The 2nd National Medicare RX Drug Congress Texas State Senator Leticia Van de Putte, R. Ph. 3.03 Medicaid & MMA Administrative Challenges: Priorities for State Legislators – November 1, 2005 If you have questions or comments please email me at leticia.vandeputte@senate.state.tx.us

Overview Challenges Stemming from Medicare Part D Dual Eligibles Effect of Hurricane Katrina Texas's Reaction due to increased cost sharing, budget shortfalls, etc. Innovative strategies to address the needs of a growing Medicaid population.

Challenges Stemming from Medicare Part D Dual Eligibles - the challenge for states is to make certain that all dual-eligibles are enrolled in a Medicare prescription drug plan by January 1, 2006 when their eligibility for Medicaid prescription drug coverage ends. The Centers for Medicare and Medicaid Services (CMS) has developed a procedure to “auto-assign and auto-enroll” full benefit dual eligibles in either a Medicare Advantage (MA) with a prescription drug benefit, if they were already enrolled in a Medicare Advantage Plan or a freestanding Prescription Drug Plan (PDP) if they were in Medicare fee-for-service. Under this plan, the states and beneficiaries will be notified of the assignment at the end of October 2005. BOSS: YOU MAY WANT TO PREFACE THE FIRST BULLET/SLIDE WITH "AS I AM SURE YOU ARE AWARE… THE CHALLENGE FOR STATES IS…"

Key Issues for Dual Eligibles Education and outreach to dual-eligibles to ensure that they understand their options: They must enroll in a Medicare prescription drug plan to maintain prescription drug coverage. If they are currently enrolled in a Medicare Advantage plan, they will be assigned to a Medicare Advantage plan that provides prescription drug coverage. If they separately enroll in a free-standing prescription drug plan, they will be disenrolled from the Medicare Advantage plan. (The Medicare Advantage plans are supposed to notify all beneficiaries regarding this issue.) They are free to switch from the plan to which they have been assigned and to enroll in another plan.

Key Issues for Dual Eligibles States and their partners (local governments, advocacy and service organizations) and/or family members will need to assist beneficiaries in selecting a plan that best meets their needs. CMS has put in place a “transition policy,” regarding maintenance medications. Under this policy, each plan must have in place a policy to continue existing prescriptions during a transition period to ensure continuity of care. Biggest challenge here is whether there will be sufficient resources to assist everyone who needs assistance.

Key Issues for Dual Eligibles Finally, the ongoing challenge will be coordination of care for dual eligibles between Medicare, Medicaid and the private prescription drug plans. The hope is that the new Special Needs Plans (SNPs), Medicare Advantage plans designed to improve care coordination for Medicare beneficiaries with chronic illnesses and which can directly target dual-eligibles, will provide a successful model for care coordination. Ultimately, these SNPs should help identify existing barriers to care coordination that exist in current state and federal laws and regulations. This will hopefully lead to changes designed to better facilitate care coordination. Unchartered waters.

Dual Eligibles and the Effect of Hurricane Katrina The protections for dual eligibles have been derailed for many Hurricane Katrina survivors and evacuees. Why???? Their home jurisdiction has changed. Their support systems have changed. They may be in a different jurisdiction by January 1, 2006. In other words, they may be hard to find and harder to place in an appropriate plan.

Dual Eligibles and the Effect of Hurricane Katrina Many states are providing assistance to Katrina survivors and evacuees, so this issue is not limited to the states directly impacted by Hurricane Katrina. Transition plans and beneficiary protections, specifically designed for Katrina survivors and evacuees, must be put in place. Texas's influx of dual eligibles due to Hurricane Katrina and how that will affect enrollment in Medicare Part D. The major existing issue we are now facing is that we don't know if the dual eligible Katrina evacuees plan on returning to Louisiana or establishing residency in Texas or elsewhere; this affects their enrollment in Medicare Part D plans. The Texas Health and Human Service Commission is continuing to work with the federal government to address these issues.

Texas's Reaction Disease Management Integrated Care Management Preferred Drug List Managed Care/Managed Care Expansion

Disease Management (DM) Disease management is a systematic approach to health care delivery that identifies people with, or those at risk for developing, a specific chronic illness such as asthma, diabetes or congestive heart failure. Patients receive specific evidence-based information, medical equipment, and support to follow their physician’s plan of care and practice healthy behaviors.

Who is served by DM? The initial implementation of DM for the fee-for-service population served people with congestive heart failure, cardiovascular arterial disease, diabetes, asthma and chronic obstructive pulmonary disease.

How are patients served by DM? The contracted DM vendor for this population performs the following activities to ensure a comprehensive approach to the management of chronic diseases: identification and outreach to eligible beneficiaries; health assessment and risk stratification; enrollment and disenrollment of eligible/ineligible beneficiaries; education of beneficiaries and providers; quality assurance; care management; and outcomes measurement.

Anticipated Savings of DM Current estimated savings in Year 1 of the contract is between $15-18 million, net of vendor fees. The contract establishes a minimum of 5 percent guaranteed savings in total medical costs for the enrolled population. 80 percent of the vendor’s administrative fees are at risk for the cost savings guarantee 20 percent of the vendor’s administrative fees are at risk for attainment of clinical outcomes/quality variables

Anticipated Outcomes of DM Decrease in utilization of inappropriate and unnecessary medical services. Appropriate utilization of and compliance with prescribed medications. Improvements in a wide range of disease specific and overall health quality indicators.

Integrated Care Management (ICM) Pilot Program ICM is intended to: improve patient health and social outcomes, improve access to care, constrain health care costs, and integrate the spectrum of acute and long-term care services and supports.

Characteristics of the ICM Model Rather than using an HMO as an intermediary, the ICM model will use an Administrative Services Organization (ASO), which is prohibited from reimbursing providers with capitated rates. Providers will continue to be reimbursed through the state’s fee-for-service system. The noncapitated rates allow local public hospital districts to utilize federal funding by drawing down Medicaid Upper Payment Limits. Because the aged/blind/disabled population makes up approximately 21% of the entire Medicaid population, yet accounts for over 62% of entire Medicaid expenditures, the Legislature directed that a pilot program be established managing care for these patients through the ICM model. An advisory committee has been established and is currently working to develop the model; once developed, the advisory committee will assist the Texas Health and Human Services Commission in implementation as well.

Anticipated Savings of ICM Budget officials estimate that the roll-out of this model, along with the roll-out of other care management models across the state will save the state of Texas approximately $109.5 million over the 2005-2006 biennium.

Preferred Drug List (PDL) Texas state law has the following requirements for the PDL: It may only contain drugs for which the state receives a supplemental rebate or program benefit from the manufacturer or labeler. A Governor-appointed Pharmaceutical and Therapeutics (P&T) Committee of physicians and pharmacists makes recommendations about which drugs to place on the list based on clinical efficacy, safety and cost effectiveness. All drugs with a federal Medicaid rebate agreement continue to be available to recipients, but the physician or other prescriber must obtain prior authorization for non-preferred drugs, which were reviewed by the committee but not selected to be on the preferred list. In response to the rising cost of prescription drugs, the 78th Legislature (Regular Session, 2003) mandated a number of new studies and initiatives in the Medicaid Vendor Drug Program (VDP). One of these initiatives was the creation of a Preferred Drug List (PDL) for Medicaid outpatient drugs. Texas implemented the first phase of its Medicaid PDL in February 2004. HHSC has added drug classes to the PDL periodically since then, and the list now has 60 drug classes representing about 70 percent of Texas’ Medicaid pharmacy expenditures. Savings For the 2004-2005 biennium (August 1, 2003 – August 31, 2005), Texas estimates the PDL will generate savings of about $350 million total funds ($140.5 million state funds) on an incurred basis before administrative costs. This includes savings from supplemental rebates and from shifting prescribing patterns toward less expensive drugs. HHSC has two contracts related to the PDL – one for supplemental rebate negotiations and P&T Committee support, and one for prior authorization services. The cost of these two contracts totaled $3.3 million all funds from November 2003 – August 2004.

Managed Care/Managed Care Expansion Managed Care refers to a health system in which a network of health care providers agree to coordinate and provide health care to a population in exchange for a specific payment per person. Four major features distinguish managed care from traditional fee-for-service (FFS) health financing arrangements: 1. Primary Care Providers (PCPs) 2. Defined Network of Providers 3. Utilization Review and Utilization Management (UR/UM) 4. Capitation 1. Primary Care Providers (PCPs)- PCPs provide clients with a “medical home,” including comprehensive preventive and primary care with access in person or via telephone to a medial professional on a 24-hour/7-day a week basis. 2. Defined Network of Providers- Managed care limits clients’ choices of provider to those under contract with the managed care organization (MCO) network. 3. Utilization Review and Utilization Management (UR/UM)- UR/UM is an MCO’s comprehensive monitoring program of network providers. 4. Capitation- is a unique financing mechanism that distinguishes managed care from traditional FFS. Under capitation, health care payers such as Medicaid or employers purchase care at a fixed, per person rate.

Managed Care Models in TX Texas currently delivers services through two different managed care models: 1. Health Maintenance Organizations (HMO): Organizations licensed by the Texas Department of Insurance that deliver and manage health services under a risk-based arrangement. The HMO receives a monthly “capitation” payment for each person enrolled based on an average projection of medical expenses for the typical patient. 2. Primary Care Case Management (PCCM): In this non-capitated model, each PCCM participant is assigned to a single PCP who must authorize most other services, such as specialty physician care, before Medicaid can reimburse them. The State sets up physician networks and contracts directly with providers. Providers receive fee-for-service reimbursement, plus PCPs receive a small monthly case management fee for each client. Managed Care Programs in Texas: The STAR (State of Texas Access Reform) program serves the acute care needs of TANF and low-income children and families on a mandatory basis and SSI and SSI-related clients on a voluntary basis. The STAR program now operates in Bexar, Dallas, El Paso, Harris, Lubbock, Southeast Region, Tarrant and Travis Service Delivery Areas. The STAR+PLUS program serves the aged, blind and disabled population and is designed to integrate the delivery of acute and long-term care services through a managed care system. The STAR+PLUS program is aimed at clients with chronic and complex conditions. The STAR+PLUS program currently operates in Harris County. STAR+PLUS is scheduled to convert to an all-hospital carve-out. NorthSTAR is a program created to integrate the publicly funded systems of mental health and chemical dependency services. NorthSTAR is designed to create a better coordinated, more efficient and flexible system of public behavioral health care. This program was implemented in 1999 and currently operates in Dallas and contiguous counties.