Medicaid Managed Care Felicien Fish Brown Kaiser Permanente

Medicaid Managed Care Felicien Fish Brown, Kaiser Permanente Medicaid Congress, Washington DC June 14, 2007

Kaiser Permanente • Comprehensive integration of services – Health education and preventive care – Primary care physicians working closely with specialists and hospitalists – Hospital outpatient offices – Pharmacy, radiology, laboratory • Medicaid, SCHIP participation – California, Hawaii, Colorado, Oregon

10 Years of Medicaid and Managed Care Enrollment Growth 65. 3% 47. 8% Millions Source: CMS, June 30, 2006.

Wide state variation in average annual Medicaid payment per member • • • California Oregon Virginia Indiana Illinois Maryland North Dakota Connecticut New York $2, 325 $3, 177 $3, 877 $4, 067 $4, 531 $5, 542 $5, 766 $6, 670 $7, 817

Why Medicaid Managed Care? • Lower preventable hospitalization rates in California – 38% lower than FFS for TANF and TANF-related enrollees – 25% lower than FFS for SSI population • Modest savings for Aged/Blind/Disabled in Oklahoma – Costs were 4% less than FFS in 1998 -2000 Study by Primary Care Research Center at University of California, Funded by California Healthcare Foundation.

Why Medicaid Managed Care? • Evidence of better access to physicians in California (2004 data) and preventive services in New York (2005 data) • Can target populations based on conditions such as asthma and sickle cell • Evidence of better cost effectiveness (Lewin study)

According to Arizona ACCHS The Value of Managed Care • Improves health status and reduces cost of high risk populations • Better medical care cost control • Market competition for members drives quality and innovation. • Provides a organized health plan for business community buy-in. • Stabilizes providers • Improves State’s economic vitality • Complements other State public health and human service goals

What is Medicaid managed care? • Full-risk, comprehensive benefit Medicaid health plans account for 42% of total Medicaid managed care enrollees (about 19 million) • Less than 20% of Medicaid dollars are in managed care • In California, managed care accounts for 48% of beneficiaries but less than 25% of Medicaid costs

Barriers to Medicaid Managed Care • Dual eligible coordination • Limited benefit packages – trend? – • HIFA waivers, DRA Monthly eligibility – churning – – Discourages longer-term relationship with plan/provider Increases administrative costs

Barriers to Medicaid Managed Care • Payment rates – – – • Law and regs say rates must be on “actuarially sound basis” Need for better federal oversight Risk adjustment would help (in CA, payment rates 2 -3 times higher but costs are 4 -5 times higher) Federal UPL Rule – – Health plan payments to hospitals not counted in UPL calculation Disincentive for state to use managed care (e. g. , TX)

The state of Medicaid managed care Interviews with state officials • • Center for Health Care Strategies, Inc. report, November 2006 Surveyed 14 states – California, Colorado, Florida, Georgia, Hawaii, Kentucky, Maryland, Michigan, Ohio, Oregon, Pennsylvania, Texas, Washington, Wisconsin – Varied in size and nature of Medicaid program

States generally happy with managed care • All surveyed states have full-risk managed care • Many states experimenting with managed care variations (e. g. , PCCM, disease management): – – – Some health plans unwilling to develop state-tailored programs Rural areas present network challenge (e. g. , Pennsylvania’s ACCESS PLUS) Broad state disease-management efforts (e. g. , Georgia)

States want to extend managed care into new areas and for new populations • • Medical home concept is appealing, especially in rural areas Interest in expanding managed care for aged, blind, and disabled – ABD account for 25% of people but 70% of costs nationally – Some states have successful ABD managed care programs (e. g. , Wisconsin, Hawaii) – But political resistance to full risk for ABD (e. g. , California) – Few examples of long-term care incorporation

KP Medi-Cal Care Coordination Pilot • • Aimed at KP Medi-Cal members with complex chronic needs – Prevalent chronic conditions include asthma, diabetes, depression, and CHF Quality – – Early intervention to coordinate and manage care Assure participation in chronic disease programs Monitor and improve medication compliance Improve clinical outcomes

KP Medi-Cal Care Coordination Pilot • Access – – – • Use case manager Support transportation needs Establish frequent communication Utilize home tele-monitoring Assure clinical appointment compliance Savings – 1% of enrollees account for 27% of total costs; more than $100, 000 per enrollee – Reduce inappropriate ED visits

Medicare special needs plans growing • SNPs established in MMA with goal of Medicare. Medicaid coordination in single health plan • Rapid growth since 2003 • In 2007 – – • 469 dual-eligible SNPs with 622, 00 enrollees Another 221, 000 enrollees in institutionalized or chronic condition SNPs Dual eligibles have substantially greater health care needs than typical Medicare beneficiary

But Medicaid SNP connection is slow • After Medicare Part D implemented, states have less financial interest in acute care for duals – In 2003 Medicaid spending for dual eligibles was: • • • 66% long-term care 14% prescription drugs 15% other non-Medicare acute care 5% Medicare premiums But states may want to gain access to SNP drug utilization data

Future of special needs plans • Federal interest in SNP reauthorization but could additional requirements – – – Medicare-Medicaid coordination of benefits Medicaid billing for non-Part D drugs Performance reporting

Increased state effort to improve data reporting and quality • Identify target populations for disease management • Monitor plan and provider performance • Use for rate and risk adjustment • Pay for performance (e. g. , Ohio, Michigan, Pennsylvania) – Also auto-enrollment rewards (e. g. , California)

History of federal Medicaid quality initiatives • 1991 – HCFA begins Quality Assurance Reform Initiative (technical assistance to states) • 1996 – HCFA Quality Improvement System for Managed Care (QISMC) (to coordinate Medicare and Medicaid) • 1997 – BBA allows managed care without waivers and established access and quality standards • 2002 – CMS issues BBA final rule; managed care organizations can seek NCQA or JCAHO accreditation and states can use Medicare or private accreditation for Medicaid.

“Measuring managed care performance is not optional. What aspects of performance to focus on, how to report on it and to whom can vary with the state context, resources, and program needs, but collection and use of performance data is critical to program improvement, accountability, and credibility. ” James Verdier and Robert Hurley, May 2004

What Wall Street is saying about Medicaid managed care • Publicly traded Medicaid plans considerably more profitable than private plans – – • Much lower inpatient and physician utilization Unclear whether due to lower risk enrollees, better medical management, or worse access Most profitable states are Virginia, Michigan, New Jersey, and Florida – Need for RFP process to bring in competition Source: 6/7/07 CIBC World Markets paper based on NAIC data. Excludes California.

State health reform efforts What role for Medicaid managed care? • Several states considering major health reform • Need to managed Medicaid costs first • SCHIP reauthorization and expansion