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State Concerns in General
Access and continuity of care for individuals
dependent on state programs
States are safety net providers if Medicare fails
Potential for impact on non-drug costs born by
states if Rx access is inadequate
Burden on state resources to educate and assist
beneficiaries and to adapt state programs to MMA
Impact on State Budgets:
Will costs outweigh savings? Hidden and known costs
Will predicted savings all materialize?
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Medicaid Issues & Options
Clawback
Based on (2003 per capita payments) x (inflation) x
(# of duals) x (90 to 75%)
Need to assure base year cost report reflects all
audits, rebates, etc.
Annual inflation factor may erode built-in savings
Different states pay different amounts per capita for
same Medicare benefit – Will formula change over
time?
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Key Issues for Medicaid: Costs vs. Savings
What is the “Clawback”?
State Clawback Rate by Year
90.00% 88.33% 86.67% 85.00% 83.33% 81.67% 80.00% 78.33% 76.67% 75.00%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Key Issues for Medicaid: Costs vs. Savings
Illustrative
$
Actual state Rx
spend
“Clawback”
payments
Projected
2001 2002 2003 2004 2005 2006 2007 drug spend
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Enrollment: Implications for Medicaid
Screening of LIS applicants for Medicare Savings Programs
May increase enrollment in these Medicaid programs
Info and assistance to duals in selecting PDPs and others in applying
for LIS
Some states supplementing CMS efforts
Info to duals about best formulary match to drug profile
Important to train related agency case managers to help clients with
choices: MH, MR, Aging, AIDS programs, H&CB waiver programs, etc.
Training for NFs, ICF-MRs, pharmacists, MDs
Collaboration with SHIPs, AAAs, senior insurance advice programs, etc.
LIS limited to average PDP premium – should Medicaid pay difference
for higher cost plans?
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Take-Up Rates for Assistance Programs
Note: Medicare Part D includes employer coverage. Medicare Part D and low-income subsidies begin in January 2006. Part D rates are estimates from CBO.
Numbers appearing as a range were averaged. Take-up rates for Medicare Parts A and B, Medicaid, and SSI are from 1975-1996.
SOURCE: Medicare Part D, Part D Low-Income Subsidy, QMB, and SLMB rates from CBO, July, 2004; National Bureau of Economic Research, March 2001.
Note: Medicare Rx Card participation WITH auto-enrollment and including MA plan cards = ~20%
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Medicaid Coverage Options
Medicaid can cover drugs excluded from Part D
with FFP
Benzodiazepines, barbiturates, OTCs, etc.
No FFP for covering duals‟ copays or non-
formulary drugs, but not prohibited from doing so
Not practical to process claims for copays - but
Pharmacists can waive copays
Fear coverage of non-formulary drugs will encourage
PDPs to be restrictive
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Consumer Protections for Duals Diminished
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Review AR laws
Many duals not capable of navigating appeals process
without help
AR = “individual appointed by the enrollee or authorized
under state law to act on behalf of…”
Individuals, case managers, doctors, etc can become
appointed representatives (AR) for purposes of appeal
Check states laws re: conservators etc to assure
compatability with Medicare rules on AR
Educate AR‟s about MMA requirements: e.g. send in
signed form annually
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Impact on Other State Agencies
An interagency task force is advisable
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Impact on Other State Agencies
Insurance Dept:
PDPs to have state insurance license
Questions and complaints: no real authority, but good
to track and try to resolve anyway
Role of ombudsman
Consumer info on how to compare plans
Report cards on plan performance
Dept on Aging, Dept of Health
Be prepared to offer info and advice, & receive many
calls
Impact on Ryan White AIDS drug progams
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State Retirees: Provisions & Options
Retiree plans may qualify for a 28% subsidy of their drug payments for
retirees
Retirees must be eligible for but not enrolled in Part D plans
Plan must be actuarially equivalent to Part D benefits
Subsidy only on actual costs (excluding rebates) between $250-5,000, so subsidy
is capped at $1330 per person
Alternative to retain current benefit plans:
Become a waivered PDP and collect federal premium payment (74.5% of national
average premium) plus risk corridors, reinsurance, & LIS payments
Need to evaluate if this will result in more state savings than the 28% subsidy
Had to file letter of intent by mid-March, „05 to do a waiver for „06, but can apply for
„07
Other alternatives
Employer pays beneficiary portion of premiums to PDPs
Employer offers wrap around plan (note payments do not count towards TrOOP,
no subsidy)
Employer offers non-qualifying plan, no 28% subsidy
States need actuarial analysis to determine savings and make choice
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Other
States should establish an evaluation protocol to
assess impact on:
DMH expenditures and utilization
Medicaid and SPAP costs, utilization and quality
Other agencies
Need full analysis of savings and costs
(SPAP + Medicaid + Retiree savings eligibility) vs.
(admin. costs + clawback costs + education costs)
If net savings: how should savings be used?
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Medicaid Cost Containment
Medicaid Cost Containment Options
Eligibility
Benefits
Unit Costs
Utilization
Managed Care
Revenue enhancement & cost avoidance
Administrative Efficiencies
The easy ideas are done, the rest may take
waivers, legislation, political guts
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Eligibility
Cut back eligibility for optional groups
Prevent transfer of assets for nursing home
applicants
LTC insurance partnerships
Strengthen estate recovery
HIFA waivers: expand (or preserve) eligibility
but for limited benefits for higher income groups
Reduce # of uninsureds / strengthen employer
insurance
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Benefits
Eliminate optional services – many restrictions –
EPSDT, pregnant women, etc
Replace high cost services with low cost
alternatives: H&CB waivers
Reform partnership with Medicare to better
manage continuum of care for elders & save
state $
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Unit Costs
Selective contracting
MFN language in all provider contracts
Multi-state Centers of Excellence contracts for
tertiary hospital services
Cut provider reimbursement rates
Mandatory generic substitution
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Utilization
Provider initiatives
Profiling and network management
Fraud and abuse detection & prevention
Intensive Clinical case reviews when costs or utilization hit
triggers
Prior authorization of services, if cost benefit is documented –
e.g. extensive home health, selected surgeries, extensive PT,
certain drugs
Drug recycling programs for unused drugs in nursing homes
Patient initiatives
Disease management, self care education
Co-payments for non-emergency use of ER
Lock-in for inappropriate use of services
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Managed Care
Capitated Managed care
Mostly for families, not the sickest populations
Use managed care principles in FFS program
Selective
contracting & network management
Case mngmt, disease mngmt for high risk/cost folks
Performance based provider payment
Copayments for upper income groups
UM, where cost benefit is demonstrated
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Administrative Efficiencies
Sometimes complicated by civil service & labor
contracts
Admin overhead very low in Medicaid, cuts in
admin can result in higher cost of health care
services
Beware of stove pipes: evaluate impact of carve
outs on full budget not just line item
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Revenue enhancement & cost avoidance
Buy-in for employer sponsored insurance
Enhance TPL activities
Medicare recoveries
IGTs, DSH, and provider taxes much more
tightly scrutinized & controlled by CMS
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Final Pearl:
Invest in solid evaluation of each initiative‟s
impact on total costs & on quality:
beware of line item savings that increase costs
elsewhere in the program or in other agencies.
Beware of cost shifting….what can be shifted can be
shifted back through utilization, state employee health
costs, etc.
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