Highlights from the report include:

• About 1.3 million veterans and nearly 950,000 members of their families are uninsured, together making up 4.8 percent of the nation’s 47.3 million uninsured in 2010.
• Forty-one percent of uninsured veterans under age 65 report having unmet medical needs, while nearly 34 percent say they have delayed medical care due to cost.
• Just four states have veterans’ uninsurance rates below six percent—Massachusetts, Hawaii, Vermont, and North Dakota. Meanwhile, four states—Louisiana, Oregon, Idaho, and Montana—have uninsurance rates above 14 percent.

The Urban Institute authors conclude that with the ACA’s implementation in 2014, nearly half of uninsured veterans could have access to coverage through Medicaid expansions and another 40 percent could qualify through federally subsidized coverage in qualified health plans (QHPs) in the health insurance exchanges.

The report was sponsored by the Robert Wood Johnson Foundation.

On Wednesday, May 23, 2012, Sellers Dorsey is hosting a free public webinar on Medicare-Medicaid dual eligibles.  The webinar begins at 1 pm EDT.

In this webinar, you’ll learn the basics of:

• The Medicare-Medicaid dual eligible population, their characteristics and spending.
• The role of Medicare and Medicaid in serving dual eligibles, including differences in covered services, financing, and care delivery.
• Integrated health plans at risk for all Medicare and Medicaid services.
• Managed fee-for-service model, where Medicare shares savings with the state.

This complimentary webinar is designed for anyone needing to understand the basics of the dual eligible market and the new frameworks for integrating Medicare and Medicaid financing and care delivery.

Please join Maureen Long, RN, MBA and Kip Piper, MA, FACHE for this webinar on the critically important, ever increasing, and rapidly changing dual eligible market.

To register, visit:  https://www3.gotomeeting.com/register/113966102.  There’s no charge but please register in advance as space is limited.  Participants will receive the presentation deck by email following the webinar.

But increases in Medicare and Medicaid spending can be attributed to increased enrollment for the most part, explain authors of Urban Institute’s Medicare, Medicaid and the Deficit Debate: Timely Analysis of Immediate Health Policy Issues. On a per enrollee basis, Medicare and Medicaid spending growth is in line with private health spending and thus not “out of control.” That said, a portion of the nation’s budget challenge has been caused by an increase in enrollment and spending per enrollee.

Between 2011 and 2020, spending growth per enrollee is projected to fall below private insurance rates and fall in-line with gross domestic product (GDP) per capita growth, state both the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office (CBO). Reasons for this slowdown include a slower relative GDP growth rate, increased private insurance cost sharing, slowed growth in prescription drug spending, Medicare payment policies, and the 2018 excise tax on high-cost insurance premiums.

Projected annual Medicare growth during the next decade is 5.7 percent, while projected annual private health expenditure is 5.8 percent during the same period. While growth rates are comparable, aging baby boomers are expected to drive Medicare enrollment up.

During the past 10 years, two economic recessions and nearly three percent per year growth rates in the disabled population have contributed to an increase in Medicaid expenditures. Spend per enrollee for private health insurance and Medicare is projected to grow 4.9 and 2.7 percent per year respectively, with slower Medicare growth largely due to the Affordable Care Act’s provider payment cuts.

To read or download the full report, click here (PDF).

Origins of Upper Payment Limit:

The Upper Payment Limit (UPL) is a federal limit placed on fee-for-service reimbursement of Medicaid providers.  Specifically, the Upper Payment Limit is the maximum a given State Medicaid program may pay a type of provider in the aggregate, statewide in Medicaid fee-for-service.  State Medicaid programs cannot claim federal matching dollars for provider payments in excess of the applicable UPL.

Prior to 1983, Medicaid followed Medicare cost-based payment methods for hospitals and nursing facilities.  When Medicare adopted prospective, DRG-based payment for hospitals, State Medicaid programs were given broad authority to set their own hospital and nursing facility rates.  To create an upper bound to Medicaid spending on fee-for-service hospital rates, Congress imposed an Upper Payment Limit based on what Medicare would have paid facilities for the same services.  There are different UPLs for other provider types.

Upper Payment Limits are a Statewide Spending Cap:

The Upper Payment Limit serves as a cap on a State Medicaid program’s total spending on particular providers, most notably hospitals and nursing homes.  The UPL is defined differently for different provider types (e.g., inpatient hospitals, outpatient hospitals, physicians).  Here are the basics of how hospital upper payment limits work:

• Statewide, a State Medicaid agency may not pay hospitals in the aggregate more than they would have been paid by Medicare, plus Medicaid Disproportionate Share Hospital (DSH) payments.
• There are separate UPLs for inpatient hospitals and outpatient hospitals.
• Each State also has a separate federal cap on statewide Medicaid DSH spending (DSH Allotment).  The UPL and DSH allotments together serve as an overall, statewide cap on a State’s Medicaid hospital spending.

To calculate the amount that Medicare would have paid, states use a variety of calculation methodologies.  In modeling UPLs and projecting Medicaid rates compared to the limits, State and provider associations are often assisted by Medicaid financing experts, most notably Sellers Dorsey.

Once the UPL is calculated, a State Medicaid agency will calculate what was actually paid for all of those services by the Medicaid program.  This amount must not exceed the UPL.

State Calculations and Assurances:

For hospitals, State Medicaid agencies must calculate what under Medicare payment rules the federal Medicare program would have paid facilities for the services rendered to Medicaid beneficiaries.  States must arrive at an aggregate, statewide, defensible, and well documented estimate of what Medicare would spend had Medicare and not Medicaid been responsible for paying for the hospital or nursing home care for those beneficiaries.  Each State must provide written assurances of compliance with the Upper Payment Limits.  CMS routinely examines and questions State modeling, assumptions, and data to ensure compliance with the federal UPLs.

State Medicaid agencies and provider groups, such as state hospital associations, often engage consultants to help improve the strength of State assumptions and find additional “room” under the specific UPLs.  This allows the State to pay providers more and can be very useful in rate negotiations with Governors and Medicaid directors.

For any or all individual providers, Medicaid payments may exceed the actual cost of medical services provided to Medicaid beneficiaries – as long as the applicable Upper Payment Limit is met.

Separate Upper Payment Limits by Type of Ownership:

For both hospitals and nursing facilities, there are separate Upper Payment Limits based on facility ownership.  The objective is to create separate aggregate spending caps on public providers.

In general, there are separate UPLs for sub-groupings of providers by type of ownership:

1. State owned or operated facilities (e.g., state hospitals).
2. County or other local government owned or operated facilities (e.g., county public hospitals, county nursing homes).
3. All other for-profit or non-profit facilities.

All UPL calculations are statewide and, again, in the aggregate for the provider type as a whole and for each ownership sub-group.

Prior to the federal requirement for separate UPL calculations by ownership class, a State Medicaid program could pay large supplemental payments to just county hospitals or county nursing homes, since public and private providers were in the same class for purposes of calculating the UPL.  Separate UPLs are now required in order to limit the ability of States to use Medicaid to pay State, county, or other government-owned facilities substantially more than their costs and more than other facilities.  States may still do so but the UPLs serve as an overall break on the practice.

Role of Intergovernmental Transfers:

Federal law requires that at least 40% of a State’s share of Medicaid benefit spending must come from the State itself.  The other 60% may come from the State or from local government, such as through a Intergovernmental Transfer (IGT).

If a given State’s federal matching rate is 50%, the State must somehow provide the other 50%.  At least 20 percentage points from the State budget (40% of the State 50% match) and no more than 30 percentage points from counties or other local governments (60% of the State’s 50% match).

Here is an example of how this can work:

1. A county government also operates a public hospital.
2. Therefore, the county is wearing two hats: (1) a local government that may help cover a portion of the State share of Medicaid and (2) a Medicaid provider (as owner of a facility).
3. The county voluntarily sends the State money to help cover the State (non-federal) share of Medicaid expenditures.  This is the Intergovernmental Transfer.  (This may also be done through county certifying county spending on federally-matchable Medicaid services such as a facility operating deficit and a portion of that is then applied to Medicaid based on utilization mix.)
4. The State runs the county dollars through Medicaid as normal, receiving the applicable federal Medicaid match.
5. The State sends the county hospital a supplemental payment.  The supplemental payment typically exceeds the amount of the county’s IGT to the State.
6. In most cases, this is a cooperative arrangement between the State and county.  If State stops the supplemental payment, the county merely stops sending the IGT payment.

UPL Programs:

States often develop supplemental payment programs to increase provider reimbursement up to the UPL if there is room between current reimbursement levels and the applicable UPL.  Most States now have one or more supplemental UPL payment programs.

UPL Problem for Medicaid Managed Care Expansion:

The Upper Payment Limits and the UPL calculations only apply to Medicaid fee-for-service spending.  Therefore, once a State Medicaid program creates a UPL program, both the State and providers become dependent on it as a Medicaid funding mechanism.  If a State with a UPL Program decides to use or expand the use of capitated managed care, it immediately runs into a fiscal and political problem.

Specifically, as managed care penetration grows within a State, the amount of fee-for-service spending declines and thus so does the amount of room available for supplemental fee-for-service payments under the UPLs.  Since Medicaid health plans are commonly capitated for hospital services, the shift from fee-for-service to managed care automatically reduces the ability of a State to make supplemental UPL payments to hospitals.  CMS interprets federal rules as prohibiting a State from directing that a Medicaid health plan pay particular rates or use a certain methodology.  Marketplace negotiations are expected to govern provider rates in capitated Medicaid managed care.  Therefore, there is no guarantee that county hospitals will receive the supplemental UPL-based payments upon which the county premised its Intergovernmental Transfers.

These new federal policies will increase Medicaid enrollment by 15 million in 2014, 21 million by 2015, 24 million by 2016, and 28 million by 2019, according to projections by the CMS Office of the Actuary (OACT).  This means CMS expects national Medicaid enrollment to increase 40% by 2016, with some states seeing increases of well over 50%.  This is far higher than earlier, pre-rule estimates from the Congressional Budget Office (CBO), which had assumed about 16 million new Medicaid enrollees by 2016.

In addition to expanding Medicaid eligibility to most adults under 65 with incomes below 138 percent of the federal poverty level (FPL), the new CMS rules will also make it much easier for individuals to apply for Medicaid and thereafter continue enrollment.  This means far more individuals with longer, uninterrupted enrollment in Medicaid fee-for-service and Medicaid health plans.

CMS’ new Medicaid eligibility and enrollment rules:

1. Expand Medicaid eligibility for non-disabled adults, per the ACA, using the modified adjusted gross income (MAGI) test and the 138 percent of FPL ceiling.
2. Simplify Medicaid eligibility categories for existing non-MAGI eligibles, which are notoriously complex.
3. Modernize eligibility verification rules, relying primarily on electronic data sources.
4. Streamline Medicaid and Children’s Health Insurance Program (CHIP) application and renewal.
5. Coordinate eligibility across Medicaid, CHIP, and the Health Insurance Exchange (HIX).

The final regulations provides states with increased flexibility but mandates that state Medicaid and CHIP agencies offer seamless, coordinated, and prompt eligibility determination processes for both the MAGI and non-MAGI eligibility groups.  The new rules are highly complex and will require massive systems and operational changes by state Medicaid agencies between now and January 2014.  The team at Sellers Dorsey is busy helping health plans, states, and other healthcare organizations adapt to these and changes under the ACA.

To better understand the new Medicaid rules, there are a couple helpful briefing documents.

The National Association of Medicaid Directors (NAMD) released a public memo providing a high level summary of some of the key changes from the proposed rule from the perspective of Medicaid directors. NAMD’s memo also includes detailed summary of CMS’ responses to NAMD’s comments on the proposed regulation.  To read or download a copy of the NAMD brief, click here (PDF).

An issue brief from the State Health Reform Assistance Network provides a summary, focusing on key areas where CMS has changed or expanded upon previous requirements for states, as well as a section-by-section summary of the ACA Medicaid eligibility regulations.  To read or download this brief, click here (PDF).

A helpful new policy brief from RWJF’s State Health Reform Assistance Network identifies the key milestones that states should reach by the close of 2012 if they hope to be ready for 2014, when Health Insurance Exchanges, Medicaid expansion, federally subsidized health coverage, individual and employer mandates, and a new regulatory framework for health insurance are set to begin.  State staff are well versed in ACA requirements, although federal rules remain fairly general and state Medicaid directors and insurance commissioners have many questions for the Centers for Medicare and Medicaid Services (CMS), particularly the CMS Center for Consumer Information and Insurance Oversight (CCIIO).  However, the brief will be quite helpful for legislators, health plans, provider groups, advocates, and news media needing more details on the massive undertaking that is ACA implementation..

The policy brief, State Milestones for ACA Implementation, provides a high-level framework for Health Insurance Exchange (HIX) development and implementation efforts, with milestones segmented under three major categories: Health Insurance Exchange, Private Insurance Market Reforms, and Medicaid Expansion. Milestones also identify core HIX functions for those states that depend on the “Federally Facilitated Exchange” (the euphemism for CMS-run HIX in any state unwilling or unable to establish a federally compliant HIX in time), as those states may choose to assume some of those functions. Individual milestones effect business operations, policy development, and IT system architecture.

With a goal to operationalize a state-based Exchange meeting federal certification requirements in January of 2013, the brief provides detailed milestones for exchange set-up, eligibility, enrollment, plan management, consumer assistance, financial management, SHOP-specific functions, system design, and vendor procurement.

The brief also details milestones for both the individual and small group markets, with a goal to implement ACA-mandated private insurance market reforms, make decisions around discretionary reforms in the individual and small group insurance markets, and define essential health benefits packages.

To prepare for ACA-mandated Medicaid expansion and modernized eligibility system implementation, the brief details milestones for eligibility, enrollment, benefits, program financing and funding, operations, system design, and vendor procurement.

To read or download the full policy brief, click here (PDF).  If you have specific questions about Exchanges or Medicaid expansion, please contact my colleagues at Sellers Dorsey.  The Sellers Dorsey team is currently advising clients, including states and health plans, on Health Insurance Exchange implementation, qualified health plan requirements, and Medicaid expansion issues.

In a new report, Laying a Foundation for Care Coordination: The Role of Health IT, the eHealth Initiative (EHI) describes ways public and private sectors can use health IT infrastructure to support care coordination. It also explores the functions and qualities required to achieve this vision.

The report presents a set of unified principles, which may be considered when implementing health IT to ensure it is effective in supporting care coordination. It also identifies four primary components of effective care coordination that necessitate health IT support including information sharing, team-based care, and care plans, along with information and service organization.

Health IT implementation should incorporate the following key principles to effectively support care coordination:

1. Information should be accessible to all involved in the individual’s care.
2. Technology should facilitate patient and care team member trust.
3. Technology should provide actionable, timely, and customizable information.
4. Technology should support the relationship between patient and caregiver or clinician.
5. eTools and health IT should support a personalized and proactive care plan.
6. Technology should facilitate successful care coordination by means of numerous healthcare system linkages.
7. Technology should make clinical workflow efficient.

The report highlights critical HIT functions required to facilitate care coordination components along with concrete steps that policy makers, industry representatives, and others may use as a starting point to advance electronic health information system capability and support improved care coordination.

To read or download the full report, click here (PDF).

In its report, FDA Has Met Most Performance Goals but Device Reviews Are Taking Longer, the U.S. Government Accountability Office (GAO) examined FDA medical device review and user fee data, interviewing FDA staff, three industry groups, and four consumer advocacy groups. The GAO examined FDA 501(k) review performance trends and FDA PMA review performance trends between 2003 and 2010. The GAO also examined stakeholder issues with the review process employed along with steps the FTC used to address each. The study aimed to determine, in preparation for reauthorization, whether FDA met performance goals and whether devices reached the market in a timely manner.

The GAO found that the time involved between submission and final decision significantly increased in recent years, though 510(k) medical device performance goals were met. It was also determined that FDA was inconsistent in meeting both original and expedited PMA submission performance goals. The following four common stakeholder issues were noted following interviews with industry and consumer advocacy groups:

• Insufficient communication throughout the review process between FDA and stakeholders.
• Unpredictability and inconsistency in reviews.
• Increased time required for final decision.
• Inadequate safety and effectiveness assurance for cleared or approved devices.

In response to stakeholder issues, FDA is enhancing reviewer training, issuing new guidance documents, and developing an electronic reporting system for adverse events.

To read or download the full report, click here (PDF).

The U.S. Government Accountability Office (GAO) was asked to describe AHRQ’s process and criteria for Recovery Act funds award for comparative effectiveness research and AHRQ’s plans for funded research dissemination. In its February 29, 2012 report, Agency for Healthcare Research and Quality’s Process for Awarding Recovery Act Funds and Disseminating Results, GAO describes its process for meeting those objectives along with the results of its study.

The study involved relevant documentation review including:

• AHRQ’s grant recipient selection policies and procedures.
• Internal documentation describing Recovery Act contract and grant award.
• Work plans of Recovery Act contractors.
• The type and number of contracts and grants awarded comparative effectiveness research funds under the Recovery Act.

GAO found that AHRQ’s standard review process and criteria was used to select grant and contract recipients. This includes grant application peer review, senior official recommendation, and agency director final funding determination. Grant applications were evaluated using AHRQ’s standard criteria along with additional requirements specific to each funding opportunity. Selected contractors were awarded Recovery Act funds based on its standard contracting criteria and processes as governed by the Federal Acquisition Regulation.

A range of existing mechanisms including training programs, written products, and social media tools would be employed to disseminate comparative effectiveness research funds.

To read or download the full report, click here (PDF).

1. Expenses for improving healthcare quality
2. Claims adjustment expenses
3. Agents and brokers fees and commissions
4. Direct sales salaries and benefits expenses
5. Other general and administrative expenses

Milliman’s research report, Administrative Expenses: 2010 Commercial Health Insurance, provides interesting data and an insightful analysis of health plans expenses across the three major commercial markets.  It also serves as a helpful baseline to track how health plans change their administrative spending in response to new Minimum Loss Ratio (MLR) regulations, Health Insurance Exchanges, and new market conditions.

All U.S. health insurance issuers with positive earning premium, that incurred claims, that had 2010 member months, and that submitting Supplemental Health Care Exhibits in 2010 were included in the Milliman analysis.

The report shows a 30 percent difference in per-member-per-month average 2010 expenses between the small group and large group insured market, with the latter reporting the lowest expenses at $30.84 and the former reporting expenses at $43.83 per-member-per-month. The largest contributor to this difference was agents and brokers fees and commissions followed by other general and administrative expenses.

Administrative expenses for the small group market were higher than those for the individual market on a per-member-per-month basis, yet the contrary was true on a percent of premium basis. This is attributed to higher premiums charged in the small group market. Greater variance on a per-member-per-month basis was found within the individual insured market.

To read or download the full report, click here (PDF).