Florida’s Medicaid Section 1115 Waiver

Joan Alker Senior Researcher Center for Children and Families Georgetown Health Policy Institute National Alliance on Mental Illness June 30, 2006

Impetus for Medicaid Changes are Primarily Fiscal “Florida’s Medicaid system will collapse under its own weight if we do not fundamentally transform the way it operates. The changes we’re proposing will help create more predictable and sustainable growth in Medicaid costs…” Governor Jeb Bush, January 11, 2005

Source: Georgetown Health Policy Institute analysis based on Florida Social Services Estimating Conference Medicaid Caseload data, 2/6/04; Medicaid expenditure data from AHCA Bureau of Program Analysis, June Why Have Florida’s Medicaid Costs Gone Up?

Medicaid/SCHIP Have Reduced the Rate of Uninsurance in Florida Note: Uninsured rate for low-income children under 18. Source: Georgetown Center for Children and Families calculations based on CPS March 1999 – 2005 data.

Bush Response is to Rely on Market Forces/Consumer Choice “…we must transform (Medicaid) completely so that the number one priority is patient wellbeing and the last consideration is government control. Our proposals … allow competition in the market to drive access and quality of care up from current levels in the Medicaid system.” Governor Jeb Bush, January 11, 2005

Medicaid Costs Less per Person and have Been Increasing at a Slower Rate Than Private Insurance

Medicaid Costs Less Than Private Health Insurance: 30% Less for Adults and 10% Less for Children Source: Hadley and Holahan, Inquiry, 2004 Estimated 2001 per capita costs of serving Medicaid enrollees with Medicaid vs. private insurance, after adjusting for health differences.

Source: Kaiser Commission on Medicaid and the Uninsured. Kaiser/HRET Survey of Employer Sponsored Health Benefits, ; Bradley C. Strunk, Paul B. Ginsburg and John P. Cookson, “Tracking Health Care Costs: Declining Growth Trend Pauses in 2004.” Health Affairs, June 21, Medicaid Costs Have Been Increasing More Slowly Than Private Insurance

How Exactly Will Medicaid Change in Florida?

Proposal Fundamentally Restructures Medicaid The proposal intends to cap the amount of money spent by the Medicaid program on a per person basis –Moves the system from “defined benefit” to “defined contribution” Proposal is based on the idea that turning the program over to private insurers without compromising access to services will save the state money through competition.  Is this feasible?

What is a Section 1115 Waiver? A Section 1115 waiver is a request to the federal government to “waive” certain sections of federal law –Medicaid has many different kinds of waivers In exchange for this flexibility states must agree to a budget neutrality agreement where the federal government limits its financial exposure

Who Will be Required to Participate? Phase 1 Virtually all children Parents Non-institutionalized SSI beneficiaries if they are not Medicare-eligibles Phase 2 Children in foster care Persons with devt’l disabilities Dual-eligibles Pregnant women >23% FPL Other groups can choose to participate

Who Will Not be Required to Participate? Persons eligible because they are “medically needy” Persons over 65 who are in state inpatient psychiatric facilities Persons receiving services through some existing waivers

What is the Timeline? Implementation in Broward and Duval counties will begin September 1, 2006 –State estimates that over 255,000 persons will be enrolled in these counties from 9/06-4/07 –Enrollment will be expanded to Baker, Clay, Nassau counties in the following year –Full enrollment statewide by end of waiver period (if legislative approval is given) by 6/10

What Benefits Will People Receive? Most children will continue to be eligible for EPSDT Adults will face a radically new benefit design –Benefits will be “actuarially equivalent” to current state plan package/historical Medicaid expenditures for the “average member of the population” Unclear if this amount will be inflated and if so how –Beneficiaries will take premium amount and choose plan –Payment based on average member of the population will be high for some, too low for others –Payments will be risk-adjusted on an individual basis in a timely manner?

Adult Benefits (cont.) Mandatory services Must be covered but can vary in amount, duration and scope Inpatient care is an exception – 45 days will be covered Benefits subject to the sufficiency test (98.5%) Optional services Need not be covered but included in actuarial value (?) Those that are covered can vary in amount, duration and scope

Are There New Costs for Beneficiaries? Not for children, pregnant women and other groups exempt under federal law Adult beneficiaries subject to the waiver will face new copayments that do not exceed nominal levels Adults will face a maximum annual benefit limit. When this is reached care will be avoided or if received become uncompensated care, a financial liability for families, providers, or both

Who is Most at Risk? Adults with disabilities and/or other chronic or episodic serious health conditions –Benefits package likely to be less comprehensive Waiver is only needed to reduce benefits not to add them Optional benefits such as DME, therapies at most risk –May face new restrictions on prescription drugs

Who is Most at Risk? (cont.) –Riskier to shift this population into managed care –Those with high services needs in any particular year risk hitting the maximum benefit level –Copayments, even though nominal, will have greatest impact on high service users –Will premium be adequate especially over time in the context of state desire to reduce spending

Enhanced Benefits Accounts Beneficiaries who participate in “healthy behaviors” receive credits Healthy behaviors/practices include check-ups, keeping all primary care appointments, gym memberships, living wills Credits can be redeemed for non-covered services or health-related supplies, like vitamins, toothpaste, sunscreen, and OTC medications Funding comes out of overall premium funding Credits are available for up to three years after beneficiary leaves Florida Medicaid

Waiver Budget Agreement Will Affect All Parts of the State Source: Georgetown University Center for Children and Families analysis based on Florida’s August 31, 2005 waiver application & enrollment data from Social Services Estimating Conference Medicaid Caseload data, February 24, 2005

What are Some of the Reasons Florida Might Exceed its Cap? Health care costs for the individuals included are higher than expected Payments to HMOs/other providers must be increased to retain their participation Implementation has not occurred as planned

State Funding: What Does the Waiver Tell Us? Governor has been clear about his desire for “predictable” costs Waiver budget attachments suggest that state anticipates it can reduce spending sharply over the next five years Reductions are larger at the end of the five year period Little information about how these reductions would occur

State Estimates of Total Medicaid Spending, With and Without Waiver Total 5-year reduction in spending: $4.58 billion Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from Florida Medicaid Reform Section 1115 Waiver Application, August 31, With Waiver Without Waiver

Estimates of Annual Medicaid Cost per SSI Beneficiary, With & Without Waiver Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from Florida Medicaid Reform Section 1115 Waiver Application, August 31, 2005.

Conclusion Many important issues at stake Will premiums be adequate to finance needed services in light of state’s desire to reduce spending? –Medicaid costs less than private insurance so how will plans save money without restricting access to needed care Unmet health needs will not go away but costs will be shifted to families, providers, and other payors in the system