DMAS UPDATE FORSENATE FINANCE COMMITTEE

MAY 21, 2019

JENNIFER LEE, MD

DIRECTOR, DEPARTMENT OF MEDICAL

ASSISTANCE SERVICES

Agenda

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Update on Medicaid Expansion and Section 1115 Waiver

Milliman Report and Update on DMAS Financial Reforms

Current Fiscal Year Budget Update Update on Hospital Provider Assessment

Overview of Medicaid Expansion Requirements

The 2018 Appropriations Act directed DMAS to implement new coverage for adults and transform coverage

Implement new coverage for adults with incomes up to 138% FPL and implement early reforms for newly eligible individuals

Implement required reforms that transform the Medicaid program for certain individuals

State Plan Amendments, contracts, or other policy changes

§ 1115 Demonstration Waiver

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Medicaid Expansion

Virginia’s Medicaid expansion began on January 1, 2019

Virginia expanded Medicaid coverage to adults with incomes ≤ 138% FPL

Virginia has enrolled over 280,000 newly eligible adults as of May 20, 2019

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Medicaid Expansion Members: Medical Conditions and Service Utilization

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More than 81,000 Medicaid expansion members have

received a prescription*

More than 175,000 Medicaid expansion members

have visited a provider*

34,855

16,606 15,089

2,5470

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Medicaid Expansion Members Diagnoses*

Hypertension Diabetes

Substance Use Disorder Cancer

*Due to claims lag, numbers largely reflect services provided in January and February

State Law Requires Waiver Changes

6 Source: 2018 Virginia Acts of Assembly Chapter 2

Work and Community Engagement

Premiums, Co-Payments, Health and Wellness Accounts

Housing and Employment Supports Benefit

7 Source: 2018 Virginia Acts of Assembly Chapter 2

Health & Wellness Program• Requirement for premiums and co-payments, health & wellness accounts

and healthy behavior incentives. • Applies to Medicaid enrollees with incomes between 100-138% FPL, who do

not meet an exemption. Exemptions are the same as in the TEEOP program.

Work/Community Engagement (TEEOP)• Requirement to participate in training, education, employment and other

community engagement opportunities for up to 80 hours per month in order to maintain Medicaid coverage.

• Applies to all “able-bodied adults” in the Medicaid program who do not meet an exemption (e.g., parents of dependent children, medically-frail, disabled).

Housing & Employment Supports for High-Risk Enrollees• A supportive housing and employment benefit for high-risk Medicaid

enrollees, including those with severe mental illness, substance use disorder, or other complex, chronic conditions.

Overview of the Virginia “Creating Opportunities for Medicaid Participants to Achieve Self-Sufficiency” (COMPASS) Waiver

Section 1115 Demonstration Waiver Components

COMPASS 1115 Waiver Process Overview

DMAS is currently negotiating the

COMPASS waiver features with the

federal government.

The federal government released the

COMPASS waiver for the federal

public comment period.

DMAS released the COMPASS

waiver for public notice. Over 1,800 public

comments were received.

DMAS submitted the COMPASS waiver to the

federal government.

September 20, 2018 –October 20, 2018

November 20, 2018 December 7, 2018 –January 6, 2019

January 6, 2019 –Present and Ongoing

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CMS Negotiation Status Update: Overview

Negotiations of 1115 Special Terms and Conditions (STCs) Current Phase

• DMAS is currently in active negotiations with CMS on the 1115 waiver STCs, which serve as the agreement between the federal government and the state on the policy for the waiver programs

Negotiations of Implementation and Evaluation Protocols Next Phase

• After the waiver approval letter is sent, DMAS and CMS will negotiate the implementation and evaluation protocols, which outline how the waiver programs will be operationalized, monitored and evaluated

Seeking Additional Federal Authorities for Key Components Additional Authorities

• This will include submission of multiple state plan amendments (SPAs) to secure authority for certain waiver components and advanced planning documents (APDs) to secure federal match for IT systems changes

DMAS has simultaneously been working with sister agencies to plan for operationalization of the waiver programs.

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CMS Negotiations Status Update: TEEOP Employment Supports

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EMPLOYMENT SUPPORT SERVICESEducational Services

• Subsidies for industry certification

Pre-Employment Services

• Job-related assessments• Person-centered employment planning• Job development and placement• Job carving (working with a client and employer to modify an

existing job description)• Benefits and education planning • Transportation to pre-employment services

Employment Sustaining Services

• Career advancement services • Negotiation • Job analysis • Job coaching • Benefits education and planning

As outlined in the waiver application, in order to ensure TEEOP enrollees have appropriate access to education, skill-building, and effective workforce services that will help them improve their success in the labor market and earn a living wage, DMAS is seeking federal

funding to include employment supports to address barriers to meaningful community engagement and employment.

• Asset development • Follow-along supports • Transportation to

employment support services

Overview of Changes Required for Virginia COMPASS Waiver

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New Business Processes and

Systems Changes for

TEEOP

o Develop new eligibility business processes for exemptions, automated reporting, suspensions of coverage and reenrollment

o Develop member compliance and reporting processeso Develop member assessment processes, including connecting individuals to serviceso Establish systems requirements, modify existing contracts, and implement new technology

serviceso Implement new systems and make systems changes, including changes to eligibility system

(VaCMS) to ensure interoperability across systems (including Workforce and Medicaid)

Stand Up Health & Wellness Program

o DMAS does not currently have Health & Wellness accounts or premiumso Develop new business processeso Create systems to operationalize premiums, accounts and copayments with

contractor/managed care organization supporto Connect new systems and processes to TEEOP processes and eligibility systems

Outreach,Training &

Stakeholder Engagement

o Extensive training of state and contractor staffo Outreach and education campaign to ensure enrollee, provider, advocate and other

stakeholder understanding of requirements and penalties

Bolster Workforce

Programs to Meet Need

o Estimated 1.3 to 5.2 million additional hours per month in community engagement activities needed to meet the need

o Build upon existing workforce programming o Seeking federal resources for additional supportive employment services

Lessons Learned from Other States

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• Caution against making systems changes prior to waiver approval by CMS. Negotiations with CMS can significantly impact business processes and systems requirements.

• Encourage significant outreach/training prior to implementation to mitigate loss of coverage due to lack of knowledge and understanding of the requirements and penalties.

• Where possible, phase in or pilot requirements and penalties so both the state and enrollee can learn and adapt prior to full implementation.

Lessons Learned for Implementation

• Currently, nine states have received federal approval to implement work/community engagement requirements (AR, AZ, IN, KY, MI, NH, OH, UT, WI).

• Four states (AR, KY, NH, IN) are in the implementation phase of the work/community engagement requirement.

• Two states have had work/community engagement requirement implementation blocked (KY) or paused (AR) by the March court ruling.

• One state (NH) has pending litigation.

Discussion of Implementation Timeline: Indiana

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Indiana HIP 1115 Waiver: Gateway to Work Program Overview• Indiana is taking a phased approach to its work/community engagement

requirement implementation.• Indiana had previously implemented Medicaid expansion and its

premiums/POWER accounts in 2015.

Feb. 2018

CMS approval of waiver

June 2017

Submit waiver to CMS

Jan. 2019

Go-live (phased approach:0-hour requirement)

July 2019

Phased-in hours requirements begin

Jan. 2020

Reporting and penalties for non-compliance begin

Virginia Proposed Implementation Timeline

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Virginia COMPASS Implementation:

• Unlike Indiana and other states, Virginia will be implementing three large-scale waiver components simultaneously.

• Virginia will be working on the operational design and planning for implementation of the waiver during negotiations with CMS.

2019 ANTICIPATED

CMS approval of waiver

Nov. 2018

Submit waiver to CMS

Demonstration Year 1

Build systems and go-live with requirements

Demonstration Year 2

Early in Demonstration Year 2, go-live with penalties for non-compliance

Agenda (Continued)

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Update on Medicaid Expansion and Section 1115 Waiver

Milliman Report and Update on DMAS Financial Reforms

Current Fiscal Year Budget Update Update on Hospital Provider Assessment

Milliman Report: Background

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• In February 2019, DMAS procured the services of Milliman, an actuarial and consulting firm, to conduct an independent, top-to-bottom review of Virginia’s Medicaid forecasting and rate-setting processes.

• Milliman conducted its review over a period of 60 days, which included:

Interviewing DMAS and external stakeholders;

Reviewing documentation and communication of current processes; and

Benchmarking against other states’ Medicaid forecasting and rate-setting processes (Arizona, Florida, Indiana, Ohio, and South Carolina) to share best practices.

• A final report with 10 recommendations was delivered to DMAS leadership on May 6, 2019.

Milliman Report: Review Highlights

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• Developing expertise of internal staff• Education for internal and external stakeholders

• Monitoring of forecast variances• Documentation of forecast process and assumptions

• Performing forecast updates more than once per year• Formalizing layers of internal review• Being proactive in external communications

Continue

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Milliman Report: Recommendations

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Forecast Process Areas Recommendations

Data Expand data used for forecast

Produce Forecast Update the forecast more frequently than once per year

Update forecast methodology

Develop detailed forecast documentation

Analysis of Results Build a robust review process into the forecast development timeline

Communication Improve collaboration and communication within DMAS

Restructure involvement of external stakeholders

Expand education for external stakeholders

Monitoring Broaden forecast monitoring

Proactively address changes to the budget language

New Forecast Process

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Forecast Process: DataFuture Planned Improvements to Automate and Manage Data

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• The Enterprise Data Warehouse System (EDWS) is under development to support DMAS’ strategy for managing data and forecasting.

The EDWS infrastructure will: Integrate disparate data sources (both internal and external) and be a central repository

of data for DMAS; Provide for agency data analytics across all data sources; Reduce extensive manual processes before and after the MES financial module is fully

operational.

• The Medicaid Enterprise System (MES) is currently under development, including key financial reporting modules to support forecasting.

The MES system will: Replace old technology that is costly to maintain, time-consuming to

upgrade, and lacks the latest security defenses; Allow for the integration of key services, such as Single Sign On

capability and data exchanges between modules; and Provide for robust analytics on members and services.

Forecast Process: Produce Forecast

• Policy and process documentation will be developed internally for all financial divisions.

• DMAS will gain efficiencies by consolidating eight fee-for-service forecast series.

Reduces the time necessary for data gathering, and decreases complexity for reporting.

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Forecast Process: Analysis of Results

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• DMAS is continually engaging in comprehensive and standardized multi-stakeholder analysis.

• Internal Financial Review Council (IFRC) Five meetings since January 31

• External Financial Review Council (EFRC) Inaugural meeting set for May 21

• Allocating additional resources and staff augmentation to support forecasting and analysis.

Forecast Process: Communication

• Building a culture of transparency New development of information-sharing

processes and expectations of transparency directed by Executive Leadership and advanced throughout the agency.

• Forecast Accuracy Reports are now posted online for the public to access.

• Expanding education for external stakeholders Rate Setting 101 – March 1, 2019.

Forecasting 101 – June 6, 2019.

• Hospital Payment Policy Advisory Council (HPPAC) meeting planned for May 2019.

Will focus on coverage assessment to support Medicaid Expansion.

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Snapshot of accuracy report. Now available at: https://www.dmas.virginia.gov/#/deidentifiedreports

Forecast Process: CommunicationRate Setting 101

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Forecast Process: MonitoringDashboards with quality metrics and financial benchmarks

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Sample “MOCK” dashboard only. Not actuals.

Forecast Process: Monitoring

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Enrollment

Sample “MOCK” dashboard only. Not actuals.

Current Financial Status

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SFY 19 Appropriation vs. Actuals(March 2019)

Appropriations

Planned Expenditures

Actual Expenditures

Budget Variances (March 2019)

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Major Forecast Category Appropriation Actual YTD % Spent % Variance

BASE Medicaid $10.7B $7.8B 73% (2%)

Medicaid Expansion $1.0B $295M 27% (22%)

FAMIS $213M $148M 69% (6%)

M-CHIP $187M $143M 76% 1%

Budget Variances Explained

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• Medicaid Expansion is reducing costs.

Caretaker adults are now financed at a higher match rate through Medicaid expansion.

Members who would have entered an “extended” Medicaid category, have been enrolled into Medicaid Expansion.

Budget Variances Explained

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• Fee-for-service expenditures for behavioral health have declined as expected following the rollout of Medallion 4.0.

• There has been a reduction in the number of capitation payments made in some CCC+ eligibility groups.

Partly due to expedited enrollment for CCC+ (reducing the time it takes for members to be enrolled), as well as the implementation of Medicaid expansion in January.

• Closure of Program of All-inclusive Care (PACE) for Seniors facility in Northern Virginia.

Update on Hospital Provider Assessments

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• Private acute hospitals are assessed to fund the non-Federal share of Medicaid Expansion as well as supplemental hospital payments.

• Net increase (benefit) to Hospitals: $2 gain for every $1 of assessment paid.

• DMAS estimates a total net increase of $495M in FY19 and $1.2B in FY20 to the private acute hospitals.

• Private acute hospitals will also receive $23M in DSH payments in FY19.

Update on Hospital Provider Assessments

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Forecasted Medicaid Hospital Provider Assessments & Payments

FY2019 FY2020 FY2021

Payment Rate Assessment $194,503,188 $420,349,538 $485,948,719

Gross Enhanced Rate Payments $463,474,562 $1,137,984,342 $1,634,563,096

Net increase to hospitals $268,971,374 $717,634,804 $1,148,614,377

FY2019 FY2020 FY2021

Coverage Assessment $87,293,314 $237,755,300 $276,979,694

Gross Hospital New Revenue $313,106,607 $749,037,250 $788,377,992

Net increase to hospitals $225,813,294 $511,281,950 $511,398,298

Total forecasted net increase to hospitals $494,784,668 $1,228,916,754 $1,660,012,675

Assessed Hospital DSH $23,008,615