CMS’ dual eligible demo savings sources uncertain

May, 14 2013

By: Anthony Brino | Healthcare Payer News

The Centers for Medicare & Medicaid Services (CMS) is looking to more than a dozen dual eligible demonstrations to fulfill the quality improvement and cost saving aims of the Affordable Care Act, although in the five demonstrations approved so far, the exact sources of projected savings remain largely unclear, according to the Kaiser Family Foundation.

CMS has finalized memoranda of understanding with California, Illinois, Massachusetts and Ohio to test a capitated payment model for Medicare-Medicaid beneficiaries, as well as an MOU with Washington State to test a managed fee-for-service model.

Washington is also proposing to test a capitated payment model, which, along with proposals from 16 other states, is pending CMS approval. The agency plans to limit national enrollment in the three year demonstrations to 2 million patients — out of some 9 million dual eligibles — and so far the five state proposals approved include 843,000, about half of them in California and 200,000 in greater Los Angeles alone.

[See also: Q&A: Primary care models for dual eligibles]

While the federal government and the states are expecting cost-savings from the demonstrations, in addition to better care and less bureaucratic hurdles for patients, a Kaiser Family Foundation issue brief notes that the five MOUs don’t explain how the expected cost savings will be achieved, but largely assume savings from community and home-based care.

Illinois, which has one of the highest rates of potentially avoidable hospital admissions for dual eligible patients nationally and one of the highest proportions of spending on institutional services, is expected to yield a one percent savings in the first year of its demonstration, for about 135,800 patients participating, followed by three percent and five percent savings in years two and three.

The MOUs for Massachusetts and Ohio are expecting savings of one percent, two percent and three percent in years one, two and three. California, which will have about 456,000 patients participating, is expecting to see minimum savings of one percent, two percent and four percent over three years, and maximum savings of 1.5 percent, 3.5 percent and 5.5 percent — the highest in the approved demonstrations, Kaiser’s brief notes.

Washington, meanwhile, will test CMS’s managed fee-for-service model, and any savings will be determined retrospectively.

The demonstrations are focusing on slightly different patient populations. Massachusetts is targeting nonelderly patients with disabilities, Washington, high risk and high cost patients, and California, Illinois and Ohio, elderly and nonelderly in select regions.

Massachusetts is requiring participating health plans to contract with community-based organizations to provide independent living and long-term services and support coordinators. Ohio is requiring health plans to contract with Area Agencies on Aging for home and community-based services for enrollees over age 60.

California is requiring plans to establish MOUs with county behavioral health agencies for specialty mental health services and with county social services agencies to coordinate in home support. Washington’s demonstration will use home care coordination organizations to manage services among existing Medicare and Medicaid providers.

Testing the capitated financial alignment model in California, Illinois, Massachusetts and Ohio, health plans will receive capitated payments from CMS for Medicare services and the state for Medicaid services, with the baseline capitation for Medicare Parts A and B services determined through a blend of the Medicare Advantage benchmarks and the Medicare fee-for-service standardized county rates, weighted by whether patients expected to transition into the demonstration are enrolled in Medicare Advantage or traditional Medicare in the prior year.

Baseline capitation payments for Medicare prescription drug services will be based on the national average monthly bid amount, the average projected low-income cost sharing subsidy and the average projected federal reinsurance amounts. In Illinois and Massachusetts, baseline Medicaid capitation payments will be based on historic state spending, and in California and Ohio Medicaid payments will be based on managed care waiver capitation rates.

As the Kaiser Family Foundation notes, the projected savings from the demonstrations are assumed to come from increased care coordination and the use of home and community-based services, with decreases in the use of institutional settings, emergency room visits and avoidable hospitalizations. Those savings will be deducted up-front from the Medicare and Medicaid contributions to health plans in the capitated model and savings will be determined retrospectively in Washington’s managed FFS model.

The specific details of those savings aren’t specified in the three-way contracts between CMS, the state and the insurers, and still remain to be seen, Kaiser noted. But CMS is preparing to evaluate the demonstrations as a whole and on more granular levels.

The agency has contracted with RTI international, which will visit care sites, study changes in quality, healthcare utilization and costs, and calculate attributable savings, which are set to be reported quarterly after the demonstrations begin later this year and next.

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W.H. won’t ding Medicaid expansion holdouts

By: Jason Millman
May 14, 2013 05:09 AM EDT
The Obama administration has proposed delaying a potentially painful decision on whether to penalize states that refuse to expand Medicaid coverage for low-income populations under Obamacare.

The national health care law calls for a gradual reduction in special federal payments — known as Disproportionate Share Hospital or DSH payments — to hospitals that take care of large numbers of uninsured patients. The idea of reducing the DSH payments, which totaled $11.3 billion in 2011, was tied to the fact that the health law’s coverage expansion would reduce the burden on hospitals. If more people get covered, the hospitals should have to provide less uncompensated care.

But last year’s Supreme Court decision on the health law left it to states to decide whether they want to expand their Medicaid programs, leaving significant doubt about how many people will gain coverage in 2014, when DSH cuts are first scheduled to take effect. The White House in its budget proposed delaying the cuts for a year to get a better picture of how Medicaid expansion is unfolding in the states. But for now, the cuts are going ahead.

But Obama administration health officials on Monday proposed ignoring states’ decisions to expand Medicaid over the next two years when calculating the DSH reductions. That means states won’t face a financial penalty for refusing the Medicaid expansion, though they’d still forgo billions in federal Medicaid dollars to cover some of their poorest residents.

Hospitals, particularly in the fiercest anti-Obamacare states, have been concerned about how the administration would put the DSH cuts into effect as about half of the states haven’t yet committed to expanding Medicaid in 2014. The cuts have also drawn scrutiny from Democratic and Republican lawmakers over the past few months, with the health law’s coverage expansion drawing closer.

As some hesitant states continue weighing whether to expand Medicaid, stakeholders said the administration’s proposal wouldn’t hurt its goal of expanded coverage.

“[T]his proposed rule will not discourage expansion, nor will it penalize hospitals in those states that have yet to make a decision,” the American Hospital Association said in a statement. “We also believe limiting the proposed reductions to two years opens the door for coverage expansions to be more fully realized.”

Kip Piper, a former adviser to the Centers for Medicare & Medicaid Services and former Wisconsin Medicaid director, predicted the proposed rule wouldn’t change states’ calculus of whether to expand Medicaid.

“I don’t think it necessarily pushes states on the fence in one direction or another,” Piper said. “It just validates what everyone was expecting.”

The president’s health law doesn’t mandate an across-the-board cut to DSH payments, which starts at $500 million in 2014 and ultimately adds up to $18.1 billion through 2020. Instead, it requires the HHS secretary to come up with a formula that levies the sharpest DSH reductions on states with the lowest levels of uncompensated care.

Piper pointed out the difficulty of gaming out the DSH cuts before the full impact of the coverage expansion is known.

“The problem with the [Affordable Care Act] is it’s making these cuts so early into the mix, when we really don’t know how effective the exchanges will be, what is the effect of all these other changes that the ACA makes to the insurance marketplace,” he said.

An official at the Washington trade group representing safety-net hospitals praised the Obama administration for wanting to take the time to analyze the first couple of years of the health law’s coverage expansion.

“Our first reaction is that [CMS] is being very cautious in how that Supreme Court decision might impact the effects of the DSH cut,” said Beth Feldpush, vice president for advocacy and policy at the National Association of Public Hospitals and Health Systems, adding that the group had been “extremely concerned” about the level of DSH cuts, even before the Supreme Court decision added further uncertainty.

A CMS spokeswoman pointed out that the proposed policy covers the first two years of DSH cuts as the agency gathers data about initial take-up of the Medicaid expansion.

“State decisions to extend Medicaid coverage will impact many of the variables used to create the reduction methodology, including the amount of uncompensated care and the percentage of uninsured individuals within states,” the CMS spokeswoman wrote. “The DSH reduction formula, we anticipate, should account for whether a state takes advantage of the 100 percent federal funding for the Medicaid expansion available for three years beginning in 2014, and never less than 90 percent after that.”

But the administration’s proposal drew criticism from Rep. Bill Cassidy (R-La.), whose state has forcefully rejected the Medicaid expansion. Cassidy said the non-expansion states will still take a funding hit from DSH cuts next year, just like everybody else — but they won’t be getting the new Medicaid dollars.

“This decision will harm vulnerable patients in those states by imposing a net decrease of federal dollars for indigent care while providing a net increase to other states via the Medicaid expansion,” Cassidy said in an emailed statement. “As much as the Obama administration has tried to sell the expansion as a ‘no-brainer’ for states, according to the governors this is not the case. States need time to figure out what is best for their citizens.”



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U.S. proposes rule on Medicaid payment cuts for hospitals

Mon, May 13 2013

(Reuters) – The U.S. government on Monday issued a proposed rule for cutting payments to hospitals that treat a disproportionate share of the poor, including a $500 million reduction in fiscal 2014, as part of President Barack Obama’s healthcare reform law.

The Patient Protection and Affordable Care Act mandates annual reductions in Medicaid payments to hospitals through fiscal 2020 in exchange for increased insurance coverage options that are expected to reduce levels of uncompensated care. The payment cuts increase each year.

Analysts said the size of the reductions over the next three years was manageable for U.S. for-profit hospital companies and noted the rule does not penalize states that have opted out of an expansion of the Medicaid program to cover more low-income Americans.

“They left the door open for states that have not agreed to Medicaid expansion yet without penalizing them for it,” said Jefferies analyst Brian Tanquilut.

However, the trade group representing public hospitals that primarily care for low-income patients urged that the cuts be delayed until the impact of Medicaid expansion on the uninsured becomes clearer.

“The Affordable Care Act’s disproportionate share hospital reductions are neither justified nor sustainable,” the National Association of Public Hospitals and Health Systems said in a statement.

Monday’s proposed rule was issued by the Centers for Medicare and Medicaid Services, the federal agency that administers Medicare, Medicaid and the State Children’s Health Insurance Program.

The expansion of Medicaid under the reform law has been accepted by governors in about half of the 50 U.S. states.

CMS said it would seek comments from the public on the rule’s provisions through July 12. Once finalized, the rule would take effect on October 1, unless Congress enacts the president’s budget proposal to begin Medicaid reductions in fiscal 2015 instead of 2014, CMS said.

(Reporting by Susan Kelly in Chicago; editing by Matthew Lewis)

Health law lets young people stay on a parent’s plan or buy their own insurance

Young adults can stay on their parents’ health insurance until age 26.

By Michelle Andrews, Published: May 13 | The Washington Post


More than 3 million young people have gained health insurance since the Affordable Care Act became law three years ago, allowing young adults to stay on their parents’ health insurance until age 26.Starting next year, young adults will have more options for health insurance. But despite the expanded choices, some may continue to face problems commonly associated with their age group: coverage for mental health issues, substance abuse and maternity care.

A recent study illustrated the extent to which young people may previously have had difficulty obtaining care. It found that young adults who enrolled in their parents’ plan after the health law passed were more likely to have claims for maternity, mental health and substance abuse services than adult children who were already covered by their parents’ plans. Experts note that adult children who joined their parents’ plans may have had unmet treatment needs before they had the option to join Mom and Dad’s plan. Individual health plans they might have applied for typically refuse to cover people with preexisting conditions. They also generally don’t cover maternity care.

The study, published by the Employee Benefit Research Institute, examined the 2011 claims of one large employer that covered more than 200,000 workers and their family members. Before the health law provision went into effect, unmarried student dependents could remain on the worker’s coverage until age 23, but most non-students had to find other insurance after they turned 19.The EBRI study found that nearly 700 young adults enrolled in their parents’ plan after the health law was passed. The average health-care spending for those adult children was $2,866 in 2011, 15 percent higher than spending by dependents who were already on their parents’ plan. This newly enrolled group was also more likely to have costs related to pregnancy, mental health and substance abuse than their peers.

Next year, health plans will no longer be able to turn people down because they have preexisting medical conditions. This will free young people to shop around for individual coverage on state-based exchanges or the private market if they don’t want to stay on their folks’ plan. All non-grandfathered individual and small-group plans will have to cover 10 “essential health benefits,” including maternity and newborn care and mental health and substance abuse services.

Despite such requirements, some coverage isn’t assured. For example, employers in the large-group market don’t have to cover the essential health benefits. Young women enrolled in such plans might find themselves without maternity coverage if they become pregnant. The Pregnancy Discrimination Act of 1978 requires most employers who provide insurance to cover maternity care for spouses, but they’re not obliged to do the same for dependent children, and many don’t do so.

Medicaid may be an option for some of these women. The joint state-federal health program for low-income people generally provides coverage for pregnant women with incomes up to 185 percent of the federal poverty level. By counting a pregnant woman as a household of two, that ceiling is $28,693 in 2013.

If she meets income requirements, the Medicaid program can also “wrap around” a young woman’s parents’ policy and provide maternity coverage her parents’ plan lacks, says Karen Davenport, director of health policy at the National Women’s Law Center. “It’s not necessarily a seamless, easy thing to do,” says Davenport, “but it would cover the gaps.”

Potential gaps in mental health and substance abuse coverage under the health law are addressed to a large degree by the Mental Health Parity and Addiction Equity Act of 2008, experts agree. The law requires employers with more than 50 workers to ensure that patient costs and coverage for mental health and substance abuse services are equivalent to those of other covered medical services. Providers are awaiting final federal regulation on implementation of that law. But there’s a catch: Many mental health counselors and addiction specialists who provide outpatient services don’t participate in any health insurance plans. So even though a health plan may offer coverage, some people must pay out of pocket for their care.

This column is produced through a collaboration between The Post and Kaiser Health News. KHN, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health-care-policy organization that is not affiliated with Kaiser Permanente. E-mail:

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