Indiana Medicaid Update HIP 2.0 Financing, Hospital Assessment Fee (HAF), and Other Updates January 26, 2018 IH 1

SUMMARY OF TOPICS Basics of the HAF & legal authority for fees Who is assessed or exempt Basis of the fee and fee rates What do HAF and HIP fees pay fund? History of HAF payment factors History of total fees HIP 2.0 Funding summary HIP 2.0 Waiver

BASICS OF THE HAF The HAF program is currently two separate programs grouped together The Hospital Assessment Fee (HAF) pays for increased Traditional & Managed Care Medicaid reimbursement HIP 2.0 is a separate program with the Medicaid expansion population legislated through the ACA Populations are very different and fees are used for different purposes Both programs are administered together in a similar manner HIP Fees are paid directly to the FSSA through their AR HAF Fees are paid two ways through State estimates: Payments on FFS remits are withheld each month (varies by claims levels) Remaining fee is paid by hospitals each month to DXC (same monthly payment for full SFY)

HAF VS HIP FEES HAF Fees Fund… Difference between Medicaid fee schedule and “Medicare” for Traditional & Managed Care population (FFS, HHW, HCC) IP, OP, Psych and Distinct Part Rehab Medicaid DSH HIP Fees Fund… Expansion population Medical expenses Limited administrative costs Increases to physician payments to 75% of Medicare

LEGAL AUTHORITY HAF exists in the Indiana Code as enacted by the General Assembly The Medicaid State Plan governs the HAF factors along with DSH eligibility and payment order Changes must be submitted by the end of the first quarter of the SFY to be effective for a SFY There is a waiver from CMS that allows Indiana to make exceptions to fees so that they do not have to be “broad-based” and/or uniform Changes in exemptions or fee rates require changes to the waiver and must meet statistical tests that prove the fee is not redistributive Changes to any of the above can create long delays

WHO IS ASSESSED OR EXEMPT Facilities within the class that are assessed: Acute care hospitals Freestanding psychiatric hospitals Facilities exempt from the fee: Long-term care hospitals Freestanding rehabilitation hospitals Hospitals owned by the state or federal government Freestanding psychiatric hospitals with greater than 40% of admissions having a primary diagnosis of chemical dependency Freestanding psychiatric hospitals with greater with > 90% of admissions comprised of individuals 55 or older having a primary diagnosis of Alzheimer’s disease or certain neurologic disorders related to trauma or aging

Basis of the Fee Fees are based on the total patient days and outpatient charges from cost reports on file at end of February for each upcoming fee year SFYs 2018-19 were based on reports on file Feb. 2017 This data is the basis of a hospital’s fees for a two-year period, but the amount assessed will change based on total program expenditures

Basis of the Fee Fees assessed on total days (not Medicaid days) capped at 6% of net statewide inpatient revenue Days are net of out-of-state and swing bed days “Day is a day”; cannot be manipulated like other statistics Outpatient fee assessed for amount over 6% of net statewide inpatient revenue Outpatient fee based on OP-equivalent patient days Excludes same days as above Historical OP portion of total fees: Between 14%-21% of total fees for SFY 2012 – 2014 0% in SFY 2015 and SFY 2016 Projected to be 6.9% for SFY 2017 and 21% for SFY 2018

“Rate” of the Fee Three “tiers” Most hospitals pay on 100% of days (net of OOS and swing bed day exclusions) 75% of days for acute care DSH hospitals, including municipal hospitals that qualify under the MIUR/LIUR thresholds 50% of days for (1) acute LIUR hospitals who were also LIURS in SFY 2010; (2) and all DSH-eligible hospitals with OOS Medicaid days more than 25% of total Medicaid days

APPLYING PAYMENT FACTORS Fee-for-service (FFS), Hoosier Healthwise (HHW), Hoosier Care Connect (HCC) and HIP claims should be reimbursed in similar manner Payment from Anthem, MDWise, MHS, and Caresource, should be consistent between MCEs HAF Factors applied at the claim level Monthly lump sum checks from MCEs ended for 12/31/16 services All add-on factors applied at claims level Laboratory services are still exempt from HAF outpatient factor – paid at fee schedule less 3%

HISTORY OF HAF PAYMENT FACTORS * * * Effective Rate IP 2.3, OP 2.5 for calendar year gg

HISTORY OF TOTAL FEES $133M** $730M $770M $753M $64M** $626M $677M ** HIP 2.0 fees

INPATIENT VS OUTPATIENT FEES $597M

How Fees and factors are related

HIP 2.0 FUNDING Per Term Sheet, no HAF funding used until SFY 2017 for HIP 2.0 program (started July 1, 2016). Hospitals’ obligation to fund these expenses ceases immediately if the waiver is terminated for any reason.

Enhanced Match is Critical for HIP 2.0 Indiana’s current FMAP is 68% Under House repeal and replace (AHCA) In 2020 and beyond, new enrollees, including those who drop out and re-enroll, would be matched at the lower, regular state Medicaid matching rate Based on historical data, CBO projected that fewer than 1/3 of those in HIP 2.0 at end of 2019 would be continuously covered two years later CBO also projected that after just five years, only 5% of current HIP enrollees would be matched at 90% Under Senate BCRA Steps down enhanced rate to 85% in 2021, 80% in 2022, and 75% in 2023 for all enrollees Regular state match in 2024 and beyond

HIP 2.0 Fees and Payments – SFY 2016 Hospital Reimbursement only (excludes physicians, other) Only includes Expansion population and HPE $828.3M HIP Fees HIP Projected Revenue

HIP 2.0 Fees and Payments – SFY 2017 Hospital Reimbursement only (excludes physicians, other) Only includes Expansion population and HPE $828.3M $867.6M HIP Fees HIP Projected Revenue $63.9M

HAF Fees and Projected Payments – SFY 2016 All fees are IP Payments include enhanced FFS (factors) and MCE lump sums $1,346.9M $867.6M $828.3M $610.1M HAF Fees HAF Projected Payments

HAF Fees and Projected Payments – SFY 2017 Fees assessed on IP and OP Payments include enhanced FFS (factors) and MCE lump sums through 12/31/16 Starting 1/1/17 MCE pay at enhanced rate at claims level SFY 2017 has not yet been reconciled for final fees $1,394.4M $867.6M $828.3M $626.4M HAF Fees HAF Projected Payments

FEDERAL POLICY ISSUES HAF expires in state law June 30, 2019, however, the federal approval is open-ended Most recent renewal was for two years External threats, like legal challenges from net contributors

FEDERAL POLICY ISSUES Possible federal limitations, such as reducing 6% limit on provider fee programs Federal DSH reductions under ACA Push in Congress to cancel scheduled cuts of $2B in FY 2018 and $3B in FY 2019 Under current schedule, cuts would increase to $8B nationally by FY 2024 Note: Reduced DSH allotment for Indiana would mean lower aggregate fees

HIP 2.0 WAIVER CHANGES MCE’s to offer member incentives consistent with the commercial market Increases from $10-$25 to as much as $200 Incentives must occur in four priority areas such as tobacco cessation and chronic disease management Expansion of tobacco cessation benefit with POWER account contribution changes Identified tobacco users in 2nd year of enrollment will see contribution increases to 3% from 2% Administrative simplifications Tiered POWER account structure rather than 2% requirement HIP Link will be terminated Expanded access to substance abuse treatment and MRO reimbursement

Gateway to Work Program (“work requirements”) HIP 2.0 WAIVER CHANGES Gateway to Work Program (“work requirements”) Targeted at able-bodied adults enrolled in HIP 2.0 Excludes following populations: Pregnant mothers Medically frail Over 60 years old Those with a certified temporary illness Adults with pre-K children Enrolled in substance abuse treatment Full-time and part-time students Other populations

Gateway to Work Program (“work requirements”) HIP 2.0 WAIVER CHANGES Gateway to Work Program (“work requirements”) Qualifying activities include: Job seeking Formal education or vocational training Community service Home schooling Care giving and other activities Required hours phase up from zero in first 6 months of enrollment up to 20 hours per week after 18 months Requirements measured upon annual renewal 6-month “lock-out” would not apply to disenrolled under Gateway to Work Individuals able to rejoin after 1 month of resuming/beginning qualifying actives

Current IHA Points of Emphasis STATE POLICY ISSUES Current IHA Points of Emphasis Working with FSSA to resolve broad system denials & additional claim submission issues Established IHA Managed Care Task Force under Council on Finance OP Fee Schedule variations Prior authorization legislation (HB 1143 & SB 210) Provider credentialing and CVO (HB 1007)

THANK YOU AND QUESTIONS? Brian Tabor, President Indiana Hospital Association 317-423-7743 btabor@ihaconnect.org Michael Alessandrini, Director Blue & Co., LLC 317-713-7959 malessandrini@blueandco.com