Title: Back to the Future Where is Medicaid going and what does it mean for the Community Behavioral Health
1Back 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
- (206) 613-3339
2Agenda
- 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
3Overview
- 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.
4Do 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
5Do 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
6Chapter 1 Background A Brief History
7The 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
8The 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)
9Managed 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
10What 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).
11Medicaid 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
12Reimbursement Methods
Source SAMHSAs State Profiles, 1999, on Public
Sector Managed Behavioral Health Care
13BBA 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
14Chapter 2 The Balanced Budget Act of 1997s New
Administrative Rules
15Pre-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
16Pre-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.
17PIHPs, 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
18State 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.
19EQR 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?
20EQR 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.
21EQR 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?
22Chapter 3 Actuarial Soundness under the Balanced
Budget Act of 1997
23Pre-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.
24Final 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.
25Actuarially 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)
26Actuarially 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.
27Concern 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.
28FFS to Case Rates Example (actual data)
29Concern 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.
30Cost per Hour Example (actual data)
31Back 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.
32Actuarial 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)
33Questions, Comments, Feedback?
34Dale 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.