1. Approaches to Slowing Cost Growth in Public Programs State Coverage Initiatives National Meeting August 5, 2010 Nikki Highsmith Center for Health Care Strategies

2. CHCS Mission To improve health care quality for low-income children and adults, people with chronic illnesses and disabilities, frail elders, and racially and ethnically diverse populations experiencing disparities in care. Our Priorities ► Improving Quality and Reducing Racial and Ethnic Disparities ► Integrating Care for People with Complex and Special Needs ► Building Medicaid Leadership and Capacity 2

3. Medicaid’s Challenges and Opportunities 60 million People in the United States with Medicaid coverage. $380 billion Projected Medicaid spending for FY 2009. 1 million Medicaid beneficiaries resulting from a 1% increase in unemployment; enrollment increased by 5.4% in FY2009 and is projected to increase by 6.6% in FY2010. 16 - 20 million Additional Medicaid/CHIP beneficiaries by 2019 due to health reform. 41% Births in the United States covered by Medicaid. 28% Children in the United States covered by Medicaid. 27% Percentage of total mental health costs financed by Medicaid. 41% Total long-term care costs financed by Medicaid. 5% Medicaid beneficiaries accounting for 57% of total Medicaid spending. 8.8 million People who are dually eligible for Medicare and Medicaid; roughly 18% of Medicaid beneficiaries. 3

4. States Need Sound Cost Containment Strategies Eligibility cuts are not available Across the board rate cuts secure immediate savings, but pose short- and long-term problems ► Access ► Quality ► Legal Delivery system and payment reforms offer opportunity to cut costs while improving quality and positioning states for health care reform ► For Medicaid patients ► For all patients 4

5. Top 5% highest-cost beneficiaries account for 57% of $$ ► Among the most expensive 1% Medicaid beneficiaries (acute care only) 80% have 3 or more chronic conditions* 49% of beneficiaries with disabilities also have psychiatric illness ► The presence of psychiatric illness increases spending and hospitalization rates by as much as 75%* Dual eligibles equal 18% of Medicaid enrollment, but drive 46% of $$ Most of these high-need, high-cost beneficiaries are in unmanaged fee-for-service Targeting Complex Need Populations: Measurable Savings and Improved Quality 5 *Sources: RG Kronick et al., “The Faces of Medicaid III: Refining the Portrait of People with Multiple Chronic Conditions.” Center for Health Care Strategies, October 2009; C. Boyd, et al. “Clarifying Multimorbidity for Medicaid Programs to Improve Targeting and Delivery of Clinical Services.” Center for Health Care Strategies, Fall 2010.

6. Specific Opportunities for Improving Quality and Containing Costs Identify “high-opportunity” primary care practices to provide innovative supports Predictive modeling to identify high-opportunity patients and tailor interventions ► Care management for high-risk pregnancy – ROI > $2 for every $1 spent ► Care management for high-risk asthma – ROI > $6 for every $1 spent ► Enhanced primary care case management to provide more intensive care management for adults with complex needs Integrated physical and behavioral health services Integrated care for dual eligibles Utilization management via retrospective and concurrent reviews 6

7. Supports for “High-Opportunity” Practices Policy Imperative: Small practices serve high volume of Medicaid beneficiaries, but often lack staff support/ resources to provide high-quality chronic care View from the States: Identify “high-opportunity” PCPs — small practices with high Medicaid volume/ low performance — for innovative practice-site supports Opportunity: Advance quality improvement infrastructure at small primary care practices, e.g.: ► Provide practice-based nurse care managers and practice facilitators ► Leverage Medicaid EHR incentive program and RECS to implement registries and EHRs ► Form virtual networks of practices 7

8. Physical Health/Behavioral Health Integration Policy Imperative: Current systems for delivering publicly financed physical and behavioral health services are “broken” ► Most of Medicaid’s highest-need, highest-cost beneficiaries have physical and behavioral health comorbidity, yet care is not coordinated View from the States: Considerable variation in the financing, organization, and delivery of care ► Full risk, partial risk, and no-risk with care/utilization management ► Managed behavioral health organizations, administrative services organizations, and community mental health centers Opportunity: Integrate physical and behavioral health services and financing 8

9. Medicare-Medicaid Integration for Dual Eligibles Policy Imperative: Dual eligibles are among Medicaid- Medicare’s highest-need patient subsets, yet receive fragmented and poorly coordinated care ► Only 2% of the nation’s 8.8 million duals are in integrated programs that align Medicaid and Medicare financing and services View from the States: Progress to integrate care has been slow due to financial misalignment (no incentive for states), administrative and operational challenges, and difficulties in taking proven models to scale Opportunity: Integrate Medicaid-Medicare administration, services, and financing via special needs plans or emerging alternatives 9

10. Medicaid is Positioned to Lead National Efforts to Contain Costs and Improve Quality... Over 60 million enrollees with enrollment growth at record levels 16 million more Americans become eligible in 2014 Medicaid is the nation’s single largest insurer... If Medicaid Adopts Sound Payment Policies 10

11. Elements of Effective Payment Reform Sound payment fundamentals ► Reflect patient acuity ► Encourage efficiency ► Collect accurate clinical data ► Facilitate measurement of quality and cost Evidence-based payment reforms ► Potentially preventable events ► Medical homes ► Episodic/bundled payments/ACOs Alignment with other payers Partnership with CMS 11

12. State Medicaid Programs Have Implemented Multiple Payment Reforms 46 states have more than half their enrollees in managed care ► Most spending still FFS 30 states have advanced medical home initiatives 11 states have adopted non-payment policies for hospital acquired conditions 12

13. Federal Health Reform Supports State Strategies to Improve Quality/Control Costs 100 percent FMAP to increase primary care rates for two years Health homes for enrollees with chronic conditions (90% FMAP for 2 years) Demonstrations for bundled payments and ACOs Grants/contracts for community health teams to support medical homes Grants/contracts for medication management for chronic disease Grants for state to provide incentives to Medicaid beneficiaries to participate in programs to prevent chronic disease Center for Medicare and Medicaid Innovation pilots to test payment and system reforms Federal Coordinated Health Care Office for dual eligibles 13

14. Visit CHCS.org to … Download practical resources to improve the quality and cost-effectiveness of Medicaid services. Subscribe to CHCS eMail Updates to learn about new programs and resources. Learn about cutting-edge efforts to improve care for Medicaid’s highest-need, highest-cost beneficiaries. www.chcs.org 14