AARP Public Policy Institute INSIGHT on the Issues Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Lynda Flowers and Wendy Fox-Grage AARP Public Policy Institute Health care reform offers opportunities for cash-strapped Medicaid programs to save money and get extra federal dollars. Amid the budget shortfalls that most states are experiencing, state policymakers should carefully consider the new opportunities presented by health care reform and direct their resources to those that will both improve health outcomes and services and realize cost savings or efficiencies. Introduction In response to the impact of the After making steep cuts during their recession on state economies, 2009 through 2011 budget cycles, states the American Recovery and continue to experience budget problems. Reinvestment Act (ARRA) of Recent projections indicate that 44 states 2009 provided states with extra and the District of Columbia will see federal funds to help defray their budget shortfalls during fiscal year (FY) Medicaid costs through December 2012, which begins July 1, 2011, in 2010.3 Another law extended the most states.1 In many states, increased enhanced federal ARRA funding Medicaid enrollment caused by the through June 2011.4 In return for recession is a significant contributor to these extra federal dollars, ARRA these deficits. The new health reform imposes a maintenance of effort law—the Patient Protection and (MOE) requirement on states Affordable Care Act (ACA)2—provides under which they are required opportunities for cash-strapped states to to maintain Medicaid eligibility find savings in the Medicaid program levels that were in effect as of July 1, 2008, until the end of June and to take advantage of grant and 2011.5 demonstration opportunities that enable them to receive additional federal dollars. One of the opportunities will The Maintenance of Effort not be available until 2014, when the Requirement in the Health new law takes effect. The remaining Reform Law opportunities are available for states to consider immediately. This Insight In addition to the maintenance of on the Issues explores some of these effort (MOE) requirement imposed by opportunities and is intended to serve as ARRA (see text box), the ACA creates a tool for state health policymakers as a new mandatory Medicaid expansion they consider what the new law has to to additional populations and provides offer. extra federal funds to states to finance Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars the expansion.6 The law imposes an available to states under an extension of additional MOE requirement in return ARRA,9 states are desperately seeking for the enhanced funding. The health ways to deal with budget shortfalls and reform MOE requires states to maintain meet their constitutional obligations to the eligibility and enrollment policies balance their budgets. Many states have and procedures that were in effect on already made cuts to their Medicaid March 23, 2010 (the date of enactment programs, and more cuts are being of the ACA). contemplated. In addition, at least one state (Arizona) has submitted a On February 25, 2011, the Centers for Medicare & Medicaid Services (CMS)— request to CMS for a waiver of the the federal agency that administers MOE requirement in the ACA so that the Medicaid program—issued a the state can drop 280,000 people from State Medicaid Director Letter and an its Medicaid program.10 Unlike most associated Q&A Document related to other states, Arizona is allowed to end the MOE requirement in the ACA.7 The coverage of many adults without running letter reinforced the policy that states afoul of the MOE, since Arizona has a cannot cut eligibility levels, increase scheduled expiration of a Section 1115 premium or enrollment fees, or use more waiver that provided expanded coverage restrictive enrollment policies. And, for a time-limited period.11 unlike the MOE associated with ARRA, the MOE requirement in the ACA While not directly responding to the applies to children in the Children’s broader request from states for relief Health Insurance Program (CHIP) as from the MOE, on February 3, 2011, well as Medicaid enrollees. The MOE the Secretary of HHS released a letter for adults ends on the date the Secretary to governors reminding them of the of the Department of Health and Human existing flexibilities available to manage Services (HHS) determines that the their Medicaid programs efficiently.12 new health insurance exchanges— The strategies identified include taking competitive health insurance advantage of opportunities to leverage marketplaces—are fully operational enhanced federal matching dollars, (presumably January 1, 2014); for modifying optional benefits, imposing children in Medicaid and CHIP, the higher cost sharing on beneficiaries MOE ends October 1, 2019. (within limits), purchasing prescription drugs more efficiently, managing high- An exception to the MOE requirement cost beneficiaries more efficiently, and in the ACA would allow a state to increasing efforts to eliminate fraud and certify to the Secretary that it has or projects a budget deficit for the current abuse.13 or following state fiscal year. The In addition to these flexibilities, the certification period is limited to January recently enacted ACA provides a 1, 2011, through December 31, 2013. number of new opportunities for states This exception limits states to eligibility to realize Medicaid savings without changes for persons with income above having to make cuts that hurt low- 133 percent of poverty who are not pregnant or disabled.8 income people or severely limit access by deepening cuts in provider payments. Faced with the steepest decline in state These opportunities, which exist on revenues since the Great Depression, both the acute and long-term care sides increased demand for publicly funded of the Medicaid program (with some services—including Medicaid—and overlap depending on the program), are the end of enhanced federal Medicaid discussed below. 2 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars While we recognize that state Medicaid ■■ Taking up the state option to programs are under a great deal of stress implement freestanding birthing to comply with a myriad of federal centers requirements (including planning for ■■ Participating in the Medicaid the implementation of ACA provisions), Emergency Psychiatric and many agencies are woefully short Demonstration staffed, we offer these options as strategies to consider both now (if it ■■ Implementing Medicaid program makes financial sense) and in the future integrity initiatives (mandatory when state fiscal situations improve. provision) Recategorizing Certain Adults as New Opportunities for Acute Care Newly Eligible for the Medicaid Medicaid14 Expansion Group Overview Beginning January 1, 2014, the ACA requires states to provide Medicaid The ACA provides a number of benefits to individuals with income opportunities on the acute side of the at or below 138 percent of the federal Medicaid program for states to realize poverty level (FPL) who are not savings or gain access to extra federal pregnant; are under age 65; are not dollars to serve beneficiaries. While enrolled in or eligible for Medicare; and there are some mandatory program are not currently receiving access to changes, the majority are options for the full Medicaid benefit package. The states to consider. These opportunities remaining group of people with income are as follows: at or below 138 percent of the FPL will ■■ Recategorizing certain adults as fall into a catchall Medicaid eligibility newly eligible for the Medicaid category designated for people who are expansion group called newly eligible. ■■ Reducing state and locality costs The law defines newly eligible for associated with uncompensated the purpose of identifying Medicaid- hospital care covered individuals who are eligible for ■■ Taking up the health home option enhanced matching funds. The federal ■■ Taking government will cover 100 percent of advantage of the incentive in their Medicaid costs from 2014 through Medicaid to prevent chronic diseases 2016, phasing down to 90 percent by ■■ Taking advantage of the state 2020. For purposes of the enhanced demonstration to integrate care for match, the newly eligible are those with dual eligibles income at or below 138 percent of the ■■ Taking up the state option to FPL who— eliminate cost sharing for preventive ■■ Are between ages 19 and 65; services ■■ Were not receiving the full Medicaid ■■ Implementing the federal prohibition benefit package (or a benchmark on payment for hospital-acquired equivalent benefit package) under conditions (mandatory provision) the state plan or a waiver as of ■■ Taking up the family planning option December 1, 2009; or 3 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars ■■ Are eligible for, but not enrolled the patient or by an insurance payer.16 (or are on a waiting list) for waiver Because millions of people will have services. access to health insurance as a result of the ACA, federal, state, and local Beginning in January 2014, states will uncompensated care costs should be be required to code their eligibility markedly reduced. The Medicaid program systems to account for those who contributes to the cost of uncompensated become newly eligible as a result of the care in two ways. First, the program ACA’s Medicaid expansion requirement. provides disproportionate share hospital Some states will benefit financially from (DSH) payments to hospitals. A state’s this requirement by reclassifying certain Medicaid program makes DSH payments individuals as newly eligible and thus to hospitals that the state designates as receiving the enhanced federal match serving a disproportionate share of low- for them. These individuals are those income or uninsured patients. A portion who were receiving a limited Medicaid of these DSH funds is used to pay for benefit package or who were subject to uncompensated care.17 States contribute an enrollment cap. to DSH payments, and the federal government matches these payments.18 The following populations would Medicaid also contributes to the cost of be eligible for the enhanced federal uncompensated care through supplemental payment: provider payments or the upper payment ■■ People who qualify as medically limit program used by most states. This needy in states that do not offer program allows states to provide additional this group the full Medicaid benefit funds to selected classes of hospitals by package15 raising their Medicaid rates above the ■■ Adults average Medicaid payment rates, but not who qualify for Medicaid higher than Medicare levels.19 under a Section 1115 waiver that allows the state to provide them with In 2008, the estimated cost of a limited benefit package uncompensated care was $57.4 billion, ■■ Adults with tuberculosis, breast with public funds financing $42.9 billion cancer, or cervical cancer who now or about 75 percent of the cost.20 Of this receive a limited Medicaid benefit amount, $17.2 billion is attributable targeted at curing their condition to direct state and local government payments for uncompensated care.21 ■■ Adults who are on waiting lists to For the period 2014–2019, it is receive waiver services projected that $170.2 billion will be attributable to state and local spending Although the final rules on the newly on uncompensated care.22 A portion of eligible provision have not yet been this amount will still be needed to match promulgated, states can begin to identify DSH payments (which will decrease groups that fit within the definition of over time under the ACA as more people the law and could potentially qualify become insured) and provide support for as newly eligible for purposes of the a smaller but much-needed safety net for enhanced federal match. those who remain uninsured. Thus, the recovery of 25 percent in state and local Reducing State and Local Costs spending on uncompensated care would Associated with Uncompensated result in a savings of $42.6 billion for Hospital Care states and localities; if half the money Uncompensated care is health care that is recovered, states and localities would is not fully paid for, either directly by save $85.1 billion.23 4 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Taking up the Health Home Option of 90 percent for the first eight fiscal Section 2703 of the ACA gives state quarters that the health home SPA is in Medicaid agencies the option to effect; thereafter, states revert to their establish health homes (also known as regular FMAPs. As of May 25, 2011, medical homes) for certain Medicaid CMS had approved planning requests beneficiaries with specified chronic from eight states: Arizona, Arkansas, conditions using the State Plan Mississippi, Nevada, New Jersey, New Amendment (SPA) process.24 The Mexico, North Carolina, and West overarching goals of health homes are Virginia.29 coordination, efficiency, economy, and Because dual eligibles—those eligible quality of care, with a focus on the for both Medicare and Medicaid— whole person.25 are the poorest, sickest, and most The ACA defines a health home as costly Medicaid beneficiaries, state a designated provider (including a policymakers should consider them an provider that operates in coordination ideal target population for the health with a team of health care professionals) home option. But because Medicare or a health team selected by the is the primary payer for the care of individual. Eligible individuals are those dual eligibles—covering their primary who— care, inpatient hospital, and subacute care—states will likely not realize much ■■ Have at least two qualifying chronic savings by selecting duals for the health conditions; home option. One possible remedy is ■■ Have one qualifying chronic for the federal government to work with condition and are at risk for having a states to identify a strategy for them second chronic condition; or to share in any savings that accrue to the Medicare program as a result of ■■ Have one serious and persistent the health home option. The federal mental health condition.26 government has already approved some demonstration projects that are testing Health home providers are required to coordinate care across settings; the shared savings model.30 The outcome provide case management; collaborate of these experiments could lead to more with patients and caregivers; facilitate opportunities for Medicaid to share in referrals to community services; provide Medicare savings. quality, cost-effective, culturally States can also realize savings by taking appropriate, patient/family-centered up the option with a focus on high-cost care; and use health information Medicaid beneficiaries who are not dual technology as appropriate.27 eligibles and who are able to participate Beginning January 1, 2011, the federal in their care. Examples of these government provides states with up populations include the following: to $25 million for planning activities ■■ Non-dual eligibles with high mental related to the development of an SPA for health costs (e.g., persons with a health home.28 These funds must be developmental disabilities who do matched at the state’s pre-Recovery Act not have a qualifying work record) federal medical assistance percentage for medical expenses. Once the health home ■■ Non-dual eligibles for whom option is approved and implemented, there are evidence-based best states will receive an enhanced federal practices for reducing unnecessary medical assistance percentage (FMAP) hospitalizations31 5 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars States will potentially save more money allowed to partner with their substance by focusing on non-dual eligibles abuse and public health agencies.34 than by focusing on duals, because the savings associated with avoiding States must commit to at least a three- hospitalizations for duals will typically year program, and conduct outreach and accrue to the Medicare program, not education campaigns to make providers Medicaid. This could change if CMS and Medicaid beneficiaries aware of designs the program in a way that will the program.35 State Notices of Intent allow Medicaid to share in the Medicare were due to CMS by April 4, 2011; savings. However, before taking up the applications were due by May 2, 2011; option, states need to consider whether and grant awards will be announced on August 1, 2011. The grant period they have the resources to implement of performance will be August 1, 2011 and monitor their programs once they through December 31, 2015.36 Although reach the implementation phase and the grant application deadline has passed, whether they will have the financial Congress might renew the program resources to sustain their efforts after the if it proves successful at modifying 90 percent FMAP is no longer available. health behaviors while saving Medicaid dollars. In addition, states that are not Taking Advantage of the Incentive participating in the program can monitor in Medicaid to Prevent Chronic the progress of participating states and Diseases benefit from their lessons learned. Section 4108 of the ACA appropriates $100 million over five years (beginning The initiatives—called the Medicaid January 1, 2011) in grants to states Incentives for Prevention of Chronic Diseases programs—must be to provide incentives to Medicaid comprehensive, evidence-based, widely beneficiaries to adopt healthier available, and easily accessible, and lifestyles. CMS will cover the entire address at least one of the following cost of these programs for services not prevention goals: tobacco cessation, otherwise covered by Medicaid. Up controlling or reducing weight, lowering to 15 percent of the grant funds may cholesterol, lowering blood pressure, be used for state administrative costs. and avoiding the onset of diabetes or Reimbursable administrative costs improving diabetes management.37 include key staff, grant-related travel, Incentives to beneficiaries may include training, outreach and marketing, and direct cash incentives, supplemental information technology infrastructure preventive and support services not development. The overall purpose of the otherwise Medicaid covered, free goods, initiative is to test approaches that may transportation support, or reduced encourage behavior modification among Medicaid program fees. Incentive the Medicaid population and develop payments may be made directly to scalable solutions.32 participants or to family members, friends, or community agencies that The Medicaid state agency is required support and facilitate a participant’s to be the lead applicant for the grant preventive program attendance.38 project. However, states are allowed to implement their programs through Analysts have suggested that significant arrangements with Medicaid providers, reductions in the need for health care community-based organizations, faith- are an important component of bringing based organizations, public-private health care costs under control. This partnerships, Indian tribes, or other program seeks to do just that. Because organizations.33 In addition, states are the program is funded 100 percent by 6 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars the federal government, it offers states delivery system and payment integration a risk-free opportunity to improve the models that can be rapidly tested and, if health of a population while, at the successful, replicated in other states. same time, mitigating the impact of any cost-sharing increases imposed Under phase one of the contract process on beneficiaries. In addition, it gives (the design phase), 15 states have been states the opportunity to target high-cost selected to receive up to $1 million each populations for interventions that, if to develop proposals for innovative successful, could significantly decrease models. The states that were awarded Medicaid costs over time. design contracts are California, Colorado, Connecticut, Massachusetts, In deciding whether to take advantage Michigan, Minnesota, New York, of this program, states should consider North Carolina, Oklahoma, Oregon, whether they have the resources to South Carolina, Tennessee, Vermont, manage the required outreach and Washington, and Wisconsin. The education component of the grant. models that states develop must include In addition, resources will be needed interventions that improve quality, care to track beneficiary participation and coordination, and cost-effectiveness. outcomes, collect individual-level data and transmit such data to CMS, perform Phase two is the state implementation state-level evaluations, and develop phase, during which states will mandatory program evaluation for the implement approved models. The receipt Secretary of HHS. of a program design contract does not guarantee support for the implementation phase.40 States that are approved for the Taking Advantage of State implementation phase will receive federal Demonstrations to Integrate Care for funding to prepare state infrastructure Dual Eligibles for conducting the model demonstration. Dual eligibles are the poorest and sickest Development and infrastructure costs of all Medicare beneficiaries, accounting may include systems change costs at the for 15 percent of Medicaid enrollment state level for testing a new payment but close to 40 percent of program approach, development of a more spending.39 efficient data exchange feed for near real- time tracking of claims, and additional The ACA created the Center for Medicare resources necessary to ensure successful & Medicaid Innovation (Innovation demonstration of the implementation.41 Center) to explore new approaches to pay for and deliver health care in ways This demonstration provides states that will enhance quality, improve health with the opportunity to develop and outcomes, and lower costs. In addition, implement programs that, if successful, the ACA created the Federal Coordinated could help them rein in the high costs Health Care Office (Office of the Duals) of providing care to dual eligibles. to support the design and implementation This is especially the case for states of innovative strategies to coordinate care that design programs that integrate for dual eligibles. Medicare and Medicaid dollars into a single system of care that would allow The Innovation Center, in partnership Medicaid to share in the savings that with the Office of the Duals, recently accrue to Medicare. The Medicare released a request for proposals for State Payment Advisory Commission—an Demonstrations to Integrate Care for independent congressional agency that Dual Eligible Individuals. The goal of the advises Congress on issues affecting demonstrations is to identify and validate the Medicare program—has concluded 7 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars that combining Medicare and Medicaid January 2014. When this coverage financing streams is a prerequisite to expansion begins, a significant number fully aligning provider and program of adults are expected to enroll in the incentives in a way that results in better program, many of whom will be between care coordination for dual-eligible ages 50 and 64. It is recommended that beneficiaries.42 people begin colon cancer screening at age 50. The costs of treating a single case Even though the 15 states have already of colon cancer—which might have been been selected for the design phase of the prevented by an appropriate screening45— program, they will still have to decide can range from $30,000 for early stage whether they have the resources to cancers to more than $120,000 for those engage during the implementation phase. caught at a later stage.46 The average cost States that can design demonstrations of a screening colonoscopy in a physician’s that combine enhanced federal funding office is $395.83.47 associated with the health homes demonstration (especially if they In considering whether to elect this are allowed to share in the Medicare option, states should carefully review savings) with funding from the state estimates of the numbers of older (pre- demonstration to integrate care could Medicare) adults their program expects realize tremendous savings related to to serve, determine whether they have the care for dual eligibles. Presumably, the resources to conduct effective outreach to states that have been awarded contracts encourage people to use the prevention have the human resources to commit benefit, and evaluate the adequacy of the to the project. Those that make it to provider networks available to deliver the implementation phase will receive the services. States that do not take additional federal funding to develop the up the option right away may want to infrastructure to support their programs. consider monitoring their utilization data to determine whether they are paying Taking up the State Option to for an inordinate number of inpatient Eliminate Cost Sharing for hospitalizations related to vaccine- or Preventive Services screening-preventable illnesses. Such information could provide an impetus to Cost sharing has been shown to implement the option. decrease use of preventive services.43 The ACA seeks to lower this barrier by Implementing the Prohibition on giving states the option to make certain Payment for Health Care-Acquired preventive services and immunizations Conditions available to Medicaid beneficiaries without cost sharing beginning January Every year, billions of dollars are 1, 2013.44 States that elect the option spent on remediating preventable will receive a one percentage point health outcomes. The National Quality FMAP increase. Although the increase Forum—a nonprofit organization whose might seem insignificant, states should mission is to improve the quality of carefully consider the consequences of American health care—publishes a list not treating preventable illnesses, and of serious reportable events (commonly the potential downstream savings that referred to as never events).48 screening and vaccines may offer. To address the growing problem of Take, for example, colon cancer screening. preventable reportable events, the The ACA mandates that all states provide Deficit Reduction Act (DRA) of 200549 Medicaid to people with income at or established the Medicare hospital- below 138 percent of the FPL, beginning acquired condition (HAC) program, 8 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars under which certain conditions are When Medicaid payment systems are not Medicare reimbursable.50 These coded to take into consideration this conditions are those that (1) are new payment policy, this provision is associated with high cost of treatment likely to result in improved quality of or high occurrence rates within hospital care as well as savings for Medicaid. settings; (2) are coded as complicating This is especially the case since the conditions that result in higher payments regulation proposes allowing states to the facility when submitted as a to deny payment across multiple care secondary diagnosis; and (3) can be settings. In addition, this policy will reasonably prevented by adherence to allow states to track adverse events and evidence-based practice guidelines.51 focus resources on those that occur most frequently. Some administrative costs Contemplating that hospitals might (which are matched with federal dollars) attempt to bill denied Medicare claims to will be associated with implementing Medicaid if the patient is a dual eligible, this policy. But, over time, states should the DRA gave state Medicaid agencies be able to realize savings by not having the option to deny payment as well.52 As to pay for untoward health conditions of February 17, 2008, nearly 20 states acquired in medical settings. had eliminated, or were considering eliminating, payment for some or all Taking up the Family Planning Option never events, and one state was using a “medically unnecessary” standard to Half of all pregnancies in the United deny payment.53 States are reported by the mother as being unintended; and more than half of these Section 2702 of the ACA creates are to unmarried women in their twenties. a mandatory health care-acquired Rates of unplanned and teen pregnancy conditions (HCAC) initiative in are higher among young unmarried Medicaid, effective July 1, 2011. women and lower-income women.56 The law defines HCACs as medical Unintended childbirth, especially among conditions that could have been teens, has serious social and economic identified by a secondary diagnosis consequences, including increased code that is not related to the primary rates of poverty and reliance on public purpose of the medical encounter. On assistance. In addition, multiple, closely February 17, 2011, CMS published a spaced pregnancies or births contribute proposed rule to implement the HCAC to increased rates of maternal and infant provision.54 The rule proposes to give morbidity and mortality.57 states the flexibility to go beyond the Medicare requirement and deny payment Recognizing the importance of family in other venues besides inpatient hospital planning services in helping women settings. The policy would also apply avoid the consequences of unintended to Medicaid-contracted managed care pregnancies, beginning in 1972 Congress organizations. The law also requires required states to provide family planning the secretary of HHS to implement the services and supplies to Medicaid-eligible HCAC provision in a way that does populations, with the federal government not result in a loss of access to care or paying 90 percent of the cost.58 Since services. The rule addresses this issue then, studies have documented the by proposing that payment reductions effectiveness of the services in helping be limited to amounts directly linked to women avoid unintended pregnancies, the provider-preventable condition and while at the same time saving federal and resulting treatment.55 state dollars (see text box).59 9 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars that its program generated $159 million in Federal law distinguishes between net savings in 2006; data from Texas show family planning services and that the state’s family planning expansion supplies and family planning- yielded net savings of $42 million.66 related services. Family planning services and supplies Acknowledging the effectiveness of are reimbursed at a 90 percent family planning in reducing unwanted FMAP, and providers and plans pregnancies while saving money on are not allowed to charge any cost Medicaid-financed pregnancy-related sharing. On the other hand, family services, the ACA created a new state planning-related services are plan option for states to provide family reimbursed at the state’s regular planning services at the 90 percent federal FMAP.60 matching rate to people who are otherwise not eligible for Medicaid. Effective March Family planning services and 23, 2010, the law establishes a new supplies that are eligible for optional categorically needy coverage the enhanced match include category that makes previously ineligible prescription contraception, men and women eligible for family sterilization and reversals, planning services if they are not pregnant preconception care (e.g., clinical and their income does not exceed the examinations and sex education and state-established income eligibility level counseling), and cancer screening. (which may not exceed the highest income Family planning-related services level for pregnant women under the are diagnosis and treatment services state’s existing Medicaid or CHIP plan). that are provided as a follow-up to a States that elect to provide the service family planning service in a family also have the option to provide a period planning setting.61,62 Examples of presumptive eligibility under which include pharmaceutical treatment people seeking family planning services for sexually transmitted diseases or who appear to be qualified to receive infections.63 them are presumed eligible for a certain period of time.67 States with existing Despite the success of Medicaid-financed family planning waivers are allowed to family planning services, federal law convert them to the state plan option. As of prohibited states from making family April 21, 2011, four states that had active planning services available to people Section 1115 demonstration waivers— who were not Medicaid-eligible unless California, New Mexico, South Carolina, they used a cumbersome Section 1115 and Wisconsin—converted their waivers to waiver process that granted them special the state plan option; and one state that did permission to do so.64 As of November not previously have a waiver—Ohio—has submitted an SPA to take up the option.68 1, 2010, 22 states had taken advantage of the waiver option. A federally funded Recent state-by-state analysis of the evaluation of the family planning waivers fiscal impact of taking up the new family found that some states—Alabama, planning coverage option shows that it Arkansas, California, Oregon, and South will lead to significant savings for most Carolina—saved more than $15 million states. Among the 28 states that do not each in a single year by helping women currently have a family planning waiver avoid unintended pregnancies that would that serves people based on income, 19 have led to Medicaid-financed births.65 would potentially avert 1,500 unintended Evaluations funded by states are even pregnancies and save $2.3 million each more impressive—Wisconsin estimates in state funds in a single year. The 10 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars remaining nine states would potentially Midwives, the American College of avert 7,500 unintended pregnancies and Obstetricians and Gynecologists, the save an estimated $17.4 million each.69 American Nurses Association, and many consumer organizations. Currently, The outlook is also positive for states only nine states—Idaho, Louisiana, that have expanded access to services Maine, Montana, Michigan, North through waivers. Among the 22 states Carolina, North Dakota, Virginia, and with waivers, 11 would potentially avert Wisconsin—do not have regulations 1,300 unintended pregnancies and save for licensing birthing centers.74 As of an additional $1.7 million.70 April 25, 2011, three states—Minnesota, Texas, and Washington—had taken up Although all states stand to benefit the freestanding birthing center option.75 financially from taking up the family planning SPA option, clearly states Medicaid is a key source of health that do not now provide these services coverage for pregnant women, financing through a waiver have the most to gain. more than one in three of the more This outlook for savings is especially than 4.3 million births annually in the positive in states that have robust United States.76 In 2003, Medicaid provider capacity and employ aggressive paid for 50 percent or more of births in outreach and education strategies. 11 states—Alaska, Arizona, Arkansas, Florida, Georgia, Louisiana, Mississippi, Taking up the State Option to Oklahoma, South Carolina, Texas, and Implement Freestanding Birthing West Virginia77—at average inpatient Centers charges ranging from $9,000 for an A birthing center is a nonhospital, uncomplicated hospital birth to $20,000 primary health care facility that provides for a cesarean with complication78 the midwifery mode of women’s (excluding newborn, physician, and health and uncomplicated childbirth anesthesia charges).79 services to women who are at low Women who deliver in birthing centers risk for obstetrical complications.71 usually stay for a shorter time, use These centers are not required to be alternative measures for pain relief, supervised by a licensed physician, and and have fewer medical interventions are often managed by nurse midwives. than they would in inpatient hospitals, According to a New England Journal incurring, on average, about a one-third of Medicine study of more than 17, to one-half less in costs.80,81 Therefore, 000 women registered for birthing providing medically low-risk women center care in 1989, “few innovations with an alternative to inpatient hospital in health service promise lower cost, labor and delivery could potentially yield greater availability, and a high degree of significant savings on hospital charges satisfaction with a comparable degree of and physician fees in states with large safety than do birthing centers.”72,73Prior numbers of Medicaid-financed births. to the enactment of the ACA, Medicaid programs were only authorized to pay In deciding whether this is a promising for maternity services to hospitals option, states need to consider whether and other facilities operated by and their legislatures will be inclined to pass under the supervision of a physician. legislation (if necessary) to approve States now have the option to cover Medicaid payments for birthing centers. state-licensed freestanding birthing In addition, states should review their centers, effective March 23, 2010. administrative data to determine whether Support for this shift in policy came they have high percentages of low-risk from the American College of Nurse- deliveries or inordinately high percentages 11 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars of uncomplicated caesarean deliveries that This demonstration opportunity could could potentially be diverted to birthing represent significant cost savings for states, centers. States also need to consider depending on how much the state was availability of providers; whether there is paying for emergency and acute inpatient a sufficient infrastructure to support birth hospital care for this population out of state centers; and whether women will be given and local general funds and on how states a choice between delivering their babies in structure the care going forward (e.g., hospitals or at birthing centers. establishing care delivery systems and care management strategies that are effective at Participating in the Medicaid avoiding expensive hospital care). Emergency Psychiatric Demonstration Implementing Medicaid Program Section 2707 of the ACA appropriates Integrity Initiatives $75 million from 2011 through Medicaid fraud represents a substantial December 31, 2015, for states to conduct financial loss and threatens to demonstration projects—the Medicaid undermine public confidence in the emergency psychiatric demonstrations— program. To address this problem, the that allow them to reimburse institutions ACA gives states a number of new for mental diseases (IMDs) for services tools to combat Medicaid fraud and provided to Medicaid beneficiaries abuse and to realize savings. Medicaid- between ages 21 and 65 to stabilize specific provisions would—82 an emergency psychiatric medical condition. Prior to this provision of law, ■■ Require states to terminate providers the IMD exclusion prohibited states from who have been terminated by receiving federal matching payments for Medicare or another state’s Medicaid inpatient psychiatric services provided to program (Section 6501) persons in that age range. ■■ Require Medicaid to exclude providers who own, control, or Through this demonstration, states will be manage an entity that (a) has failed allowed to cover patients receiving care in to repay overpayments for a specified nongovernment, freestanding psychiatric period; (b) is suspended, excluded, hospitals and receive federal Medicaid or terminated from participating matching payments. States will have to in any Medicaid program; or (c) is contribute their own matching share of affiliated with an individual or entity funds. This demonstration project will— that has been suspended, excluded, ■■ Evaluate or terminated from Medicaid the role of inpatient participation (Section 6502) psychiatric care in the continuum of ■■ Require entities that submit provider community-based mental health care ■■ Help claims to register with the state and to determine ways to address the secretary of HHS (Section 6503) timely access to behavioral health ■■ Require states and managed care services organizations to provide Medicaid ■■ Focus on the cost-effectiveness Management Information Systems of inpatient psychiatric care and (MMIS) data related to program the efficiency of the delivery of integrity to the Secretary of HHS psychiatric care (Section 6504) ■■ Focus on discharge planning and ■■ Bar Medicaid agencies from paying aftercare to help reduce unnecessary providers located outside of the hospitalization United States (Section 6505) 12 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars ■■ Require states to make their MMIS Medicaid recipients, receive LTSS, which methodologies compatible with can include a wide range of services, such Medicare’s national correct coding as nursing home care, personal care, and initiative, which promotes correct skilled home health care.84 coding and controls improper coding (Section 6507) Despite three decades of growth in Medicaid-funded HCBS, most states’ Aggressive implementation and Medicaid LTSS spending for older enforcement of federal policies to clamp Americans and adults with physical down on program fraud should yield disabilities is “out of balance,” with savings for both states and the federal roughly 7 out of 10 dollars going government. To maximize savings, toward nursing homes (see figure 1).85 states should allocate sufficient human resources to monitor their programs. Figure 1 Medicaid Long-Term Services and Supports Spending for Older People and New Opportunities for Medicaid Adults with Physical Disabilities in the Home and Community-Based United States, 2009 Long-Term Services and Supports The ACA also includes opportunities to increase access to home and community-based services (HCBS). This section discusses the funding of Medicaid long-term services and supports (LTSS) and the ACA programs that provide new federal dollars to shift more Medicaid Source: AARP Public Policy Institute analysis based on data from Steve Eiken, Kate Sredl, Brian Burwell, and Lisa Gold, funding toward HCBS (see appendix Medicaid Long Term Care Expenditures FY 2009 (Cambridge, MA: Thomson Reuters, 2010). A for a grid describing each of these HCBS options). The following are opportunities for states to realize long- During the current recession, most term savings and receive new federal states temporarily maintained funding: Medicaid LTSS because of the MOE requirements of ARRA.86 However, ■■ Applying for the Money Follows the by July 2011, the ARRA funds and Person Rebalancing Demonstration its associated MOE requirement will Program expire. ■■ Taking up the Community First The ACA provides a number of financial Choice Option incentives—both enhanced federal ■■ Applying for the State Balancing Medicaid matching rates and grants—for Incentive Payments Program states to expand Medicaid HCBS and to balance their array of services to better meet the needs of consumers, most of Medicaid Funding for Long-Term whom prefer to live at home and in the Services and Supports community. A key characteristic of a Medicaid is the largest payer for LTSS. high-performing LTSS system is choice In 2009, Medicaid spending for LTSS of care setting. State policymakers can was more than $114 billion.83 More use the HCBS provisions of the ACA to than 3 million people, or 7 percent of meet this goal.87 13 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Applying for the Money Follows the assessment tools, and conflict-free case Person Rebalancing Demonstration management systems. Program Section 2403 of the ACA extended and Taking up the Community First modified the Money Follows the Person Choice Option (MFP) program. The purpose of the Section 2401 of the ACA created the program is to provide transition funding Medicaid Community First Choice for Medicaid beneficiaries leaving (CFC) Option to allow states to provide nursing homes for community settings home and community-based attendant and to fund initiatives that improve the services and supports using an SPA. opportunities for people to choose HCBS States would fund an individual’s instead of institutional services.88 person-centered care plan, and the Between FY 2007 and FY 2011, the individual could hire any qualified federal government awarded enhanced persons, including family members, to matching grants of $1.75 billion to provide services and supports. 29 states plus the District of Columbia to implement MFP programs. The Effective October 2011, states that program was slated to expire in FY 2011, implement the CFC Option will receive but the ACA extended it and provided a six percentage point FMAP increase $2.25 billion in additional funding from for expenditures related to this option. FY 2011 to FY 2016, totaling $4 billion The proposed rule estimates the potential since FY 2007. In February 2011, CMS new payments for services to be announced 13 new state grantees, totaling $1.585 billion in FY 2012.91 There is no 43 grantees since 2007.89 The 30 existing end date associated with this option. grantees must submit written requests for continued participation to CMS. During the first full fiscal year in Renewals are expected in summer 2011. which the SPA is implemented, the state must maintain or exceed the level These grantees receive an enhanced of state Medicaid expenditures for federal match for services provided services provided to older Americans to Medicaid beneficiaries for the first or individuals with disabilities in the year after beneficiaries leave nursing previous fiscal year. The rationale for this homes for community settings. The MFP requirement is maintenance of effort. beneficiary must first be in the nursing home for 90 days, excluding Medicare Under the CFC Option, there are three Skilled Nursing Facility days. Prior to pathways to eligibility. States can provide the ACA, the minimum institutional attendant services and supports, for requirement was six months. individuals who are eligible for medical The vast majority of existing MFP assistance under the state plan, to: grantees are expected to renew.90 The 1. People whose income does not MFP grants allow for great flexibility and present few to no downsides. They can exceed 150 percent of the FPL who be used for a wide range of balancing do not meet institutional level of care activities, such as nursing home diversions standards; and funding for staff who work on balancing initiatives. The funds can help 2. People with income above states meet the balancing requirements 150 percent of the FPL who meet of other ACA HCBS provisions, such as the state’s institutional level of care developing single points of entry, uniform criteria; and 14 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars 3. People who qualify for Medicaid nursing homes. However, there could under the special home and be short-term, upfront costs before community-based wavier eligibility longer-term savings are realized. group and who are receiving at least one HCBS waiver service per month. Applying for the State Balancing Incentive Payments Program State policymakers will have to assess Section 10202 of the ACA created the the following criteria to determine State Balancing Incentive Payments whether to take part in this option: Program (BIPP), a competitive grant ■■ The cost and entitlement. States program to encourage states to balance may be concerned about the costs their Medicaid spending toward more associated with this program because HCBS. Effective October 2011, CMS once it is adopted, qualifying will award grants to states of up to individuals are entitled to receive $3 billion total. The grant period will benefits statewide as long as the end by October 2015. state participates in the CFC Qualifying states will receive enhanced Option. When a state opts to cover federal matching funds. The amount of personal care services as part of the enhanced FMAP will depend on how its state Medicaid plan, it becomes much of the state’s Medicaid spending an entitlement. In contrast, states goes toward HCBS. There are two that offer personal care services categories of states for this program: under Medicaid waivers can limit populations covered, geographic ■■ States with less than 25 percent of coverage, and the amount and their Medicaid LTSS spending going duration of services. States can also toward HCBS can receive a five choose to maintain waiting lists for percentage point federal matching waiver services, but they cannot do increase and must raise HCBS so for personal care services under spending to 25 percent by October the state Medicaid plan since it is 2015. an entitlement. States will need to ■■ States assess whether the increased federal with 25 to 50 percent of their matching funds will exceed what Medicaid LTSS spending going they may need to spend for people toward HCBS can receive a two who were not previously eligible for percentage point federal matching these or similar services. increase and must raise HCBS spending to 50 percent by October ■■ Enhanced federal matching 2015. funds. States that already provide personal care under the Medicaid States that spend more than 50 percent of state plan option may be interested in their Medicaid LTSS spending on HCBS providing expanded services because are not eligible for this program. of the enhanced federal matching payments. In addition to expanding Medicaid HCBS spending, qualifying states must ■■ Nursing home diversions and agree to make the following structural transitions. States that do not cover changes within six months: personal care under their Medicaid state plan might be interested in ■■ A statewide “no wrong door” single taking this option to help divert point of entry system to enable people from going into nursing consumers to access LTSS through an homes and to get people out of agency, coordinated network, or portal; 15 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars ■■ Conflict-free case management to generate significant Medicaid savings develop a care plan, arrange for and/or bring in extra federal dollars at LTSS, and conduct monitoring; and a time when they are least able to take ■■ Core advantage of those choices. Budget standardized assessment shortfalls have caused many states to instruments for determining impose furloughs on state workers, eligibility for LTSS and other institute hiring freezes, and in some services as well as a care plan. cases, lay off workers. States must also agree to collect According to the Center on Budget quality, services, and outcomes data. and Policy Priorities, at least 44 states They cannot apply more restrictive and the District of Columbia plan to eligibility standards, methodologies, eliminate or not fill some state jobs, or procedures than those in effect on impose mandatory furloughs (time off December 31, 2010, for all services for without pay), or make other cuts that which they will receive the enhanced impact the ability of the state workforce federal match. As of this writing, state to meet the needs of citizens attempting policymakers are waiting for federal to access state-funded services.94 In guidance to decide whether to apply addition, states are under pressure for BIPP funding. It is difficult for state to upgrade their coding systems for policymakers to determine the costs how diseases are classified for billing and benefits of this option because purposes by October 1, 2013. This many questions remain about state activity will also be a pull on scarce eligibility and the infrastructure change state resources.95 Despite these daunting requirements. challenges, states should carefully consider the options presented in this Making the Business Case for paper, understand the requirements, Balancing evaluate the cost-effectiveness, and In addition to heightened consumer direct their resources to those that will satisfaction, states can make a business both improve health outcomes and case for balancing in that they can serve services and realize cost savings or more people in the community and efficiencies. can better contain costs over time. On average, Medicaid can pay for nearly Figure 2 three people in the community for every Average Medicaid Spending per Person person in a nursing home92 (see figure 2). Served in the United States, by Type of Long-Term Care Service, 2007 State Medicaid programs that reduce reliance on nursing homes experience a positive financial impact over time. Expansion of HCBS incurs a short-term increase in spending, followed by a reduction in institutional spending and long-term cost savings.93 Conclusion Source: AARP Public Policy Institute analysis based on data from Terence Ng and Charlene Harrington and Jhamirah For many states, it may truly be “the Howard , Medicaid Home and Community-Based Service Programs: Data Update( Washington, DC: Kaiser Commission best of times and the worst of times.” on Medicaid and the Uninsured, February 2011); and CMS, State officials confront a myriad of Medicare & Medicaid Statistical Supplement 2009, table 13.27, accessed March 2011. choices that have the potential to 16 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Other Related Affordable Care Act must be offered statewide. This Provisions provision is not included in the A number of other ACA provisions also above discussion because it does not provide “carrots” to states to improve the offer new enhanced federal funds, lives of people with LTSS needs: but it does allow states to offer these limited HCBS without Medicaid ■ Aging and Disability Resource waivers. Centers. From FY 2010 through ■ Health homes (as discussed above). 2014, the ACA provides $10 million per year in grants to states for their Within the context of LTSS, the U.S. “no wrong door” single point of Centers for Medicare & Medicaid entry systems to help consumers Services expects states that provide and their families access services. this optional benefit and health home Although most states have Aging providers to have a “whole person” and Disability Resource Centers, this philosophy that provides linkages to additional funding will help with long-term community care services geographic and service expansions. and supports as well as social and ■ Section 1915(i) State Option. States family services.96 can provide HCBS under a Medicaid ■ state plan to individuals whose Dual eligibles (as discussed above). income does not exceed 300 percent One of the goals of the new Federal of Supplemental Security Income. Coordinated Health Care Office is States can place limits on the type, to improve the quality of health and amount, duration, population, and long-term services for dual-eligible scope of services, but the services individuals. 17 Enhanced Medicaid State Purpose Total Funding Funding Participation Timing Key Issues Money To provide $2.25 billion For first 12 months 43 states total; 29 FY 2011– Expansion: Matching Follows the transition funding appropriated by after a Medicaid plus D.C. existing FY 2016 available for people Person for Medicaid the ACA through beneficiary goes grantees and 13 leaving institution in beneficiaries leaving FY 2016, totaling back into the new states 90 days (it was 180 days nursing homes $4 billion community; and before the ACA) for community federal matching settings and to available for a wide fund initiatives that range of balancing improve the balance activities such of funding for as nursing home within the Affordable Care Act HCBS diversion and staff; leverage for other ACA tasks Community To enhance HCBS Estimates Funds HCBS Possibly states with October 2011– Entitlement: statewide; First Choice attendant services of $1.585– attendant services existing Medicaid future; it is not no enrollment ceilings or 18 and supports under a $3.7 billion, and supports at 6% personal care plan time limited service caps. Medicaid state plan depending on enhanced federal options option the number of Medicaid match Maintenance of effort: states and people during the first year, receiving services states must maintain under this option level of state Medicaid expenditures for HCBS attendant services and Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars supports Appendix A. Home and Community-Based Services “Balancing” Options Enhanced Medicaid State Purpose Total Funding Funding Participation Timing Key Issues Balancing To encourage states Up to $3 billion in ■ States with less than 25% of October 2011– Delivery system changes Incentive to balance their competitive grants Medicaid LTSS spending going October 2015 required within 6 Payments Medicaid spending toward HCBS = 5% federal months: Program on LTSS toward matching increase to raise HCBS 1. Single point of entry HCBS spending to 25% by Oct. 2015 2. Conflict-free case ■ States with 25%–50% of management Medicaid LTSS spending going 3. Statewide core toward HCBS = 2% federal standardized matching increase to raise HCBS assessment spending to 50% by Oct. 2015 instrument for determining eligibility 19 ACA = Affordable Care Act HCBS = home and community-based services LTSS = long-term services and supports Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars Endnotes 1 15 E. McNichol, P. Oliff, and N. Johnson, Federal law does not require states to offer the States Continue to Feel Recession’s Impact full Medicaid benefit package to the medically (Washington, DC: Center on Budget and Policy needy. Priorities, updated January 21, 2011). 16 J. Hadley and J. Holahan, The Cost of Care 2 Public Law 111-148, enacted March 23, 2010. for the Uninsured: What Do We Spend, Who 3 Pays, and What Would Full Coverage Add to Public Law 111-5, enacted February 17, 2009. Medical Spending? (Washington, DC: Kaiser 4 Public Law 111-226, enacted August 10, 2010. Commission on Medicaid and the Uninsured, May 2004), http://www.kff.org/uninsured/ 5 Centers for Medicare & Medicaid Services upload/The-Cost-of-Care-for-the-Uninsured- (CMS), American Recovery and Reinvestment What-Do-We-Spend-Who-Pays-and-What- Act of 2009: Section 5001: Increased Federal Would-Full-Coverage-Add-to-Medical- Medical Assistance Percentage Fact Sheet, Spending.pdf. http://ccf.georgetown.edu/index/cms-filesystem- 17 Other portions of DSH funds are used action?file=statistics/guidance%20on%20 to compensate hospitals for low Medicaid arra%20fmap.pdf. payments. 6 Section 2001 of the ACA. 18 Kaiser Commission on Medicaid and the 7 CMS, Center for Medicaid, CHIP and Survey Uninsured, The Medicaid Resource Book &Certification, Dear State Medicaid Director (Washington, DC: Kaiser Commission on letter: Maintenance of Effort, SMDL#11-001 and Medicaid and the Uninsured, 2002). ACA#14 (February 25, 2011). 19 J. Hadley et al., Covering the Uninsured 8 The state would be required to submit a State in 2008: A Detailed Examination of Current Plan Amendment (or amend an existing wavier) Costs and Sources of Payment, and Incremental indicating this change in eligibility. Costs of Expanding Coverage (Washington, DC: Kaiser Commission on Medicaid and the 9 On August 10, President Obama signed Uninsured, August 2008). H.R. 1586, containing a six-month extension of 20 J. Holahan and B. Garrett, The Cost of an enhanced match for the Medicaid (FMAP) Uncompensated Care with and without and Title IV-E programs. The legislation provides Insurance (Washington, DC: The Urban Institute, states $16.1 billion through a phased-down March 2010). enhanced match—3.2 percent beginning the first 21 calendar quarter of fiscal year 2011, then dropping The authors estimated state and local to 1.2 percent in the second calendar quarter. This government spending on uncompensated care by includes an extension of the additional relief based excluding all state payments financed through on increased unemployment, as well as the hold provider taxes or intergovernmental transfers. harmless clause. They also subtracted out hospital payments used to compensate for shortfalls in Medicaid 10 The governor says that this action is necessary reimbursement rates. J. Hadley, et al., “Covering because the state is facing a $763.6 million the Uninsured in 2008: Current Costs, Sources deficit in the current fiscal year and a of Payment, and Incremental Costs,” Health $1.15 million deficit in FY 2012. G. Rough, Affairs; 27, no. 5 (September 2008):w399–w415. “Brewer Submits Request for Medicaid Waiver,” 22 Using the 6 percent increase in annual per Arizona Republic, January, 25, 2011, capital health spending estimated by the CMS http://www.azcentral.com/news/election/ Office of the Actuary, researchers at the Urban azelections/articles/2011/01/25/20110125 Institute projected the amount forward to arizona-submits-medicaid-waiver.html. 2014–2019. S. Dorn and M. Buettgens, Net 11 U.S. Department of Health and Human Effects of the Affordable Care Act on State Services, Dear Governor letter (February 3, 2011). Budgets (Washington, DC: The Urban Institute, December 2010). 12 Ibid. 23 Ibid. 13 Ibid. 24 A State Plan is the officially recognized 14 Not all of these categories are discrete, and document describing the nature and scope of some can overlap into long-term services and a state’s Medicaid program as required under supports. Section 1902 of the Social Security Act. The 20 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars state submits plan changes to HHS as State for Medicare beneficiaries and will receive a share Plan Amendments (SPAs). Through CMS, HHS of the Medicare savings and impact Medicare reviews each SPA to determine whether it meets policy. Community Care of the Sandhills, 646 federal requirements and policies. The State Plan Medicare Demonstration Project, is updated when CMS issues final approval of http://www.communitycare-sandhills.org/focused- the SPA. initiatives. 25 States that implement health homes 31 Practices that have been shown to reduce are required to track avoidable hospital hospital and emergency room admissions include readmissions, emergency room visits, and skilled care transition programs, care coordination, and nursing home admissions; identify savings improving the ability of patients and family resulting from improved care coordination; and members to manage post-hospital care. monitor how health information technology 32 improves care delivery and coordination. CMS, Center for Strategic Planning, Medicaid Department of Health and Human Services, Incentives for Prevention of Chronic Diseases, CMS, Dear State Medicaid Director and Dear Initial Announcement, Funding Opportunity State Health Official Letter, SMDL# 10-024 and CMS-1B1-11-001 (February, 23, 2011), ACA#12, Re: Health Homes for Enrollees with http://www.cms.gov/MIPCD/Downloads/HHS_ Chronic Conditions (November 16, 2010). ACA_S4108_Solicitation.pdf. 33 26 States are required to consult and coordinate Ibid. with the Substance Abuse and Mental Health 34 Ibid. Services Administration in addressing issues of 35 prevention and treatment of mental illness and Ibid. substance use disorder. Ibid. 36 Ibid. 27 Association of Maternal & Child Health 37 Ibid. Programs, Health Reform: What’s in It to 38 Promote the Medical Home? (Washington, Ibid. DC: Association of Maternal & Child Health 39 Kaiser Family Foundation, Kaiser State Programs, October 2010), http://www.amchp.org/ Health Facts, Dual Eligibles as a Percent of Advocacy/health-reform/Documents/Medical- Homes-ACA-Fact-Sheet.pdf. Total Medicaid Enrollees, 2007, http://statehealthfacts.org/comparemaptable. 28 States may request planning funds in excess jsp?ind=305&cat=6&sub=76; Dual Eligibles of the $500,000 if they need to. Department of Share of Medicaid Spending in Millions, 2007, Health and Human Services, CMS, Dear State Accessed at http://www.kff.org/medicaid/ Medicaid Director and Dear State Health Official upload/7846-02.pdf. Letter. 40 CMS, Federal Business Opportunities, State 29 E-mail communication from Mary Pat Farkas, Demonstrations to Integrate Care for Dual Eligible Health Insurance Specialist, Division Integrated Individuals (November 16, 2010; Modified Health Systems, Disabled and Elderly Health November 18, 2010), https://www.fbo.gov/index?s Program Group, Center for Medicaid, CHIP and =opportunity&mode=form&id=819095ab34a418a Survey & Certification (Wednesday, May 25, 0dc90f754db01faae&tab=core&_cview=1. 2011, 3:07 p.m.). 41 30 Ibid. One example is Section 646 of the Medicare 42 Modernization Act of 2003, which established Medicare Payment Advisory Commission the Section 646 Medicare Health Care Quality (Medpac). Report to the Congress (Washington, Demonstration Program. The demonstration will DC: Medpac, June 2010). test providers’ ability to improve the quality of care 43 G.P. Guy, “The Effects of Cost Sharing on and services delivered to Medicare beneficiaries Access to Care among Childless Adults,” Health through a major system redesign. Goals of the Services Research 45, no. 6, Part 1 (December 2010). 646 demonstration are to improve patient safety, 44 enhance quality, increase efficiency, and/or reduce States can make available without cost unwarranted variation in medical practices and sharing only immunizations that have been costs. The legislation states that goals will be recommended by the Advisory Committee achieved in large part by adopting and using on Immunization Practices —the federally decision support tools such as best practice approved body with authority to make national guidelines and shared decision-making programs. recommendations for vaccination. The screening Networks that participate in the demonstration will tests that states can make available without be able to test innovative strategies to improve care cost sharing are those that have an A- or 21 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars B- recommendation from the United States Brookings Center on Children and Families, July Preventive Services Task Force (USPSTF)—the 2008). federally approved body with authority to rate 57 R. Gold, C. Richards, U. Ranji, and A. health screenings. Salganicoff, Medicaid’s Role in Family Planning, 45 The USPSTF gives an A- rating to screening Issue Brief (Menlo Park, CA: Kaiser Family for colon cancer beginning at age 50. Foundation; and New York, NY: Guttmacher Institute, October 2007), http://www.kff.org/ 46 T. S. Jordan, Colorectal Cancer Treatment womenshealth/upload/7064_03.pdf. Costs, http://www.ehow.com/way_5553222_ 58 colorectal-cancer-treatment-costs. Before this time, providing family planning html#ixzz1DZWDg96C. services was a state option in Medicaid. 47 59 E-mail communication from Kathleen Teixeira, Gold, Richards, Ranji, and Salganicoff, American Gastroenterological Association. Medicaid’s Role in Family Planning. June, 20, 2011 at 3:45 pm. 60 Department of Health and Human Services, 48 CMS, “Medicaid Program; Payment CMS, Dear State Health Official Letter. Adjustment for Provider-Preventable Conditions SMDL#10-13, ACA#4, Re: Family Planning Including Health Care-Acquired Conditions”: Services Option and New Benefit Rules for Proposed Rule, Federal Register, 76, no. 33 Benchmark Plans (July 2, 2010). (Thursday, February 17, 2011):9283–94. 61 Ibid. 49 Public Law 109-171, enacted February 8, 2006. 62 U. Ranji and A. Salganicoff (The Kaiser 50 CMS included 10 categories of conditions for Family Foundation), and A. Steward, M. the HAC payment provision: Foreign Object Cox, and L. Doamekpor (George Washington Retained After Surgery; Air Embolism; Blood University Medical Center), State Medicaid Incompatibility; Stage III and IV Pressure Coverage of Family Planning Services: Ulcers; Falls and Trauma; Manifestations of Summary of State Survey Findings (Washington, Poor Glycemic Control; Catheter-Associated DC: The Kaiser Family Foundation and Urinary Tract Infection (UTI); Vascular Catheter- George Washington University Medical Center, Associated Infection; and Surgical Site Infection November 2009). Following; Deep Vein Thrombosis (DVT)/ 63 Department of Health and Human Services, Pulmonary Embolism (PE). Note: Under the CMS, Dear State Health Official Letter. Medicare HAC policy, hospitals are not allowed SMDL#10-13, ACA#4, Re: Family Planning to balance-bill beneficiaries. U.S. Department Services Option and New Benefit Rules for of Health and Human Services, CMS, Hospital- Benchmark Plans (July 2, 2010). Acquired Conditions, http://www.cms.gov/ HospitalAcqCond/06_Hospital-Acquired_ 64 Department of Health and Human Services, Conditions.asp. CMS, Dear State Health Official Letter, 51 SMDL#10-13, ACA#4, Re: Family Planning National Conference of State Legislatures, Services Option and New Benefit Rules for Medicare Non-Payment for Medical Errors Benchmark Plans (July 2, 2010). (Washington, DC: National Conference of State Legislatures, August 2008), http://www.ncsl.org/ 65 A. Sonfield, J. J. Frost, and R. B. Gold, Portals/1/documents/health/MCHAC.pdf. Estimating the Impact of Expanding Medicaid 52 Eligibility for Family Planning Services: 2011 Department of Health and Human Services, Update (New York, NY: Guttmacher Institute, Center for Medicaid and State Operations, Dear January 2011). http://www.guttmacher.org/pubs/ State Medicaid Director Letter, SMDL #08-004 Medicaid-Family-Planning-2011.pdf. This report (July 31, 2008), http://www.cms.gov/SMDL/ contains estimates of savings for every state. downloads/SMD073108.pdf. 66 53 Ibid. CMS, “Medicaid Program; Payment Adjustment for Provider-Preventable 67 Section 2303(b) of the ACA, creating a new Conditions.” Section 1920C of the Social Security Act. 54 Ibid., 9283–95. 68 E-mail communication with CMS official 55 Linda Peltz, Director, Division of Benefits and Ibid. Coverage, Disabled and Elderly Health Programs M. S. Kearney and Phillip B. Levine, Reducing 56 Group, Center for Medicaid, CHIP and Survey Unplanned Pregnancies through Medicaid and Certification, Centers for Medicare and Family Planning Services (Washington, DC: Medicaid Services (April 25, 2011, 4:26 p.m.). 22 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars 69 Sonfield, Frost, and Gold, Estimating the 76 The Henry J. Kaiser Family Foundation, Impact of Expanding Medicaid Eligibility. Medicaid: A Primer. Key Information on the Nation’s Health Program for Low-Income People 70 Sonfield, Frost, and Gold, Estimating the January 2009, http://www.kff.org/medicaid/ Impact of Expanding Medicaid Eligibility. upload/7334-03.pdf. 71 High-risk situations that are not appropriate 77 Kaiser Commission on Medicaid and the for out-of-hospital birth include women who are Uninsured, State Health Facts. Number of Births pregnant with twins; vaginal breech deliveries Financed by Medicaid, 2009 (Washington, or vaginal birth after cesarean; women with DC: Kaiser Commission on Medicaid and the chronic high blood pressure or diabetes requiring Uninsured, 2009), http://statehealthfacts.org/ insulin; women who have placenta previa comparemaptable.jsp?ind=222&cat=4. (the placenta is over the cervix); women with pregnancy-induced hypertension/preeclampisa 78 American Association of Birth Centers (aka toxemia); and women who are carrying (AABC), Birth Center Savings (unpublished a child with a known medical problem (e.g., data) from AABC Uniform Data Set. U.S. heart defect) that will require special care. Agency for Healthcare Research and Quality, The Birth Center, Wilmington, DE: ND), HCUPnet, Healthcare Cost and Utilization http://www.thebirthcenter.com/ShowPage. Project. 2008 data. asp?id=152#LowHighRisk. 79 E-mail communication from Eunice K. M. 72 The National Birth Center Study was designed Ernst, Mary Breckinridge Chair of Midwifery, to respond to the recommendation of the Institute Frontier Nursing University, Coordinator of of Medicine committee that studies be conducted AABC Consulting Group, American Association to provide reliable information about the of Birth Centers (May 13, 2011). relative safety and efficacy of all birth settings. 80 J. P. Rooks et al., “Outcomes of Care in Birth Birth Centers: Alternatives to Hospitals, Centers: The National Birth Center Study,” The reviewed by the BabyCenter Medical Advisory New England Journal of Medicine, 321, no. 26 Board, last updated September 2008, (December 28, 1989):1804–09. http://www.babycenter.com/0_birth-centers- alternatives-to-hospitals_2007.bc. 73 A research team in California compared 81 women who planned to give birth attended E-mail communication from Eunice K. M. by midwives in a freestanding birthing center Ernst. with similar women who chose to give birth 82 There are a number of antifraud provisions that in the hospital with doctors. Women choosing relate to Medicare, Medicaid, and CHIP. They hospital birth were twice as likely to have may be found in Sections 6401, 6402, 6403, cesarean surgery and more than twice as likely 6601, 6602, 6603, 6604, 6605,6606, and 6607 of to have forceps- or vacuum-assisted vaginal the ACA. births. Women planning birthing center births were much more likely to eat or drink, use a Steve Eiken et al., Medicaid Long-Term Care 83 tub or shower, and walk around during labor. Expenditures in FY 2009 (Cambridge, MA: They were much less likely to need medicine to Thomson Reuters, August 17, 2010). speed up labor and also much less likely to have 84 Kaiser Commission on Medicaid and the episiotomies (a surgical incision to make the Uninsured, Medicaid and Long-Term Care vaginal opening larger when the baby is born). Services and Supports (Washington, DC: The The babies born in the birthing center group were Henry J. Kaiser Family Foundation, March just as healthy as those in the hospital group. 2011). D. J. Jackson, J. M. Lang, W. H. Swartz, et al., “Outcomes, safety, and resource utilization in a 85 Enid Kassner, et al., A Balancing Act: State collaborative care birth center program compared Long-Term Care Reform (Washington, DC: with traditional physician-based perinatal care,” AARP Public Policy Institute, July 2008). American Journal of Public Health, 93, no. 6 86 Jenna Walls et al., Weathering the Storm: The (2003):999–1006. Impact of the Great Recession on Long-Term 74 American Association of Birth Centers, Birth Services and Supports (Washington, DC: AARP Center Regulation Map (Perkiomenville, PA: Public Policy Institute, January 2011). American Association of Birth Centers, 2011). 87 Susan C. Reinhard, Enid Kassner, and Ari As of 2011, the following states were exploring Houser, “How the Affordable Care Act Can Help regulations or had draft regulations: Maine, Move States Toward a High Performing System Montana, Michigan, Virginia, and Wisconsin. of Long-Term Services and Supports,” Health 75 E-mail communication with Linda Peltz. Affairs, 30 (2011):447–53. 23 Health Reform Law Creates New Opportunities for States to Save Medicaid Dollars 88 Texas pioneered the MFP program by first changeover to ICD-10 codes.” CMS, ICD-10 authorizing the program through “riders” or Overview, http://www.cms.gov/ICD10/. amendments to state appropriations bills. 96 CMS, “Health Homes for Enrollees with 89 HHS Press Release, “Affordable Care Act Chronic Conditions,” State Medicaid Director Supports States in Strengthening Community Letter #10-024 (November 16, 2010). Living” (Washington, DC: U.S. Department of INSIGHT on the Issues Health and Human Services. February 22, 2011). The authors would like to thank their 90 Walls et al., Weathering the Storm. AARP colleagues, Roger Auerbach 91 CMS, Proposed Rule on the Community First (independent consultant), Stan Dorn Choice Option [42 CFS Part 441; file code CMS- (Urban Institute), Patricia Riley 2337-P] (February 25, 2011). (independent consultant), Donna 92 Kassner et al., A Balancing Act. Folkemer (Hilltop Institute), and Judy 93 H. S. Kaye, M. P. LaPlante, and C. Harrington, Solomon (Center on Budget and Policy “Do Non-institutional Long-Term Care Services Priorities) for comments that improved Reduce Medicaid Spending?” Health Affairs, 28, this paper. no. 1 (2009):262–72. 94 All errors and omissions are the N. Johnson, P. Oliff, and E. Williams, responsibility of the authors. At Least 46 State Have Imposed Cuts that Hurt Vulnerable Residents and the Economy (Washington, DC: Center on Budget and Policy Priorities, February 9, 2011). 95 Insight on the Issues 52, July, 2011 “ICD-10 codes must be used on all HIPAA [Health Insurance Portability and Accountability Act of 1996] transactions, including outpatient AARP Public Policy Institute, claims with dates of service, and inpatient claims 601 E Street, NW, Washington, DC 20049 with dates of discharge on and after October 1, www.aarp.org/ppi. 2013. Otherwise, claims and other transactions 202-434-3890, ppi@aarp.org may be rejected, and require a need to resubmit with the ICD-10 codes. This could result in © 2011, AARP. delays and may impact your reimbursements, Reprinting with permission only. so it is important to start now to prepare for the 24