1 The Role of Managed Care in Strengthening Medicaid 2 nd Annual Medicaid Congress June 15, 2007 John Monahan President, State Sponsored Business

2 State Sponsored Business Offers Medicaid, SCHIP, and low income, publicly funded programs Serves the health care needs of approximately 2.1 million members in 14 states: California Colorado Connecticut Indiana Kansas Massachusetts Nevada New Hampshire New York Ohio Texas Virginia West Virginia Wisconsin

3 Medicaid Budget Pressures

4 Current Landscape: Although economic outlook is improving, many states are under pressure to control Medicaid costs Medicaid spending is outpacing state revenue growth and is the fastest growing budget component, outpacing K-12 spending in many states Most costly beneficiaries remain in FFS Long-term care will place significant strain on budgets due to an aging population Changes are needed to ensure Medicaid’s long term sustainability. Federal and state governments are evaluating Medicaid programs for reform opportunities

5 Medicaid Budget Pressures Sources: Kaiser Commission on Medicaid & the Uninsured Data: Congressional Budget Office projected enrollees not available Medicaid Growth - Spending & Enrollment: 31% 94% 93%

6 Medicaid Budget Pressures Outpacing K-12 spending since 2003 Medicaid vs. K-12 Spending – Percent of State Budgets: Source: National Association of State Budget Officers, Annual State Expenditure Reports 1985 – 2006

7 Medicaid Enrollees and Spending: 27M Total Managed Care Enrollees TANF 22M (56%) ABD 5M (49%) LTC 70K (2%) LTC $84B (33%) TANF $78B (31%) ABD $90B (36%) Total Estimated Medicaid Spending 52M Total Medicaid Enrollees TANF 39M (75%) ABD 10M (19%) LTC 3M (6%) Medicaid Budget Pressures

8 Benefits / Eligibility Co-pays Provider Rates Rx Disease Mgmt Fraud & Abuse LTC Managed Care Number of States State Cost Containment: Source: Kaiser Commission on Medicaid and the Uninsured

9 Future of Medicaid

10 Future of Medicaid Health Reform: Leadership analyzing reform options to obtain substantial cost savings while ensuring affordable health care is accessible to all citizens Medicaid Commission: Convened by US DHHS Secretary Michael Leavitt in July 2005, submitted recommendations for long- term reform to Congress and the Secretary on 12/31/06 Deficit Reduction Act of 2005: Reduces Federal Medicaid spending and grants states flexibility to alter benefits and allows premium & cost sharing for certain populations Federal Actions:

11 Future of Medicaid Looking at health reform options in both the public and private markets to reduce costs while providing access to health care to the growing uninsured population Using DRA benefit flexibilities & cost sharing: Idaho, Kentucky, West Virginia Implementing managed care as a solution: Statewide expansion of managed care Including aged, blind, and disabled in mandatory enrollment Considering expansion to LTC beneficiaries State Actions:

12 Managed Care Solutions

13 Managed Care Solutions Managed care has proven to be successful From its inception, managed care has promised improved quality and decreased cost trends for states and the federal government Managed care has kept its promises and has assisted in strengthening state Medicaid programs With states considering or implementing various stages of health reform, we will continue to be responsive to state needs within this changing health care environment

14 Managed Care Solutions Promises Kept... Improved Outcomes Do Lead to Cost Savings: In reviewing managed care programs, Lewin found: Managed care yields cost savings between % Arizona – 19% ($52M) Kentucky – 9.5% ($36M) Michigan – 19% ($40 PMPM) Texas STAR+PLUS – 17% in Harris County ($123M) Significant cost savings are attributable to shifting utilization from inpatient to primary and preventative care

15 Managed Care Solutions In 2 regions where SSB competes with FFS, results showed: SSB vs. PCCM program in Northern Virginia savings were 20% SSB vs. FFS in Northern California savings were 24% Inpatient hospital and emergency room utilization significantly lower under managed care than FFS SSB concurrently experienced an increased number of visits for: EPSDT & primary care Outpatient services Specialty care Promises Kept... Improved Outcomes Do Lead to Cost Savings:

16 Managed Care Solutions -64% -9% +32% +31% +136% +13% Units/1000 SSB vs. PCCM in Northern Virginia: EPSDT - Early and Periodic Screening, Diagnostic, and Treatment Services DME - Durable Medical Equipment

17 Utilize a care management approach with tailored programs addressing each state’s unique populations and diverse health conditions Develop state specific cost savings initiatives Collaborate with states to implement models that will work with their specific geography and needs Partner with States to Control Costs and Improve Quality: Managed Care Solutions

18 Only 16% of Medicaid spending was paid via capitation in FY2003 Capitation spending accounted for: 36% of spending for healthy adults & children 14% of spending for ABD LTC is the highest cost and largely untouched by managed care However... Significant Opportunities Still Exist: Managed Care Solutions

19 Looking Forward

20 Looking Forward Reform is vital to ensure the continued viability of the Medicaid program Opportunities still remain to increase quality and reduce costs in Medicaid, especially among the ABD and LTC populations Apply lessons learned to ensure long term sustainability of Medicaid Create and replicate successful models of care for all populations and continue to be effective purchasers of care Support widespread use of quality initiatives and best practices Bottom-line... Health care impacts everyone and every person deserves the right to high quality care.