NOVEMBER MEDICAID RECAP

 

Syrtis Solutions delivers a monthly Medicaid news summary to help you stay informed. The monthly roundup concentrates on developments, analysis, and legislation that pertains to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Here is a list of last month's significant Medicaid developments.

See November's recap.

FY 2021 MEDICAID IMPROPER PAYMENTS

 

Medicaid has been designated a high-risk program by the Government Accountability Office (GAO) since 2003 because of improper payments, low-quality data, and administrative challenges. Earlier in November, the Department of Health and Human Services (DHHS) posted its Agency Financial Report. In FY 2021 Medicaid's estimated improper payments amounted to a staggering $98.72 billion. According to DHHS, the vast majority of these improper payments were a result of inadequate documentation and eligibility errors.

Just recently, CMS published the following Improper Payments Fact Sheet.

What You Need to Know:

• Improper payments represent payments that do not meet program requirements.
• The vast majority of improper payments occur in regards to people who may be eligible for care, but for whom there was an unintentional payment error or a reviewer can not determine if a payment was proper due to insufficient payment documentation from a state or a provider.
• Improper payments do not necessarily represent expenditures that should not have occurred and can include both overpayments and underpayments situations where there is insufficient documentation to determine if a payment is proper in accordance with program payment requirements.
• While fraud and abuse are improper payments, they are not synonymous; it is important to note that most improper payments are not attributable to fraud, and improper payment estimates are not fraud rate estimates.

Improper Payment Measurements:

Medicare

• CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the Medicare Fee-For-Service (FFS) program's improper payment rate.

• The CERT program cites improper payments in accordance with payment policies on any claim: 1) that was paid when it should have been denied or paid at another amount (including both overpayments and underpayments); and/or 2) for which documentation was insufficient to be an improper payment.

• The CERT program reviews a statistically valid stratified random sample of Medicare FFS claims to determine if they were paid properly under Medicare coverage, coding, and billing rules. If these criteria are not met, the claim is counted as either a total or partial improper payment.

• The majority of Medicare FFS improper payments fall into two categories:

• (1) insufficient documentation; and
• (2) the documentation provided for the items or services billed did not sufficiently demonstrate medical necessity.

Medicaid

• CMS estimates Medicaid and CHIP improper payments using the Payment Error Rate Measurement (PERM) program.

• The PERM program uses a 3-year, 17 state rotation, meaning each state is reviewed once every three years and each cycle measurement includes one-third of all states. The most recent three cycles (2021, 2020, and 2019) combined to form each year's overall national rate.
• PERM ensures a statistically valid random sample representative of all Medicaid and CHIP payments matched with federal funds meets a national precision requirement where CMS is 95% confident that the Medicaid and CHIP improper payment rates are within +/- 3 percentage points.
• The Medicaid and CHIP improper payment national rates are based on reviews of the FFS, managed care, and eligibility components of a State's Medicaid and CHIP program in the year under review.
• In addition, the PERM program combines individual state component estimates to calculate the national component estimates. National component rates and the Medicaid and CHIP rates are weighted by state size, such that a state with a $10 billion program is weighted more in the national rate than a state with a $1 billion program. A correction factor in the methodology ensures that each Medicaid improper payment is counted only once in the combined national rate.

• Medicaid and CHIP improper payment data released by CMS are based on reviews of whether states are implementing their Medicaid and CHIP programs in accordance with federal and state payment and eligibility policies.

Click here to read the white paper Improper Payments - Medicaid's Billion Dollar Problem

Improper Payments Do Not Necessarily Indicate Fraud:

• Improper payment rates are not measures of fraud in CMS programs. Most improper payments are caused by improper or inadequate documentation.
• Improper payments do not necessarily represent expenditures that should not have occurred.

• For example, a majority of improper payments are due to instances where information required for payment was missing, documentation that an eligibility determination was made correctly was missing from the state system, states did not follow the appropriate process for enrolling providers, and/or states did not follow the appropriate process for determining beneficiary eligibility. However, these improper payments do not necessarily represent payments to illegitimate providers or on behalf of ineligible beneficiaries. Had the missing information been on the claim and/or had the state complied with the enrollment or redetermination requirements, then the claims may have been payable. A smaller proportion of improper payments are instances where the State Agency had sufficient documentation to determine that payments should not have been made or should have been made in different amounts, which are considered monetary losses to the Federal Government (e.g., medical necessity, incorrect coding, and other errors).

• Improper payments can result from a variety of circumstances, including:

• 1) services with no documentation,
• 2) services with insufficient documentation, or
• 3) no record of the required verification of an individual's eligibility, such as income, specifically for Medicaid and CHIP.

• Proper payments occur when there is sufficient documentation to support payment in accordance with the program payment requirements. Two examples of proper payments include:

• Payments where the state appropriately maintained documentation of an eligibility verification requirement and appropriately determined eligibility based on program eligibility and payment requirements.
• Payments where sufficient documentation was provided to support medical necessity in accordance with program payment requirements.

Improper Payment Reporting Criteria

• The Payment Integrity Information Act of 2019 defines significant improper payments are defined as either:

• (i) improper payments greater than $10 million and over 1.5 percent of all payments made under that program, or.
• (ii) improper payments greater than $100 million.

• The Office of Management and Budget (OMB) has identified Medicare Fee-For-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, and the Children's Health Insurance Program as susceptible to significant improper payments. The Advanced Premium Tax Credit program has also been identified as susceptible to significant improper payments. In FY 2021, CMS completed the development of the Federally-facilitated Exchange improper payment measurement and commenced measurement activities for future reporting.

CMS/State Collaboration on Improper Payments

• CMS collaborates with states in many ways to share information and help to ensure they maintain the proper documentation to demonstrate that payments are being made correctly. Examples include:.
• Medicaid Eligibility Quality Control (MEQC) Program: Under MEQC, states design and conduct pilots to evaluate the processes that determine an individual's eligibility for Medicaid and CHIP benefits. States have flexibility in designing pilots to focus on vulnerable or error-prone areas as identified by the PERM program and state. The MEQC program also reviews eligibility determinations that are not reviewed under the PERM program, such as denials and terminations.
• Enhanced State PERM Corrective Action Plan Process: CMS works with states to coordinate state development of corrective action plans to address each error and deficiency identified during the PERM cycle. After each state submits the corrective action plan, CMS monitors each state's progress in implementing effective corrective actions. Throughout the process, CMS also provides training opportunities to ensure compliance with federal policies.
• State Medicaid Provider Screening and Enrollment Data and Tools: CMS shares Medicare data to assist states with meeting Medicaid screening and enrollment requirements.
• Enhanced Assistance on State Medicaid Provider Screening and Enrollment: CMS provides ongoing guidance, education, and outreach to states on federal requirements for Medicaid provider screening and enrollment. CMS also assesses provider screening and enrollment compliance, provides technical assistance, and offers states the opportunity to leverage Medicare screening and enrollment activities.
• Medicaid Integrity Institute (MII): CMS offers training, technical assistance, and support to state Medicaid program integrity officials through the MII. More information is located at the Medicaid Integrity Institute website.

Click this link to learn more. 

MEDICAID NEWS FROM OCTOBER

 

Syrtis Solutions distributes a monthly Medicaid news roundup to help you stay informed. The monthly recap concentrates on developments, analysis, and legislation that pertains to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's important Medicaid news.


Read October's news here.

MEDICAID IMPROPER PAYMENTS CAUSE CONCERN AMONG SENATORS

Under the Payment Integrity Information Act of 2019, the Centers for Medicare & Medicaid Services (CMS) was instructed to assess federal programs in danger of improper payments. The bill tasked CMS to evaluate what programs are at risk, estimate the number of improper payments, and report on steps taken to lower improper payments.

In November, CMS issued its Medicaid Payment Error Rate Measurement (PERM) review discoveries. CMS determined that the national Medicaid improper payment rate estimate reached 21.36 percent in FY 2020, representing $86.49 billion in improper payments. Medicaid improper payments represented more than twenty percent of federal Medicaid expenditures, and one out of every four Medicaid dollars was spent improperly. Furthermore, the majority of improper payments stemmed from eligibility errors.

As November approaches and legislators consider additional Medicaid expansion, some representatives are concerned about the climbing improper payment rate and what the FY 2021 audit will uncover. The upcoming report will be the first full audit of all fifty states after program expansion.

On Monday, thirteen Senate Finance Committee Republicans sent a letter to Administrator Brooks-LaSure at CMS to voice their concerns and to request data to inform policy discussions.

Read the letter below.

Dear Administrator Brooks-LaSure:

As some in Congress consider proposals to expand the Medicaid program by potentially half a trillion dollars over the next decade, it is vital that both Senators and Members of the House of Representatives have accurate information about how the program is using taxpayer resources. Every November, the Centers for Medicare and Medicaid Services (CMS) releases estimates of improper payment rates for programs within its jurisdiction. The November 2020 report showed that the Medicaid improper payment rate reached 21.4 percent, with total federal improper payments in the program amounting to $86.5 billion annually. Medicaid’s improper payment rate has significantly increased since the passage of the Affordable Care Act, which dramatically expanded Medicaid. In 2013, the year before the ACA’s Medicaid expansion took effect, the improper payment rate was just 5.8 percent.

According to last year’s report, eligibility errors are the major drivers of the increased Medicaid improper payment rate. According to CMS, “Eligibility errors are mostly due to insufficient documentation to affirmatively verify eligibility determinations or non-compliance with eligibility redetermination requirements.” One of the most common eligibility errors often occurs when failing to verify information provided by the applicant, including income. Failure to properly verify that applicants are eligible for the program, especially to this extent, harms the nation’s taxpayers and takes resources away from those who are eligible and who truly need the program.

There is concern that the November 2020 improper payment rate estimate of 21.4 percent was unrealistically low because the eligibility reviews excluded one-third of states. Since the Obama Administration canceled eligibility audits from 2014-2017, this year’s forthcoming report will be the first complete assessment of all states since the expansion took effect. Given its more complete nature, the upcoming assessment has the potential to show that the improper payment rate in the program exceeds 25 percent, totaling above $100 billion annually. Such a high improper payment rate demonstrates that the program requires a stalwart defense to ensure those that are eligible receive the care they need. This rate also raises questions of whether Congressional and regulatory actions have made Medicaid too complicated for the Federal government to properly oversee it, especially given the differing improper payment rates among states. Congress needs complete and updated information about the improper payment rate in Medicaid as well as the corresponding drivers of this problem. We understand that the essential work on the 2021 CMS improper payment report has concluded, and drafts of the report have been completed. While state and Federal responses to COVID-19 halted some payment and eligibility reviews in 2020, this work is too vital to remain paused when the consequences are so dire. Given the importance of accurate data to inform ongoing policy discussions, by Monday, November 8, we ask that you provide:

• The updated improper payment rate in Medicaid;
• A breakdown of improper payment rates by state; and
• The corresponding estimated total of improper payments from insufficient verification or non-compliance with eligibility requirements.

When asked about this at a June hearing in front of the Senate Finance Committee, Secretary Becerra committed to making available such data. We also request a briefing with Committee Members’ staff, so that Congress can ask informed questions on this important matter. Thank you for your prompt attention to this shared concern.

Click here to find out more. 

ASCERTAINING MEDICAID TPL

The majority of Medicaid improper payments occur as a result of antiquated data systems that lead to eligibility errors. As the Medicaid program has expanded, finding primary commercial coverage, also referred to as Third Party Liability (TPL), has become significantly more complicated and challenging. By law, Medicaid plans are payers of last resort. This means if a plan member has health care coverage through any other third party, that third party must pay its legal liability first. If any liability remains, Medicaid plans will then pay. According to the Centers for Medicare and Medicaid Services (CMS), "States are required to take all reasonable measures to ascertain the legal liability of third parties to pay for care and services that are available under the plan."

This rule has been in place since the Employee Retirement Income Security Act (ERISA) modified the Social Security Act in 1974. To this day, ascertaining TPL remains a difficult challenge. Coordination of benefits (COB) is no easy task. CMS explains that COB is achieved by, "determining Medicaid benefits when an enrollee has coverage through an individual, entity, insurance, or program that is liable to pay for health care services."

WHERE TPL IS IDENTIFIED

The discovery of liable third parties happens at three points in the lifecycle of a Medicaid beneficiary. This identification of unknown primary insurance coverage may occur in the course of the enrollment process, prospectively before claims are paid, and retrospectively after an improper claims payment has been made.

In the enrollment phase, Medicaid applicants are approved and their self-reported TPL is validated and reported to the state. The main challenge is that over 13% of the Medicaid population has unreported TPL. Applicants are often not aware of other health insurance or fail to disclose it at the time of enrollment. At the point of service-- when recipients are presenting insurance information to care providers-- they might not furnish proof of primary coverage. The system is undoubtedly complex, and members may not realize that they have valid primary coverage, and even if they do, it is unlikely that they are familiar with the concept of payers of last resort. Compounding the confusion, the Medicaid population is in near-constant flux, with individuals becoming eligible and ineligible for services depending on a number of factors such as income and disability status.

Once an applicant is enrolled, plans undertake ongoing prospective identification of other insurance coverage. The difficulties here are the same issues that are responsible for the high amount of improper payments in the Medicaid program. That is, existing data mining and matching models are antiquated and need constant verification. Sometimes, a Medicaid plan uses an outside vendor to conduct monthly eligibility checks in an attempt to discover a Medicaid member's TPL. However, the data available to these vendors suffer the same antiquation and inaccuracy problems. Though health plans make an effort to discover TPL in as timely a manner as possible, there are many obstacles.

The final point at which health plans can discover TPL is retrospectively after claims are paid in error. At present, pharmacy and medical claims reviews are profoundly retrospective, which creates a multitude of problems for improper payments. Consequently, a post-payment recovery process, known as 'pay and chase,' is needed to recoup the claims payments that were made in error.

Beyond simple mistakes at the point of service with providers, there are fundamental problems in the health care data used by the federal government that lead to the loss of literally billions of dollars a year.

One of the major challenges facing Medicaid is the lack of high-quality eligibility data. In testimony before Congress in 2012, HHS Regional Inspector General Ann Maxwell gave an alarmingly unfavorable assessment relating to the reliability of data the federal government uses to detect overpayments and fraud in the Medicaid program. She explained, "much of the data used to identify improper payments and fraud is not current, available, complete, [or] accurate."

Identifying primary commercial coverage is extremely difficult for payers of last resort. Due to the complexity of COB, the near-constant flux in the program's population, and bad quality eligibility data health plans rely greatly on retrospective identification and recovery. Unfortunately, this is costing Medicaid billions in waste. To coordinate claims effectively, payers of last resort must look to new data solutions that determine TPL before claims are paid in error.

To learn more, click here. 

SEPTEMBER MEDICAID NEWS

Syrtis Solutions issues a monthly Medicaid news roundup to help you stay informed. The monthly recap focuses on developments, research, and legislation that relates to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's Medicaid news.

Open September's news here. 

MEDICAID TPL SOLUTION PRESENTS A CONSIDERABLE SAVINGS OPPORTUNITY

 

Dependence on the Medicaid program has increased exponentially over time. Currently, it is the single largest insurer in the country, and in FY 2019, it accounted for more than half of all federal monies distributed to states. Regrettably, as the safety net program has grown, waste has also become more widespread. Improper payments are costing the program billions of dollars every year.

Despite being on the GAO's High Risk List since 2003, Medicaid's improper payment rate continues to surge and put more pressure on budgets. In 2018, the program's improper payment rate was at nine percent, and by 2020 it had grown to twenty-one percent. That equates to a shocking $143 billion. However, according to analysts, these numbers are conservative estimates that do not take into account all the needed data. In reality, the improper payment rate is thought to be closer to twenty-seven percent or $100 billion annually.

Initiatives to Decrease Improper Payments

Fiscal integrity has been a problem for Medicaid since its conception. So much so that over the last 56 years, various policy and legislative efforts have occurred to focus on improper payments. These efforts primarily evaluate the risk of fraud, estimate the effect of TPL, increase reporting requirements, and increase data sharing. Unfortunately, while these actions help bring the problem into scope, they do nothing to prevent the improper payment rate from climbing.

Apart from these legislative efforts to manage costs, some policymakers have suggested transforming how the safety net program is funded to decrease waste. They think that the program should be incentivized to use funding more responsibly and efficiently. One thought is to implement block grants. These grants would take into consideration the size of the eligible population within a state and give the states the flexibility to distribute the funds with limited oversight from the federal government. The states would be responsible for ensuring that the appropriate care is being delivered to beneficiaries and that program resources are not wasted. Another idea is for Congress to establish tax-free health savings accounts to lessen the dependence on Medicaid and improve access to health care for those in need. The accounts would be financed with the savings achieved from decreasing waste in the Medicaid program.

Reducing Improper Payments with Medicaid TPL Tech Solutions

While lawmakers think about program reform, one area of opportunity to dramatically reduce costs lies within Medicaid's coordination of benefits. Currently, the majority of Medicaid's improper payments actually stem from bad quality data and inefficient TPL processes, not deliberate fraud and abuse. Payers of last resort struggle to identify primary coverage on pharmacy and medical claims. Much of the data they have access to is not current, available, complete, or accurate. Consequently, plans have no choice but to pay claims in error and chase reimbursement once other health insurance (OHI) is found. Unfortunately, the actual funds recovered are around twenty cents on the dollar.

Syrtis Solutions realized that Medicaid plans needed a way to identify active OHI coverage so that claims could be adjudicated properly. In 2010, they introduced ProTPL, a real-time point of sale cost avoidance service for the payer of last resort market. ProTPL supplies powerful and accurate eligibility data that can be acted upon. The solution gives plans the ability to cost avoid pharmacy and medical claims and the associated costs of recovery. Additionally, the coverage identified by ProTPL can not be found by other vendors. Syrtis Solutions is able to do this by checking claims against the nation's largest and most complete active healthcare coverage information database. Customers who implement the tool see an average 25% increase in OHI discovery. This means Syrtis' customers get the best and latest eligibility responses when they need them.

In March, enrollment in the Medicaid program reached nearly 75 million people, and that number continues to rise. As a result, the chances for waste and improper payments are likely to increase also. This is problematic considering that Medicaid is losing billions every year in improper payments already. Due to strained budgets, program integrity issues, and enrollment surges, some policymakers and states are considering innovative ideas and program reform to reign in costs and decrease waste. While these efforts are being considered, they have yet to be implemented. At this time, one of the most significant opportunities for reducing Medicaid's improper payments lies within the coordination of benefits. Plan administrators should turn to TPL technology solutions for further efficiency and cost avoidance opportunities.

Click here and learn more.

AUGUST MEDICAID NEWS RECAP

 

Syrtis Solutions distributes a monthly Medicaid news recap to help you stay up-to-date. The monthly summary highlights developments, analysis, and legislation that relates to Medicaid integrity, cost avoidance, coordination of benefits, improper payments, fraud, waste, and abuse. Below is a summary of last month's notable Medicaid articles.

Click this link to open the news.

MEDICAID TPL AND IMPROPER PAYMENTS LEGISLATION

Throughout the last fifty years, Medicaid has helped provide health services to the most vulnerable populations in the United States. As member enrollment rises, Medicaid TPL and fiscal responsibility have been problematic. To address these challenges, numerous legislative efforts have occurred to curb fraud, waste, and abuse. Unfortunately, these measures have done very little to protect program integrity and Medicaid's improper payment rate continues to climb.

Improper Payments and Medicaid TPL Legislation

The federal government's efforts to combat improper claims payments and improve TPL processes fall into four categories:

• Assessing the risk of fraud
• Estimating the impact of TPL
• Requiring more reporting
• Increased data sharing

Here is an overview of the legislation aimed towards improving Medicaid TPL and reducing improper payments.

1974 - ERISA

Congress passed the Employee Retirement Income Security Act (ERISA) in 1974. This law was aimed at self-insured companies to ensure that they abided by the same health insurance criteria as other large group plans. Additionally, it placed them under Medicaid TPL requirements.

2002 - IPIA

The Improper Payments Information Act (IPIA), passed in 2002, required agencies to actively identify programs or activities subject to high levels of improper payments. Agencies were now directed to make an annual report to Congress pertaining to overpayments or underpayments and measures taken to address such issues. In compliance with the IPIA, the Payment Error Rate Measurement (PERM) was created. PERM reviews Medicaid and CHIP data to measure improper payments and determine program-level error rates.

2005 - The Deficit Reduction Act

The Deficit Reduction Act (DRA) added additional entities to the list of those considered third parties. By law, all entities identified as third parties are mandated to observe Medicaid TPL processes, which includes supplying beneficiary eligibility data to states (much like ERISA dictates for self-insured plans).

2006 - Medicaid Integrity Program

The DRA also introduced the Medicaid Integrity Program (MIP) under section 1936 of the Social Security Act. The MIP was the first extensive federal initiative to combat fraud, waste, and abuse. It allowed contractors to review provider activities, audit claims, identify improper payments, and educate providers on integrity issues. It also provided support to states to address fraud and abuse.

2008 - Qualifying Individual Program Supplemental Funding Act

The Qualifying Individual (QI) Program Supplemental Funding Act of 2008 modified state participation criteria of the Public Assistance Reporting Information System (PARIS). It called for states to link their eligibility systems through PARIS, providing data for matching purposes across participating entities. CMS discovered that beneficiaries crossing state lines were one source of improper payments since a mechanism did not exist for states to share data and "match" beneficiary information.

2009 - Executive Order 13520

Executive Order 13520 was an effort to lower Medicaid improper payments. It looked to intensify efforts to eliminate payment errors, waste, fraud, and abuse while at the same time ensuring that Medicaid and other federal programs would continue to serve their beneficiaries. EO 13520 tracked federal programs with the highest dollar amount of improper payments and established reduction and recovery target rates.

2010 - Improper Payments Elimination and Recovery Act

Congress passed the Improper Payments Elimination and Recovery Act of 2010 to improve data sharing, coordination between state agencies and third parties, and increase reporting requirements. Some of the measures taken include:

• Amendment of the IPIA to require the leader of each federal agency to review and determine vulnerabilities in their programs that could lead to improper payments

• Modifications of the criteria related to improper payment estimations

• Requirement of a report from agencies as to whether it has "sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to prevent improper payments"

2015 - Fraud Reduction and Data Analytics Act

The Fraud Reduction and Data Analytics Act called for the Office of Management and Budget to establish new guidelines for federal agencies to improve TPL management. Under the act, agencies needed to "establish financial and administrative controls to identify and assess fraud risks." Furthermore, agencies were expected to submit annual reports to Congress regarding their progression on these efforts.

2015 - Federal Improper Payments Coordination Act

Congress also passed the Federal Improper Payments Coordination Act in 2015. It addressed administrative operations, reporting guidelines, and data-sharing to improve TPL and cost avoidance. Under the act, the judicial branch, legislative branch, and state government agencies managing federal programs were authorized to use the U.S. Treasury Department's Do Not Pay Program.

2015 - Medicare Access and CHIP Reauthorization Act

The Medicare Access and CHIP Reauthorization Act of 2015 consisted of several sections relevant to Medicaid programs, including a section impacting TPL data sharing. It instructed the Secretary of HHS to look at "incentives for states to work with the Secretary under the Medicare-Medicaid Data Match Program."

ProTPL Saves Medicaid TPL Millions

Discovering Medicaid TPL is very difficult for program administrators as they deal with bad quality data that is not up to date, usable, or correct. Since they are not able to effectively determine TPL before claims are paid, improper payments are costing Medicaid billions of dollars. Medicaid plans agree that cost avoidance makes more sense than pay and chase, but the ability to execute it effectively has not been widely available. Now, through Syrtis Solutions' ProTPL, payers of last resort are able to cost avoid pharmacy and medical claims on the front end. Their solution minimizes the need for recovery and the associated expenses while cost avoiding payments. Those involved in the process of Medicaid claims adjudication have been working with the best tools they had available. Now, they have new and better tools through Syrtis.

Click here and learn more. 

JULY MEDICAID NEWS ROUNDUP

Syrtis Solutions issues a monthly Medicaid news recap to help you stay informed. The monthly roundup focuses on developments, analysis, and legislation that relates to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Here is a summary of last month's significant Medicaid developments.

Click here to open July's news.

MEDICAID PHARMACY CARVE-OUTS

 

Wisconsin Pharmacy Benefit Carve-Out

In 2020, the Wisconsin Department of Health Services carved out prescription drugs from the Family Care Partnership Program and transitioned to a Fee-for-Service (FFS) delivery model. The carve-out ensured compliance with the 2020 Medicaid and CHIP Managed Care Final Rule and eliminated the need for Managed Care Organizations (MCOs) to implement their own drug utilization review program. In addition, Wisconsin believes that the carve-out will reduce Medicaid costs by lowering prescription drug prices. To date, Wisconsin, Tennessee, West Virginia, and Missouri have carved-out their Medicaid pharmacy benefit.

How States Manage Medicaid Drug Costs

Medicaid's drug spend has skyrocketed over time, and in 2017 it reached $64 billion. While states are not obligated to include pharmacy benefits in their Medicaid programs, the majority do because it is an important part of modern medicine and greatly improves the coordination of care. As a result of Medicaid expansion, surges in enrollment, and the pandemic-driven recession, the problem has only been exacerbated. When states are dealing with fiscal pressure, they usually look to different payment strategies, utilization controls, benefit delivery models, or reductions in program benefits to decrease costs.

Generally, states will employ one of two different methods to manage the costs of drugs. The most common approach is for a state to contract with a MCO and PBM to manage their pharmacy benefits. The alternative is to carve-out Rx benefits and manage drugs by means of a fee-for-service delivery model. Below, we will review the pros and cons of each model to understand their impact on Medicaid drug costs better.

ACA Drug Rebate Policy Changes

States who opt to carve-out Medicaid Rx benefits think they will receive lower drug prices by negotiating with pharmaceutical manufacturers directly. This approach has been successful in some situations; however, the passage of the Affordable Care Act (ACA) introduced drug rebate policy changes that totally altered state prescription drug plans.

Under the ACA, drug companies were mandated to raise the rebate percentage for states from 15.1 percent to 23.1 percent. Aside from the eight-point increase, MCO beneficiaries were also made eligible for these rebates. Prior to the ACA, these rebates were only for enrollees in fee-for-service Medicaid programs.

After the ACA was implemented, The Lewin Group, a premier national health care and human services consulting firm, examined the effect of these changes. Their report, Projected Impacts of Adopting a Pharmacy Carve-In Approach Within Medicaid Capitation Programs, revealed that the ACA eliminated the savings advantage that cave-outs previously had. Furthermore, their report studied carve-outs in fourteen states and concluded that those states could save $12 billion over a ten-year duration by carving-in Rx benefits.

Following the ACA's rebate and eligibility changes, most states contracted with MCOs to deliver care to Medicaid beneficiaries. By 2017, there were 39 states with Medicaid MCO contracts, and 35 had carved-in their Medicaid prescription drug benefits. As of July 2018, 40 states were contracted with risk-based managed care plans, and 5 had carved out prescription drugs.

Recent Carve-Outs

While most states have kept pharmacy benefits carved into their managed care contracts, there continues to be carve-out activity and other efforts to lower costs.

New York was planning to carve out pharmacy benefits starting April 1, 2021. Medicaid members enrolled in managed care plans, health and recovery plans, and HIV-special needs plans would begin to receive their prescription drugs through a Medicaid FFS pharmacy program as opposed to their MCO. However, the change has been postponed two years due to an amendment of the state budget after lobbying efforts. The transition to the new Medicaid FFS model will now go into effect on April 1, 2023.

In 2019, Ohio's legislature directed the state to select a Single Pharmacy Benefit Manager (SPBM) after growing criticism of how its pharmacy benefits were being administered. Following the order, the state released a RFP for a SPBM that would contract with Ohio directly to improve transparency and manage its prescription drug program. Ohio's newly designed program is anticipated to take effect at the beginning of 2022.

In 2019, Governor Gavin Newsom signed an executive order that California would move all pharmacy services for Medi-Cal to a FFS model. As a result, California expects to negotiate better drug prices from drug companies by consolidating purchasing power and leveraging the state's population size. According to the Legislative Analyst's Office, carving-out could result in hundreds of millions in savings annually. That being said, the move is controversial. There are concerns over its possible impact on MCOs, PBMs, pharmacies and the coordination of care since California's Medicaid Rx benefit is currently managed by ten separate PBMs responsible for 90% of the state's Medicaid beneficiaries.

In 2019, Michigan's Department of Health and Human Services issued a notice of proposed policy declaring that outpatient drug coverage would no longer be a benefit and the state would move to a FFS model. Michigan anticipated saving approximately $10 million on a yearly basis using drug rebates and doing away with associated administrative capitation costs. Critics opposing the decision alleged that it did not align with MHP's goal of delivering whole-person integrated care. They believed that out of pocket costs would increase and members would not have the appropriate overview of their prescriptions. After considering the carve-out, the state decided to implement a single Medicaid Preferred Drug List (PDL) instead.

Like Michigan, Washington state has also introduced a PDL to minimize costs. The Apple Health Preferred Drug List was rolled out in 2018, and all Medicaid MCO plans and fee-for-service plans were mandated to use the PDL.

Medicaid Payers and PBMs

Although states determine what delivery model they use to coordinate care, MCOs stand behind carving-in Medicaid Rx benefits. Whenever a program benefit, like prescription drugs, is carved out it makes the coordination of care challenging and awkward. MCOs believe that when pharmacy benefits are carved-in, program performance is strengthened, quality is improved, and costs are reduced.

In 2015, America's Health Insurance Plans (AHIP) commissioned a report from The Menges Group that evaluated the impact of carving-out prescription drug benefits from MCO benefit packages. According to The Menges Group, "the decision to carve out pharmacy benefits is likely to significantly increase costs for states and the Federal government". The evaluation also discovered that in "28 states using the carve-in model, the net cost per prescription was 14.6 percent lower than the average net cost per prescription in states not carving in pharmacy."

Critics of the managed care model argue that PBMs add to the high cost of drugs, as they operate like middlemen in getting pharmaceuticals from manufacturers to patients. PBMs obviously disagree with this criticism. Instead, they maintain that they are uniquely positioned to help manage the cost of Medicaid Rx benefits. PBMs work to negotiate rebates, manage formularies, provide mail-order options to patients, manage the distribution of drugs among pharmacies, and provide specialty drug services.

Over time pharmacy spend has become an increasing expenditure in state budgets. Because of fiscal pressure states are considering different delivery models, PDLs, and legislation to reduce drug costs. While most states deliver pharmacy benefits through managed care models, a handful have chosen to carve-out prescription drugs and shift to FFS models. In addition to lowering drug costs, states should also seek out cost avoidance opportunities and further efficiency in their Medicaid plans to reduce costs.

Click this link and continue reading. 

JUNE MEDICAID NEWS RECAP

 

Syrtis Solutions sends out a monthly Medicaid news summary to help you stay up-to-date. The monthly recap highlights developments, research, and legislation that relates to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Here is a summary of last month's significant Medicaid developments.

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COST AVOIDANCE IN MEDICAID WITH E-PRESCRIBING

Medicaid payers face the challenging task of recovering claims payments made in error when program beneficiaries fail to report primary coverage information at the time services are rendered. Plan beneficiaries do not share other coverage information for a number of reasons, but usually, they are not aware that other coverage exists. Without technology at the point of sale to prospectively discover other health insurance (OHI) coverage, payers of last resort cannot help but make claims payments incorrectly. Once it is identified that a claim was the responsibility of another third party payer, Medicaid plans try to recover those payments with a process called pay-and-chase. Unfortunately for payers trying to recover improper claims payments, the actual monies recovered remain around twenty cents on the dollar. Within this post, we will examine a new approach to Medicaid third-party liability cost avoidance. We will explain how e-prescribing functions and how its OHI databases can be used by Medicaid to cost avoid millions of dollars in payments made in error.

What Is E-Prescribing?

An e-prescribing infrastructure provides a safe and secure means to electronically connect patients, healthcare providers, pharmacies, and pharmacy benefits managers (PBMs). It outlines the ability to send error-free, accurate, and understandable prescriptions electronically from the provider to the pharmacist. For an e-prescribing system to function, there must be a master database that keeps consistent, accurate, and current demographic and necessary medical data on the patients seen and managed within its different departments. The need for prompt and accurate OHI data requires the cooperation of health plans and PBMs to provide ongoing active eligibility data to the database.

The Transaction Hub is the common link between the prescriber, pharmacy, and PBMs. The hub directs inquiries to PBMs and prescriptions to pharmacies. For this complex process to operate, the eligibility and demographic data that passes through must be consistent, accurate, and current. This is accomplished through a Master Patient Index.

A master patient index (MPI) is a database used across e-prescribing platforms to maintain consistent, accurate, and current demographic information and essential medical data on the patients seen and managed within its different departments. MPIs are intended to solve the common problem where multiple systems throughout the organization progressively become inconsistent with respect to the patient's most current data; for example, when the patient's information changes and only one system is updated, the changes are not propagated to the others.

When the Transaction Hub receives patient demographics and medication from a healthcare provider, it will verify the patient with the MPI, sending an electronic message to the PBM. In response, the PBM will send information on the patient eligibility, formulary, and medication history back to the Transaction Hub. The Transaction Hub then sends this information back to the healthcare provider, who can make a decision about the prescription based on this information.

Leveraging an E-Prescribing MPI for Medicaid TPL Efforts

As previously stated, the key to an effective e-prescribing system is its MPI, which is continuously being updated by its partners. The eligibility and demographic data that passes through must be consistent, accurate, and current for the system to operate. While an e-prescribing MPI is built specifically for electronically writing prescriptions, we have found another significant use for it in Medicaid TPL cost avoidance.

Anyone involved with Medicaid TPL recognizes that the market needs a technology-based solution to improve recovery efforts. In 2010, Syrtis Solutions began the process of experimenting with the Surescripts MPI to see if we could deliver high-quality, active Rx coverage and corresponding medical coverage that other processes cannot provide. This lead to the development of ProTPL, a real-time point of sale cost avoidance solution.

Through the active participation of almost every PBM and payer in the commercial healthcare marketplace, the Surescripts MPI of more than 280 million covered lives is the largest in the nation. Connectivity to the Surescripts MPI allows for superior OHI discovery.

ProTPL Case Study

In a year-long case study with one of our Medicaid Managed Care customers, for which nearly 3 million transactions were processed, 38,754 utilizing members were found to have OHI. These discoveries resulted in the cost avoidance of $14.6 million in unnecessary claims payments.

The first step to gaining insight into how this solution will benefit your organization is for Syrtis Solutions to perform a no-cost quantitative claims analysis. By checking your claims against the Surescripts MPI, we can, in empirical terms, show you exactly how much your Medicaid plan can save.

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