Medicaid Managed Care for Persons with

Severe Mental Illness in New York:

Challenges and Implications

Michael Birnbaum

Director of Policy, Medicaid Institute

United Hospital Fund

June 5, 2008

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The Medicaid Institute at the United Hospital Fund provides information and analysis explaining New York’s Medicaid program, with the goal of helping all stakeholders redesign, restructure, and rebuild the program.

“The Institute’s mission is to shape sound health policy and practice so that Medicaid can meet its most important challenges: covering more low-income New Yorkers, better managing patient care, reforming payment systems, providing effective long-term care, and improving program administration.”

James R. Tallon, Jr. PresidentUnited Hospital Fund

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A cornerstone of New York’s health insurance system

Medicaid provides insurance to 4.1 million low-income New Yorkers.

1.6 million children

1.5 million (non-elderly, non-disabled) adults

Over 1 million elderly or disabled beneficiaries

Medicaid funding sustains nearly one-third of New York’s health care economy.

Medicaid accounted for $44.7 billion in payments to health care providers and plans in New York in 2006.

Note: Medicaid enrollment is from June 2007; categories do not sum to total due to rounding. Source: United Hospital Fund analysis of NYS DoH enrollment reports; CMS NHE and 64 data.

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0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Original MMC Family Health Plus

Source: United Hospital Fund analysis of NYS Department of Health enrollment reports: March 1997 – March 2007.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Managed care enrollment: 1997 - 2007

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Managed care penetration

Source: United Hospital Fund analysis of NYS Department of Health enrollment reports: April 2007.

77%

15%

85%

23%

0%

25%

50%

75%

100%

Children and Adults Elderly and Disabled

Managed care enrollees All others

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Managed care: 60% of enrollment and 14% of spending

Note: Medicaid spending is from FFY 2006. Enrollment is from December 2006.Source: UHF analysis of New York State Department of Health enrollment reports andCMS 64.

60%

14%

40%

86%

0%

25%

50%

75%

100%

Medicaid enrollment Medicaid spending

Managed care FFS, residential care, all other services

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Disabled and Elderly (SSI) Medicaid beneficiariesin New York City

SED mandate10,000

Initial mandate125,000

Enrolled voluntarily

50,000

SPMI mandate25,000 Excluded

350,000

RemainingExempt40,000

N = 600,000

(2006)

(Prior to 2006 )

(2007)

(2007)

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Medicaid Institute analysis of beneficiaries with SPMI

Analysis of beneficiaries’ spending, service use, and diagnostic patterns using the Medicaid paid claims file. Data provided by New York State Department of Health

Research and statistical programming by Center for Health and Public Service Research, New York University

SSI adults (18-64) with SPMI in FFS Medicaid as of December 2004 and facing mandatory managed care. Cohort identified using DOH algorithm, based on utilization

thresholds for mental health services.

Slightly different population than those meeting a clinical definition of SPMI.

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Those with the most severe mental health conditions

SSI adults with SPMI most often have :

Major depression

Bipolar disorder

Schizophrenia

Other psychosis

Some combination of the above

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19%25% 26%

18%

30% 31%

42% 40%50% 51%

20%21%

0%

20%

40%

60%

80%

100%

All Lower cost High cost Ultra-highcost

Asthma Diabetes Cardiovascular condition

Rates of select chronic conditions: SSI adults with SPMI

Note: Data are from 1999 through 2004. Cardiovascular conditions include coronary heart disease, congestive heart failure, and hypertension. Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

Bottom 80% Next 15%Top 5%

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19% 20% 18% 17%

28%23%

48%54%

0%

20%

40%

60%

80%

100%

All Lower cost High cost Ultra-highcost

Cancer Substance abuse condition

Prevalence of other significant health conditions: SSI adults with SPMI

Note: Data are from 1999 through 2004. Substance abuse conditions include alcoholism and drug addictions. Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Primary care visits in a one-year period: SSI adults with SPMI

14% 20%

38% 36%37%

49% 49% 51% 43%

13%13%

38%

0%

25%

50%

75%

100%

All Lower cost High cost Ultra-highcost

None 1 to 5 6+

Note: Data are for CY 2004. Shares may not sum to 100 percent due to rounding.Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Outpatient mental health visits in a one-year period: SSI adults with SPMI

9%16% 18%

27%26% 30% 14%

15%

54% 53%63%

49%

3% 5%2%17%

0%

25%

50%

75%

100%

All Lower cost High cost Ultra-highcost

None 1 to 12 13 to 24 25+

Note: Data are for CY 2004. Shares may not sum to 100 percent due to rounding.Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Outpatient prescription drugs: SSI adults with SPMI

98% 97% 93%

7%3% 3%2%

97%

0%

25%

50%

75%

100%

All Lower cost High cost Ultra-highcost

None Some

Note: Data are for CY 2004. Shares may not sum to 100 percent due to rounding.Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Hospital admissions in a one-year period: SSI adults with SPMI

71%

10%

15%13%

24%

16%

14% 5%

42%

74%

34%

82%

0%

25%

50%

75%

100%

All Lower cost High cost Ultra-highcost

None One Two or more

Note: Data are for CY 2004. Shares may not sum to 100 percent due to rounding.Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Hospital admissions in a one-year period – a closer look: SSI adults with SPMI

34%

42%

33%

16%

27%

7%

30%

10%0%

25%

50%

75%

100%

High cost Ultra-high cost

None One or two Three or four Five or more

Note: Data are for CY 2004. Shares may not sum to 100 percent due to rounding.Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Less concentrated Medicaid spending

There are very few low-cost SSI adults with SPMI.

The 80-20 rule does not apply.

The lowest-cost 80 percent accounts for 46

percent of the cohort’s total spending.

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$24,643

$88,277

$14,395

$49,979

$115,183

$3,810$0

$30,000

$60,000

$90,000

$120,000

Low cost High cost Ultra-high cost

Initial mandate (non-SPMI)

SPMI

Note: Costs are for CY 2004 and are not annualized for full-year enrollment. Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007. Birnbaum M. and J. Billings. New York’s SSI Beneficiaries: the Move to Managed Care. Medicaid Institute at the United Hospital Fund, 2006.

Comparison of per capita Medicaid spending:SSI adults

(Bottom 80%) (Next 15%) (Top 5%)

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For lower-cost SSI adults with SPMI—the bottom 80 percent—two-thirds of Medicaid costs are already driven by services that would be a cornerstone of any intervention aimed at curbing spending. Outpatient mental health services Outpatient prescription drugs

Inpatient hospital account for only a small share (13%) of their Medicaid costs—leaving a very small target for spending that is “potentially avoidable.”

Where can the Medicaid savings come from?

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Patient profile: lower-cost beneficiary

Ms. F

Total Medicaid costs2004 $21,8282003 $22,9022002 $33,196

2004 service useHospital admissions -

Outpatient MH visits 169Outpatient MH costs $12,898

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Mr. A

Total Medicaid costs2004 $146,6192003 $173,6332002 $124,433

2004 service useHospital admissions 21 Of which MH 21Hospitals visited 12Inpatient days 246Inpatient costs $144,695

Outpatient MH visits 3Outpatient MH costs $646

Patient profile: ultra-high cost beneficiary

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Services delivered through FFS for MMC enrollees:

Outpatient mental health

Inpatient mental health Includes stays in general hospitals with MH diagnosis

Outpatient substance abuse

Inpatient substance abuse

Outpatient prescription drugs

Key services are carved out of New York’s managed care benefit for SSI enrollees, including those with SPMI.

Note: One substance abuse service, detoxification, is carved-in for SSIs.

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Note: shaded cells are carve-outs All Lower High Ultra-high

Hospital inpatient 8,346$ 1,816$ 19,955$ 77,970$ physical health 1,890$ 641$ 4,574$ 13,818$

mental health 5,831$ 1,037$ 13,419$ 59,753$ substance abuse 625$ 138$ 1,963$ 4,399$

Outpatient mental health 5,898$ 4,378$ 11,041$ 14,778$ Outpatient substance abuse 355$ 270$ 767$ 483$

Prescription drugs 5,489$ 4,975$ 7,895$ 6,488$ All other 4,686$ 2,955$ 10,320$ 15,464$

Total spending 24,773$ 14,395$ 49,979$ 115,183$

HI as % of total spending 34% 13% 40% 68%Behavioral health as % of HI 77% 65% 77% 82%

Key sectors carved out of MMC 18,197$ 10,798$ 35,084$ 85,901$ Carve-outs as % of total spending 73% 75% 70% 75%

Average per capita spending by service area:

SSI adults with SPMI

Note: Costs are for CY 2004. Source: Birnbaum M. and L. Powell. Medicaid Managed Care for Persons with Severe Mental Illness: Challenges and Implications. Medicaid Institute at United Hospital Fund, 2007.

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Current policy limits MMC plans’ ability to coordinate care and may undermine incentives to reduce hospitalizations.

Most spending remains outside managed care

State cannot assess MMC plan performance

Achieving cost savings and providing high-quality coordinated care will require a strategy beyond the two existing options:

MMC with significant carve-outs

Fee for service

Challenges and opportunities