Session 75OF, Medicaid Hot Topics

Moderator/Presenter: Sabrina H. Gibson, FSA, MAAA

Presenters:

Zachary C. Aters, ASA, MAAA Sabrina H. Gibson, FSA, MAAA

Mary K. Hegemann, FSA, MAAA Chris Priest

Michelle L. Raleigh, ASA, FCA, MAAA

SOA Antitrust Disclaimer SOA Presentation Disclaimer

2018 SOA Health MeetingMedicaid Hot Topics Session 75Tuesday, 6/26/2018, 11:00 am - 12:15 pm

Sabrina Gibson, FSA, MAAA, ModeratorChristopher PriestMary Hegemann, FSA, MAAAMichelle Raleigh, ASA, MAAAZachary Aters, ASA, MAAA

• Work Requirements and Other New 1115 Waiver Topics

• Integration of Pass-Throughs into Risk Rates• Mega Rule Implementation Changes• Medicaid Expansion Member Durational Costs• Social Determinants Paper• Other Medicaid Hot Topics

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Planned Topics

We will use polling during this session.To participate in the polls, please navigate your smart phone to:

https://health.cnf.ioand select our session:

Session 75 - Medicaid Hot Topics

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Polling

Panel Bios

4

• Vice President and Chief Medicaid Actuary for WellCareHealth Plans.

• Health care for 20+ years.• Medicaid for 12 years - mostly with a health plan but

also as a consulting actuary. • Experience with 26 Medicaid and CHIP programs in 16

states.• Active member of the American Academy of Actuaries

Medicaid workgroup and on the committee that developed the Actuarial Standard of Practice on Medicaid Managed Care Rate Setting – ASOP 49.

• Active with the Medicaid SOA committee as a presenter of current Medicaid topics at SOA meetings and webinars.

Sabrina Gibson, FSA, MAAA

• Principal at Wakely Consulting Group• Health care actuary for 20+ years, mostly in

consulting• Medicaid experience includes consulting for

Medicaid-focused MCO, association of Medicaid managed care plans, and certify Medicaid capitation rates

• Also consult for Medicare Advantage plans (especially dual-SNPs), ACA commercial lines of business, and non-profit organizations providing health care for homeless and indigent populations

Mary Hegemann, FSA, MAAA

• Vice President of Actuarial Services at Centene• Lead team of actuaries dedicated to Medicaid programs• 25 Medicaid health plans across the United States

• Focused career on Medicaid• 8 years with health plans• 17 years in consulting

• Co-authored the ASOP 49 on Medicaid Managed Care Rate Development

• Participate in various workgroups, co-author papers, and event speaker

Michelle Raleigh, ASA, MAAA

• Senior Actuary for Optumas Consulting• Health care for 19 years, including Commercial,

Medicare, and Medicaid• Medicaid focused for 11 years – Consulting• Recent programs include Oregon, Colorado,

Iowa, Nebraska, and Kansas• Active member of SOA, regularly presenting at

SOA meetings

Zachary Aters, ASA, MAAA

• Vice President, Medicaid Solutions at Centene• 25 Medicaid Health Plans across the United States

• Prior to coming to Centene was Michigan Medicaid Director and was elected to represent all Midwest Medicaid Directors on the board of the National Association of Medicaid Directors (NAMD)

• Secured multiple 1115 waivers and made reforms to the program in Michigan.

• Experience working for Governors of both political parties, working in Medicaid agencies in two states (e.g. IN and MI) and representing States in Washington DC.

Christopher Priest

32%

36%

0%

28%

4%

In what area do you work?

Medicaid - MCO

Medicaid - Consulting

Medicaid – State Employee

Health – Not Medicaid

Other

Work Requirements and Other New 1115 Waiver Topics

12

Work Requirements - Intro

• Per Kaiser Family Foundation as of 4/9/18:CMS has approved 1115 waivers in 3 states (KY, AR, and IN)

that include “work requirements” 7 other states have submitted proposals to CMS (AZ, KS, ME,

MS, NH, UT, and WI)

• These waivers require “work” as a condition of eligibilityBeneficiaries need to verify their participation in approved

activities (e.g., employment, job search, job training programs) for a certain number of hours per week Certain populations commonly exemptedAdministration complexities

13

https://www.kff.org/medicaid/issue-brief/which-states-have-approved-and-pending-section-1115-medicaid-waivers/?utm_source=web&utm_medium=trending&utm_campaign=waivers

41%

3%

50%

6%

0%

10%

20%

30%

40%

50%

60%

Caregivers Attending School Illness or Disability Other

What is the #1 reason that nonelderly non-SSI adult members are not working?

Work Requirements - Intro

16

Per Kaiser Family Foundation (KFF), this new requirement may only impact 7% of the relevant population

Work Requirements - Intro

17

Majority of public believes the main reason for imposing these work requirements is to reduce spending3

71%

41%

15%

3%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Membership will drop Healthier membersdisenroll

Members will developskills that will movethem out of poverty

Members will becomemore engaged in their

healthcare

No Impact

What kind of impact do you think the work requirements will have on the Medicaid population?

Indiana’s Healthy Indiana Plan (HIP)• HIP – 1115 Waiver (2008) Goal: test consumer-driven model to low-income

beneficiaries Population: Caretakers of TANF kids and Childless adults

up to 150% FPL POWER Account:“Savings Account” pays for first $1,500 claims (jointly

funded by state and member)• Member Premiums (contributions to POWER

account)• Limited rollovers help fund future year premiums• Non-payment of premium lead to disenrollment

20

Indiana’s HIP Program, cont.• HIP 2.0 - 1115 Waiver

(2015) Changes: All adults up to

138% FPL (including former TANF)POWER account

increased to $2,500Introduced

Basic/Plus Program distinction (see flowchart)

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Caretaker?

Yes: HIP State Plan

Paying premium?

Yes: Plus (additional benefits)

No: Basic (copays)

No: HIP Regular

Paying Premium?

No: Under 100% FPL?

Yes: HIP Basic (copays)

No: Lose Coverage

Yes: HIP Plus (additional benefits)

Indiana’s HIP Program, cont.• HIP - 1115 Waiver (2017) Changes:Work Requirement (next page)SUD Treatment expansion (ASAM criteria,

using IMDs)Changes in Open Enrollment Tobacco Surcharge (50% increase in

premium)Tiered Premium Structure More former TANF members (including

pregnant) moving into HIP

22

Indiana’s HIP Program, cont.Work RequirementsAll HIP eligible members, not otherwise meeting an Exemption, will be required to:1. Work average 20 hours per week over 8 months during the

calendar year; or2. Be enrolled in full-time or part-time Education; or3. Participate in 1 of 16 activities defined by the state (e.g. Job

Training, Volunteer work, MCE Employment Initiatives, etc.) for 20 hours per week for 8 of 12 months.

• Compliance: members assessed at the end of each calendar year to determine if they met requirements.

• Approaching as a social determinant of health• Phased in approach – no expected eligibility changes until

January 2020 when a look back at 2019 activity occurs.

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Indiana’s HIP Program, cont.Work Requirements

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Not Working due to …

Not Working Due to …

Not Working Due to Homelessness,

Recent Incarceration or SUD Treatment

4%

Working >= 20 hours a week*

38%

Not Working Due to School Attendance

4%

Not Working …

Indiana Work Status and Reason for Not WorkingAmong Non-SSI Nonelderly Medicaid Adults

* Includes 25% of members covered by SNAP and TANF and therefore already subject to the work requirements of those programs

Estimated to be96k members to be subject to the requirements

Indiana’s HIP 2.0 Program, cont.

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Member Engagement Basic Plus All

Enrollment mix 33% 67% 100%

Member Income less than 100% FPL (and therefore would maintain eligibility without paying premium)

100% 86%

Member Satisfaction Basic Plus All

Satisfaction with program 71% 86% 80%

Willing to pay more to participate 90% 80%

Would re-enroll again 93%

Members asked providers about the cost of care 1 in 4

Clinical Outcomes Basic Plus

Primary Care Visits 16% 31%

Preventive Care Visits 45% 64%

Drug Adherence 67% 84%

Missed Appointments 23% 18%

ER Utilization per Thousand 1,034 776

Kentucky ProgramDemonstration Goals Strengthen engagement in personal health care and

provide incentives for responsible decision making Requiring premiums will motivate beneficiaries to use

health services more efficiently Incentives to engage in healthy behaviors will result in

better health outcomes, lower overall costs, and improved socioeconomic conditions Community engagement requirements will help

beneficiaries obtain employment, transition to commercial health insurance, and achieve improved health outcomes

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Kentucky Program

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Medicaid Populations Not Included in Kentucky HEALTH

Medicaid Populations Included in Kentucky HEALTH

SSI AdultsNO CHANGE

Dual EligiblesNO CHANGE

SSI ChildrenNO CHANGE

Foster Care Children

NO CHANGE

Traditional Medicaid Parents and Caregivers

• Premiums or copays• No change in benefits

(Retain vision, dental, transportation)

• Community engagement required, unless primary caretaker of dependent

Medicaid Expansion Adults

• Premiums or copays• Alternative Benefit Plan • Vision and dental available through My Rewards Account• Community engagement required, unless primary caretaker

Pregnant Women & Children (Traditional

Medicaid and KCHIP) • No premiums • No change in benefits • Community engagement initiative not applicable

Medically Frail Adults and Former Foster

Children up to Age 26• No mandatory premiums or copayments• No change in benefits • Community engagement initiative not applicable

Grace periods

Re-entry if payment of past-due premiums within 6 months

Re-entry at 6 months with clean slate

6-month lockout at redetermination

Seasonal workers

Monthly entry of hours worked

Different options for <100% FPL and >100%

Rate Setting Considerations

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Morbidity

• Premium• Premium versus

Copay (risk adjustment)

• Work Requirement• Short duration (run-

on-the-bank and pent-up demand)

Other Fun Considerations

• Randomized Control Trial

• Outside payers• Risk mitigation

strategies

Phase-in Timing

• Medically Frail: enrollment, minimum length of enrollment

• RCT: closed block• Community

engagement: phase-in by geographic area

• Premium payments: delays and lockout periods

Medically Frail

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1 42 CFR 440.315(f)2 SSI program participants and Foster Care Children are excluded from Kentucky Health

Per regulations expanded in 2013, the medically frail program criteria must include, at a minimum1:

• Disabling mental disorders• Chronic substance abuse disorders• Serious and complex medical conditions• Physical, intellectual, or developmental disability that

impairs one of more activities of daily living (ADLs)• Disability determination (Social Security or state plan)• Supplemental Security Income (SSI) program

participants, disabled, and foster children2

Medically Frail Identification Process

The member enrolls in the MCO and is

assigned a COA of MAGI Adultor Parent and

Caregiver

At Enrollment

The member completes

the ‘Welcome to

Medicaid’ HRA

HRA returned; MCO reviews;

identifies member as potentially

Medically Frail; schedules

appointment with provider

Provider completes clinician

attestation; returns to the

MCO; MCO scores the attestation based on points

system

Total points lessthan threshold = not eligible

for MF

Total points more than threshold =

eligible for MF

Member remains in current COA

status

Member enrolled in Medically Frail

program; sent letter providing option to

opt-out

Through MCO Tool

MCO runs membership and claims

data through the MCO tool

MCO tool scores member using diagnosis

codes and other qualifying

claims criteria; returns

Medically Frail status

MCO tool identifies

member as automatic MF

MCO submits result to DMS; member enrolled

in MF program

Total points lessthan threshold = not eligible for

MF

Total points more than threshold =

eligible for MF

Member remains in

current COA status

Member enrolled in

Medically Frail program

MCO tool identifies

member as possible MF

MCO schedules appointment with

provider

Provider completes clinician

attestation; returns to the

MCO; MCO scores the attestation

based on points system

Medically Frail MCO Tool

Objectives

Meet CMS guidelines for defining Medically FrailAccurately identify Medically Frail membersSimple to understandMinimize gaming by any stakeholder

Inputs

Member eligibility fileEncounter claims data (medical and Rx)

SQL Code

FreeEditable

Outputs

Automatically qualifying membersPossibly qualifying members• Follow-up clinician

assessment required

Medically Frail Clinician Attestation

MCO applies the scoring algorithm, which includes scoring for different levels of severity, to determine each member’s eligibility

Clinicians also document non-claims information

Severity of mental health conditions Activities of daily living (ADLs) impairments

Accompanying instructions help clinicians list the member’s conditions

Clinician categorizes a member’s conditions

KY Flow Chart

The following page contains a flow chart of how the non-disabled adult members obtain or lose coverage in Kentucky under the new waiver.Red highlighted boxes are concerns about potentials for risk.

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Integrating Pass-Throughs in Risk Rates

37

Illinois• Current: State pays MCOs a monthly lump sum and MCOs

wire the lump sum to the Illinois Hospital Association• Future (7/1/18?):

• Legislated – not yet approved by CMS• $3B of pass-throughs added to a $9B program = $12B

• Add a portion to the hospital fee schedules – 18% for 1st 2 years, 36% in next 2 years, then ???

• Remainder is an “access” payment• Funded through a hospital tax• No requirement in MCO/State contract to make

“access” payment – MCO and hospitals must agree to it

38

IllinoisState pays MCO the

capitation rate

MCO calculates amount of “access” payment and pays the Illinois Hospital

Association

Illinois Hospital Association

distributes funds to the Hospitals

Hospitals pay the Hospital Tax

39

MCO has contracts with the IHA and

each Hospital allows for the

payment of the “access” payment.

Capitation Rates include an

identified PMPM in each rate cell for

the “access” payment.

Hospitals do not pay the tax until they receive the funds from the

MCOs.

This is where the process can break down

Missouri• Technically not a pass-through:

• Increases hospital payments to UPL level• Payment structure is approved by CMS

• 23% increase to the risk rates• Paid to hospitals as a PMPM amount • Each hospital receives a portion• The hospitals “portion” is pre-determined based

on a prior year’s utilization• Funded as any other Medicaid amount• Requirement in MCO/State contract to make

payment

40

MissouriState pays MCO the

capitation rate

MCO calculates amount of payment and pays the Hospital or the Missouri Hospital

Association

Missouri Hospital Association distributes funds to the Hospitals

that not are paid individually

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MCO has an agreement with

the MHA allows for the payment.

Capitation Rates include an

identified PMPM in each rate cell for

the payment.

Nebraska

• The University of Nebraska Medical Center (UNMC) providers are reimbursed at commercial fee levels.

• Since the MCOs contract at levels more commensurate with Medicaid reimbursement, a supplemental payment is required to be paid to UNMC by each MCO to make these providers whole.

• The State includes this supplemental payment as part of the capitation rates, which is then paid by the MCOs to UNMC.

42

NebraskaState pays MCO the

capitation rate

MCO calculates amount of payment and pays

UNMC Providers

UNMC Providers receive payment from

MCO

43

Capitation Rates include an

identified PMPM in each rate cell for

the payment.

NebraskaMethodology• Identify claims and services attributed to UNMC providers. • UNMC fee schedules are used to calculate the difference

between the UNMC fee schedule and the UNMC reimbursement inherent in the data.

• Difference is amount added into the rate development. • Per CMS regulations, pass-through payments cannot

increase in magnitude from the 7/5/16 value. To maintain consistency with this regulation, the UNMC fee schedule was reduced so the pass-through payment would remain smaller than the 7/5/16 value and the amount built into the previous rate cycle (7/1/17 – 12/31/17).

44

Michigan Directed Payments• For fiscal year 2018, Michigan made changes to their Hospital Rate

Adjustment (HRA) that ensure compliance with the Medicaid managed care regulations by converting this pass-through into a directed payment.

• Major changes include:• Payments will be directly tied to actual hospital claims, not cost reports. MI Medicaid

will review hospital claims submitted by health plans and provide the supplemental HRA payments to hospitals on a quarterly basis.

• The distribution of HRA payments has been weighted more towards outpatient claims, which will provide rural hospitals, who tend to provide more outpatient services, a greater share of HRA revenue.

• Hospitals have agreed to be taxed more to provide an additional $190.0 million through this new arrangement.

• These adjustments to the HRA were approved in October by the federal government. The new HRA structure has been implemented for fiscal year 2018.

45

Michigan Directed Payments, cont.

Plans submit inpatient and outpatient encounters to State on quarterly basis

State analyzes encounters and makes gross

adjustment to health plans based on prescribed

methodology in preprint

State directs plans to pay specific amount to specific

hospital based on those encounters

Plans make payments to hospitals based on state

direction

Rinse and Repeat every quarter

46

CMS Process to ApproveCMS will need to approve the new payment methodology, but the approval process can be quite different depending on a state’s approach. For example.

47

Fee Schedule Change Directed Payment

State obtains authority to increase fee schedule/change current payment (if necessary); State prepares state plan amendment utilizing existing state process (e.g. tribal notice).

State obtains authority to change payment (if necessary); state submits preprint to CMS central office (payment must be tied to utilization or value, and must advanced state’s managed care quality strategy)

State Plan Amendment changes proposed to CMS followed by CMS approval.

Review and approval by CMS (OACT and CMCS Quality teams) – questions back and forth between State and CMS prior to approval. Formal letter notifies the state of approval process

New fee schedule taken into account during rate setting; MCO Contract changes, if necessary.

New methodology is factored into rate setting going forward; MCO contract changes, if necessary

Pass-Through Considerations• Moving to the hospital fee-schedule creates

variable income for hospitals• Being embedded in risk rates means it is subject

to:• Withholds• Risk adjustment

• FFS programs are not constrained by the mega-rule

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11%

89%

Will the mega-rule requirements kill the hospital tax pass-throughs?

Yes

No

Mega Rule Impacts to Rate Setting

51

Selected Mega Rule Provisions by Effective Date

52

Full schedule - https://www.medicaid.gov/medicaid/managed-care/downloads/implementation-dates.pdf

• MH parity | LTSS contract requirements | Actuarial soundness | IMD exclusionAlready in effect

• New OP Rx rules | Additional rate dev. requirements | Pass through payments | MLR standards | New state oversight regs.

July 1, 2017

• Certify by rate cell | +/- 1.5% rate adj. w/o re-certifying | Network adequacy standards | Provider screen / re-enroll

July 1, 2018

• Quality ratings system (a la Medicare STARS program)May 2019

• CMS rate review for 85% MLR floorJuly 1, 2019

35%

65%

0%

10%

20%

30%

40%

50%

60%

70%

Agree Disagree

More oversight enhances the process of rate development and results in more accurate capitation rates.

Transparency

• Mega Rule introduced a new level of review with respect to Medicaid capitation rate submissions/approval

• Similar to Medicare rate review process• Substantiation is required for all actuarial assumptions• This level of review has facilitated more transparency

between Optumas/MCOs/State/CMS(OACT), resulting in a more rigorous/collaborative process

• Discuss examples of transparency

55

Minimum Loss Ratio (MLR) • States must monitor MLR on a regular basis• Actuaries are expected to consider historical MLRs when

developing capitation rates• Numerator: The numerator of an MCO’s MLR for a MLR

reporting year is the sum of the MCO’s incurred claims, expenditures for activities that improve health care quality, and fraud reduction

• Denominator: The denominator of an MCO’s MLR for a MLR reporting year must equal the adjusted premium revenue. The adjusted premium revenue is the MCO’s premium minus the MCO’s Federal, State, and local taxes and licensing and regulatory fees

• States are not required to implement rebates along with MLR

56

36%

64%

0%

10%

20%

30%

40%

50%

60%

70%

Agree Disagree

The Mega Rule requires MCO specific rates to be actuarially sound.

Misconceptions Actuarial Sound Rate Requirement• Misconception: Mega Rule requires actuary to

develop actuarial sound rates for each participating MCO commensurate with MCOs business model (Plan Specific Rates)

• Intent: Mega Rule requires actuary to develop actuarial sound rates for the program that are shown to be:

• Reasonable and attainable• Encourage access to care

59

53%

47%

46%

47%

48%

49%

50%

51%

52%

53%

54%

Agree Disagree

The Mega Rule allows states to adjust actuarially sound rates by 1.5% or less at their own discretion.

Misconceptions 1.5% rate adjustment without rate certification• Misconception: States have the autonomy to adjust

actuarially sound rates up or down by 1.5%• Intent: (Mitigate administrative burden) Medicaid

programs are constantly changing due to policy changes, changes in economy, or changes within the provider community. These changes may result in rates not aligning with risk of the program. States may adjust actuarial sound rates within the 1.5% variance without submitting an actuarial certification, but still must submit substantiation surrounding the cause of the rate adjustment to CMS/OACT

62

11%

89%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Agree Disagree

An 85% MLR requirement implies a non-medical load of 15% must be used within the rate development.

Misconceptions

85% MLR requirement• Misconception: States must align non-medical load

assumptions with MLR requirement of 85%, implying a 15% NML.

• Intent: Rates should be set such that there is not high probability of projection error resulting in MLRs that are unpredictable.

• MLR calculation is more complex than just taking traditional medical expenditures and dividing by revenue

65

94%

6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Agree Disagree

The certifying actuary can use less than 3-years of historical base data to develop capitation rates.

Misconceptions

Encounter Data• Misconception: States must use three years of

historical data as base data to develop capitation rates

• Intent: Ideally, three years of data is used as base data, however, there are unique situations that do not allow the actuary to comply. In these cases, the actuary should include substantiation related to the unique situation.

68

Medicaid Expansion Member Durational Costs

69

Medicaid Expansion Member Durational Results

• Avalere published a paper in January 2018• Analysis of how enrollment, utilization, and cost patterns

for newly eligible Medicaid Expansion enrollees change over time and whether spending patterns differed for earlier versus later expansion enrollees

• Used experience from three MCOs• Paper located here:

http://go.avalere.com/acton/attachment/12909/f-0517/1/-/-/-/-/Avalere%20Medicaid%20Expansion%20Analysis.pdf

70

Enrollment Composition by Age Group Over Time, First Half 2014 Enrollment Group

71

Average Per Member Per Month Costs for Medicaid Expansion Beneficiaries Who Enrolled in 2014, by Length of Enrollment

72

Percentage of Healthcare Costs by Type over Time, First Half 2014 Enrollment Group

73

Study Conclusions• Across plans and states, the expansion population

experienced high disenrollment rates – substantial churn in this population.

• Even after adjusting for age and gender, claims costs increased steadily over time, suggesting that expansion enrollees have complex and/or chronic conditions.

• For some enrollment cohorts, average claims costs decreased modestly in the second half of the first year of enrollment, suggesting some initial pent-up demand for services, though claims costs increased steadily from that point forward.

• Across enrollment groups, per member per month spending on prescription drugs increased with enrollment duration.

• Among enrollees who remained enrolled the longest, inpatient claims initially made up the largest share of claims costs, but were surpassed by prescription drug claims by month 8 of enrollment, on average.

74

Social Determinants

75

Social Determinants of Health per Healthy People 2020

76

https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-health

Social Determinants & Rate Development• The Commonwealth Fund’s report “Enabling

Sustainable Investment in Social Interventions: A Review of Medicaid Managed Care Rate-Setting Tools” was issued in JanuarySummary of a literature review and interviews with state

officials, health plan leaders, actuarial experts, and other stakeholdersDiscussed ways rates could be developed so MCOs are

incentivized, required and/or have the resources to address social issues6 strategies states can employ to support MCOs in

addressing social issues

77

http://www.commonwealthfund.org/publications/fund-reports/2018/jan/social-inteventions-medicaid-managed-care-rate-setting

Social Determinants & Rate Development, cont.

Modify state plan to include social benefits

Explore flexibility of 1115 waivers

Require value-based payment and other delivery system reforms

Include incentives and/or withholds to drive coverage

Explore whether social benefits can count as quality improvement initiatives

Reflect/reward plans with higher rates to prevent premium slide

78

Other Quick Topics

79

• Medically Frail - . https://www.wakely.com/blog/identifying-medically-frail-individuals-kentucky-medicaid-case-study

• Medicaid Expansion Study -http://go.avalere.com/acton/attachment/12909/f-0517/1/-/-/-/-/Avalere%20Medicaid%20Expansion%20Analysis.pdf

• Social Determinants -https://www.healthypeople.gov/2020/topics-objectives/topic/social-determinants-of-healthhttp://www.commonwealthfund.org/publications/fund-reports/2018/jan/social-inteventions-medicaid-managed-care-rate-setting

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