1 The Role of Managed Care in Strengthening Medicaid 2 nd Annual Medicaid Congress June 15, 2007 John Monahan President, State Sponsored Business.

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The Role of Managed Carein Strengthening Medicaid

2nd Annual Medicaid CongressJune 15, 2007

John Monahan

President, State Sponsored Business

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State Sponsored Business

• Offers Medicaid, SCHIP, and low income, publicly funded programs

• Serves the health care needs of approximately 2.1 million members in 14 states:

• California

• Colorado

• Connecticut

• Indiana

• Kansas

• Massachusetts

• Nevada

• New Hampshire

• New York

• Ohio

• Texas

• Virginia

• West Virginia

• Wisconsin

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Medicaid Budget Pressures

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Medicaid Budget Pressures

Current Landscape:

• Although economic outlook is improving, many states are under pressure to control Medicaid costs

• Medicaid spending is outpacing state revenue growth and is the fastest growing budget component, outpacing K-12 spending in many states

• Most costly beneficiaries remain in FFS

• Long-term care will place significant strain on budgets due to an aging population

• Changes are needed to ensure Medicaid’s long term sustainability. Federal and state governments are evaluating Medicaid programs for reform opportunities

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Medicaid Budget Pressures

Sources: Kaiser Commission on Medicaid & the Uninsured. 2015 Data: Congressional Budget Office.

$157B

$305B

$590B

42M 55M

$0

$100

$200

$300

$400

$500

$600

$700

1995 2005 2015

Costs Enrollees

2015 projected enrollees not available

Medicaid Growth - Spending & Enrollment:

31%

94%

93%

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Medicaid Budget Pressures

8

10

12

14

16

18

20

22

24

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Medicaid K-12

Outpacing K-12 spending since

2003

Medicaid vs. K-12 Spending – Percent of State Budgets:

Source: National Association of State Budget Officers, Annual State Expenditure Reports 1985 – 2006

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Medicaid Enrollees and Spending:

27M Total Managed Care Enrollees

TANF 22M(56%)

ABD 5M(49%)

LTC 70K (2%)

LTC $84B(33%)

TANF $78B(31%)

ABD $90B (36%)

Total EstimatedMedicaid Spending 52M Total Medicaid

Enrollees

TANF 39M(75%)

ABD 10M (19%)

LTC 3M (6%)

Medicaid Budget Pressures

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Medicaid Budget Pressures

5

10

15

20

25

30

35

40

45

50

55

Benefits / EligibilityCo-pays

Provider Rates

Rx

Disease Mgmt

Fraud & Abuse LTC Managed

Care

Num

ber

of

Sta

tes

46 42 29 141717 12

2006 State Cost Containment:

Source: Kaiser Commission on Medicaid and the Uninsured

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Future of Medicaid

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Future of Medicaid

•Health Reform: Leadership analyzing reform options to obtain substantial cost savings while ensuring affordable health care is accessible to all citizens

•Medicaid Commission: Convened by US DHHS Secretary Michael Leavitt in July 2005, submitted recommendations for long-term reform to Congress and the Secretary on 12/31/06

•Deficit Reduction Act of 2005: Reduces Federal Medicaid spending and grants states flexibility to alter benefits and allows premium & cost sharing for certain populations

Federal Actions:

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Future of Medicaid

•Looking at health reform options in both the public and private markets to reduce costs while providing access to health care to the growing uninsured population

•Using DRA benefit flexibilities & cost sharing: Idaho, Kentucky, West Virginia

•Implementing managed care as a solution:

• Statewide expansion of managed care

• Including aged, blind, and disabled in mandatory enrollment

• Considering expansion to LTC beneficiaries

State Actions:

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Managed Care Solutions

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Managed Care Solutions

• Managed care has proven to be successful

• From its inception, managed care has promised improved quality and decreased cost trends for states and the federal government

• Managed care has kept its promises and has assisted in strengthening state Medicaid programs

• With states considering or implementing various stages of health reform, we will continue to be responsive to state needs within this changing health care environment

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Managed Care Solutions

Promises Kept . . . Improved Outcomes Do Lead to Cost Savings:• In reviewing managed care programs, Lewin found:

• Managed care yields cost savings between 2 - 19%

• Arizona – 19% ($52M)

• Kentucky – 9.5% ($36M)

• Michigan – 19% ($40 PMPM)

• Texas STAR+PLUS – 17% in Harris County ($123M)

• Significant cost savings are attributable to shifting utilization from inpatient to primary and preventative care

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Managed Care Solutions

• In 2 regions where SSB competes with FFS, results showed:

• SSB vs. PCCM program in Northern Virginia savings were 20%

• SSB vs. FFS in Northern California savings were 24%

• Inpatient hospital and emergency room utilization significantly lower under managed care than FFS

• SSB concurrently experienced an increased number of visits for:

• EPSDT & primary care

• Outpatient services

• Specialty care

Promises Kept . . . Improved Outcomes Do Lead to Cost Savings:

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Managed Care Solutions

100

200

300

400

500

600

700

800

Inpatient Days ER Outpatient Specialist Child EPSDT DME

WellPoint SSB Traditional PCCM

-64%

-9%

+32%

+31%

+136%

+13%

Uni

ts/1

000

SSB vs. PCCM in Northern Virginia:

EPSDT - Early and Periodic Screening, Diagnostic, and Treatment Services

DME - Durable Medical Equipment

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• Utilize a care management approach with tailored programs addressing each state’s unique populations and diverse health conditions

• Develop state specific cost savings initiatives

• Collaborate with states to implement models that will work with their specific geography and needs

Partner with States to Control Costs and Improve Quality:

Managed Care Solutions

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• Only 16% of Medicaid spending was paid via capitation in FY2003

• Capitation spending accounted for:

• 36% of spending for healthy adults & children

• 14% of spending for ABD

• LTC is the highest cost and largely untouched by managed care

However . . . Significant Opportunities Still Exist:

Managed Care Solutions

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Looking Forward

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Looking Forward

• Reform is vital to ensure the continued viability of the Medicaid program

• Opportunities still remain to increase quality and reduce costs in Medicaid, especially among the ABD and LTC populations

• Apply lessons learned to ensure long term sustainability of Medicaid

• Create and replicate successful models of care for all populations and continue to be effective purchasers of care

• Support widespread use of quality initiatives and best practices

Bottom-line . . . Health care impacts everyone and every person deserves the right to high quality care.