Back to the Future Where is Medicaid going and what does it mean for the Community Behavioral Health

1
Back to the FutureWhere is Medicaid going and
what does it mean for the Community Behavioral
Health System?

• Dale Jarvis, CPAMCPP Healthcare Consulting
  National Council for Community Behavioral
  Healthcare
• dale_at_mcpphc.com
• [phone]

2
Agenda

• Introduction and Overview
• Chapter 1 Background A Brief History
• Chapter 2 The Balanced Budget Act of 1997s New
  Administrative Rules
• Chapter 3 Actuarial Soundness under the Balanced
  Budget Act of 1997
• Questions and Answers

3
Overview

• In June 2002 the Balanced Budget Act (BBA) of
  1997s Final Rules for Medicaid Managed Care were
  issued. This new rulebook changes how states
  with Medicaid Behavioral Health Managed Care
  Waivers are paid for services and manage their
  programs.
• This session will help participants understand
  the opportunities and threats to the community
  behavioral health system from the most
  significant change to Medicaid regulations in
  over a decade.

4
Do we have a problem? Exhibit A

• When I first went to work at OMB in 1989 during
  the first Bush Administration, total Federal and
  State Medicaid spending was 61.2 billion. By
  the time I departed in 1993, total Medicaid
  spending had grown to 132 billion. Today, total
  Medicaid spending for 2004 is projected to be
  304 billion thats nearly a tripling in
  spending over 10 years and five-fold increase
  since 1989. Moreover, Medicaid not Medicare
  is now the largest government health program in
  the United States. In FY2002, total
  Federal-State outlays (259 billion) exceeded
  Medicare outlays (257 billion) for the first
  time.
• Prepared Witness Testimony 10/8/03, Challenges
  Facing the Medicaid Program in the 21st Century,
  Thomas A. Skully, CMS Administrator

5
Do we have a problem? Exhibit B

• U.S. Nears Clash With Governors on Medicaid
  Cost
• The Bush administration is headed for a
  confrontation with states over the financing of
  Medicaid, the nations largest health program, as
  federal officials crack down on arrangements used
  by many states to shift costs to the federal
  government.
• Federal officials and auditors contend that
  states use creative bookkeeping and other ploys
  to obtain large amounts of federal Medicaid money
  without paying for their share.
• The General Accounting Office, an investigative
  arm of Congress, recently added Medicaid to its
  list of high-risk programs.
• New York Times, February 16, 2004

6
Chapter 1 Background A Brief History
7
The Medicaid Program

• Established in 1965 as a Joint Federal/State
  Program
• To provide medical care for individuals and
  families with low incomes and resources
• States share costs with the Federal Government
  Federal Financial Participation (FFP) ranges from
  50 to 77, with no limit on federal funds if
  state provides the match
• In the early years Medicaid looked like a typical
  insurance plan
• Any willing provider could sign up,
• To see patients who had Medicaid coupons,
• Who then billed the services on a fee for service
  basis
• But the program grew and grew and grew
• From 400 million to 259 billion (FY-02)
• From 4 million enrollees to 47 million enrollees
  (FY-02)
• Expanded benefits, increase in the elderly and
  disabled population, and technology contributed
  to growth

8
The Medicaid Program

• 4. Managed Care in Medicaid
• Started in early 1980s for healthcare services
• By 2002, more than 58 of all Medicaid enrollees
  were in some form of managed care program
• 5. Waiver Process
• Mechanism to facilitate the move to managed care,
  waiving rights that are built into the Medicaid
  legislation, thus allowing more flexibility to
  manage patient care
• States could use an 1115 demonstration and
  research project waiver, a 1915(b) freedom of
  choice waiver, or a 1915(c) home and community
  based services waiver
• 6. In 1998 Michigan began a 1915(b)(c) combo
  waiver that blended funding for mental health,
  substance abuse and developmental disabilities
  (first of its kind in the country)

9
Managed Behavioral Health Care

• The 1990s saw a great deal of movement to
  managed care in the public behavioral health
  system

Source SAMHSAs State Profiles, 1999, on Public
Sector Managed Behavioral Health Care
10
What is Managed Care?

• People use the phrase managed care to describe a
  variety of systems and arrangements for planning,
  managing and paying for healthcare.
• Generally, a Managed Care Organization (MCO)
  participates in managed care by agreeing to meet
  the healthcare needs of a defined population in
  return for receiving a fixed pot of money,
  often in the form of a capitation payment.
• Exemplary MCOs will manage care through an
  organized effort to balance Quality, Access,
  Utilization, and Cost to ensure that consumers
  get the right care, in the right amount at the
  right time.
• The original Medicaid managed care funding rule
  book supported these principles by encouraging
  flexibility and creativity within each states
  Upper Payment Limit (UPL).

11
Medicaid Behavioral Health Managed Care
Reimbursement Methods

• Managed Care Organizations are paid
• On a capitated basis (37 States)
• Fixed Fees (12 States, including 7 of the 10 ASO
  arrangements)
• Fee for Service (10 States)
• Provider Organizations are paid
• Fee for Service (34 States)
• However most States use multiple payment
  mechanisms to reimburse providers
• 27 States pay some providers on a capitated basis
• 18 States pay fixed fees
• 17 States pay case rates

12
Reimbursement Methods
Source SAMHSAs State Profiles, 1999, on Public
Sector Managed Behavioral Health Care
13
BBA of 1997 Key Changes

• Substantial rewrite of the Medicaid and Medicare
  program rules
• Allows Implementation of Medicaid Managed Care
  without a waiver
• But cant be done if it includes children with a
  Serious Emotional Disturbance thus not relevant
  to behavioral health programs
• Removes exemptions from administrative rules for
  many PHPs
• Repeals the Upper Payment Limit and implements
  actuarially sound payment rates
• Final rules passed on June 14, 2002 and went into
  effect August 13, 2003

14
Chapter 2 The Balanced Budget Act of 1997s New
Administrative Rules
15
Pre-BBA Two Sets of Administrative Rules for
MCOs and PHPs

• MCOs Comprehensive health plans providing full
  healthcare coverage including inpatient and
  outpatient services.
• Examples include commercial plans such as Blue
  Cross/Blue Shield, Kaiser or Aetna, as well as
  specialized Medicaid plans such as Molina
• MCOs began National Committee for Quality
  Assurance (NCQA) accreditation process by late
  80s
• NCQA Standards set the performance bar for
  insurance carriers as they became managed care
  organizations (not for their indemnity plans)
• NCQA Standards were stretch standards a decade
  ago, now are accepted business practices

16
Pre-BBA Two Sets of Administrative Rules for
MCOs and PHPs

• PHPs Organizations providing more limited array
  of services such as behavioral health or dental
  care
• Examples include the Regional Support Networks
  (RSNs) in Washington, the Oregon Mental Health
  Organizations (MHOs) and the California County
  Mental Health Departments
• PHPs were exempted from many of the
  administrative requirements in Medicaid managed
  care regulations
• Has resulted in great variation in implementation
  of key managed care strategies related to access,
  utilization management, quality improvement,
  credentialing, member rights and
  responsibilities, preventive health and
  coordination of care
• Some PHPs initially talked about pursuing NCQA
  accreditation, major MBHOs (Magellan, Value
  Options) have done so, most PIHPs have not.

17
PIHPs, PAHPs and PHPs

• PIHPs and PAHPS replace PHPs
• Prepaid Inpatient Health Plans (PIHPs) manage
  inpatient and outpatient care
• Prepaid Ambulatory Health Plans manage only
  outpatient care
• PIHPS now expected to meet MCO requirements
• PAHPS still exempt like old PHPs
• PIHPs now required to look and act like true
  health plans
• CMS reviews and approves all MCO, PIHP and PAHP
  contracts and establishes monitoring requirements
• 230 item contract checklist
• Monitoring protocol
• Actuarial checklist

18
State MH/SA/DD Obligations

• Contracting with MCOs, PIHPs, and PAHPs
• The Final Rules specify that the CMS Regional
  Office must review and approve all MCO, PIHP, and
  PAHP contracts. A lengthy CMS Checklist for
  Managed Care Contract Approval must be used to
  determine whether the contracts comply with the
  Balanced Budget Act regulations.
• Monitoring PIHP Compliance
• In February 2003 CMS issued Monitoring Medicaid
  Managed Care Organization (MCOs) and Prepaid
  Inpatient Health Plans (PIHPs) A protocol for
  determining compliance with Medicaid Managed Care
  Proposed Regulations at 42 CFR parts 400, 430, et
  al. The protocol is a 254 page document that is
  required to be used in independent, external
  reviews of the quality and timeliness of, and
  access to, care and service provided to Medicaid
  beneficiaries by the MCOs, PIHPs, and PAHPs.
• All states with managed care waivers must hire an
  External Quality Review Organization (EQRO) to
  complete the external review.

19
EQR Challenges for States PIHPs

• An analysis of the EQRO Protocols show that they
  come from the world of NCQA-type quality
  improvement and are aimed at answering the
  following questions.
• Do you have well-designed processes in place to
  manage the core MCO/PIHP activities?
• Do you have a sufficient number of adequately
  experienced and trained staff to complete the
  work?
• Are your processes properly documented?
• Are the processes stable and predictable?
• Are you actively engaged in continuous quality
  improvement efforts, including Process
  Improvement Projects (PIPs)?
• Are you using data to support your improvement
  efforts?
• Do you truly have a culture of measurement?

20
EQR Challenges for States PIHPs

• The answer to the previous questions in a number
  of States, especially those with regional or
  county-based mental health PIHPs, is PROBABLY
  NOT.
• Consider
• California has 58 counties and 57 Medicaid mental
  health PIHPs. 22 of the PIHPs have a total
  population (not Medicaid enrollees) of less than
  100,000 persons, and half of those have a total
  population under 30,000
• Of the 80 mental health PIHPs on the West Coast
  (lower 48) at least ½ have PIHP staff of 4.0 FTEs
  or less and many have less than 2.0.

21
EQR Challenges for States PIHPs

• Yet to be answered questions include
• How many mental health PIHPs will receive
  passing grades on their EQRs?
• How serious will the deficiencies be?
• What kinds of corrective actions will be
  required, in what timeframe?
• Is it possible for small regional or county-based
  mental health authorities to rise to the
  standards of a true NCQA-accredited health plan?
• What expectations does CMS have for this first
  round of EQRs and how will they respond if there
  are a large number of poor results?
• What will happen if performance does not
  appreciably improve in years 2 and 3 of the EQRs?

22
Chapter 3 Actuarial Soundness under the Balanced
Budget Act of 1997
23
Pre-BBA Medicaid Managed Care Financing (Old
Rules)

• Under managed care, there is added flexibility to
  give clients what they need, even if it doesnt
  fit into a defined service code.
• Cost savings from the Medicaid managed care plan
  can be used to provide additional mental health
  services we dont have to worry about giving
  money back if we dont spend it.
• Recording and tracking every unit of services is
  not as important because were not begin paid fee
  for service.
• We should be focusing more on managing to client
  outcomes than managing our unit cost and
  productivity levels.

24
Final Rules Changes in Financing

• The Final Rules include a very important change
  in the Federal financing of Medicaid managed care
  programs - the repeal of the Upper Payment Limit
  (UPL), replacing it with the requirement for
  States to set Actuarially Sound Capitation Rates.
• Many States have considered the Upper Payment
  Limit a double edged sword.
• On the one hand they were guaranteed 100 of
  the inflation-adjusted funding that they had
  received under the old, fee for service systems,
  even if they were able to achieve cost savings.
• But States that had either done a good job
  managing costs in the old system, or had
  systematically underfunded the Medicaid programs
  were stuck at the old levels, regardless of the
  needs of the Medicaid population.

25
Actuarially Sound Rates

• The New Math Medicaid Rates are based on
• Counting the historical services that have been
  reported,
• Multiplying them by a rate for each service, and
• Adding/subtracting adjustments for inflation and
  expected changes in utilization
• Rates must be based only on Medicaid services
• If a provider provides services outside the state
  plan and theyre not one of the approved 1915(b)3
  alternative service, they wont be counted
• Rates must only pay for services to Medicaid
  beneficiaries
• If a plan uses any savings to serve persons who
  have lost their Medicaid coverage, they wont be
  counted (and they will be subject to recoupment
  in an audit)

26
Actuarially Sound Rates (continued)

• Savings in a world of Actuarially Sound Rates
• If a PIHP has any money is left over at the end
  of the year, the savings must be put into a
  Community Reinvestment Fund, which must be
  earmarked for service delivery projects to
  Medicaid enrollees, to be spent in the following
  12 months.
• If the PIHP is a governmental entity, savings
  equal payments minus expenses no provision for
  surpluses.
• If a provider is related to the government-run
  PIHP (e.g. any overlap of board members), the
  provider organization will likely be considered a
  related party and any unexpended provider funds
  will also be called savings.

27
Concern Allowable Services will not be Properly
Captured and Counted

• A number of States have managed mental health
  care systems where PHPs/PIHPs have passed a
  portion of their capitated risk down to providers
  in the form of case rates or sub-capitation
  payments with the expectation that
• Providers must meet the needs of the
  clients/populations for which they are
  responsible.
• Providers are at risk for excess utilization and
  cost under case rates, plus penetration risk
  under sub-capitation.
• Providers can reap the reward if savings were
  achieved.
• These reimbursement methods inadvertently broke
  the link between recording/submitting services
  and being paid. As a result, there was a drop in
  reported state plan services and the inability to
  quantify how much was due to decreased clinical
  effort, and how much to service capture problems.

28
FFS to Case Rates Example (actual data)
29
Concern Historical Unit Costs will not be
Accepted during the Actuarial Process

• Issue A number of actuarial firms are beginning
  to examine unit costs in publicly-funded mental
  health systems in a number of non-fee for
  service managed care states this issue had
  previously fallen below the radar screen.
• Concern In States with PIHP designs that pay
  providers using methods other than Fee for
  Service, actual unit costs may be well above
  costs used in the actuarial studies and the
  provider community will not be able to respond
  quickly enough, which could result in loss of
  capacity and system instability.

30
Cost per Hour Example (actual data)
31
Back to Fee for Service

• Under a system that uses actuarial approaches to
  set PIHP capitation rates, if a service has not
  been properly recorded at the provider agency,
  accurately transmitted to the PIHP, and then
  submitted and accepted by the State Mental Health
  Departments data system, the service did not
  occur. Regardless of the payment methods used
  by states to pay PIHPs, and PIHPs to pay
  providers, we have moved to what is essentially a
  fee for service system.

32
Actuarial Challenges for States PIHPs

• Yet to be answered questions include
• How quickly will States and PIHPs respond to the
  new math?
• Will the provider community train-up quickly
  enough to ensure that allowable services are
  properly captured and reported?
• What are acceptable unit cost figures? Will
  urban, rural variations be taken into account?
  Will higher no-show rates that are often found
  with seriously mentally ill persons be taken into
  account?
• Will the fidelity of evidence-based practices be
  negatively impacted by certain EBP services that
  may not be Medicaid-reimbursable? (portions of
  the Supported Employment and Family
  Psycho-Education SAMHSA EBPs)

33
Questions, Comments, Feedback?
34
Dale A. Jarvis, CPA

• Dale Jarvis is a Managing Consultant at MCPP
  Healthcare Consulting, a Seattle-based consulting
  firm. Mr. Jarvis helps health and behavioral
  health organizations and system managers develop
  and install practical financial planning,
  analysis and information systems.
• He has contributed articles to publications and
  is a co-author of two books, The Primary Care
  Performance Management System and How to Thrive
  in Managed Behavioral Healthcare.
• In recent years he has worked with over 60 PIHPs
  and provider organizations in several states
  addressing behavioral health financing and
  technology-related issues.
• Dale can be reached at dale_at_mcpphc.com and (206)
  613-3339. MCPP Healthcare Consulting is on the
  web at www.mcpphealthcare.com.