1. October 6, 2014 Billy Millwee, MHA Managing Principal Texas Medicaid: Contemplating the Future

2. 2 Waiver Renewal 2 Coverage Expansion Opportunities 3 National Trends and Texas. 1 Overview and Agenda

3. Capitated Managed Care Source: National Trends and Texas Duals Demonstrations Quality, Payment, and Delivery System Reforms

4. National Trends and Texas

5. Capitated Managed Care National 70% of beneficiaries are in managed care About 35% of services are capitated Trend is to move more services and complex populations under capitation Texas Major expansion March 2012 Nursing facility carve in 03/2015 STAR Kids 09/2016 Intellectually and Developmentally Disabled (IDD) Physical health: 09/2014 Other services ???

6. National Trends and Texas Duals Demonstrations Enabled by Affordable Care Act Managed by CMS Office of Medicare/Medicaid Coordination Objective Improve care coordination and financial alignment Shared savings arrangements with states Two models Capitated managed care Managed FFS

7. National Trends and Texas Duals Demonstrations 26 states submitted proposals 16 states have approved MOU CMS/States negotiate MOUs for implementation Three-way contract arrangement CMS State Medicare/Medicaid integrated plan

8. National Trends and Texas Duals Demonstrations With MOU Without MOU

9. National Trends and Texas Duals Demonstrations Who are the Duals? 9+ million 5.6 million: low income and elderly 3.4 million under 65 and disabled High proportion of women, African-Americans, and Hispanics Three times more likely to have a disability and/or function impairment More likely to have higher rates of diabetes, pulmonary disease, stroke, Alzheimer’s, and mental illness All have low incomes with limited assets Most receive benefits for each program (acute, LTSS, mental health) through FFS Little service coordination

10. National Trends and Texas Duals Demonstrations Need Source for chart

11. National Trends and Texas Duals Demonstrations Who are the Duals? 9+ million 5.6 million: low income and elderly 3.4 million under 65 and disabled High proportion of women, African-Americans, and Hispanics Three times more likely to have a disability and/or function impairment More likely to have higher rates of diabetes, pulmonary disease, stroke, Alzheimer’s, and mental illness All have low incomes with limited assets Most receive benefits for each program (acute, LTSS, mental health) through FFS Little service coordination

12. National Trends and Texas Duals Demonstrations Implementation March 2015 Six counties impacted: Bexar26,542 Dallas27,941 El Paso 19,645 Harris47,160 Hidalgo 27,090 Tarrant 16,986 Total165,274

13. National Trends and Texas Duals Demonstrations Duals are in program if: Age 21 or older Receive Medicare Part A, B and D and receive full Medicaid benefits In STAR+ PLUS Members receive enrollment packet 60 days before start date Can opt-out

14. National Trends and Texas Quality, Payment, and Delivery System Reforms Moving from commodity toward value reimbursement models Emerging models Physician incentive models Episodes of care Potentially Preventable Events Many states use State Innovation Model (SIM) grants to drive innovation During Round One $300 million was awarded to 25 states Round Two will provide up to $730 million A lot of focus on multi-payer initiatives CMS implementing Innovation Acceleration Program (IAP) $100M allocated to accelerate innovation at the state level

15. National Trends and Texas Quality, Payment, and Delivery System Reforms Texas Initiatives Build on SB 7, 2011, 2013 Focus on PPEs Preventable Readmissions Primary care preventable admissions Preventable ED visits Use of diagnostic ancillary services Hospital complications Nursing homes Texas consistently rated among the worst Hope to see incentives to improve nursing home care FQHCs Will cost-based reimbursement survive? Alternative payment models? $100M allocated to accelerate innovation at the state level

16. Texas Waiver Renewal

17. Texas Waiver Renewal: Background Waiver obtained December 2011 Allowed statewide expansion of managed care Implementation of dental managed care Re-purposed Upper Payment Limit (UPL) Created: Regional Health Partnerships Uncompensated Care Pool (UC) Delivery System Reform Incentive Program Pool (DSRIP) Increased available funds from $15 billion to $30 billion over five-year waiver period.

18. Texas Waiver Renewal: Background Original Waiver Concept Reshape UPL Medicaid expansion was to occur in January 2014 Prior to SCOTUS Medicaid expansion was required Waiver would allow Texas to build the “Runway to 2014” Invest in delivery system reforms Build infrastructure Provide hospitals with increased compensation for uncompensated care Invest in mental health system

19. Texas Waiver Renewal Renewal Challenges Uncompensated Care Pool No Medicaid or other coverage expansion Will UC pool continue? DSH is generally considered the vehicle for states to fund UC DSRIP About 1,500 DSRIP projects Will all projects be allowed to continue? Will the valuation methodology remain unchanged? System impacts if projects are eliminated or if valuation methodology is changed. Sustainability Is the waiver sustainable over time? When can the waiver be discontinued?

20. Coverage Expansion Opportunities

21. Source: Kaiser Family Foundation – August 28, 2014 Implementing Expansion (28) Open Debate (2) Not Moving Forward Now (21) Medicaid Expansion: Current Lay of the Land

22. Source: Kaiser Family Foundation – August 28, 2014 Medicaid Expansion: Alternative Expansions Iowa: 2 simultaneous 1115 waivers, Medicaid Choice Plan and Iowa Wellness Arkansas: Health Care Independence Program -- Private Option) Michigan: Healthy Michigan Pennsylvania: Healthy Pennsylvania

23. Source: Kaiser Family Foundation – August 28, 2014 Medicaid Expansion: Alternative Expansions Indiana: Healthy Indiana Plan (HIP 2.0) pending approval of proposal. Utah: Healthy Utah received favorable CMS review of concept document.

24. Alternative Coverage Expansion 1115 Waivers States are able to test new and innovative approaches for the delivery of services. Waivers serve as the basis for alternative coverage expansions. Constraints CMS has indicated that States cannot receive enhanced FFP unless they implement the full expansion covering all newly eligible adults with incomes <138% FPL. Waivers cannot be used to change FMAP. “Block Grants” would require a change to statute—not something that can be done through a waiver.

25. Key Components of TX Centric Expansion Model Embraces previous state legislative/executive direction on coverage expansion proposals: SB 10, 80 th Texas Legislative Session, 2007: Authorized HHSC to seek a Medicaid waiver to implement the Texas Opportunity Pool (THOP) to provide premium assistance to reduce the number of Texas that do not have health insurance.

26. Key Components of TX Centric Expansion Model HB 13, 82 nd Texas Regular Legislative Session, 2011 and SB 7, 2011 Texas 1 st Called Special Legislative Session: Authorized HHSC to obtain a Medicaid waiver that would: Encourage use of the private health benefits coverage market rather than public systems. Encourage people that have access to private employer-based health benefits to obtain or maintain those benefits. Create a culture of shared financial responsibility and accountability through use of co- payments, HSAs, vouchers.

27. Key Components of TX Centric Expansion Model SB 78, 81 st Texas Legislative Session, 2009: Created “Healthy Texas.” Encourage Texas small businesses to offer health insurance as a benefit. Provides funding for premium assistance. Intent was to make health insurance more available and affordable. Effective August 2012 enrollment was suspended due to lack of state funding.

28. Reforms Current Medicaid Key Components of TX Centric Expansion Model Mandatory co-payments Health Savings Accounts Global, risk-adjusted finance mechanism Increased flexibility Emphasis on personal responsibly

29. Reforms Current Medicaid Key Components of TX Centric Expansion Model Mandatory co-payments Health Savings Accounts Global, risk-adjusted finance mechanism Increased flexibility Emphasis on personal responsibly Does Not Increase State Budget No impact on Article II, even when expansion match becomes 95%

30. Reforms Current Medicaid Key Components of TX Centric Expansion Model Mandatory co-payments Health Savings Accounts Global, risk-adjusted finance mechanism Increased flexibility Emphasis on personal responsibly Does Not Increase State Budget No impact on Article II, even when expansion match becomes 95% Does Not Increase Federal Spending Maintains current level of federal projected spending.

31. Reforms Current Medicaid Key Components of TX Centric Expansion Model Mandatory co-payments Health Savings Accounts Global, risk-adjusted finance mechanism Increased flexibility Emphasis on personal responsibly Does Not Increase State Budget No impact on Article II, even when expansion match becomes 95% Does Not Increase Federal Spending Maintains current level of federal projected spending. Considers the current TX 1115 Waiver Engages communities Leverages IGTs

32. Questions? Sellers Dorsey sellersdorsey.com Billy Millwee Managing Principal Sellers Dorsey bmillwee@sellersdorsey.com 512.393.4018 32