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Vermont Global Commitment

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Review team: Eileen Ellis and Theresa Sachs. Our background: ... Since MCO Model, allowance of 9% for administrative costs ... OVHA may 'spend' the savings ... – PowerPoint PPT presentation

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Title: Vermont Global Commitment


1
Vermont Global Commitment
  • Health Access Oversight Committee
  • Joint Fiscal Committee
  • September 27 28, 2005
  • Montpelier, VT
  • Theresa Sachs, Principal
  • Eileen Ellis, Principal
  • Health Management Associates

2
Presentation Overview
Presentation Overview
  • HMA review process
  • Waiver concept
  • Programmatic issues
  • Financing issues

3
HMA Review Process
HMA Review Process
  • Joint Fiscal Office contracted with Health
    Management Associates
  • Review team Eileen Ellis and Theresa Sachs
  • Our background
  • State Medicaid Agency experience, including
  • Extensive experience in program financing and
    fiscal analysis
  • CMS experience, including
  • Medicaid reform and Health Insurance Flexibility
    and Accountability initiative
  • Our charge
  • Independent review, risk analysis of Global
    Commitment

4
HMA Review Process (cont.)
HMA Review Process (cont.)
  • What we did
  • Review of documents
  • Interviews of staff and consultants
  • Our work products
  • Presentations
  • Written recommendations

5
Waiver Concept
Waiver Concept
  • Global cap
  • Public managed care organization (MCO)
  • Financing flexibility
  • Benefit flexibility
  • Protection of mandatory eligibles

6
Unique Feature of the Waiver Public MCO
Receives Premiums
  • VAHS pays premiums to OVHA
  • Because of Global Cap, federal funds will match
    premiums for ALL enrolled waiver populations,
    including VHAP expansion adults other waiver
    expansion adults
  • OVHA pays for direct care services and
    distributes funds to other state agencies
    pursuant to contractual agreements
  • OVHA can also distribute its savings to other
    agencies to fund allowable health-related
    programs for low-income populations
  • Discussed in more detail later. These are Costs
    Not Otherwise Matchable or CNOM

7
Programmatic Discussion

8
Issues Related to Meeting MCO Requirements
  • The OVHA would have to meet all managed care
    requirements specified in federal regulation
  • The only requirement being waived is the provider
    credentialing process
  • The intergovernmental agreement between VAHS and
    OVHA has been reviewed by CMS as an MCO agreement
    and has met with preliminary approval

9
Issues Related to Documentation of Demonstration
Provisions
  • Demonstration documentation
  • Special terms and conditions (STCs) are the only
    documentation of what is being approved
  • The original demonstration proposal has not been
    updated
  • No operational protocol will be required
  • No Attachment C of the STCs will be required

10
Documentation Risk and Recommendation
  • Demonstration documentation (cont.)
  • Risk Future disagreements over operational
    elements of the demonstration
  • HMA recommendation Written documentation of all
    understandings between the Agency for Human
    Services and CMS
  • This can be done via a letter from VAHS to CMS
    CMS would have to respond in writing to correct
    any misunderstandings

11
Financing Discussion

12
Topics Regarding Financing the Global Commitment
Waiver
  • Parallels to financing of the Vermont Health
    Access Plan (VHAP)
  • Global Cap How calculated what are the risks
  • Premiums How established what are the risks
  • Use of Savings to cover Costs Not Otherwise
    Matchable (CNOM)
  • Internal CNOM
  • External CNOM

13
Parallels to VHAP
  • VHAP waiver used some of the same concepts as
    Global Commitment
  • Without Waiver budget traditional Medicaid
    populations with generous trend rate
  • With Waiver costs budget traditional
    populations and expansion populations
  • VT used savings on traditional populations to
    fund VHAP expansion
  • As a result Vermont has more generous eligibility
    than almost every other state
  • Surplus of 66.6 million authority from VHAP

14
How was 4.7 B. Cap developed?
  • Projected costs - mandatory optional Medicaid
  • Trend rates
  • Average over 10 for mandatory and optional
    waiver populations
  • Over 9.25 for non-waiver families ABD
  • Developmental services waiver 9.92 per year
  • Since MCO Model, allowance of 9 for
    administrative costs
  • Includes 66.6 million VHAP Surplus
  • Allowance of 10.8 million per year for Vermont
    State Hospital (VSH) alternatives
  • Excludes costs of expansion groups (such as
    VHAP adults who are not parents or caretakers)

15
Average Annual Growth RatesTotal Medicaid
Spending, 1992 - 2005
Annual growth rate
SOURCE For 1992-2002 Urban Institute estimates
based on data from Medicaid Financial Management
Reports (HCFA/CMS Form 64) For 2003, 2004 and
2005 Health Management Associates estimates
based on information provided by state officials.
16
How was the Cap developed?
17
Premiums
  • Actuarially sound premium RANGE to be set by an
    external actuary for each population in the
    waiver
  • Will use historical medical costs, the funds for
    the VSH alternatives and an actuarial trend rate
  • The premium includes an allowance of 9 of
    premium for administrative costs (total of 405
    million over five years)
  • CMS guidelines allow for risk, contingency
    profit in MCO rate setting
  • The premiums have not yet been calculated

18
How it works Chart Joint Fiscal Office
19
Scenario A Premiums above Cap
  • Actuary sets premium RANGE hopefully part of
    range is below cap and VAHS pays at lower end of
    the range
  • If premiums too high, federal share limited by
    the cap
  • VT does not appear to have sufficient state funds
    to support 4.7 billion anyway, so program
    reductions are required with or without waiver if
    spending is at that level.
  • Federal CMS 64 reports of amounts expended still
    required
  • Cant carry excess federal funds forward to use
    as match
  • Would need to return any excess federal funds

Note Global cap is cumulative can be exceeded
in a given year within STC thresholds, and if
VT has sufficient state funds
20
Scenario B Premiums at Cap
  • Staff (administration and JFO) estimates imply
    that if the product of premiums and enrollment is
    4.428 billion, it would match current program
    estimates, including matchable CNOM. This is less
    than the 4.7 billion cap.
  • If total premiums are at the Cap
  • If due to higher than anticipated caseload, VT
    would need to find additional state funds or
    reduce programs.
  • If due to high premium rates, would need to
    identify additional CNOM for use of savings or
    try to reduce the premiums.

21
Scenario C Premiums below Cap
  • If premiums payments are below the cap, but at
    4.428 billion or above, projected 5 year savings
    are attainable (staff estimate of 135 million in
    internal CNOM)
  • Some have suggested funding of external CNOM
    between cap and premiums.
  • Would require a waiver amendment.
  • While possible, this seems unlikely
  • If premiums are below 4.428 billion
  • If due to lower than expected caseload, state
    will share in savings
  • If due to lower per capita premium rates, less
    ability to fund CNOM through savings hurts state
    budget.

22
How internal CNOM is funded
  • Premium rates may exceed costs pmpm if
  • Administration costs less than 9 (highly
    probably)
  • Benefit costs less than rate due to favorable
    trend in premium
  • Medical management or provider rate negotiations
    reduce cost trends
  • OVHA may spend the savings
  • Generates federal matching funds for existing
    state funded programs
  • Only for specified activities related to the
    uninsured, underinsured, and Medicaid populations

23
Uses for premium savings
  • Per waiver Special Terms Conditions (STC),
    savings can be used for programs to
  • Reduce the rate of uninsured and, or underinsured
    in Vermont
  • Increase the access of quality health care
    uninsured, underinsured and Medicaid
    beneficiaries
  • Provide public health approaches to improve the
    health outcome and the quality of life for the
    uninsured, underinsured Medicaid-eligible
    individuals in Vermont and
  • Encourage the formation and maintenance of
    public-private partnerships in health care.
  • Clarification is needed regarding this indirect
    funding of CNOM and waiver list (which may be
    only restrictions on direct use of waiver funds
    for CNOM).

24
Is the Cap Sufficient What are the Risks?
  • September 9/07/05 staff document shows forecast
    of total expenditures subject to the cap lt 4.2
    billion over 5 years.
  • Result is cushion of 518 million
  • Staff estimate opportunity to use 255.8 million
    of waiver authority for other programs.
  • This part SAVES state funds (135 million) since
    these programs would otherwise have been funded
    with 100 state dollars
  • Still gross waiver authorization cushion of
    262.3 million
  • If costs within waiver exceed 4.182 billion
    forecast, would need state funds for matching
    purposes
  • Absent additional state funds, would need to cut
    programs, with or without the waiver

25
Risks To Vermont Related to the GC Premiums
  • Initial premiums havent been set may be too
    low or high
  • Rates will be set annually
  • Current documents discuss interface with
    legislative decisions. Staff indicate that
    initial trends will be used by the actuary, but
    modified for any legislative changes in coverage
  • Existing documents dont fully explain this.
  • HMA recommendation
  • Initial premiums should be available before the
    waiver is approved by the legislature and
    implemented by VAHS and OVHA.
  • The process for annual changes should be further
    specified.
  • Also a concern that CMS or HHS Inspector General
    might review rates and discount some of the
    savings for year three or beyond.

26
Risks of Global Commitment Waiver to the State
  • Apparent risk if cost increases exceed an average
    of 9 to 10 per year due to caseload or medical
    cost increases. Due to 4.7 billion cap, VT would
    be at risk to spend 100 state funds.
  • However, existing data indicates VT doesnt have
    state funds to even reach the cap without
    savings for CNOM
  • Premiums unknown
  • Could be too low or too high for viability
  • Need assurance that there isnt going to be a
    rebasing in the middle of the waiver period.

27
Risks of Global Commitment Waiver to Beneficiaries
  • Assertion Under GC, OVHA has an incentive to
    reduce costs by limiting amount of care for
    waiver enrollees to increase savings for other
    programs
  • Observation While perhaps waiver increases this
    incentive (because savings can be used for CNOM),
    the state already has this incentive due to
    budget deficits.
  • Assertion Due to waiver cap, OVHA may not be
    able to pay for all eligible individuals
  • Observation The waiver lets VT fund more
    individuals with less state funding. If total
    program cost were to exceed 4.7 billion, VT
    would need significant additional state revenues.

28
Risks of Global Commitment Waiver to Providers
  • Assertion Under Global Commitment, OVHA has an
    incentive to reduce costs by reducing provider
    payment rates or limiting increases
  • Observation While the waiver may increase this
    incentive (because savings can be used for CNOM),
    the state already has this incentive due to
    budget deficits.
  • Observation This is an issue without waivers in
    almost every state.
  • On October 19 our latest report on Medicaid
    budgets will be released by the Kaiser Foundation
    at www.kff.org.

29
Some Advantages of Global Commitment Waiver
  • Vermont can continue funding VHAP expansion
    groups
  • Vermont is able to carry-forward VHAP
    authorization surplus (66.6 million)
  • Federal funding is included for alternative
    services to Vermont State Hospital
  • Generous cap allows direct federal funding in
    premiums for VHAP expansion populations and new
    expansion populations (expansions dont require
    other savings to fund them)

30
Additional Advantages of GC
  • If service costs can be kept less than premium
    assumptions, funds are available for CNOM
  • Because OVHA is an MCO, premiums can include 9
    administrative component
  • Expected much lower spending on administration
    savings for CNOM
  • CNOM Potential to draw 135 million (or more)
    in federal matching funds over waiver period for
    currently 100 state programs

31
Wrap-Up
Wrap-Up
  • Federal perspective
  • Key benefits
  • Predictable spending growth
  • Ability to claim savings inside the cap if
    Vermont does not draw down full amount
  • Ability to test Medicaid reform principles
  • Key risks
  • No major risks seen

32
Wrap-Up
Wrap-Up
  • State perspective
  • Key benefits
  • Generous cap
  • Flexibility with respect to financing, benefits,
    eligibility
  • Key risks
  • Scant documentation may lead to future
    misunderstandings
  • The actual premium has not been set

33
Wrap-Up
Wrap-up
  • Beneficiary perspective
  • Key benefits
  • More stable financial support for some existing
    state-funded programs
  • Potential to lower uninsurance rate
  • Key risks
  • No major risks seen that would not also exist
    without the waiver
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