IS MEDICAID MANAGED CARE IN DANGER?

The AHCA, which narrowly passed in the House of Representatives, aims to cap federal Medicaid funding. The major drop in funding could possibly put an end to Medicaid Managed Care as we know it. Converting the open-ended entitlement program to a system of per capita caps or block grant payments would make it very challenging for Medicaid managed care plans to continue to function. The CBO estimates, that over a ten-year period, federal Medicaid spending would be reduced by $834 billion.

States that did not end their Medicaid expansion programs could likely see an increase in enrollment. According to Joe Moser, "States are going to look for what gives them budget predictability, and that's what managed care does. You will see more states expanding their managed care populations to more critical populations." PwC at the moment estimates that 73% of Medicaid beneficiaries are covered by Medicaid managed care; however, this does not account for those in need of long-term care or the disabled. It is very easy to presume that by shifting these groups to managed care; states could reduce costs as federal funding begins to dry up. Ari Gottlieb, of PwC stated, "A per capita cap could accelerate the trend of managed care." Still, insurers contend that the proposed fixed-payment formula will put plans at risk. They vehemently disagree that the formula would offer adequate resources for an unanticipated economic recession, new public health needs, or new prescription medications and treatments.

Under the proposal, the guideline for state's per-capita beneficiary group spending would be established off of the 2016 fiscal year. Payments would rise yearly at the rate of the Medicaid component of the CPI. The elderly, blind, and disabled payments would also increase at CPI plus one percentage point. Medicaid spending in 2016 reached $548 billion. The consulting firm, Health Management Associates measured that Medicaid managed care spending went from $238 billion in 2015 to $269 billion in 2016.

Anna Gupte, an analyst at Leerink Partners, strongly believes that the 2016 baseline will make it more likely that states will cut payment rates to managed care plans if costs or enrollments increase. Medicaid plans' operating margins average around 2%. "I expect margin compression as states claw back rates in Medicaid to offset the funding pressure from the rollback in Medicaid funding and a move to per capita caps."

Insurance companies are looking to the Senate for a correction in the AHCA's framework for federal Medicaid payments to the states. More specifically, they would like the calculating baseline year to adjust every two years. Additionally, insurers want states to be required to adhere to federal actuarial soundness in arranging payment rates to Medicaid plans. John Lovelace, president of UPMC, stated, "The concept of a per capita cap is fine. It's a devil in the details conversation."

The situation could be critical if there are zero protections in place and the bill passes without any revisions. Meg Murray, CEO of ACAP, whole-heartedly opposes the House bill's Medicaid provisions. "What we're worried about is that plans wouldn't be able to survive. It could end up fundamentally undermining the Medicaid managed care system and all the good things that have come out of it."

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H.R. 938 MISSES THE POINT: THE NEED TO MAKE MEDICAID MORE EFFICIENT

By Howard Green

H.R. 938, the Medicaid Third Party Liability Act, was recently presented by Rep. Michael Burgess (R-Texas) to help Medicaid save money. As legislators return to Washington this week, health care remains at the top of their agenda. The primary issue amongst Republicans is how to handle the Medicaid debate, particularly in states that expanded the program, or are choosing to expand under the ACA. But they will have a challenging time funding the expansions without continued federal support. The outcome of the decision is sure to affect patients, health care workers and the overall economy.

The Trump administration has left all sectors involved in health care with uncertainty. The promise to repeal and replace the Affordable Care Act with the AHCA passed by a razor thin margin last month in the House of Representatives. Waivers to alter Medicaid are being submitted to HHS for review. And the publication of the president's budget creates ambiguity with regard to the level of federal funding states can count on.

Trump's budget, "A New Foundation for American Greatness," eviscerates spending in almost every department except defense. While it has little to no chance of passage, health care professionals caution that it shouldn't be ignored because it demonstrates clear intent. "It's hard to imagine that it'll be enacted fully, but at a minimum, it reflects the priorities of the administration," says Elizabeth Burak, senior program director at Georgetown University's Center for Children and Families.

The administration's submitted budget would slash Medicaid spending by $800 billion over a decade. This is above and beyond suggested cuts in the American Health Care Act to replace the ACA, which the President's budget assumes will become law. If both the President's proposed budget and the AHCA were to pass, states will encounter well over a $1 trillion reduction in Medicaid funding.

Trump's budget director, Mick Mulvaney, emphatically argues that the decreases in funding, along with the shift to per capita caps and block grants, would offer states more flexibility in the administration of their respective Medicaid programs. However, most health care experts believe that such deep cuts would only give states flexibility in disenrollment plans for a large swath of Medicaid beneficiaries.

So currently, more than ever, Medicaid plans should be concentrating their efforts on finding ways to further efficiency and cost savings ahead of potential funding cuts. Discovering ways to save taxpayer money is certainly a good practice regardless of the political headwinds, but now; Medicaid overseers can not rest on their laurels and assume the status quo of federal funding will continue. They need to begin getting aggressive in cost control. Recently, House Bill H.R. 938 was presented to do just that.

H.R. 938, known as The Medicaid Third Party Liability Act, aims to remove loopholes that forces Medicaid to pay for claims that are the liability of primary payers. As much as 13 percent of Medicaid members around the nation hold additional insurance other than Medicaid, which is called Third Party Liability (TPL). Types of TPL include employee insurance, Workers' Compensation, Medicare, COBRA health insurance from former employment, casualty insurance, dental insurance, eye insurance and insurance to cover pharmaceutical costs. In these instances, Medicaid pays last, and if a Medicaid member holds other insurance coverage, that insurer pays first and then Medicaid pays any remaining costs.

H.R. 938 was formed to increase savings and promote efficiency by eliminating loopholes that third parties have been capitalizing on. The bill protects against payers that are liable for costs from holding back payments to Medicaid. The primary provisions in H.R. 938 that help Medicaid avoid the costs of improper claims payments are:

• H.R. 938 would thwart efforts of liable commercial payers to deny reimbursement of claims due to a lack of prior authorization.
• H.R. 938 would afford Medicaid Managed Care Organizations (MCOs) the same rights as state-run Fee For Service plans to be the payer of last resort.
• H.R. 938 would replicate the same prompt payment standards regularly enforced in the commercial marketplace, but in this case, the recovery of improper claims payments made by Medicaid that are really the liability of a primary insurer.

While the provisions of The Medicaid Third Party Liability Act are solid steps in the right direction, they are in a sense addressing the symptoms of improper claims payments, rather than the disease of "Pay & Chase". What we need is more pressure or incentive to persuade Medicaid plans to get better at identifying TPL prior to improperly paying for claims. The Social Security Act, signed into law by President Franklin Roosevelt in 1934, states in the statute § 1902( a)( 25) of the law "... that the State or local agency administering such plan will take all reasonable measures to ascertain the legal liability of third parties ... to pay for care and services" delivered to Medicaid recipients.

Passage of the Medicaid Third Party Liability Act (H.R. 938) will help recover money that was spent incorrectly, but until we shift our focus from Pay & Chase to prospectively preventing the costs of improper payments, Medicaid will still see substantial amounts of waste.

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PROPOSED MEDICAID REDUCTIONS FROM PRESIDENT TRUMP'S ADMINISTRATION

By Howard Green

Medicaid could receive funding cuts due to Trump's 2018 budget proposal and this may fundamentally transform how the Medicaid program operates. The proposals goal is to give individual states flexibility. According to the budget, states will have an option between receiving a block grant in the fiscal year 2020 or they can choose to receive Medicaid funds as a per-capita cap grant. This is the foundation of the American Health Care Act, which, if passed in the Senate, would take the place of the Affordable Care Act.

Richard Frank, a Harvard Medical School professor, feels this will fundamentally change how Medicaid would operate. "It's no longer an open-ended matching program" and the proposal "fundamentally changes the kind of contract that exists between the states and the federal government." The CBO estimates that 14 million people will no longer have access to Medicaid by 2026 as a result of the AHCA eligibility requirements.

IN THE PAST, STATES RECEIVE MONEY FOR MEDICAID FOR:
New treatments

Treatment expenses

An increase in healthcare needs

In addition to the federal government match, states themselves fund a considerable amount for their Medicaid programs. This is beginning to exhaust resources locally and federally because Medicaid has always been an open-ended entitlement program.

The possible passage of the proposed budget plan has states on their feet to grow their Medicaid programs. Since the implementation of the ACA, eligibility requirements became relaxed and contributed in broadening access to a larger percentage of the population. To compensate for the increased amount of enrollees, states received enhanced federal funds. States such as North Carolina, Virginia, and Kansas made efforts to expand in March but failed.

NO MEDICAID PLAN IS FLAWLESS

Richard Frank is troubled with the proposal's two funding choices because the medical care CPI does not account for shifts in the population or unexpected crises. For instance, overall improved health and longer life spans have risen in recent years. People are more healthy and living longer. This means in the near future, the amount of eligible enrollees to the program will increase and create a larger demand on Medicaid. Dr. Frank feels that the costs for elderly people's healthcare would jump at a faster rate than the medical care CPI.

In addition, the per-capita funding option would organize people into groups based on age or disabilities. This is problematic since the groups would be too broad and would not allow for effective distribution of available funds. The Harvard medical professor estimates there will be a 9% shortfall, which translates into $10 billion annually that states would have to satisfy. On the other hand, the CBO estimates that spending will be reduced 25% by 2026 compared to the ACA.

STATE'S OPTIONS

In the current landscape, states will need to either cut expenses or invest in their programs. If they cut costs, beneficiaries will lose coverage and the eligibility requirements will become stricter for future enrollees. It's thought that substance abuse and mental illness treatment would be the first to be discontinued. This is problematic given that opioid deaths increased 15% between 2014 and 2015. The medical care CPI doesn't account for that growing rate.

At this point, there is a significant amount of criticism as to what should be done and how it should implemented. What is certain is that the demand for Medicaid is increasing and there are many opinions on the best course. Currently, a majority of the public thinks the program should remain the same.

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$36 BILLION IN IMPROPER MEDICAID PAYMENTS IN 2016

For the fourth straight year, the federal government increased the amount of money described as improper payments. The Government Accountability Office is reporting that agencies exceeded $144 billion in improper payments in fiscal 2016, up from $137 billion in 2015.

This escalation translates to a higher improper payment rate as well, up to 4.67 percent of all outlays from 4.39 percent last year. Regardless of the increase, the rate still is half a percent lower than when President Barack Obama entered office in 2009, U.S. GAO said.

" This increase between FY 2015 and FY 2016 can be attributed to percentage and dollar increases in the Medicaid Program, the Direct Loan Program, the Medicare Part C Program, the Pell Grant Program, the VA Community Care Program, and the Earned Income Tax Credit (EITC) Program," U.S. GAO mentioned in the report released January 12. "For fiscal year 2016, federal entities reported improper payment error rates that exceeded 10 percent for 11 risk-susceptible programs, accounting for more than 70 percent of the governmentwide improper payment estimate."

GAO states the Medicare Fee for Service (FFS) program accounted for the largest amount of improper payments-- $41 billion or 28 percent of the governmentwide total. Medicaid was the second with $36 billion or 25 percent of the governmentwide total while the EITC and Medicare Part C joined account for the third with $33 billion or 23 percent of the governmentwide total.

On the positive side, The GAO claimed the government recovered about $20 billion in overpayments last year. To be clear, an improper payment does not suggest the federal government overpaid a beneficiary or another customer. An improper payment could signify someone was underpaid as well.

" Approximately $44 billion of the governmentwide improper payments in fiscal 2016 are caused by insufficient documentation. A lack of supporting documentation could be a situation where there is a lack of supporting documentation necessary to verify the accuracy of a payment identified in the improper payment testing sample such as a program not having the documentation to support a beneficiary's eligibility for a benefit," GAO stated. "Approximately $34 billion of the governmentwide improper payments in fiscal 2016 were caused by the inability to authenticate eligibility." The GAO explains the inability to authenticate eligibility is a problem where the agency can't identify if the citizen is eligible to prevent a payment.

The OMB has been pushing for agencies to employ more and better data and other approaches to decrease improper payments.

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MEDICAID’S WASTEFUL SPENDING – THE NUMBERS

The CMS has seen an extraordinary surge in improper Medicaid payments and suggests the Affordable Care Act might be the reason. The Medicaid improper payment rate has vaulted from 5.8% or $14.4 billion in fiscal 2013 to 9.78% or $29.12 billion in fiscal 2015, according to an HHS financial review.

An improper payment might occur when funds go to the incorrect recipient, the Medicaid enrollee has other primary insurance coverage, information is not available to support a payment or the recipient uses funds in an inappropriate manner. The tally incorporates fraudulent claims but is by no means a measure of fraud.

In a post on the CMS blog, chief medical officer Dr. Patrick Conway notes, "When we talk about improper payments, it's important to remember what they are and why they happen. To be clear, improper payments are not typically fraudulent payments."

Dr. Conway goes on to explaining the jump, attributing the increase to challenges that state organizations are having with new provider enrollment and screening guidelines under the Affordable Care Act. Without having these new requirements, the Medicaid improper payment rate would have dropped to 5.1%, Conway said.

" We often see such increases when new requirements take effect, as states and providers often need time to modify their operations in order to comply with the updated standards," Conway said. "We believe, however, that these requirements will ultimately strengthen the Medicaid and CHIP programs, and that the improper payment rates will again decrease with state and provider experience."

So far, Medicaid Recovery Audit Contractors (RACs) are actually providing little assistance to states in recovering improper payments. States were obligated to employ Medicaid RAC programs by Jan. 1, 2012, under the Affordable Care Act. Recoveries amounted to $57.71 million in fiscal 2015, up slightly from $55.1 million in fiscal 2014, according to the review. The audit does not clarify why the RAC recoupment is so low, however, it does raise concerns as to why the emphasis remains on post-payment recovery versus the application of technological innovations to avoid paying claims in error.

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Medicaid Improper Payment Rate Continues to Grow

Last month The house held a hearing regarding the growing number of improper payments in Medicare and Medicaid. The House oversight panel reviewed concerns regarding increasing improper payment rates discovered by federal oversight groups which include the Government Accountability Office (GAO) and the Health and Human Services Office of the Inspector General (HHS-OIG).

The key testimony came from Dr. Shantung Agrawal, CMS's Director of the Center for Program Integrity. Dr. Agrawal explained how CMS and the states were employing guidance from the GAO and HHS-OIG to reduce improper payments. He also discussed challenges with carrying out program integrity initiatives, particularly in the state Medicaid programs.

In 2005, CMS implemented the Medicare Recovery Audit Program, resulting in billions of dollars recovered for the Medicare Trust Fund. CMS has also implemented numerous other programs to identify and recover improper payments, including the Medicaid Integrity Program, Zone Program Integrity Contracts and a host of others. These programs are sizable and complex efforts, and although they have had certain success, the improper payment rate for Medicare and Medicaid continues to grow.

It's time that we stop throwing away tax dollars as a result of inefficiency and poor technology. CMS and state Medicaid agencies should focus their efforts on proactively avoiding improper payments, not on detecting liable primary payers after the improper payment is made and then attempting to recoup the wasted dollars after the fact (A systemic method known widely as "Pay & Chase"). The means to achieve this is by implementing prospective cost avoidance at the time claims arrive to the Medicaid plan, before any remittance is made. Technologies are actually currently obtainable that can stop paying on claims that are the liability of third party commercial payers, which account for 56% of Medicaid's improper payments. Prospectively identifying if a Medicaid recipient has primary coverage will effectively eliminate the necessity for post-payment recovery.

To this end, the program which gauges Medicaid improper payments and eligibility could be getting tougher in the future under a new rule proposed by CMS last Monday.

The measure would apply stipulations of the Affordable Care Act in the Payment Error Rate Measurement program, that generates improper payment rates accordinged to assessments of the fee-for-service, managed care and eligibility components of Medicaid. A major provision is that the task of performing PERM eligibility assessments would move to a state-supported federal contractor, rather than the current provision requiring states to administer their own eligibility reviews and document results to CMS.

States whose improper payment rates surpass 3% could face stricter Corrective Action Plans and potential payment reductions or disallowances under the proposed regulation. Monday's proposal likewise would transform the Medicaid Eligibility Quality Control program, a separate eligibility assessment program that obligates states to report the ratio of their improper payments for medical services compared with their total costs for medical services.

The aim is to "restructure" the program so it can help states decrease their eligibility improper payment rates, and more effectively complement PERM.

The agency is taking comments on the proposed rule through August 22. Click here to read the entire proposal in the Federal Register.

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Trends is Medicaid Managed Care Spending

Federal spending for Medicaid managed care represented over one-third of the entire government Medicaid spending in 2014, according to a government report (GAO-16-77) released Jan. 19 that showcases exactly how states are progressively relying on managed care as they expand Medicaid coverage under the Affordable Care Act.

The Government Accountability Office report said federal spending on Medicaid managed care increased from $27 billion in fiscal year 2004 to $107 billion in FY 2014. Managed care as a percentage of total federal Medicaid spending was higher in seven of eight selected states in fiscal year 2014 compared with 2004, yet total and average per beneficiary payments by states to managed care organizations (MCOs) varied.

The importance of managed care in Medicaid-- under which states contract with MCOs to provide a specified group of programs-- has increased as states increase eligibility for Medicaid under the ACA and progressively move people with complicated health needs into managed care, the report said. States have flexibility inside broad federal guidelines to develop and execute their Medicaid programs, and as a result play a critical role in overseeing managed care.

Medicaid managed care plans serve some or all Medicaid enrollees in 39 states and DC, and more than half of all Medicaid beneficiaries obtain all or some of their care from risk-based managed care organizations.

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