Medicaid OverviewTrey Wood, Chief Financial Officer

Stephanie Muth,State Medicaid Director

February 6, 2019

HHSC Budget OverviewMajority of budget is allocated to Medicaid client services

Other Grants/Client Services include TANF, Women's Health, MHBG, ECI, etc.

MSS Program Admin includes salary, travel, and contracts (Eligibility staff, TIERS, TMHP, etc.)

State Supported Living Centers appropriations include Medicaid funding.

Indirect Administration includes PCS, FSD, GR/Comms, Legal, Internal Audit, Regional Support, etc. 2

Key Budget Drivers

• HHSC projects caseloads to increase by about

1 percent each year of the biennium for

Medicaid and 4.5 percent for CHIP

• Acute care Medicaid cost growth ranges

between 2.4 percent and 5.5 percent each year

of the biennium

• Cost growth is impacted by:

➢ Utilization trends

➢ Benefit changes

➢ Population acuity factors

➢ Aging and births

➢ Evolutionary and revolutionary advances in

medicine 3

Medicaid Caseload Trends

4

2,878,126

3,005,620

3,298,099

3,543,0573,655,930 3,658,629

3,746,124

4,056,702 4,060,5644,067,380

4,021,6673,968,049

4,026,3584,094,589

4,007,4524,056,515

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Historical and Estimated Caseloads Compared With 86th Legislature Appropriated Caseloads for Fiscal Years 2008 - 2021

House Bill 1 Caseloads

Current (Prelim December 2018) Medicaid Caseload: 3,940,000

Total Disability-Related Clients: 410,000 (10%)

Total Income-Eligible Children Clients: 2,884,000 (73%)

November 2018: LAR Update

2020-2021 (in italics)

House Bill 1

Caseloads

Medicaid Caseload: Final through June 2018 Preliminary data through January 2019; Forecast data starting February 2019

Medicaid Federal Funds

Medicaid is an entitlement program

There is no cap on federal funding to provide eligible services to eligible persons

• Federal Medical Assistance Percentage (FMAP) is

derived from each state’s average per capita income

• CMS updates the rate annually

• For federal fiscal year (FFY) 2019, Texas’ Medicaid

FMAP is 58.19 percent

➢ The FFY is on a different calendar cycle than the state

fiscal year (SFY)

➢ The SFY FMAP rate is 58.08 percent (one of month the

FFY 2018 rate of 56.88 and 11 months of FFY 2019 rate

of 58.19 percent)

5

CHIP Caseload Trends

6

325,744

534,091

577,102

630,646

376,366

425,082 417,819

453,671

251,575

506,968

333,707

312,101

466,242

532,888

593,619

339,831

390,625 386,377

421,648

13,643

67,84944,214 37,027 36,535 34,458 31,442 32,023

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total CHIP Traditional CHIP CHIP Perinatal

Traditional CHIP Excludes Perinatal

CHIP program began May 2000

CHIP Perinatal ProgramIncludes perinates not eligible for Medicaid until birth. Beginning FY 2011 children go to Medicaid upon birth.

CHIP caseload: Data for FY 2018 is estimated; FY 2019-21 is projected based on November 2018 forecasts.

CHIP Federal Funds

CHIP is not an entitlement program

Federal funds are capped – when a state’s

CHIP funds are spent, no more are available

• Like Medicaid, the match rate is derived from each state’s average per capita income and changes annually

• States are allotted a portion of the total federal funds based on a formula then receive federal matching funds up to that allotment

• CHIP has a more favorable match rate then Medicaid

• FFY 2019 match rate is 93.73 percent

• The Affordable Care Act increased the match rate for:

➢ Oct. 2015 – Sept. 2019 by 23 percent

➢ FFY 2020 by 11.5 percent

➢ CHIP resumes its standard match rate in FFY 2021

7

Caseload and Cost Growth Summary

8

$419$410

$377$388$404

$413

$451$465 $475 $477 $474 $479 $491 $477 $492

$515$528

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Millions

Texas Medicaid Acute and Long-Term Services Costs, Fiscal Years 2002-2018:Total and Per Member Per Month Costs for Full-Benefit Clients

Total Full-Benefit Cost Full-Benefit Per Member Per Month

PMPM

Total Full-BenefitCost

Cost Growth Trends

9

+30%

Caseload is the primary drive of cost; however, despite caseload increases, Texas Medicaid cost per person cost growth is substantially lower than the national trend

2008 to 2017

Texas Medicaid Caseload Growth

+41%

Texas Medicaid Per Capita Cost Growth

+14%

U.S. Healthcare Per Capita Spending Growth*

+30%

<1.5% avg. growth per year

*Data is for Calendar Year (CY) 2008 to CY 2016

Impact Perspective

4.5 millionTexans receiving

services

14% of Texans covered

53% of Texas births covered by Medicaid

44% of Texas children on Medicaid or CHIP

62% of nursing home residents covered by Medicaid

10

Who is Eligible for Medicaid?

11

Federal law:• Requires coverage of certain populations and services• Gives flexibility for states to optional populations and services

Financial Criteria Non-Financial Criteria

How the applicant’s income compares to the definition of the

federal poverty level (FPL) for annual household incomes

• Age• Residency• Citizenship or alien status

Varies by program

Eligible Population Categories

Children and Youth Parents and Caretaker Relatives Women

Children and Adults with DisabilitiesPeople Age 65 and Older

Texas Medicaid Income Eligibility Levels

12More information on eligibility criteria for Medicaid and CHIP can be found in Chapter 1 of the 12th Edition of the Texas Medicaid and CHIP Reference Guide

% Caseload vs. % Spending

13

24%

61%7%

9%69%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Caseload Spending

Non-Disabled

Children

Non-Disabled

Adults

Age & Disability-

Related

Major Category Spending

Programs and Services Available to Texans

14

Acute Care

• Focus on preventive care, diagnostics, and

treatments

• All clients enrolled in Medicaid programs are

eligible for acute care services

• Examples of services include:

➢ Physician

➢ Inpatient and outpatient hospital services

➢ Pharmacy

➢ Laboratory

➢ Behavioral health

➢ X-ray services

14

Long-Term Services & Supports (LTSS)

• Support an individual with ongoing,

day-to-day activities, rather than

treat or cure a disease or condition

• Must meet functional eligibility

requirements

• Examples of services include:

➢ Community-based care

➢ Personal Assistance with activities of

daily living (cleaning, cooking)

➢ Nursing facility services16

Behavioral Health Services

• Treat mental health conditions and substance use disorder (SUD)

• These services are included in all Medicaid programs

• Services include:

➢ Psychiatric diagnostic evaluation

➢ Medication assisted therapy for SUD

➢ Psychological and neuropsychological testing

17A full list of services offered in Texas is available in Appendix B of the 12th

Edition of the Texas Medicaid and CHIP Reference Guide

Service Delivery and Oversight

18

Two Models for Service Delivery

Fee-for-Service (FFS)• Clients go to any Medicaid provider• Providers submit claims directly to HHSC’s admin services

contractor for payment• Providers are paid per unit of service• Most FFS clients do not have access to service coordination

Managed Care• A managed care organization (MCO) is paid a capitated rate for

each member enrolled• MCOs provide a medical home through a primary care physician

(PCP) and referrals for specialty providers, when needed*• MCOs negotiate rates with providers• MCOs may offer value-added services

Examples: youth community or sports membership, pest control, respite care

*Exception: Clients who receive both Medicare and Medicaid (dual eligible) get acute care services and a PCP through Medicare

95% of clients

5% of clients

19

Goals of Managed Care

• Emphasize preventive care

• Improve access to care

• Ensure appropriate utilization of services

• Improve client and provider satisfaction

• Establish a medical home for Medicaid clients through a primary care provider

• Improve health outcomes, quality of care, and cost effectiveness

• Promote care in least restrictive, most appropriate setting

20

Managed Care Growth

21

10-year increase in managed care service delivery: +1.2 million clients

Medicaid Managed Care Programs

22

ProductName Population Served

CHIPChildren in families that earn too much money to qualify for Medicaid, but cannot afford to buy private health insurance

STARChildren, newborns, pregnant women, and some TANF-level families

STAR+PLUS People with a disability or people who are age 65 or older; and women with breast or cervical cancer

MMPPeople who are eligible for both Medicare and Medicaid, also known as ‘dual eligibles’

STAR Kids Children and adults 20 or younger with a disability

STAR HealthServes children in the conservatorship of the Department of Family and Protective Services

Dental For most children and young adults enrolled in Medicaid

Program Enrollment

23

67%

13%

10%

5%4%

1%

STAR

STAR+PLUS*

CHIP

FFS

STAR Kids

STAR Health

*STAR+PLUS includes Dual Demonstration and CHIP includes CHIP-Perinatal

Figures represent average monthly enrollment totals in SFY 2018 for full benefit clients. Data is Preliminary

3,010,872

568,943

443,111

245,454

162,647

33,751

Clients Enrolled SFY18

23

Texas MCOs by the Numbers

25

Current as of January 2019 – contract numbers are subject to change

Contract Oversight Tools

Tools span a multitude of areas, administered by various expertise

Operational

Readiness reviews prior to serving members, biennial

operational reviews, targeted reviews as needed

Service delivery

Acute care utilization reviews (UR), long-term services and

supports URs, drug UR, electronic visit verification

Access to services

Network adequacy monitoring,

appointment availability studies, member

satisfaction studies

Quality measure dashboard, custom

evaluations, improvement projects, pay-for-quality,

alternative payment models, MCO report cards

Validation of financial statistical reports, administrative

expense and profit limits, independent auditing

Financial

Quality of care

26

Oversight Tool Highlight

Contract formation with

clear terms

• Set standards for reported financial data

✓ Principles ✓ Timing ✓ Templates

• Cap administrative expenses

• Limit profits

Management by specialized expertise

• Reconcile and validate financial data

• Define scope of annual financial audit based on compliance

• Manage other additional financial audits & reviews

Non-compliance discoveries enforced as established in the contract, including liquidated damages or recovery of the Experience Rebate

(i.e. recovery of “excess profit”)

Audits annually & as needed

• Conduct annual audit by two independent contractors for additional data validation

• Conduct supplemental audits or reviews based on other identified issues

Financial

27

Contract Safeguards

Administrative Expenses

Capped by program

Profit

Net income

MCOs keep profit to <3%

Experience Rebate

If profit is

3% 5% 20% 5% 7% 40%7% 9% 60%9% 12% 80%12% or greater 100%

Excessive profit

Expenses in excess of admin cap At least but less than

HHSC recovers

Fiscal responsibility ensured through caps on administrative expenses, conversions to income, and rebates on excessive profit

28

Financial Oversight Timeline

HHSC recovers

29

Year start

Q2 FSR

Q3 FSR

Q4 FSR

HHSC validates data

Audit starts

Audit ends

6 – 8 months to conduct

Final Report

HHSC remedies compliance issues for that year.

An 18-20 month audit process post-year end

Year end 1

Q1 FSR

Year end 2

12 months for claims to run out

Fin

albooks c

lose

In

itia

lbooks c

lose

FSR = Financial Statistical Report

Oversight Tool Highlight

30

Service Delivery: Utilization Reviews (UR)

Conducted by nurses, overseen by the Office of the Medical Director

To ensure MCOs are correctly enrolling members in HCBS through assessment and justification of service need

To ensure MCOs are providing services according to their assessment of service needs

1

2

Overall purpose

MCO on-site visit

UR components

Records request

Desk reviews

Client home visits

Complaint referrals

Reporting of results

Findings inform

Needed policy and contract clarifications

MCO consultation or training topics

Internal process improvements

Necessary MCO remedies

Ongoing training, consultation, and technical assistance to MCOs

HCBS = Home and Community Based Services

Addressing Non-Compliance

31

S t a g e 1

S t a g e 2

S t a g e 3

S t a g e 4

S t a g e 5

Plans of Action

Corrective Action Plan(CAP)

Liquidated Damages (LDs)

Suspensionof DefaultEnrollment

Contract Termination

$Financial Impacts

Multiple stages to address non-compliance discovered via oversight and monitoring

Increased levels of impact for MCOs

Remedy issued is contingent on type of non-compliance and not necessarily sequential

Financial Impact Trends

32

$5.2M

Liquidated damages (LDs) have increased with ongoing strengthening of oversight practices

All dollars are based on SFY and are rounded

$900K

$2.9M$2.1M $2.4M

2009 2010 2011 2012 2013 2014 2015 2016 Q1-Q3 2017

LDs: $1.6M$1.1M

$4.9M

Q1-Q3 LDs: $27.3MM

Strengthening Oversight

31

Six focus areas:

Network Adequacy• Improve the accuracy of provider directories• Address the special needs of rural counties• Increase the use of telemedicine• Reduce administrative burden, including process automation• Integrate network adequacy data• Add network adequacy standards for LTSS provider type

Complaints Process and Data• Standardize definition and categorization of complaints across HHSC and

MCOs• Improve data analysis to efficiently identify patterns and resolve issues early• Streamline the member complaints process• Improve transparency by publicly sharing complaints data• Enhance education on the issue resolution process

1

2

Strengthening Oversight

34

Six focus areas, cont.:

Clinical Oversight• Expand URs to include STAR Kids and STAR Health Medically Dependent

Children Program (MDCP) recipients• Collect and analyze prior authorization data to inform oversight activities• Improve guidance on utilization management and medical necessity

determinations

Outcome Focused Performance Management• Enhance onsite operational reviews by refining the process and adding

modules for review• Review and streamline MCO deliverables when appropriate• Strengthen oversight integration across divisions

4

3

Strengthening Oversight

35

Six focus areas, cont.:

Service and Care Coordination• Examine service coordination requirements by product line

➢ Initial focus on STAR Health• Align terminology and definitions across product lines• Enhance oversight of service coordination activities

5

Administrative Simplification• Reduce Medicaid provider burden through key areas of administrative

improvements:➢ Claims payment➢ Prior authorization submissions ➢ Eligibility information➢ Enrollment process

6

Governing Framework

36

Medicaid Governing Framework• Basic principles for Medicaid were established

by the Social Security Act

• The Centers for Medicare & Medicaid Services (CMS) is the agency within the U.S. Department of Health and Human Services that oversees the Medicaid Program

• Federal regulations require each state designate a single state agency responsible for the program

• The Medicaid State Plan is a dynamic document that serves as a contract between the states and CMS

• States can apply to CMS through waivers to test new ways to deliver and pay for services

37

Fundamental Requirements

38

• Statewide Availability: All Medicaid services must be available

statewide and may not be restricted to residents of particular

localities

• Sufficient Coverage: States must cover each service in an

amount, duration, and scope that is “reasonably sufficient”

• Service Comparability: The same level of services (amount,

duration, and scope) must be available to all clients, except

where federal law specifically requires a broader range of

services or allows a reduced package of services

• Freedom of Choice: Clients must be allowed to go to any

Medicaid health care provider who meets program standards

1

2

3

4

State Plan

• Each state has a State Plan that constitutes their agreement with the federal government on:

➢ Who will receive Medicaid services (all mandatory and any optional populations)

➢ What services will be provided (all mandatory and any optional services)

➢ How the program will be administered

➢ How the program will be financially administered

➢ What the other program requirements are

• CMS must approve the State Plan to ensure the federal matching funds will be provided

39

Waivers

• Waivers provide states with options to operate their Medicaid programs

• States apply for waivers with CMS for permission to deviate from certain Medicaid requirements

• Waivers are typically sought to:

➢ Provide different kinds of services

➢ Provide Medicaid to new groups

➢ Target certain services to certain groups

➢ Test new service delivery and management models

40

Three Primary Waiver Types

41For additional information about waivers, see pgs. 111-112 and Appendix C of Twelfth Edition of the Texas Medicaid and CHIP Reference Guide.

1

2

3

Research and Demonstration 1115 WaiversProvide flexibility to test new ideas for operating Medicaid programs.

Texas: Also called the 1115 Transformation Waiver. Allows the state to expand managed care including pharmacy and dental services while preserving federal hospital funding (historically received as UPL payments). Participating providers implement programs, strategies, and investments to improve care.

Freedom of Choice Waivers 1915(b)Provide states with the flexibility to modify their service delivery systems.

Texas: The authority under which the state implements the managed care model

Home and Community-Based Services 1915(c) WaiversAllow states to provide community-based services as an alternative for people who

meet eligibility criteria for care in an institution.

Texas: Medically Dependent Children Program (MDCP), Home and Community-Based Services (HCBS), Texas Home Living (TxHml), Community Living Assistance and Support Services (CLASS), Deaf Blind with Multiple Disabilities (DBMD), Youth Empowerment Services (YES)

1115 Transformation Waiver

42

Texas received initial approval for 1115 Transformation Waiver in December 2011

Expanded the managed care delivery model statewide

Created the Uncompensated Care (UC) funding pool

Created the Delivery System Reform Incentive Payment (DSRIP) Program

funding pool

1115 Transformation Waiver

43

In December 2017 CMS approved 5-year renewal to September 30, 2022

CMS Waiver Approval Letter:

“Texas’ DSRIP program will transition to a more strategic systemic effort focusing on health system performance

measurement and improvement that achieves sustainable and effective delivery system reform”

• DSRIP was extended for four years

• The DSRIP pool phases out in the renewal period

• Texas is required to submit a Transition Plan for DSRIP by October 1, 2019

DSRIP Transition Planning

44

Goal: Sustain DSRIP Successes

• Increased access to care achieved through DSRIP is at least partially sustainable as providers can continue to bill for the increased number of services they are providing

• Other DSRIP successes, such as quality improvements, can be sustained through quality programs in Medicaid managed care

• HHSC will work with state leadership and CMS on the transition plan and strategies for post-DSRIP