Texas Medicaid Program: Reimbursement Methodologies Michelle Apodaca, J.D. VP, Advocacy, Legal & Public Policy Texas Hospital Association Greater El Paso Chamber of Commerce Healthcare Council February 22, 2012

Texas Medicaid Overview  Jointly funded state-federal health-care program, and administered by the Texas Health and Human Services Commission (HHSC).  Entitlement program, which means the federal government does not, and a state cannot, limit the number of eligible people who can enroll, and Medicaid must pay for any services covered under the program. Texas treats only mandatory populations required by federal government. 2

Medicaid Expenses Medicaid Beneficiaries and Expenditures: and older/disabled = 30% caseload, 60% cost 3

Health Care and Texas Budget: Adopted Version 4 Rate Cuts Nursing Homes3%0% ICF-MR (not SSLC)3%2% HCS Waiver2%1% NF-related Hospice2%1% Other Community Waivers0% $12.5 million GR cut in in admin for agencies Medicaid & CHIP physician, dentist, orthodontist 2%0% Medicaid Hospital2%8% Medicaid DME & Labs2%10.5% Other Medicaid Providers2%5% Other CHIP Providers2%8% Medicaid Pediatric private duty nursing & home health 2%0% Medicaid Managed Care premiums reduced to “average acuity” n/a$169.3 million GR cut

Medicaid Managed Care Expansion  Estimated $386M GR in savings  Medicaid lives under capitation (MCO) –Over 3 million, which is 77% of all lives –Pre-expansion, 1.8 million lives, 50% of all lives 5

Medicaid - Rate Methodologies 1. Medicare-Linked (Traditional Medicaid – FFS) –Rates based on actual Medicare rates, % of Medicare rates, or the methodology used by Medicare. –Physicians and other Practitioners  Based on Medicare Relative Unit (RVU) time and resource weighted system; CMS updates RVUs. –Inpatient hospital: Rates based on Medicare Standard Dollar Amount (SDA) x Diagnostic Related Group (DRG). –Children’s and Rural Hospitals: Rates based on costs. –Other programs: Ambulatory Surgical Centers, Ambulance 6

Medicaid - Rate Methodologies 2. Actuarial Based – “Capitation Rates” (Managed Care Programs) -Rates established using encounter and experience data. -Programs: STAR, STAR+PLUS (aged and disabled), STAR Health (foster care), CHIP, CHIP Perinatal, CHIP dental, NorthSTAR (Behavioral health in North Texas), and PACE. -Rates vary by geographical area, risk group (pregnant women, TANF adults, TANF children, newborns, etc.), and acuity. 7

Capitation Rate Methodology  Existing Areas –Service areas that have been in existence for 2 yrs. combine all the MCO’s medical costs (encounter data) by risk group and service area. –Annual adjustments are made prospectively for benefit changes, reimbursement changes (i.e., Frew) and cost trends. –Allowances are made for administration, premium tax, and risk margin. –All MCO’s start with the same overall average ‘community’ rate (e.g., Hildalgo). –Thereafter, rates are adjusted from the community rate to reflect different levels of acuity each MCO experiences. 8

Capitation Rate Methodology (cont’d)  New Areas –Rates are determined using data from fee-for-service (FFS) and/or primary care case management (PCCM) programs. –A managed care efficiency adjustment is made to anticipate savings. –Similar to existing MMC service areas, adjustments are made for administration, premium tax, benefit changes and changes in reimbursements. –Because the acuity of the clients enrolling into each MCO is unknown, no risk adjustment is applied. 9

Medicaid Reimbursement Fee-For-Service vs. Managed Care (MC0) 10 Fee-For-Service Managed Care 1 1 : Medicare Based 2 : Capitation Rate – Actuarial based 3 : Individually Contracted 1 : Medicare Based 2 : Capitation Rate – Actuarial based 3 : Individually Contracted

Medicaid – Capitation Rates (effective 3/1/12) (source: ) 11 El PasoTravisHidalgo El Paso 1st.MolinaSuperior BCBS/ Sendero- TravisSeton- TravisSuperior- Travis Hidalgo TANF Children (over age 1) TANF Children (<1) TANF Adults Pregnant Women Newborns Expansion Children (over age 1) Expansion Children (<1) Federal Mandate Children Delivery Supplemental Payment

SB 1299 & SB 1053 Task Force Recommendations  Improve Medicaid and CHIP funding by increasing Medicaid fee schedule to Medicare and thereafter, update Medicaid rates each year by Medicare inflation factor.  Prohibit further funding reductions to the Medicaid and CHIP programs as a result of reductions in the Appropriations Act or cost containment strategies.  Continue to examine potential changes in rate methodologies - all Medicaid and CHIP rate methodologies should promote the same outcomes in the programs related to access, provider rates, HMOs rates and motivation for high quality of care to members. 12

Local Economic Impact Largest El Paso county employersNumber of employees El Paso Independent School District8,663 Fort Bliss (civilian employees)6,803 Ysleta Independent School District6,500 City of El Paso6,264 University of Texas at El Paso4,871 Socorro Independent School District3,995 Sierra Providence Health Network3,761 El Paso Community College3,728 Wal-Mart3,706 County of El Paso2,700 Las Palmas and Del Sol Regional Health Care System 2,244 Echostar Satellite Corp.2,012 Source: 13

Local Economic Impact of Funding  Nursing School Funding (est. FY 10 $280,000; est. FY 11 $420,000)  Trauma Funding (FY 04- FY 10 = $11.3 M)  Upper Payment Limit (UPL) Supplemental Funding: $49M (public) + $12M (private) = Est. FY11 $61M 14

Questions? Michelle Apodaca, J.D. VP, Advocacy, Legal & Public Policy Texas Hospital Association 512/