Health reform implementation: Challenges and tools for states

State Coverage Initiatives Program

August 4, 2010

Stan Dorn

The Urban Institute

Sdorn@urban.org 202.261.5561

Overview

Selected highlights of the Patient Protection and Affordable Care Act (PPACA)

The exchange Using PPACA to achieve state policy

goalsNote: This afternoon, we’ll discuss the goal of maximizing coverage and access to care

Preliminary comment: administrative resources

Serious capacity limitations

OptionsFoundationsFederal grants

Key: focus

More preliminaries This is the start of a

conversation Much is outside this

discussion, including LTC, workforce, and program integrity

Focus is on state choices, not compliance with federal law

Part I

Selected PPACA Highlights1. The world in 20142. PPACA’s theory of cost-control3. Close-ups on selected topics

What 2014 will look like

Medicaid/CHIP New Medicaid coverage up to 138% FPL (MAGI) Childless adults receive 90-100% federal match MOE

o Adults, ends 1/14o Children, through 2019—but no CHIP allocations after FY 15

The exchange Run by the state or HHS Offers plans to small groups and individuals Tax credits and other subsidies for non-Medicaid eligibles

without access to employer-sponsored coverage (ESI) up to 400% FPL

Shared responsibility Individual mandate Possible penalties for companies with > 50 workers not offering

ESI Increased Medicare payroll taxes for households with incomes

above $250,000 ($200,000 for single tax filers) Insurance reforms

Theories of cost control

Traditional argument From the right, demand-side management From the left, supply-side management

Common assumption: health care is a fixed widget

Third way: what if we change the widget? Intuition: we’re paying for things we don’t

needo The incentives are wrong

Examples of success: Geisinger, Mayo

But how do we move from

TO

Close-up #1: Center for Medicare and Medicaid Innovation (CMI)

$10 billion appropriated through 2019 Authority to test and expand, starting in

2011 Any promising model, including

PCMHPatient decision-supportFully integrating Medicare/MedicaidCare coordination for chronically ill

Close-up #2: Medicaid and the exchange

A common form and eligibility determination system for Medicaid, CHIP, and subsidies in the exchange “No wrong door” “Behind-the-scenes” processing Data exchange system Medicaid can determine all eligibility, if

o The exchange wants to contract with Medicaid and o The state Medicaid program meets federal standards

HHS determines eligibility for subsidies in the exchange Year-end reconciliation if income changes

MAGI is the same for all subsidies, but: Time frames differ

Part II

The exchange

Should the state run the exchange?

Advantages Powerful tool for accomplishing state policy goals

o Qualified plans can be excluded from exchange Potential for better coordination between Medicaid and

subsidies in the Exchange Disadvantages

New institutions Hard tasks Federal standards Exchanges self-financing starting 1/1/15

o But if surcharges can be included in premiums, paid by federal tax credits

General approaches to exchange

1. Market organizer “Craig’s list for health insurance”

2. Selective contractor Only plans that meet state criteria can join

3. Active purchaser State negotiates with plans to obtain

concessions, in exchange for access to covered lives in the exchange

Part III

Using PPACA to achieve state policy goals1. Making health insurance more like a classic market2. Holding insurers accountable3. Reforming health care to slow cost growth and improve

quality4. Reducing state budget deficits

Making health insurance more like a classic market

Why isn’t health insurance a smoothly functioning market?

Absence of consumer information Plans Providers

Purchasers do not experience the consequences of their choices Employers decide, but employees feel the effects Insured consumers pay only their cost-sharing

amounts

State information strategies

Make information usable to consumersPut in one placePresent in easy-to-understand format. Very

challenging. Very important. Build on HHS methodological progress Fill information gaps Multi-payor strategies

PPACA information reforms

General quality and efficiency measures Opportunity for states to piggy-back on HHS efforts,

includingo Specific measureso Strategies to tack hard methodological issues (like risk-

adjusting outcome data) Medicare provider data

Quality and efficiency measures for hospitals and physicians. “Hospital compare” and “Physician compare” websites.

Other hospital data – readmission rates, standard charges

Health plan information – lots!

Filling information gaps

Plan-specific consumer out-of-pocket (OOP) cost-sharing amountsNH

Physician charges Condition-specific costs and outcomes

Risk-adjusted Medical Reimbursement Data Centers

Multi-payor information strategies Why?

Powerful effects Easier for providers Performance with low-income consumers can affect private payments

Why not? Herding tigers Differences between beneficiary populations

What? Medicare calls the tune—OR Medicare dances to the state’s tune – CMI Either way, All-Payor Data Base

How? Old news: public employee coverage, Medicaid, private insurance

mandates, jawboning large private employers New tools

o Requirements for plans in exchangeo CMS Center for Innovation

The exchange as a consumer-driven market Consumer chooses, not employer

Limit: employer picks AV Consumer pays marginal cost increases

Consumer balances cost vs. product features Considerable plan variety

Multiple AV levels Within AV, multiple benefit designs, room for

innovation Limits on competing by avoiding risk Result: plans seek market share by giving

consumers what they want at a cost they can afford

Making the exchange a consumer-driven market: plans

Market-organizer approach maximizes plan participation Empirical issue: limits on consumer capacity for

information processing Middle-ground strategies

o Some plans in exchange, others outsideo All plans in exchange, some are “recommended”

Increase plan variety All AV levels Within AV levels, varied benefit design Encourage existing plans to fill gaps

o E.g., more limited provider networks Encourage new market entrants

Making the exchange a consumer-driven market: consumers

Consumer participation Use agents and brokers Maximize firm eligibility

o Contributions from multiple employers?o Work with firms to design effective procedures

Outreach, public education Consumer information

Particular facts o E.g., formularies, providers accepting new patients

Condition-specific costs and results Private information providers Key: easily understandable, “apples-to-apples” presentation

Holding insurers accountable

New legal duties on insurers Federal requirements

Key concept: no discrimination based on health status or gender

Many other requirements o Medical loss ratioo Appealso Etc.

Variationso Most important: grandfathered vs. other plans

States can add to federal requirements Higher medical loss ratio Less premium variation based on age Limits on exchange plans

State options that go beyond standard-setting

Accountability mechanisms State-based public plan to compete with

private insurers in the exchange

Data to detect violations

Past data uses: year-end audits Examples of new data uses

High rates of denials of certain claims may show failure to cover essential benefits

High rates of disenrollment among consumers with health problems may show discrimination

Few claims from certain geographic areas may show gaps in provider networks

State can supplement federal data requirements Focus data requests to make them usable Make redacted data publicly available for use by

advocacy groups, reporters, researchers, purchasers

Other accountability mechanisms

Access to the exchange as an incentive for exemplary plan performance“Selective contracting agent” or “active

purchaser” role False Claims Act Health consumer assistance programs Health plan appeals

Administrative resources

More dollars Through interagency agreement, insurance

departments can certify plans as qualified to be offered in exchange

o Access to the exchange’s administrative funding Federal grants to build rate review capacity False Claims Act recoveries

Insurance regulators may be able to offload some responsibilities Consumer assistance programs Exchange

Public plan Being pursued in CT – “SustiNet” Health insurance involves high barriers to market entry Public plan can surmount by using existing populations as members

State employees and retireeso Separate risk pool

Medicaid/CHIP No reduction in benefits for these populations

Incorporate state-of-the-art delivery system reforms Offer in the exchange, with standard commercial benefits

Competition Can galvanize spread of successful delivery system reforms to other

payors Must be state-licensed

Can change state licensure laws

Reforming health care to slow cost growth and improve quality

1. Reimbursement2. Health care delivery

3. Prevention and wellness

Reimbursement – general concept

We reward the wrong things What if we:

Paid more for high-value performance?Penalized dangerously poor performance?Bundled payments for hospital procedures?Created Accountable Care Organizations that

would share in savings?Shifted from fee-for-service to capitated or

salary-based payments?

Medicaid

Demonstrations 5 states, global fees to large safety net hospitals or

networks, starting FY 10 Pediatric ACOs, starting FY 12 8 states, bundling demos, starting CY 12

Focus Medicare demonstrations on duals Community-Based Care Transitions Program, starting

CY 11 ($500 million) Independence at Home, starting FY 10 ($30 million)

Medicare payment reforms

Hospitals Financial penalties, high rates of preventable readmission, FY

12o Help for poor performers

Value-based purchasing, FY 13 Bundling demo, CY 13 Financial penalties, hospital-acquired conditions, FY 15

Physicians ACOs, CY 12 Value-based modifier, phased-in CY 15-16

o Preceded by confidential feedback, including resource use Demo: patient incentives to pick high-value physicians

Building on Medicare changes

Old tools Public employee coverage Medicaid Private insurance mandates Jawboning large private employers

New tools Exchange participation CMI: apply state policy changes to Medicare

But is it a good idea? ACOs – state intervention may be needed to prevent

high prices P4P – questions about desirability

Delivery system reforms

General idea: care is fragmented, disorganized, non-accountable

States can implement multi-payer initiatives with almost any reformE.g., home-based intervention to prevent

rehospitalization of high-risk patients All-payer payment systems

Patient-Centered Medical Homes

Concept Care coordination Patient education 24-7 access Locus for accountability and patient contact

State strategies, beyond usual multi-payor tools Medicaid option Community health teams, HIT, training for providers

o Either appropriations or CMI Qualified plans in exchange

Comparative effectiveness research

General concept PPACA

Patient-Centered Outcomes Research Institute May not “include mandates”

State implementation Pay for the lowest-cost, clinically equivalent service

o How? Opportunity for provider to make exceptions, with appeals process Consumers can pay for more costly services

o Who? Public employee coverage Permission for private insurers

HIT decision support, recording reasons for exceptions

State options for prevention and wellness

Community transformation grants $100 million for Medicaid incentives to

participate in evidence-based programs aimed at obesity, diabetes, smoking, etc., CY 11

Medicaid option for adult preventive care, CY 13 10-state demonstration of wellness programs in

individual market 30% premium discount

Numerous grants States can buy adult vaccine at CDC rates New federal prevention fund

Reducing state budget deficits1. Public employee coverage

2. Shifting costs from states and localities to the federal government

3. Slowing Medicaid cost growth

Public employee coverage

General delivery system reforms Focus on chronic illness, employees and retirees Potential for highly targeted efforts:

o Pre-diabeticso Home-based prevention of rehospitalization o PCMH, supported by HIT

Federal reinsurance Now available

Cutting cost for localities can lower pressure for states to provide local aid

Medicaid maximization Concept: services now provided to adults, using

state or local money, can receive federal Medicaid dollars Now: standard match rates 2014: 100% match, dropping to 90%

Candidates Payments for uncompensated care

o Useful adjunct: hospital-based presumptive eligibility Mental health

o Useful adjunct: demo for Medicaid payment of IMD GA-type health coverage Social services to parents

Medicaid minimization

Concept: starting in CY 14, shift optional Medicaid-eligible adults above 138% FPL into federally-subsidized coverage

Easier to do if implement Basic Health Program, with Medicaid-like coverage up to 200% FPL Federal dollars > full pmpm Advantages in terms of affordability and continuity Trade-off: reimbursement rates

o But can use extra federal money to raise reimbursement

Pregnant women – an example

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Current law Episodic

o Covered after incur share of costo Must spend down for each period

1 to 6 months Important pathway to long-term care

Are tax credits available? PPACA: If eligible for Medicaid or Medicare, no tax

credits What happens before spend-down has been met?

“Medicaid ineligible,” so qualified for tax credits?

Suppose IRS says tax credits are available before spend-down is met

States can encourage medically needy to shift to exchange or BHP Consumers may be better off: ongoing, rather than episodic

coverageo Depends on premium and OOP costs

States better off: no Medicaid costs Long-term care still available

Plans in exchange and BHP won’t cover much If need LTC, meet spend-down by OOP payment for uncovered

services Eventually qualify for long-term care – but State saves money, because coverage in exchange or BHP

delays start of spend-down

Slow cost-growth within Medicaid

Delivery system reforms, prevention, etc. Integrated dollars and services for dual eligibles

Rationale New CMS Coordinated Health Care Office CMI: authority to let states control Medicare dollars in

integrated care systems for duals Very fragile population, need for great care

o Start with small geographic area, tune up, then scale up SNPs: boost in Medicare rate if full integration

o State can guarantee savings – BUTo Serious risks

Conclusion

Extraordinary opportunities to make progress

Extraordinary effort will be required to make the most of these opportunities