or other alternative. • 100 Day Supply requirement for specified maintenance drugs/early refill limits. • Reimburse C-Sections at Same Rate As Vaginal Deliveries, Unless C-Section is Medically Necessary. • Care Management contract for high cost Fee-For-Service members. • More aggressive approach to MAC pricing/Balanced with additional payments for enhanced pharmaceutical care. • Reform the way Critical Access Hospitals are paid. • Adopt APC approach for outpatient payments. Wisconsin Department of Health Services 14

15. Rate Reform Version 1.0 has been a success! Wisconsin Department of Health Services • On track to save $633 million (all funds) as required by the 2009-11 state budget. • Initially explored 72 items, though some have been eliminated or consolidated. • 32 of the remaining 56 ideas have been implemented to date. • These 32 ideas are projected to save $277.8 million (all funds) over the biennium. 15

16. Continuous Quality Improvement & Rate Reform • However, Medicaid program grows during difficult economic times. • Demand for Medicaid services exceeds current funding. • Continually looking for more efficiencies and enhancements to the program. • Result = Wisconsin Medicaid Rate Reform 2.0. Wisconsin Department of Health Services 16

17. RATE REFORM VERSION 2.0 DRAFT PACKAGE

18. Rate Reform 2.0 Package Summary Wisconsin Department of Health Services • Rate Reform 2.0 is much smaller than version 1.0 • We did not hit our target of $100M GPR • Total Preliminary Savings Estimate: $39,779,668 (AF) • Focus is on: • Program Improvement • Medicare Alignment • Focus is not on: • Items needing legislation changes • Total Number of Recommended Ideas: 36 18

19. Rate Reform 2.0 Timeline 2/19 – 3/9 Meetings with 4 Stakeholder Groups 1/26 Kick-Off Meeting DRAFT Final Package to Stakeholders at Meeting Implementations Begin* Brief the Secretary’s Office Modify Package Ongoing Jan. Feb. Mar. Apr. May Jun. Jul. Brief the Legislature Brief the Governor’s Office 7/1 Final Package *Note: Some initiatives require State Plan language changes. Implementation start dates will be impacted by these changes. Wisconsin Department of Health Services 19

20. Rate Reform 2.0 DRAFT Package Wisconsin Department of Health Services *All Funds 20

21. Rate Reform 2.0 DRAFT Package Wisconsin Department of Health Services *All Funds 21

22. Rate Reform 2.0 DRAFT Package Wisconsin Department of Health Services *All Funds 22

23. Rate Reform 2.0 DRAFT Package Wisconsin Department of Health Services *All Funds 23

24. Rate Reform 2.0 DRAFT Package *All Funds Wisconsin Department of Health Services 24

25. Lessons Learned • Thanks to BadgerCare Plus, Wisconsin leads the nation in health care access. • Budgets are about values and priorities. Governor Jim Doyle has made health care access a priority during good and challenging budget times. • Managing the budget effectively must include engaging stakeholders and thinking creatively. • Legislative changes are difficult to accomplish • Fewer focus groups are easier to manage • Be aware of systems and staff limitations • In open process - be prepared for anything Wisconsin Department of Health Services 25

26. QUESTIONS?james.johnston@wisconsin.govhttp://www.dhs.wisconsin.gov/medicaid/ratereform/QUESTIONS?james.johnston@wisconsin.govhttp://www.dhs.wisconsin.gov/medicaid/ratereform/ Wisconsin Department of Health Services