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Health & Human Services

PREPARED FOR

Vertical Report

May 2016

© 2016 e.Republic

Introduction Vertical Spend

State and Local HHS Spend

Budget Trends

Top HHS IT Budgets in the States

HHS is second only to education for public expenditure. Growth is

forecasted to continue.

According to the National Association of State Budget Officers (NASBO) the

total state HHS market in 2016 is forecasted to be $609B, approximately

one-third of state budgets.

The Center for Digital Government estimates that in 2016 the IT spend in

HHS will be $25.9B.

This represents around 25% of the total state and local government IT

spend.

Vertical Spend in HHS

© 2016 e.Republic

SOURCE: National Association of State Budget Officers, “State Expenditure Report (Fiscal 2013-2015 Data),” http://www.nasbo.org/publications-data/state-expenditure-report

State and local HHS spending is

expected to grow by 5.2% in 2016,

6.5% in 2017 and an additional 5.7%

in 2018.

Total state and local HHS spending

levels are projected to rise from $589B

in 2016 to an estimated $662B in

2018.

© 2016 e.Republic

State and Local HHS Spend

Spending increases are projected to reach a peak in 2017.

SOURCE: Center for Medicare and Medicaid Services, 2015, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nationalhealthaccountsprojected.html

4.5%

5.2%

6.5%

5.7%

2015 2016 2017 2018

Rate of Spending Growth

Health, rather than human services, comprises most of state spending.

31 states enacted increases in spending for Medicaid, for a net total increase

of $9.2B.

K12 education will be the only vertical to surpass health in growth, seeing

net increases of $14.7B.

Public assistance (humans services) increases for FY2016 are forecasted to

be just $0.02B.

Medicaid and education combined will comprise the majority of state general

fund spending.

FY 2016 State Budget Trends

© 2016 e.Republic

SOURCE: National Association of State Budget Officers, Fall 2015, “Fiscal Survey of States,” http://www.nasbo.org/publications-data/state-expenditure-report

Top State HHS Agency IT Budgets

© 2016 e.Republic

State State Agency Estimated IT Budget 2015

California Department of Health Care Services $3,108,205,835

New York Department of Health $2,028,785,192

Pennsylvania Department of Human Services $1,384,342,436

Texas Health and Human Services Commission $1,186,558,332

Illinois Department of Healthcare and Family Services $964,046,344

Florida Agency for Health Care Administration $930,369,743

Ohio Department of Medicaid $900,895,210

North Carolina Department of Health and Human Services $736,158,200

New Jersey Department of Human Services $614,786,250

Massachusetts Office of Health and Human Services $608,255,603

SOURCE: Navigator

© 2016 e.Republic

Budgets and Caseloads

Human services in state budgets

Human services caseload

The ACA and its effect on state health budgets

The healthcare caseload

27.4%19.3%

10.3%

7.7%

3.1%1.3%

30.9%

Medicaid

K12

Higher Ed

Transportation

Corrections

Public

Assistance

Medicaid was the largest single expenditure in state budgets last year.

The National Association of

State Budget Officers

(NASBO) calculates total

state spending (all verticals)

at $1.9 trillion for FY 2015.

NASBO uses the states’

enacted budgets to determine

spending in key verticals.

FY 2015 Expenditures by Vertical

© 2016 e.Republic

SOURCE: National Association of State Budget Officers, “State Expenditure Report Summary (Fiscal 2013-2015 Data),” http://www.nasbo.org/publications-data/state-expenditure-report

The most recent numbers show a decline in overall spending.

States spent $24.7B on human services in FY 2015.

This was a 7.3% drop from FY 2014.

54.8% of funds come from the federal government, the rest from state

budgets.

FY 2016 budgets are projected to be $24.72B.

Technology solutions are needed to help agencies find more cost-

effective ways to provide services and administer programs.

Human Services in State Budgets

© 2016 e.Republic

SOURCE: National Association of State Budget Officers, “State Expenditure Report (Fiscal 2013-2015 Data),” http://www.nasbo.org/publications-data/state-expenditure-report

Millions of Americans are served through human services programs.

Human services programs include Head Start, support for foster children,

child support enforcement, food assistance for seniors, veterans services, etc.

Examples of the volume of service provided by two of the largest programs

include:

In January 2016 alone, more than 44.7 million Americans, or 14.5% of the

population, participated in the Supplemental Nutrition Assistance

Program (SNAP).

For FY 2015, Temporary Assistance for Needy Families (TANF) averaged

over 3.08 million recipients every month.

Human Services Caseload

© 2016 e.Republic

SOURCE: USDA Food and Nutrition Service, 4/8/16, “Supplemental Nutrition Assistance Program: Number of Persons Participating,” http://www.fns.usda.gov/sites/default/files/pd/29SNAPcurrPP.pdf; Office of Family

Assistance, 1/13/16, “TANF: Average Monthly Number of Recipients,” https://www.acf.hhs.gov/sites/default/files/ofa/2015_recipient_tan.pdf

© 2016 e.Republic

The ACA and State BudgetsThe changes brought by the Affordable Care Act (ACA) of 2010 dramatically increased budget allocations to healthcare.

2016 is the third year for health exchange sign-ups under the ACA.

Medicaid expansions under the ACA are causing large spending increases at

the state and federal levels, including in IT.

States continue to implement or upgrade their Medicaid Management

Information Systems (MMIS).

Historically median implementation costs are reported to be around $50

million per state.

Spending increases will slow as the ACA implementation ends.SOURCE: National Association of State Budget Officers, “Summary: NASBO State Expenditure Report,” http://www.nasbo.org/sites/default/files/Summary_State%20Expenditure%20Report.pdf; Center for Digital Government MMIS

Systems Watch 2016

Healthcare Caseload

© 2016 e.Republic

Medicaid and the Children’s Health Insurance Program (CHIP) alone provide

coverage for approximately 70 million low-income Americans.

An estimated 12.7 million people are forecasted to sign up or automatically

re-enroll through the ACA-created state and federal health care

marketplaces during the 2016 open enrollment period.

42% (4.9 million) of these are expected to be new consumers.

SOURCE: National Conference of State Legislatures, “Medicaid and CHIP,” http://www.ncsl.org/research/health/medicaid-and-chip.aspx; U.S. Department of Health & Human Services, 3/1//16, “Nationwide the Health Insurance

Marketplaces signed up 4.9 million new people during the third Open Enrollment period,” http://www.hhs.gov/about/news/2016/03/11/nationwide-health-insurance-marketplaces-signed-49-million-new-people-during-third-

open-enrollment.html

31 states have enacted Medicaid expansions under the ACA, allowing large enrollment increases.

Total Medicaid spending for FY 2015

is estimated at $512.3B.

This was an increase in 2015 of 15.1%

over FY 2014. State funds increased

by an estimated 4.8%, while federal

funds increased by 22.5% over 2014.

Medicaid is estimated to represent

54.3% of all federal funds to the

states in FY2015.

Budget allocations have grown over the past

three years.

Medicaid Expansion and State Spending

© 2016 e.Republic

SOURCE: National Association of State Budget Officers, “NASBO State Expenditure Report,” http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report%20%28Fiscal%202013-2015%29S.pdf

4.4% 4.8%

13.5%

22.5%

9.5%

15.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FY 2014 FY 2015 (Estimated)

Medicaid Spending Growth by Funding Source

State funds Federal funds Total spending growth

© 2016 e.Republic

Challenges in HHS Technology-specific challenges include:

Complicated business processes

Uneven electronic health record (EHR) adoption

Cyberattacks

46%

37%

12%

2%

2%

1%

Strongly Agree

Somewhat Agree

Neither Agree nor Disagree

Somewhat Disagree

Strongly Disagree

Do Not Know

83% of HHS professionals

surveyed in 2015 by the

Center for Digital

Government agree this is

a challenge

Challenge: Complicated Business Processes

© 2016 e.Republic

SOURCE: Center for Digital Government Health & Human Services Special Report Survey, 2015

“Complicated paperwork and processes make it difficult for people in need to get help in human services programs.”

A multiplicity of HHS agencies with large caseloads and staffing shortages are hindered by complicated business processes.

Complicated business processes that present a barrier to client renewal have

been shown to raise administrative costs by as much as $80 per case.

An opportunity exists for automated workflows and content management

solutions to help HHS agencies work more efficiently.

Example: the Los Angeles County Department of Public Social Services

suite of apps allows clients to upload documents for their caseworkers to

review, thereby avoiding expensive office visits.

Complicated Business Processes

© 2016 e.Republic

SOURCE: Center on Budget and Policy Priorities, 2/5/16, “Opportunities for States to Coordinate Medicaid and SNAP Renewals,” http://www.cbpp.org/research/health/opportunities-for-states-to-coordinate-medicaid-and-snap-

renewals; Governing, 4/15, “New Apps May Make Giving and Getting Government Aid Easier,” http://www.governing.com/columns/tech-talk/gov-human-services-apps.html

Electronic Health Records (EHRs) have been incentivized by the federal government since 2009, but adoption is not complete.

The Federal Health Information Technology for Economic and Clinical Health

Act (HITECH) of 2009 pays incentives for demonstrated meaningful use of a

certified EHR system.

Reduced Medicare reimbursement rates for providers who have not

adopted qualified EHRs went into effect in 2015.

1/5 of providers still have not adopted certified EHRs. Factors are reported to

include: expense of adoption, lack of broadband access, security concerns and

usability.

Challenge: Uneven EHR Adoption

© 2016 e.Republic

SOURCE: Office of the National Coordinator for Health Information Technology, 2015, “Update to Congress on the Adoption of Health IT,” http://dashboard.healthit.gov/report-to-congress/2015-update-adoption-health-information-

technology-executive-summary.php

Uneven EHR Adoption

© 2016 e.Republic

SOURCE: HealthIT.gov, data from CMS EHR Incentive Program data, 2015 and SK&A Office-based Provider Database, 2013. Numbers apply to ambulatory medical doctors and doctors of osteopathy only

Percentage of all office-based physicians that have demonstrated meaningful use through Medicare as of December 2015

The increasing use of EHRs, data sharing, and mobile technologies creates data security challenges.

A survey of state CIOs by the National Association for State CIOs (NASCIO)

found security and risk management to be their top priority for 2016.

The Federal Health Insurance Portability and Accountability Act (HIPAA)

privacy laws require protection of personal health information, reinforced

with fines in the millions of dollars.

Challenge: Data Security Threats

© 2016 e.Republic

SOURCE: National Association of State CIOs, 11/10/15, “State CIO Top Ten Policy and Technology Priorities for 2016,” http://www.nascio.org/TopTen/ArtMID/659/ArticleID/295/State-CIO-Top-Ten-Policy-and-Technology-

Priorities-for-2016

Health information breach incidences have risen sharply in the past two years, affecting millions of Americans.

According to the US

Department of Health

and Human Services, in

2015 approximately

113 million individuals

were affected by private

health information

(PHI) breaches.

Cybersecurity in Healthcare

© 2016 e.Republic

SOURCE: U.S Department of Health and Human Services, 2/16, “Breaches of Unsecured Protected Health Information,” http://dashboard.healthit.gov/quickstats/pages/breaches-protected-health-information.php

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2012 2013 2014 2015

Number of PHI Breaches

Number of Incidents

39%

7%

7%

6%

4%

2%

35%

Percentage of Incidents of Data Breaches by Industry

Health Services

Business Services

Educational Services

Insurance Carriers

Hotels & Other Lodging

Social Services

All Other

Cyberattacks on HHS data are increasing in frequency and with expensive consequences.

In 2015, 39% of all data

breaches were in healthcare,

the largest percentage

across studied sectors.

Healthcare data breaches

are on the rise, with the cost

to the U.S. healthcare

system at an estimated $6B

a year.

Cybersecurity in Healthcare

© 2016 e.Republic

SOURCE: Symantec, 4/12/16, “Internet Security Threat Report, vol. 21,” https://www.symantec.com/content/dam/symantec/docs/reports/istr-21-2016-en.pdf; Ponemon Institute, 5/27/15, “Cost of Data Breaches Rising

Globally, Says 2015 Cost of a data Breach Study,” https://securityintelligence.com/cost-of-a-data-breach-2015/

0

50,000,000

100,000,000

150,000,000

200,000,000

Social Services

44.5% of total

(1st place)

Insurance Carriers

23.4% of total

Personal Services

9.4% of total

Administration of

Human Resources

5% of total

Health Services

1% of total

(10th place)

Number of Identities Stolen by Selected Subsectors

Social Services as a subsector saw few data breach incidents compared to healthcare, but saw the largest number of identities exposed.

Research shows that

social services agencies

had the largest number

of identities stolen in

2015.

44% of all identities

stolen were from

social services.

Human Services Cybersecurity is Also Challenged

© 2016 e.Republic

SOURCE: Symantec, 4/12/16, “Internet Security Threat Report, vol. 21,” https://www.symantec.com/content/dam/symantec/docs/reports/istr-21-2016-en.pdf

© 2016 e.Republic

Technology Needs in HHS Mobile technologies and capabilities

Collaboration and platform integration

Data analytics

Telemedicine

A survey conducted by CDG in 2016 asked respondents working in state and local government human services what technologies should be more fully utilized in their agencies to improve operations or delivery of care.

IT Opportunities in Human Services

Q: Which of the following technologies do you believe should be more commonly or fully utilized in human services agencies to improve either internal operations or delivery of care? Select all that apply. © 2016 e.Republic

SOURCE: Center for Digital Government Health & Human Services Special Report Survey, 2016, N=165

25%

38%

46%

52%

53%

Telemedicine/treatment or consultation

Remote reporting/data entry

Predictive data analytics

Integrated data platforms

Mobile technologies such as smart phones or tablets

© 2016 e.Republic

Smartphone and other mobile health technologies are gaining increased acceptance and legitimacy in the health professions.

In 2014, 18% of Americans surveyed by the Office for National Coordinator

for Health Information Technology reported communicating with their health

care provider through text message.

The U.S. Food and Drug Administration has announced that they will allow

physicians to prescribe health-related apps as part of a course of treatment.

Health industry interest in these apps is in part due to the high cost of non-

adherence to drug regimes, which costs the U.S. health care system $110-

$289B annually.

Client-Facing Mobile Health Technology

SOURCE: HealthIT.gov, 2014, “Trends in Individuals Use of Health IT,” http://dashboard.healthit.gov/quickstats/pages/FIG-Individuals-Health-IT-Use.php ; Annals of Internal Medicine, 12/4/12, “Interventions to Improve Adherence

to Self-administered Medications for Chronic Diseases in the U.S.,” http://annals.org/article.aspx?articleid=1357338#r3-6

Traditionally siloed systems create inefficiencies.

Research conducted by CDG October 2015 – February 2016 interviewing

heads of state HHS agencies has indicated that inter-agency data sharing is

problematic for many due to policy, processes, and technology.

The Missouri Department of Health and Senior Services has begun a data-

sharing project with Missouri’s departments of Mental Health and Social

Services.

Under this data sharing initiative, hospital use is down 20% by Medicaid

users, and emergency room visits fell by 12%. State leaders estimate that

the initiative will save Missouri $8 million annually.

Interoperability and Collaboration

© 2016 e.Republic

SOURCE: Center for Digital Government Health & Human Services Special Report Survey, 2016, N=165; Government Technology, 9/29/14, “Missouri Shares Data with Healthy Results,” http://www.govtech.com/health/Missouri-

Shares-Data-with-Healthy-Results.html

A survey conducted by CDG in 2016 asked government HHS employees where data analytics has the most potential to positively impact patient or client care.

Benefits of Data Analytics

Q: Where do you believe data analytics has the most potential to positively impact patient/client care? Select up to three. © 2016 e.Republic

SOURCE: Center for Digital Government Health and Human Services Special Report Survey, 2016, N=233.

25%

25%

30%

31%

42%

43%

Prioritizing needs for budget allocations

Tracking distribution and rates of incidents in the population served

Helping administration forecast and anticipate service demands

Streamlining business processes

Supporting the development of evidence-based performance metrics

Evaluating treatment success rates and identifying best practices

The Federal Office of Rural Health Policy is offering $6 million in grants in

2016 to establish telemedicine networks in rural areas.

The President’s Council of Advisers on Science and Technology recently

recommended telemedicine usage, citing cases of providers expanding both

their caseload size and geographical reach while improving client outcomes.

Unequal Parity Laws present a challenge for implementing telemedicine.

Parity laws require that insurance payments for telemedicine be at an

equal rate to other treatment forms

Telemedicine

© 2016 e.Republic

SOURCE: Center for Digital Government Health and Human Services Special Report Survey, 2016; President’s Council of Advisors on Science and Technology, 3/16, “Independence, Technology, and Connection in Older Age,”

https://www.whitehouse.gov/sites/default/files/microsites/ostp/PCAST/pcast_independence_tech__aging_report_final_0.pdf;

Telemedicine is currently seeing increased investment due to the perceived potential for expanding care and improving client outcomes.

No Parity Legislative Activity

Telemedicine Parity Law

Proposed Parity Law

Partial Parity Law

Telemedicine RegulationsA significant challenge for telemedicine deployment in both health and human services lies in the patchwork of regulations across states.

© 2016 e.Republic

SOURCE: American Telemedicine Association, “State Telemedicine Gaps Analysis,” http://www.americantelemed.org/policy/state-policy-resource-center#.VyEJafkrJph

© 2016 e.Republic

Key Takeaways Opportunities in HHS

External Pressures

Technological Solutions

The high cost of healthcare and human services delivery is pushing demand for IT solutions that promise administrative and cost efficiencies.

Opportunities in HHS

© 2016 e.Republic

The federal push for technological advancement in HHS, combined with a

growing and aging population, will result in opportunities across the vertical.

HITECH and other federal funding for EHR adoption and MMIS

improvements will continue at least through 2021.

Multiple grant programs exist to expand healthcare access using new

technologies.

Despite these opportunities, budgets continue to be tight, spurring agencies

to seek technological solutions.

© 2016 e.Republic

Several factors are raising operational costs in HHS and increasing demand for services.

Pressures that increase demand for services include:

Medicaid expansions under the ACA

An aging population

Calls for improved mental health services

The opioid abuse crisis

Pressures that increase costs for providers and agencies include:

Agency workforce shortages, cyberattacks, and updating legacy systems

to harness new technologies.

External Pressures on HHS Agencies

The many external pressures on HHS providers drives up demand for technological solutions that help contain costs while improving outcomes.

Sought-after technological solutions to these critical issues include:

Data sharing solutions

Integrated systems

Data analytics

Mobility for caseworkers

Improved automated processes

Telemedicine

Technological Solutions for HHS

© 2016 e.Republic

Thank you!

© 2016 e.Republic

The Center for Digital Government is a division of e.Republic, the nation’s only media and

research company focused exclusively on state and local government and education.

www.erepublic.com / www.centerdigitalgov.com

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