Medicaid Managed Care: Part 1*

Transcription

1 Texas Conservative Coalition Research Institute Medicaid Managed Care: Part 1* The Value of Medicaid Managed Care A Policy White Paper December 2017 *This paper is Part 1 of a two- part series. Part 2 of the series will explore ways to reform and improve managed care.

2 For more information about any of the recommendations contained in this document, please contact the Texas Conservative Coalition Research Institute: Texas Conservative Coalition Research Institute P.O. Box 2659, Austin, TX (512) The contents of this document do not represent an endorsement from any individual member of the Texas Conservative Coalition Research Institute Board of Directors. There may be some policy recommendations or statements of philosophy that individual members are unable to support. We recognize and respect their position and greatly appreciate the work of everyone involved in the organization. Copyright 2017 Texas Conservative Coalition Research Institute, all rights reserved. 2

3 Executive Summary With total annual expenditures of approximately $38 billion (including supplemental federal hospital funds), the Texas Medicaid program comprises about 29 percent of the entire state budget. 1 Program caseload has grown considerably under the Affordable Care Act (ACA), even though Texas rightfully refused to expand Medicaid coverage to able- bodied adults. Since the ACA s full implementation in September 2014, more than 4 million enrollees have been covered by Texas Medicaid each month. 2 Because Medicaid is an entitlement program, eligible individuals must receive covered services and funding is open ended, meaning that neither the state nor federal governments can cap Medicaid spending. One of the most effective means of bending this cost curve, and providing high- quality affordable health care coverage, is through Medicaid managed care. Health plans are generally able to provide better care by helping coordinate and manage an enrollee s health care to more preventive, lower cost settings, and by utilizing the providers within their networks. Plans also assume financial risk should costs exceed the negotiated per member per month (PMPM) rate, which helps provide budget certainty for the state. The Texas Legislature first began utilizing Medicaid managed care in the early 1990s. What began as a small regional Medicaid managed care pilot in 1993 has today grown to operate in all of Texas 254 counties and cover over 90% of the state s Medicaid enrollees. 3 Texas, like other states at the time, originally turned to managed care as an innovative method for controlling costs, 4 and that goal has undoubtedly been met. The expansion of managed care has resulted in a significant cost savings; from state fiscal years alone, Medicaid managed care achieved a savings totaling $4 billion in all funds and $2 billion in general revenue for the state. 5 However, beyond the promise of cost containment, integrating all aspects of an individual s care has also yielded improved client outcomes. In an in- depth review after implementing its initial managed care programs, state officials found that the Medicaid managed care model resulted in improved access to care, cost savings, program accountability, and quality improvements that would not have 1 Health and Human Services Commission, Presentation to the Senate Finance Committee Subcommittee on Healthcare Costs, February 3, 2017, slide 5, available at healthcare- costs- workgroup.pdf. 2 Health and Human Services Commission, Healthcare Statistics, Preliminary Medicaid Enrollment by Month (September January 2017), available at hhs/records- statistics/data- statistics/healthcare- statistics. 3 Texas Health and Human Services Commission, Fact Book, 2017, p. 39, available at regulations/reports- presentations/2017- factbook.pdf. 4 Boben, Paul J. Medicaid Reform in the 1990s. Health Care Financing Review22.2 (2000): 1 5. Print. 5 Milliman Client Report, Texas Medicaid Managed Care Cost Impact Study, 2015, prepared for the Texas Association of Health Plans, available at 3

4 occurred in the traditional Medicaid fee- for service system. 6 These benefits continue to this day, 7 with the state now enforcing a Pay- For- Quality (P4Q) initiative that puts a portion of a plan s capitation at risk if certain quality measures are not met, while providing the opportunity to earn limited additional compensation for meeting or exceeding bonus measures. 8 The State of Texas has long recognized the value and benefit of managed care and utilizes it, not only in Medicaid and the Children s Health Insurance Program (CHIP), but also in the state employee, university employee, teacher group plans, and in the correctional system. Since its inception as a small pilot program in the 1990 s, Medicaid managed care has grown into one of the state s most successful initiatives, both in terms of cost savings and improved patient outcomes. It allows the state to utilize private sector businesses and free market innovation to deliver government- sponsored programs. Various interim charges in both the House and Senate will likely provide an opportunity over the coming year to explore any modifications that should be made to the managed care system. Some issues that deserve further exploration include: Reforming the Medicaid program to function more like the commercial market, including fully implementing point- of- service copayments; enacting missed appointment fees; instituting open enrollment periods that prohibit enrollees, to the extent allowed by federal law, from switching to a different health plan without cause; and rejecting any willing provider mandates. Ensuring that MCOs are encouraged and incentivized to test new and innovative Medicaid payment and service delivery models. Enhancing the use of data to provide more transparent user- friendly monitoring information and metrics to plan enrollees, providers, and stakeholders. Going into future sessions, it is vital that lawmakers take action to improve the effectiveness and efficiency of the Medicaid managed care program and reject policies that would hinder an MCO s ability to continue providing higher- quality affordable care to the state s Medicaid and CHIP populations. 6 Ibid. 7 The Institute for Child Health Policy, Texas Medicaid Managed Care and Children s Health Insurance Program: EQRO Summary of Activities and Trends in Healthcare Quality, Contract Year 2015, submitted January 8, 2016, available at summary- of- full- report- Activities- and- Trends- in- Healthcare- Quality.pdf. 8 See HHSC website, Pay- For- Quality Program, available at hhs/process- improvement/medicaid- chip- quality- efficiency- improvement/pay- quality- p4q- program 4

5 Background: The Texas Medicaid Program With total annual expenditures of approximately $38 billion (including supplemental federal hospital funds), the Texas Medicaid program comprises about 29 percent of the entire state budget. 9 Because the state s program is so large, even relatively minor changes in Medicaid caseload and costs can have a significant impact on the state budget. This can force other budget priorities, such as criminal justice, education, and roads, to compete for limited state resources. While the Affordable Care Act s (ACA) unfunded commercial market mandates have led to skyrocketing premiums and decreased consumer choice, the bill s Medicaid provisions have proven just as problematic. Even states like Texas, which rightfully refused to expand its program, have found their Medicaid rolls at an all- time high due to eligibility changes mandated by the ACA and federal rule changes. Before full implementation of the ACA, monthly Texas Medicaid enrollment hovered around 3.6 million individuals. 10 In January 2014, after new federal eligibility changes went into effect, 11 Medicaid enrollment began steadily climbing and, in September 2014, topped 4 million for the first time. 12 Enrollment has remained over 4 million since then. 13 According to the Texas Health and Human Services Commission (HHSC), Medicaid currently covers about 52 percent of all births in the state of Texas, and, when combined with the Children s Health Insurance Program (CHIP), these government- funded programs provide health care to about 45 percent of all Texas children. 14 Non- disabled children and adults account for about 76 percent of the program s enrollees, but only about 41 percent of its costs. 15 The aged and disability- related population, sometimes referred to aged/blind/disabled, or ABD, makes up 24 percent of the program, but accounts for 59 percent of total costs. 16 According to HHSC, by fiscal year (FY) 2019, Texas is expected to see its Medicaid rolls grow by almost 500,000 additional monthly enrollees since full implementation of the ACA. 17 The net effect of these required eligibility changes is that even states that chose not to implement the optional ACA Medicaid expansion have been forced to grow their programs. Contributing to that expansion are mandatory use of 9 Health and Human Services Commission, Presentation to the Senate Finance Committee Subcommittee on Healthcare Costs, February 3, 2017, slide 5, available at healthcare- costs- workgroup.pdf. 10 Health and Human Services Commission, Healthcare Statistics, Preliminary Medicaid Enrollment by Month (September June 2017), available at hhs/records- statistics/data- statistics/healthcare- statistics. 11 These changes include mandatory twelve- month eligibility certification periods, a prohibition on assets testing for eligibility, a mandate that forces states to allow hospitals to implement presumptive Medicaid eligibility, a five percent income disregard, Medicaid coverage for former foster youth to age 26, and mandatory transition of certain children from CHIP to Medicaid. 12 Health and Human Services Commission, Healthcare Statistics, Preliminary Medicaid Enrollment by Month (September January 2017), available at hhs/records- statistics/data- statistics/healthcare- statistics. 13 Ibid. 14 Health and Human Services Commission, Presentation to the Senate Finance Committee Subcommittee on Healthcare Costs, February 3, 2017, slide 3, available at healthcare- costs- workgroup.pdf. 15 Ibid., slide Ibid, slide Ibid., slide 18. 5

6 Modified Adjusted Gross Income to calculate eligibility, 18 a prohibition on assets testing, 19 twelve- month eligibility certification periods, 20 hospital presumptive eligibility, 21 the five percent income disregard, 22 and the transition of certain children from the Children s Health Insurance Program (CHIP) to Medicaid. 23 Table 1, contained in a February 2017 HHSC presentation on the cost of health care in the state, provides a representation of the historical impact of various policy changes, both state and federal, on Texas Medicaid caseloads. One of the most compelling conclusions from Table 1 is the growth among the population for whom Medicaid was originally established, i.e. aged- and disability related individuals, compared to the growth among new populations added over the years. 4,500,000 4,000,000 Table 1. Historical Texas Medicaid Caseloads 24 Texas Medicaid Caseload by Group, September August 2018 Forecast March August 2018 showing ACA Policy Changes Medicaid Caseload shifts beginning January 2014, with increased lengths of stay for all income-eligible children and parents (TANF). Caseload categories (Risk Groups) also change, to align more closely with age categories and our Texas Healthcare Transformation and Quality Improvement (1115) Waiver Groups January 2014 ACA (categories merged and changed; ACA-related overall growth) Recipient Months 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 Between 1986 and 1991, Congress gradually extended Medicaid to new groups of Poverty-Related Pregnant Women and Children July 1991: Poverty- Related Children ages 6-18 CHIP / CHIP outreach, Summer Increases clients identified as Medicaid. S.B. 43, Medicaid Simplification, January 2002 Poverty-Related Children, Ages 1-18 ALL Poverty- Related Children, Ages 0-18 (includes TANF and Newborns) 1,000,000 Pregnant Women / Newborns Adults & Pregnant Women 500,000 0 Income Assistance: TANF Adults and Children Original Medicaid Population: Aged and Disability-Related Adults and Children Aged & Disability- Related, no change Source: Texas Health and Human Services Commission 18 See Affordable Care Act Sec See Affordable Care Act Sec. 1902(e)(14)(C). 20 See Affordable Care Act Sec. 2002; MAGI is calculated annually and CMS adopted a series of rules to implement limitations on how the state could check eligibility information within a 12- month period (42 CFR ). 21 Centers for Medicare and Medicaid Services, Bulletin to all states, Medicaid and CHIP FAQs: Implementing Hospital Presumptive Eligibility Programs, January 2014, available at Resource- Center/FAQ- Medicaid- and- CHIP- Affordable- Care- Act- Implementation/Downloads/FAQs- by- Topic- Hospital- PE pdf 22 See 42 CFR (d)(4). See also: Health and Human Services Commission, Presentation to the Senate Finance Committee Subcommittee on Healthcare Costs, February 3, 2017, slide 16, available at healthcare- costs- workgroup.pdf. 23 See Affordable Care Act, Sec Health and Human Services Commission, Presentation to the Senate Finance Committee Subcommittee on Healthcare Costs, February 3, 2017, slide 14, available at healthcare- costs- workgroup.pdf. 6

7 Because Medicaid is an entitlement program, eligible individuals must receive covered services and funding is open- ended, meaning that neither the state nor federal governments can cap Medicaid spending. Thus, as natural population growth occurs, combined with policies that ease eligibility standards for the Medicaid program, costs continue to rise with no decrease in sight. This reality is clearly demonstrated in Table 2, which depicts the growth in Medicaid expenditures over the last 25+ years, with a steep upward trajectory coinciding with implementation of the ACA. Table 2. Historical Texas Medicaid Expenditures 25 Source: Texas Health and Human Services Commission Medicaid cost drivers fit into one of four basic categories: 26 Program caseload - the number of enrollees and case mix (i.e. children, adults, aged- and disability- related groups); Reimbursement and revenue - rates paid to health care providers and any enrollee cost- sharing; Program benefits - physician and hospital services, long- term services and supports, prescription drugs, etc.; and, Benefit utilization - the type of and frequency of services that are used, as well as the appropriateness of those services. Simply speaking, in order to impact cost trends, one of the four components of Medicaid costs must be modified, and states are often constrained by federal laws and rules. Texas by and large only covers federally mandated Medicaid populations, 27 so adjusting the caseload size or mix in an attempt to 25 Ibid., slide Ibid., slide Ibid., slide 16. 7

8 achieve appreciable savings is not a viable option, absent federal action. Medicaid reimbursement rates are already historically low and federal law strictly limits whether states can charge co- pays to mandatory populations. 28 While copayments should be implemented to the fullest allowable extent in order to instill greater personal accountability into the program, they are unlikely to generate significant revenue. This leaves states to determine whether optional benefits are cost- effective to the program, and whether benefits are being appropriately utilized. Take for instance prescription drugs- an optional benefit 29 with an annual cost of about $3.7 billion 30 to the Texas budget. Although this is a high cost benefit that is not mandated by the federal government, ending prescription drug coverage would most likely result in a net cost increase as untreated medical conditions are exacerbated, requiring more complex and costly care. Although it can seem that states are left with no options for bending Medicaid s ever- growing cost curve, that is not the case. One of the most effective means of providing high- quality affordable health care coverage is through managed care. Health plans are generally able to provide better care by helping coordinate and manage an enrollee s health care to more preventive, lower- cost settings and by utilizing the providers within their networks. By only contracting with certain providers, health plans have the opportunity to negotiate lower prices and, most importantly, adopt standards that may restrict lower- quality providers from joining their networks. History of Texas Medicaid Managed Care Prior to the 1990s, Texas Medicaid enrollees received their health care services in what is known as a fee- for- service (FFS) system. In FFS, providers are paid per claim directly by the state. While enrollees can access any Medicaid provider in FFS, there is no coordination of care or benefits, which often leads to Medicaid enrollees receiving duplicative or unnecessary services and results in an overall lack of successful management of chronic conditions like asthma and diabetes. In 1991 the Texas Legislature passed House Bill 7 (72 1 st Called Special Session), establishing the state s first Medicaid managed care pilot programs, with the goal of seeking innovative methods for providing higher- quality lower- cost health care to the Medicaid population. 31 The first pilot, known as LoneSTAR (State of Texas Access Reform, later shortened to just STAR), was originally implemented in the Travis County and Gulf Coast regions for acute care clients in the early 1990 s. 32 Encouraged by the program s success, the Legislature began growing this model, and, by the end of the decade, STAR had expanded to most of the state s major metropolitan areas; the program had also begun serving some long- term 28 Kaiser Family Foundation, Premiums and Cost Sharing in Medicaid, February 2013, available at 29 Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, p. 63, available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 30 Ibid., p Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, Appendix D, available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 32 Ibid. 8

9 services and supports (LTSS) enrollees in the STAR+PLUS program which, for the first time, integrated acute and LTSS care for the state s most complex and high- cost members. 33 Texas, like other states at the time, originally turned to managed care as an innovative method for controlling costs. 34 However, the managed care model also yielded myriad client benefits. Beginning in 1999, HHSC conducted a 15- month review of the state s current Medicaid managed care programs with the input of various stakeholders to assess the model s effectiveness and outcomes. The analysis concluded that: implementation of managed care improved access to providers, produced program savings, and resulted in program accountability and quality improvement standards and measurement not found in the traditional fee- for- service (FFS) Medicaid program. 35 Building upon these accomplishments, the Legislature continued to steadily expand the Medicaid managed care model over the years, both in terms of geography and in the types of clients served, due in equal parts to its success in achieving cost savings and improving client outcomes. Table 3 shows the progression of managed care after its initial growth in the 1990s. Table 3. Medicaid FFS vs. Managed Care Caseloads, SFYs Source: Texas Health and Human Services Commission 33 Ibid. 34 Boben, Paul J. Medicaid Reform in the 1990s. Health Care Financing Review22.2 (2000): 1 5. Print. 35 Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, Appendix D, available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 36 Ibid., p

10 Today managed care operates in all of Texas 254 counties and over 90% of the state s Medicaid enrollees receive their services through Medicaid managed care organizations (MCOs). 37 HHSC contracts with these plans and pays them a capitated per member per month (PMPM) premium to ensure that Medicaid recipients receive all necessary and appropriate services. Texas Medicaid managed care enrollees are served through one of the following programs: STAR - provides primary, acute, and behavioral care and prescription drug coverage for low- income pregnant women, children, and certain parents of children enrolled in Medicaid. STAR+PLUS - integrates primary care, behavioral health services, prescription drug benefits, and LTSS services for enrollees aged 65 or older or other adults with disabilities; a portion of this program also serves individuals in home or community- based settings as an alternative to institutional settings, such as nursing facilities. STAR Kids - similar to STAR+PLUS, this program integrates acute and LTSS services for children and young adults with disabilities. STAR Health - operates on a statewide basis to provide children and youth in foster care with comprehensive medical and behavioral health services. Children s Medicaid Dental Services Program - the state contracts separately with dental maintenance organizations to administer dental benefits for children who do not reside in a health care facility or are not in the STAR Health program (these clients receive dental services through their primary delivery models). 38 The state is divided into 13 geographic service areas (SA) through which the managed care model operates. The state bids out the various managed care programs by SA, meaning that one plan might have multiple contracts with HHSC to serve clients in various programs and/or various SAs, depending on the plan s offerings and geographic constraints. The managed care programs within each SA have at least two MCOs from which enrollees may choose, 39 and the state contracts with a neutral third- party enrollment broker to assist Medicaid clients in choosing and enrolling in the plan best suited to their needs. 40 Health plans are at risk for facilitating the provision of all of an enrollee s services within the negotiated PMPM rate and have relatively wide latitude in implementing prior authorizations (PAs) for certain services, negotiating provider rates, and managing enrollee care. The exception to this rule, however, is the Medicaid prescription drug benefit. Although health plans are responsible for administering this 37 Texas Health and Human Services Commission, Fact Book, 2017, p. 39, available at regulations/reports- presentations/2017- factbook.pdf. 38 Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, pp , available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 39 Health and Human Services Commission, Texas Managed Care Service Areas, as of Fall 2016, available at content/uploads/2016/04/c- Managed- Care- Service- Areas- Map.pdf. Note- the exception to this is the STAR Health model, which contracts with a single plan to administer the program statewide. 40 Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, pp. 160, available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 10

11 benefit through their subcontracted pharmacy benefit managers (PBMs), MCOs are required to adhere to the state s drug formulary, clinical edits, and PA guidelines. 41 Current statute requires that health plans adhere to the state formulary until August 31, Plans are also required to accept any willing pharmacy provider. 43 This is unlike the commercial market, where each health plan develops and controls its own provider network, drug formulary, and clinical standards. However, despite this variation with the administration of prescription drug benefit, MCOs must still maintain provider networks that ensure their members access to all types of care, e.g. physician, hospital, pharmacy, therapy, etc. 44 Unlike the FFS system, managed care plans must also meet specific access standards, such as how far members must travel to see a provider and how long it takes to get an appointment. 45 Comprehensive Health Plan Oversight MCOs are paid billions of taxpayer dollars on an annual basis to care for some of the state s most complex and vulnerable populations. While plans must be allowed the freedom to design and implement innovative initiatives, the state must balance this flexibility with appropriate oversight. HHSC has implemented various methods and controls to ensure proper management of these contracts. A report reviewing HHSC s oversight of MCOs explains: As the Medicaid program has transformed from a [fee- for- service] FFS to a managed care model, HHSC's Medicaid and CHIP Services (MCS) department adapted its contractual oversight structure and processes to effectively manage all contractors, vendors, and programs it administers, under the managed care delivery system framework. Within MCS, each area is involved in the monitoring and management of managed care contractors. Oversight and contract management functions are not facilitated exclusively by a singular area, but are instead, shared efforts among all MCS departments. This has resulted in a robust governance structure, providing comprehensive contract oversight, including the identification of anomalies in service utilization. 46 As part of its inclusive supervision, HHSC monitors all aspects of an MCOs business and operations, from the robustness and availability of provider panels, how long it takes enrollees to schedule appointments, and the quality of services provided, to the plan s fiscal soundness and staff turnover; HHSC also assesses contractual remedies, including correction action plans and liquidated damages, 41 Ibid., p TEX. GOVERNMENT CODE (a)(1). 43 TEX. GOVERNMENT CODE (a)(23)(H). 44 Health and Human Services Commission, Texas Medicaid and CHIP in Perspective, 11 th Edition, February 2017, p. 129, available at regulations/reports- presentations/2017/medicaid- chip- perspective- 11th- edition/11th- edition- complete.pdf. 45 Ibid., p Health and Human Services Commission, Review of HHSC s Contract Management and Oversight Function for Medicaid and CHIP Managed Care and Fee- for- Service Contracts, February 2017, available at regulations/reports- presentations/rider56- medicaid- chip- contract- management- oversight- feb pdf. 11

12 when appropriate. 47 The state places a cap on the amount of money that MCOs may use towards administrative expenses, places a percentage of a health plan s premium at risk to ensure certain client quality metrics are met, and enforces a strict limit on the amount of profit these plans can make from Medicaid and CHIP business. 48 Any profit that exceeds this threshold is recovered by the state through an experience rebate process. 49 The combination of a profit cap and quality measures adds an additional layer of client protection by disincentivizing plans from taking any action that might adversely impact an enrollee s outcome in an attempt to increase profit margins. In addition, HHSC contracts with an independent external quality review organization (EQRO) to assess and report on care provided by MCOs including patient access to providers, quality of care, and overall enrollee experience. 50 While a multitude of MCO data is available on HHSC s website, some of this information, such as financial statistical reports 51 and EQRO data, 52 is not presented in a way that conveys user- friendly information to a layperson or, most importantly, a potential MCO enrollee. There has rightfully been an increased focus in recent years on providing more transparent and user- friendly information on MCO performance to Medicaid enrollees, providers, and stakeholders. To that end, HHSC has developed MCO report cards, which provide a concise snapshot of an MCO s performance to aide Medicaid clients in choosing a plan. 53 These standardized report cards provide grades on issues such as how quickly enrollees can get needed care, whether enrollees are pleased with their primary care providers, how the plan helps care for individuals with chronic illnesses such as diabetes, and enrollees overall rating of the plan s performance. 54 State law also directs HHSC to post MCO sanctions on a quarterly basis on its public website. 55 These reports explain the specific contractual infraction, the date the finding and remedy were assessed, the maximum financial penalty that may be assessed for the violation, and the actual damage levied. 56 Although HHSC s health plan 47 Ibid. 48 Texas Association of Health Plans, Texas Medicaid Managed Care, October 2015, available at content/uploads/2016/11/tahp- Fact- Sheet- Medicaid- Managed- Care- Saving- Dollars- Saving- Lives- October pdf. 49 Health and Human Services Commission, Review of HHSC s Contract Management and Oversight Function for Medicaid and CHIP Managed Care and Fee- for- Service Contracts, February 2017, available at regulations/reports- presentations/rider56- medicaid- chip- contract- management- oversight- feb pdf. 50 The Institute for Child Health Policy, Texas Medicaid Managed Care and Children s Health Insurance Program External Quality Review Organization Summary of Activities and Trends in Healthcare Quality, Contract Year 2015, p. 1, available at medicaid- managed- care- insurance.pdf. 51 See HHSC website, Medicaid and CHIP Financial Statistical Reports, available at chip/provider- information/medicaid- chip- financial- statistical- reports#star. 52 See HHSC website, External Quality Review Organization, available at categories/external- quality- review- organization. 53 See HHSC website, Managed Care Report Cards, available at chip/programs/managed- care- report- cards. 54 Ibid. 55 See TEX. GOVERNMENT CODE See HHSC website, Managed Care Organization Sanctions, available at chip/provider- information/managed- care- organization- sanctions. 12

13 management activities are robust and comprehensive, it is imperative that the results of this oversight be made available to stakeholders and clients in a meaningful and useful format. MCO Savings and Increased Client Outcomes The expansion of Medicaid managed care has resulted in a significant cost savings. A 2015 study estimated that over the six- year period of state fiscal years , Medicaid managed care resulted in nearly $4 billion in all funds, and $2 billion in general revenue savings to the state. 57 That is the most recent cost savings study available to Texas, and it bears noting that, the longer Texas Medicaid is in the managed care model, the more difficult it becomes to draw an apples- to- apples comparison of what costs would have run under a FFS system. In Texas, Medicaid managed care achieves cost savings by negotiating rates with a preferred network of providers, by ensuring that clients receive appropriate levels of care, by improving enrollees health outcomes so they become less expensive over time (this is particularly true of the LTSS population), and by assuming financial risk should costs exceed the negotiated PMPM amount. All of these variables have now been baked into the Medicaid program s cost and budget projections for several years. Thus, it becomes extremely difficult to attempt to determine what expenditures would have been without these cost and quality controls in place. In addition to the billions of dollars in cost savings attributable to delivering Medicaid benefits through managed care, this system has a proven record of increasing patient outcomes and satisfaction. In one of the EQRO s recent review of the state s Medicaid managed care program, about two- thirds of children and adolescents in the acute care STAR program were listed in excellent or very good overall health and mental health. 58 In addition, access to well- care visits, and prenatal and postpartum care was generally in line with, or exceeded, national quality standards as determined by the widely- regarded Healthcare Effectiveness Data and Information Set (HEDIS) measures. 59 The STAR program also performed well in terms of patient/caregiver satisfaction, and exceeded national rates in overall member satisfaction with both their health plan and the care they received. 60 STAR+PLUS, the managed care program that provides coordinated acute and long- term services and supports to elderly and/or disabled clients, serves some of the most fragile, medically complex and challenging clients within the entire Medicaid program. While the review showed that many of these clients, understandably, reported fair/poor physical and mental health status, the report did show an 57 Milliman Client Report, Texas Medicaid Managed Care Cost Impact Study, 2015, prepared for the Texas Association of Health Plans, available at 58 The Institute for Child Health Policy, Texas Medicaid Managed Care and Children s Health Insurance Program: EQRO Summary of Activities and Trends in Healthcare Quality, Contract Year 2015, submitted January 8, 2016, p. 36, available at summary- of- full- report- Activities- and- Trends- in- Healthcare- Quality.pdf. 59 Ibid. pp Ibid. p

14 upward trend in these patients access to primary and ambulatory health services, 61 and a downward trend in potentially preventable hospital admissions 62 and readmissions. 63 In addition, the STAR+PLUS plans also met or exceeded national standards in enrollees overall ratings of their health care and their health plans. 64 In STAR Health, the managed care program serving foster care children in state conservatorship and former foster children, the EQRO notes that this population is not necessarily comparable to the general national Medicaid population. However, the program received high marks in members access to care, with the report finding that STAR Health enrollees generally had excellent access to care when compared to national and state Medicaid standards. 65 The Medicaid managed care model has also given rise to innovative quality initiatives with the purpose of increasing patient outcomes and the quality of healthcare they receive. One such initiative is the Pay- for- Quality (P4Q) program, in which Texas has been a leader. This program: creates incentives and disincentives for managed care organizations based on their performance on certain quality measures. Health plans that excel on meeting the at- risk measures and bonus measures may be eligible for additional funds while health plans that don t meet their at- risk measures can lose up to 3 percent of their capitation rate. 66 Quality measures vary by population but are based on standards such as well- child visits; prenatal and postpartum care; potentially preventable events (i.e. emergency room visits/ hospital readmissions); diabetes care measures; and the percentage of enrollees who provide their plans with the highest satisfaction ratings. 67 Conclusion The State of Texas has long recognized the value and benefit of managed care and utilizes it, not only in Medicaid and CHIP, but also in the state employee, university employee, and teacher group plans, as well as in the correctional system. Since its inception as a small pilot program in the 1990 s, Medicaid managed care has grown into one of the state s most successful initiatives, both in terms of cost savings and improved patient outcomes. It allows the state to utilize private sector businesses and free market innovation to deliver government- sponsored programs. 61 Ibid., p Ibid., p Ibid., p Ibid., p Ibid., pp See HHSC website, Pay- For- Quality Program, available at hhs/process- improvement/medicaid- chip- quality- efficiency- improvement/pay- quality- p4q- program. 67 Ibid. 14

15 As the managed care model has grown to serve almost the entire Medicaid population, many lessons have been learned along the way. The program is by all accounts fully established and mature. Thus, the conversation now turns to what, if any, changes or improvements should be made to the current model and how this system can continue to remain flexible and innovative as Medicaid caseloads and health care costs continue to rise. Various interim charges in both the House and Senate will provide an opportunity over the coming year to explore any modifications that should be made to the managed care system. Some issues that deserve further exploration include: Reforming the Medicaid program to function more like the commercial market, including fully implementing point- of- service copayments; enacting missed appointment fees; instituting open enrollment periods that prohibit enrollees, to the extent allowed by federal law, from switching to a different health plan without cause; and rejecting any willing provider mandates. Ensuring that MCOs are encouraged and incentivized to test new and innovative Medicaid payment and service delivery models. Enhancing the use of data to provide more transparent user- friendly monitoring information and metrics to plan enrollees, providers, and stakeholders. Going into future sessions, it is vital that lawmakers take action to improve the effectiveness and efficiency of the Medicaid managed care program and reject policies that would hinder an MCO s ability to continue providing higher- quality lower- cost care to the state s Medicaid and CHIP populations. 15