Bending the Health Care Cost Curve in New York State:

Bending the Health Care Cost Curve in New York State: Integrating Care for Dual Eligibles October 2010 Prepared by The Lewin Group

Acknowledgements Kathy Kuhmerker and Jim Teisl of The Lewin Group led development of this implementation plan. The following individuals also contributed valuable input to the plan: Deborah Bachrach Bachrach Health Strategies Heather Bates Medicare Rights Center Melanie Bella Center for Health Care Strategies Donna Frescatore New York State Department of Health Dan Heim New York Association of Homes and Services for the Aging Harold Iselin Greenberg Traurig, LLP Paul Macielak New York Health Plan Association Sheila Nelson New York Health Plan Association Jane Preston Greenberg Traurig, LLP Kathleen Shure Greater New York Hospital Association Carla Williams New York State Department of Health Support for this work was provided by the New York State Health Foundation (NYSHealth). The mission of NYSHealth is to expand health insurance coverage, increase access to high-quality health care services, and improve public and community health. The views presented here are those of the authors and not necessarily those of the New York State Health Foundation or its directors, officers, or staff. 2

Overview The following high-level implementation plan is presented as a follow-up to the New York State Health Foundation s (NYSHealth s) July 2010 report, Bending the Health Care Cost Curve in New York State: Options for Saving Money and Improving Care. The report was designed to inform a State-level discussion of health care savings opportunities in New York, and outlines the estimated impact of 10 scenarios that could help to contain escalating health care costs in New York State over the next decade while also improving health care quality. While the report demonstrates that New York State s health care cost curve can be bent through policy options that better coordinate care and improve health care outcomes, significant effort on the part of a variety of stakeholders is required to actually achieve these savings. With the assistance of a Technical Advisory Panel, four of the modeled scenarios were selected for high-level planning to identify the action steps, timeframes, and resources required for implementation. The following four scenarios were selected based on a combination of their savings potential, feasibility, and impact on quality of care: Expanding Palliative Care. Require hospitals to establish a palliative care program to promote better coordinated, higher value care where appropriate. Integrating Care for Dual Eligibles. Enroll New York s Medicaid/Medicare dual eligibles into a fully integrated coordinated care setting. Adopting Bundled Payment Methods. Make prospective payments for entire episodes of care, potentially encompassing inpatient care, physician services while hospitalized, and post-acute care services, including short-term rehabilitation and home health care. Rebalancing Long-Term Care. Restructure New York State s Medicaid programs for long-term care, examining both residential and community-based settings for a large population of beneficiaries with extensive functional and cognitive impairments, and behaviorally and medically complicated needs. With the exception of the managed care for the dual-eligible population scenario, each of these opportunities can be advanced by the State of New York through the Medicaid and the State employee benefit programs, with minimal Federal involvement other than routine program oversight. While more significant savings are associated with adoption of these scenarios beyond these State-operated programs, implementation by New York State is a major first step toward more widespread adoption. In the case of managed care for the dual-eligible population, however, full implementation of the modeled scenario requires a change to Federal Medicare statute, which guarantees freedom of choice under the Medicare program. For each of the four scenarios, we convened a group of stakeholders that included New York State officials, policy experts, and representatives of payers, providers, and patients. Stakeholders were not asked to endorse any of the scenarios, but were asked to comment on implementation requirements necessary to achieve each of the scenarios. Those involved in the planning process acknowledged that implementation of these scenarios will require a great deal of effort. It is our hope that the following implementation plans can serve as a roadmap for policymakers seeking to contain costs while improving care coordination and quality. Achieving substantial improvement in the delivery of health care is neither quick nor easy, and requires active participation by government, providers, and payers working together, and not shifting costs. The potential improvements in efficiency and quality of care associated with these initiatives make it worthwhile to initiate implementation efforts as soon as possible. 1

Integrating Care for Dual Eligibles Implementation Plan Scenario Summary This policy scenario, as modeled, would require mandatory enrollment of all New York State s Medicare/Medicaid dual eligible population into capitated managed care organizations (MCOs). Overall savings achieved by the program would be split 50/50 between the Federal government and New York State. This option is estimated to save up to $10.8 billion over 10 years if fully implemented, and to improve care for these individuals. Additional assumptions include that all benefits would be provided through the MCOs, the care management entity bears full financial risk, and savings are shared between the State and Federal government. Full implementation requires a change to Federal Medicare statute that guarantees freedom of choice under the Medicare program, and such a change appears highly unlikely in the short term. This implementation plan, therefore, assumes that enrollment into an integrated care program is not strictly mandatory, but strongly encouraged through incentives and/or automatic enrollment with an opt out opportunity. It also contemplates a host of program design issues, including those that differ somewhat from the policy scenario modeled (e.g., limiting eligibility for integrated care to a subset of dual eligibles). Less than mandatory enrollment would reduce potential savings. Current Environment There are approximately 650,000 dual eligible individuals residing in New York State, and, under this scenario, all would be required to enroll in an MCO. At present, most dual eligibles receive uncoordinated care through a combination of the Medicare and Medicaid fee-for-service programs, as well as an array of waiver programs that manage aspects of care to varying degrees. However, unlike many states, New York State has considerable experience with programs to coordinate care for dual eligibles. New York Medicaid also provides approximately 6,000 dual eligibles with fully integrated care through voluntary Special Needs Plans under the Medicaid Advantage and Medicaid Advantage Plus programs. In addition, partially capitated managed long-term care plans and the Program of All-Inclusive Care for the Elderly serve approximately 30,000 dual eligible individuals. The Patient Protection and Affordable Care Act (PPACA) places additional focus on better coordinating care provided to dual eligibles, including the creation of the Federal Coordinated Health Care Office. However, as previously indicated, mandatory enrollment of dual eligibles into a fully integrated care model is currently prohibited by Federal statute. Obstacles to Implementation Existing Federal statute is clearly the primary obstacle to achieving full implementation of the modeled scenario. While it may not be possible to mandate managed care enrollment, it is essential to design the program so that it is as close to mandatory as possible. Such a program will avoid the costs that completely voluntary managed care programs incur related to higher marketing expenses, and increased medical costs that result from adverse selection, which occurs when only the sickest individuals enroll. Even in a managed care program that is not mandatory, it is possible that an amendment to the State s 1115 waiver may be needed to enable the opt out or other enrollment incentives that 2

may be determined necessary. In addition, New York State s existing coordinated care programs for duals are built on a Medicare Advantage platform, which may not be viable due to changes in Federal support for the program. Myriad rules between the Medicare and Medicaid programs will likely make administration of a combined program difficult unless clear lines of authority are established in advance and maintained. Stakeholders raised inconsistent county determination of eligibility for programs as a disadvantage of voluntary programs. Similarly, health plan experience with county variability may be an impediment to gaining their interest under this modified approach. However, in both cases, concerns may be mitigated by an impending State takeover of eligibility determination. Additional obstacles are related to the unique nature of the dual-eligible population, which includes elderly individuals, and those with chronic mental illness and substance abuse issues as well as other disabilities. Existing managed care networks are often designed for a relatively healthy population and, therefore, may currently be insufficient to address the amount and nature of the needs of this less healthy population. In addition to network considerations, if managed care companies coordinate the care, they must increase their financial reserves to reflect the additional risk they will assume as a result of the greater-than-average health care services and costs that dual eligibles are likely to need and use. Steps will also need to be taken to ensure prompt and sufficient payment to providers to guarantee their participation. Finally, promoting enrollment in managed care, whether through opt out provisions or other incentives and disincentives, may be perceived as reducing or limiting available benefits and may result in negative public perception. Action Plan Program Design New York State Department of Health Activities Establish stakeholder group to assist in development and vetting of program design and related activities. Identify potential members to work with Department of Health: New York State Office of Mental Health New York State Office for People with Developmental Disabilities New York State Office of Alcoholism and Substance Abuse Services New York State Office for the Aging Patient advocacy groups (e.g., Medicare Rights Center, National Alliance on Mental Illness, AARP) Provider associations Health plans/associations Solicit input from other states that have previously implemented integrated programs for dual eligibles. 3

Solicit feedback from enrollees in existing programs for dual eligibles and those receiving only Medicaid fee-for-service to determine components that are currently working. Explore potential for innovative arrangements of capitated payments to organizations other than MCOs. Determine whether PPACA opportunities, such as accountable care organizations and/or health homes, should play a role in program development. Develop a concept paper to share with the Centers for Medicare & Medicaid Services (CMS) and engage CMS as early as possible in the process. Collect data to establish a baseline of population and services to inform the design phase. Data should include, at least: Beneficiary counts and service utilization for the under 65 disabled population and those 65 or older. Presence/absence of mental health conditions and other chronic conditions. Network adequacy data, such as numbers of primary care providers and specialists by geographic area. Adequacy of provider networks may be a determining factor when deciding whether to implement the program in particular geographic areas. Assess adequacy of current data capability and report production. Identify all State and Federal regulations, statutes, waiver provisions, and policy documentation that may need to be amended to implement the program. The State s existing 1115 and 1915 waivers will likely require modification. Coordinate with Federal policymakers, including CMS officials with both Medicaid and Medicare oversight authority, and the newly created Coordinated Health Care Office. Work with CMS to address key design issues including a shared-savings strategy, enrollment incentives such as opt out approach, and data-sharing. Include design details and savings estimates associated with each alternative. Share solutions developed through stakeholder process. Include financial and programmatic (including Part D) data-sharing protocols between the State and CMS, and a savings reconciliation process. Develop a uniform set of policies, for example: The enrollment process should be consistent, regardless of the manner in which an individual enters the program (e.g., Medicaid participant turning 65, or a Medicare beneficiary that spends down to Medicaid). A truly integrated program should have only one grievance process. Periodically brief legislative staff on progress and issues. 4

Department of Health Activities Informed by Stakeholder Group Work with stakeholder group to address the following questions: What type of entity will be responsible for provision of care including care coordination (e.g., managed care organization or some other risk-bearing entity to be developed)? What population will be included (i.e., all dual eligibles or a subset)? Should the State consider plans that provide services to all dual eligibles or should some/ all plans be targeted to specific populations? What benefits will be included in the coordinated care plan? How do the services that will be included overlap with existing programs/services for dual eligibles, and how should these overlaps be addressed? For example, many dual eligibles receive case management services through existing programs. How will as mandatory as possible be achieved (i.e., what approaches should be incorporated into the program to encourage maximum participation, as waiting for Congressional action may not be a viable option)? Auto-enrollment with opt-out Enhanced benefits for participation Cost-sharing incentives Counter encouragement from other stakeholders (e.g., providers) to opt-out Will the care coordinating entity be at full or partial risk for the cost of care? How will eligible individuals be incentivized to enroll and how will the program be marketed? How will eligible individuals be enrolled and disenrolled? What is the existing network capacity? Will existing plans/programs be grandfathered? What is the premium structure, including risk adjustment? How will incentives be aligned between providers and care coordinating entities? How will case management be financed? Will Medicaid or Medicare reimbursement rates be used for providers? How can savings be shared among New York State, CMS, and care coordinating entities? What outcome measures will be used to determine success? Will the program be piloted or phased in? If piloted or phased in, will this occur by region, population group, or some other variable? 5

CMS Federal Coordinated Health Care Office Work with Department of Health on program and waiver design issues, including a sharedsavings strategy, enrollment incentives, data-sharing, and administrative alignment. Implementation State Legislature Amend State statute (Articles 28 and 44 of the Public Health Law; Title XI of the Social Services Law; Insurance Law) as necessary. Department of Health Activities Develop pilot or phase-in plan, as appropriate. Modify regulations, State Plan provisions, waiver program terms and conditions, program standards, as necessary. Determine approach for soliciting plan participation in new program (e.g., full request for proposals (RFP) and negotiating with existing plans). Develop strategy to build support among providers and program participants. Train local district or State staff concerning provisions of new program, including enrollment protocols, Medicaid Management Information System (MMIS) and Welfare Management System changes. Establish rates for new program, which could range from establishing an overall rate structure or modifying rate cells used to reflect new dual eligible groups. Develop shared savings approach, in conjunction with CMS and plans. Implement monitoring and data capture processes to enable shared savings to be determined. Modify enrollment system and MMIS as necessary. Modify existing enrollment broker contract to include the expanded population, or develop/ procure a new mechanism for enrollment. Work with local social services districts (LSSD) to modify policies and procedures as needed (e.g., concerning voluntary enrollment in a managed care plan). Educate enrollment staff which could be LSSD staff regarding the program, particularly if enrollment is not automatic. Develop quality assurance protocols in conjunction with Federal officials. Health Plan (or Other Coordinating Entity) Activities Determine nature of desired participation in the program. Some/all regions Some/all populations 6

Enhance network adequacy to meet the needs of the dual-eligible population by modifying existing relationships with providers and/or adding providers. Population needs are very different, and health care needs are often much more intensive, than those of currently managed populations. Expand/develop financial reserves to accommodate the new population. Submit required information/responses to obtain State approval to participate in program. Establish internal policies and procedures to enhance care coordination and promote quality of care. Establish data collection and analysis processes to enable plan to respond to quality delivery and reporting requirements. Develop/modify enrollment and billing processes and systems. Health Plan/Coordination Entity/Association Activities Informed by Stakeholder Group Develop and deploy informational campaigns for providers and patients, both to inform program participants and to promote the potential benefits of enhanced coordination. Educate consumers about their options and how to enroll (if enrollment is not automatic). CMS Federal Coordinated Health Care Office Implement data-sharing processes (e.g., Part D data) and other administrative alignments. Work with State officials to monitor program for quality, savings, satisfaction, etc. Required Resources A variety of resources, including people and systems and financial resources, will be required to implement a care coordination program for dual eligibles. New York State Staff/other resources to design program Actuarial resources to modify/develop premium structure Staff/other resources for solicitation and contracting oversight Staff/other resources to conduct quality assurance activities System enhancements to accommodate billing as well as data-sharing with CMS Federal government Staff/other resources for program oversight System enhancements to accommodate data-sharing with New York State Coordinating entities/health plans System enhancements to accommodate billing and data collection and transfer Staff/other resources to modify network, as needed 7

Estimated Timeline for Implementing Dual-Eligible Managed Care Policy Option: Integrating Care for Dual Eligibles 2010 2011 2012 2013 Action Step Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Work through program design issues, including discussions with stakeholders and CMS Engage CMS and Federal policymakers, beginning with concept paper after initial planning Identify all restrictive Federal and State statutes/regulations/waiver provisions that need to be amended Engage current/past Medicaid Advantage Plus members, and those who receive services only through FFS, to determine program components that work, are problematic, or otherwise need to be addressed Program Design Implementation Finalize definitions of covered services and populations to be included in integrated care program Develop a common understanding between the State and Federal governments of the financial data Develop policies and procedures for enrolling and disenrolling beneficiaries Determine how to share projected savings and develop a savings reconciliation process Determine capitation rate setting approach Develop/enhance quality assurance activities Negotiate waiver with CMS Draft/enact/adopt proposed changes to State statute, regulation, waivers, etc. Determine and implement method for soliciting MCO or other care management organization participation in new program (e.g., issue and evaluate RFP for MCO contracting) Develop and implement strategy to build support among providers and program participants. Modify New York State Enrollment Broker contract/ develop new enrollment process Modify systems for new enrollment / billing codes Modify billing related systems Expand/develop provider networks to meet new population needs Establish policies and procedures to enhance care coordination, promote quality of care Deploy new informational/campaign materials for consumers and providers Go live 4/1 8

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