1. Medicaid Per Capita Caps: What Do They Mean for Me?
Barbara Eyman
June 22, 2017

2. Agenda Background on Per Capita Caps How Would Per Capita Caps Work?
State Level Impact of Per Capita Caps
What About Block Grants?

3. Background on Per Capita Caps

4. Per Capita Caps Proposal in context
AHCA Provision
Related to ACA?
Repeal Cost Sharing Subsidies 
Repeal Premium Tax Credit
Repeal Individual & Employer Mandates
Repeal ACA Taxes
Repeal and Replace Insurance Regulations
Repeal Prevention and Public Health Fund
Repeal Medicaid Expansion
Repeal DSH Cuts
Establish Medicaid Per Capita Caps/Block Grant 
AHCA Provision
Related to ACA?
Repeal Cost Sharing Subsidies 
Repeal Premium Tax Credit
Repeal Individual & Employer Mandates
Repeal ACA Taxes
Repeal and Replace Insurance Regulations
Repeal Prevention and Public Health Fund
Repeal Medicaid Expansion
Repeal DSH Cuts
Establish Medicaid Per Capita Caps/Block Grants 
AHCA Provision
Related to ACA?
Repeal Cost Sharing Subsidies 
Repeal Premium Tax Credit
Repeal Individual & Employer Mandates
Repeal ACA Taxes
Repeal and Replace Insurance Regulations
Repeal Prevention and Public Health Fund
Repeal Medicaid Expansion
Repeal DSH Cuts
Establish Medicaid Per Capita Caps/Block Grant 

5. MACPAC, June 2016 report to congress
“Medicaid’s rate of growth in spending per enrollee has been comparable to or lower than that of Medicare and private insurance since the early 1990s, and it is projected to be lower than that of Medicare and private insurance in the future.”

6. Significant Savings (AKA Deep Cuts) from AHCA Medicaid Proposals
Savings from Per Capita Caps proposal at least $65 billion/10 years
Medicaid’s rate of growth in spending per enrollee has been comparable to or lower than that of Medicare and private insurance since the early 1990s, and it is projected to be lower than that of Medicare and private insurance in the future. [MACPAC]
All amounts in billions

7. Per capita caps are a limit on federal match
Since 1965, Medicaid has guaranteed open-ended federal matching funds for all eligible state Medicaid expenditures
Per capita caps limit that guarantee
All other Medicaid requirements remain in place
State options for remaining within the caps
Increase state-only spending
Reduce optional benefits
Cut reimbursement (including supplemental payments)
Delivery system changes (eg expand managed care)

8. How Would Per Capita Caps Work?

9. How would the Per capita caps work?
Medical CPI +1
Medical CPI
Expenditures allocated across 5 eligibility groups
Per capita amount for each is determined
Base amount inflates each year

10. What’s in and out of the per capita cap?
INCLUDED
EXCLUDED
Base Payments for Services (Acute + Long Term Care)
DSH (But Subject to Allotment Cap)
Non-DSH Supplemental Payments
Excluded Populations
Waiver Expenditures
New Safety Net Adjustment
Medicare Cost Sharing
State Administrative Costs

11. How Would per capita caps work?
Per Capita Amounts
$10 $3 $5 $4 $8

12. Potential for states to owe money back
Excess spending determined after the year ends
States could find themselves owing significant amounts back to CMS
Quarterly repayment of excess amount
Potential for double cuts as states fund prior year excess and attempt to control current year spending
Incentives to spend less than the cap to avoid disallowance
No ability to roll over unused cap room to subsequent years
Difference between per capita cap and capitation payment

13. Impact of Per Capita Caps

14. What does this all mean? Spending limit fluctuates with enrollment
Higher than anticipated enrollment = higher limit
Spending limit DOES NOT fluctuate with health care costs
State at risk for all aspects of health care spending except enrollment
High priced specialty drugs
Technology
Public health crises
Changing acuity within eligibility groups
Or…providers (especially essential providers) at risk for rising costs

15. Spending limit serves to freeze in place 2016 policy choices
Or, more accurately, prohibit policy choices that require more spending
Optional benefits
Only 3 states have not added an optional benefit at some point in the last decade (AL, ME, NJ))
Amount, duration and scope of benefits
E.g. day limits, dollar limits, restricted scope
Reimbursement rates
Prior authorization policies
Enrollment strategies to capture hard-to-reach (and higher-than-average-cost) beneficiaries
Incentives to cherry-pick?
Long term investments in higher value care
E.g. patient centered medical homes, home and community based services
Data on optional benefits from State Health Facts

16. Differential state-by-state impact
More difficult for states with lower tax base to make up the difference when per capita caps bite.
States have less flexibility to reduce reimbursement rates in markets with low provider participation.

17. Per Capita Spending Trends 1991-2014
Variation not only in per capita amount but in growth in per capita amount.
Source: CMS Health Expenditure by State of Residence Data

18. variation among states by enrollee category

19. Impact of per capita caps in out years
Brookings report
Huge variation in impact across states
No winner states, only loser and break-even states
Just under half of states would have had no impact
“Low cost” states hardest hit
Brookings study modeled per capita cap impact in 2011 if it had been implemented in 2004 based on 2000 expenditures (i.e. 8th year of implementation). State with largest impact would have had to cut (or increase expenditures) by 77%. Just under half of states would have had no impact.

20. Impact of base year Choice of base year is necessarily random
What happened in your state in 2016?
Comparison to 2015 and 2017
State budget pressures?
New state policies implemented/retracted?
CMS policy disputes?
New waiver spending?
Reduction in waiver spending?
New supplemental payments?
Reduction in supplemental payments?
Unusual spike or dip health care costs/needs?
Etc. etc.

21. What about waiver states?
Per capita caps supersede waiver budget neutrality limits
Although budget neutrality limits still apply
Waivers require budget neutrality over a 5 year period
Permits higher spending (investments) in early years, balanced out by savings in out years
No longer permissible
Impact on innovation in Medicaid
May be advantageous if 2016 is an early year of your state’s waiver
May be disadvantageous if in later years or if CMS imposed new restrictive policies (e.g. uncompensated care pool policy)

22. What About Block Grants?

23. The AHCA also gives states a block grant option
Like per capita caps except limit is a flat dollar amount
State at risk for all health care spending including enrollment
Growth rate is medical CPI
Funds may be rolled over from year to year
Only for children and/or non-disabled, non-expansion adults
Block grant option is for 10-year periods
States given significant flexibility:
Eligibility requirements
Benefits & cost-sharing
Delivery system
CMS approval of State Block Grant Plan required
Enhanced FMAP available
Fast growing state?
Economic downturn?
CMS may only disapprove if incomplete or actuarially unsound

24. Block Grant Vs. per capita cap
State Savings

25. Washington Counsel to America’s Essential Hospitals
QUESTIONS??
Barbara Eyman
Washington Counsel to America’s Essential Hospitals
Eyman Associates