Mandatory Medicaid Services

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Gwendolyn Parker
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1 Florida Medicaid: A Case for Modernization October 5, 2004

2 Medicaid Structure Federal Medicaid laws mandate certain benefits for certain populations Medicaid programs vary considerably from state to state, and within states over time State Medicaid programs vary because of differences in: optional service coverages limits on mandatory and optional services optional eligibility groups income and asset limits on eligibility provider reimbursement levels Medicaid does not cover all low income individuals Individuals not covered are often working adults without children in fact, the number of uninsured children nationally is at the lowest level since measuring began Medicaid serves the most vulnerable; in Florida: 27% of children 44% of pregnant women 66% of nursing home days 885,000 adults - parents, aged and disabled 52% of people with AIDS 1

3 Mandatory Medicaid Services Advanced Registered Nurse Practitioner Services Early & Periodic Screening, Diagnosis and Treatment of Children (EPSDT)/Child Health Check-Up Family Planning Home Health Care Hospital Inpatient Hospital Outpatient Independent Lab Nursing Facility Physician Services Portable X-ray Services Rural Health Transportation Florida Medicaid Mandatory Services for All Eligibles FY Mandatory 40.67% of $12.7 Billion 2

4 Florida Medicaid Optional Services* Adult Health Screening Ambulatory Surgical Centers Assistive Care Birth Center Services Children s Dental Services Children s Hearing Services Children s Vision Services Chiropractic Services Community Mental Health County Health Department Clinic Services Dialysis Facility Services Durable Medical Equipment Early Intervention Services Emergency Dental for Adults Healthy Start Services Home and Community-Based Services Hospice Care Intermediate Nursing Home Care Occupational Therapy Optometric Services Orthodontia for Children Personal Care Services Physical Therapy Physician Assistant Services Podiatry Services Prescribed Drugs Primary Care Case Management (MediPass) Florida Medicaid Optional Services for All Eligibles FY Optional 59.33% of $12.7 Billion Intermediate Care Facilities/ Developmentally Disabled *States are required to provide any medically necessary care required by child eligibles. Private Duty Nursing Registered Nurse First Assistant Services Respiratory Therapy School-Based Services Speech Therapy State Mental Hospital Services Subacute Inpatient Psychiatric Program for Children Targeted Case Management 3

5 Projected FY Medicaid Expenditures by Appropriation Category Physician Services 5.13% Other 32.92% Prescribed Medicine/Drugs 17.98% Home & Community Based Services 5.23% Prepaid Health Plans/HMO 11.03% Hospital Inpatient Services 11.98% Nursing Home Care 15.73% Other: Special Payments to Hospitals Supplemental Medical Insurance Hospital Outpatient Services Disproportionate Share Hospital Payments Hospice Services Intermediate Care Facility/DD Source: FY GAA Home Health Services Therapeutic Services for Children 4

6 Estimated Medicaid Spending FY Service Prescribed Medicine/Drugs Nursing Home Care Hospital Inpatient Services Prepaid Health Plans/HMO Home & Community Based Services Physician Services Special Payments to Hospitals Supplemental Medical Insurance Hospital Outpatient Services Disproportionate Share Hospital Payments Hospice Services Intermediate Care Facility/DD Home Health Services Therapeutic Services for Children Other Total Source: FY GAA Estimated Annual Spending $ 2,644,054,895 $ 2,314,153,880 $ 1,762,289,358 $ 1,622,434,059 $ 769,697,270 $ 754,478,058 $ 577,333,410 $ 539,444,228 $ 533,443,612 $ 310,917,998 $ 219,702,401 $ 194,819,297 $ 162,861,286 $ 159,329,606 $ 2,144,318,352 $14,709,277,810 Percent of Total Spending 17.98% 15.73% 11.98% 11.03% 5.23% 5.13% 3.92% 3.67% 3.63% 2.11% 1.49% 1.32% 1.11% 1.08% 14.58% % 5

7 General Revenue History by Service $1,000,000,000 $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- FY96-97 FY97-98 FY98-99 FY99-00 FY00-01 FY01-02 FY02-03 FY03-04 FY04-05 Hospital Inpatient Hospital Outpatient Prepaid Health Plans/HMO Home and Community Based Services Prescribed Medicine Drugs Nursing Home Care Physician Services 6

8 Principles of Medicaid Reform Principles: Predictability in Growth Accountability Appropriately serving the population for which the program was created Evaluation Criteria: Will it result in savings, while stabilizing expenditure increases at a rate in keeping with revenue growth? Does it give consumers incentives to reduce utilization/ change behavior/purchase services wisely? Does it give providers incentives to reduce costs/ reduce utilization and provide effective care? Does it promote innovation in service delivery systems? 7

9 Agency reform teams Stakeholder meetings Experts in the field Broad Input from Numerous Sources The Agency has researched what other states are doing to reform state Medicaid programs, including: Oregon Tennessee Mississippi The Agency continues to review and discuss the merits of the concepts put forth to date. 8

10 Focusing the Modernization Efforts The Agency will hold a series of day-long workshops Format: A facilitator with knowledge of the Medicaid program will be on hand to facilitate meaningful discussion, Panelists will be charged with discussing the benefits and drawbacks of potential options. Opportunity for the public to comment or submit written comments in response to information that will be posted on the internet prior to the meeting. 9

11 Where We Go From Here Solving the puzzle Putting all input together in a cohesive package that best serves the State of Florida including Medicaid beneficiaries and providers. Policy and Rule Changes State Statutory Changes Federal Waiver/SPA Proposed Federal Statutory/Rule Changes 10

12 Medicaid Pharmacy Workshop Options for Discussion

13 Controlling Spending for Pharmacy Services Florida prescription drug trends are consistent with National trends Since FY 96/97, growth in pharmacy services has outpaced spending in other areas Since FY 2001, pharmacy claims have increased by an average of 12% annually Total expenditures for pharmacy services have grown annually by an average of approximately 16% $1,000,000,000 $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- FY96-97 FY97-98 FY98-99 FY99-00 FY00-01 FY01-02 FY02-03 FY03-04 FY04-05 Hospital Inpatient Hospital Outpatient Prepaid Health Plans/HMO Home and Community Based Services Prescribed Medicine Drugs Nursing Home Care Physician Services 12

14 Pharmacy Services Spending by Population $1.77 billion spent on mandatory population in FY 03 $529 million spent on optional populations in FY 03 Optional 23% Mandatory 77% 13

15 Prescribed Drug Cost Control Programs Monthly Four Brand Prescription Drug Limit Preferred Drug List Supplemental Drug Manufacturer Rebates Drug Prior Authorization $500 Million Drug Drug Therapy Limits Savings Ingredient Cost Adjustments State MACs Beneficiary Pharmacy Lock-In Wireless Handheld Clinical Pharmacology Drug Information and Recipient Rx History Database Home Delivery Pharmaceutical Services Pilot Project Behavioral Pharmacy Management Program 14

16 Reforming Florida s Medicaid Prescribed Drug Program Describe ways in which the state can successfully implement options presented. What are some of the obstacles that the state will face in implementing these programs? What are possible solutions to eliminating or overcoming these obstacles? What is the possible impact outside of the Medicaid program? What are some alternative options related to specific options (population, services, financing) that should be considered? 15

17 Population Options Current Pharmacy Benefit All Medicaid recipients receive equal pharmacy benefits Includes categorically and Medically needy Current experience 2.2 million beneficiaries enrolled In FY 03-04, FL Medicaid paid for 36.1 million prescription claims Medicaid expected to pay 38.8 million prescription claims in FY Average users per month is 575, prescriptions/user/month 16

18 Option A Vary Pharmacy Benefit Levels Among Different Population Groups Evaluate current pharmacy utilization patterns among population groups Determine basis for benefit tiers Establish benefit tiers See Oregon Model 17

19 Option B Preserving Prescription Drug Services for the Medically Needy Establish benefit tiers; Determine basis for the benefit tiers; Evaluate current pharmacy utilization patterns among population groups; See Chapter Law

20 Option C Include/Exclude Supplemental Benefits for Dual Eligible Population The Medicaid benefit exceeds what will be available under Medicare Part D; Establish maximum state supplement, recognizing that state bears 100% of the cost. See Medicare Part D benefit; Mississippi Medicaid. 19

21 Service Options Current Pharmacy Benefit Unlimited number of prescriptions covered Limited to four brand name prescriptions per month Preferred drug list governs Lock-in program for over-utilization Current experience 46% of claims are for generic products 53% of claims are for brand name products Less than 1% of the claims are for non-drug products 84% of prescription drug spending was for brand name products 15.4% of spending was for generic products 20

22 Option A Formulary Revisions Closed/restricted formulary, which includes medically necessary products only; Generics only, with must have brands; Lowest price; OTC allowance; See Arizona Medicaid; New York Medicaid; Medicare Part D. 21

23 Option B Establishment of Caps Hard cap script limit same for entire population or vary by population; Hard cap with no prior authorization; Individual monetary limits; See Texas and Louisiana Medicaid; FL Silver SaveRx Program. 22

24 Option C Development of Comprehensive Pharmacy Management Program Mandatory participation in disease management program; Mandatory drug management consultation; Expansion of current programs used to control utilization (lock-in, academic detailing, etc.). See Medicare part D. 23

25 Financing Options Current Pharmacy Benefit Providers reimbursed at lower of AWP minus 15.4% or WAC plus 5.75% Limited state MACs on multi-source products Minimum required supplemental rebate 29% Optional recipient cost sharing Current experience Total pharmacy expenditures in FY 03/04 was $2.33 billion Average cost of prescription was $

26 Option A Opt Out of Federal Rebate Program Negotiating all rebates; See Arizona AHCCCS program. 25

27 Option B Change in Ingredient Cost Reimbursement Methodology Use of average sales price (ASP) methodology; 100% state MACs; Competitive bidding; Most Favored Nations (MFN) reimbursement; See Medicare Part B and Part D. 26

28 Option C Change in Recipient Cost Sharing Structure Mandatory cost sharing; Tiered co-payments for different populations; Co-payments for medically needy population. See State Employees Benefit Program. 27

August 2004 Report No Scope. Background. 1 Section 11.51(6), F.S. 2 Expected Medicaid Savings Unrealized ; Performance, Cost Information Not

August 2004 Report No Scope. Background. 1 Section 11.51(6), F.S. 2 Expected Medicaid Savings Unrealized ; Performance, Cost Information Not August 2004 Report No. 04-53 Medicaid Should Improve Cost Reduction Reporting and Monitoring of Health Processes and Outcomes at a glance While Medicaid expenditures have continued to increase, the annual