Medicaid: Current Challenges and Future Prospects

Medicaid: Current Challenges and Future Prospects Diane Rowland, Sc.D. Executive Vice President, Henry J. Kaiser Family Foundation Executive Director, Kaiser Commission on Medicaid and the Uninsured The Future of Medicaid: Building a Sustainable Program through Innovation Muskie School of Public Service, University of Southern Maine Augusta, Maine November 22, 2013

Figure 1 Medicaid is an integral part of the health system. Health Coverage Health Spending Employer- Sponsored Insurance 49% Uninsured 16% Medicaid 16% Medicare 13% Total = 307.9 million Other Public 1% Private Non-Group 5% NOTE: Health spending total does not include administrative spending. SOURCE: Health insurance coverage: KCMU/Urban Institute analysis of 2011 data from 2012 ASEC Supplement to the CPS. Health expenditures: KFF calculations using 2011 NHE data from CMS, Office of the Actuary Private Health Insurance 35% Consumer Out-of- Pocket 13% Other Private Funds 8% Medicaid 16% Medicare 24% Total = $2.3 trillion Other Government Programs 4%

Figure 2 Medicaid has many roles in our health care system. Health Insurance Coverage 32 million children & 18 million adults in low-income families; 16 million elderly and persons with disabilities Assistance to Medicare Beneficiaries 9.6 million aged and disabled 20% of Medicare beneficiaries Long-Term Care Assistance 1.6 million institutional residents; 2.9 million community-based residents MEDICAID Support for Health Care System and Safety-net 16% of national health spending; 40% of long-term care spending State Capacity for Health Coverage For FY 2014, FMAPs range from 50 73.1%

Figure 3 Medicaid Benefits Acute Care Long Term Care Mandatory Inpatient & outpatient hospital services Laboratory and x-ray services Physician, nurse practitioner services, nurse midwife, and other advanced practice nursing services Federally-qualified health centers; rural health centers EPSDT for children Family planning services Transportation No cost sharing for children Nursing facility for age 21 and up Home health (if entitled to NF care) State Option Care by other licensed practitioners (chiropractic, podiatry, etc.) Pharmacy Dental services Diagnostic, screening, preventive, and rehab services Clinic services Primary care case management Occupational & physical therapy Speech, hearing, and language disorder services Medical supplies and durable medical equipment, eyeglasses, and orthotic and prosthetic devices Limited nominal cost sharing for adults Inpatient psychiatric services if age under 21 or over 65 Intermediate care facilities for people with developmental disabilities Home health Case management Community-based care (private duty nursing, personal care, hospice, adult day health) Community-based care (licensed social worker protective services, etc.)

Figure 4 Medicaid spending is mostly for the elderly and people with disabilities, especially in Maine. Disabled 15% Elderly 9% Adults 27% Children 49% Disabled 42% Elderly 22% Adults 15% Children 21% Disabled 20% Elderly 18% Adults 28% Children 34% Disabled 49% Elderly 27% Adults 10% Children 14% National Medicaid Enrollees Total = 66.4 Million National Medicaid Expenditures Total = $369.3 Billion MaineCare Enrollees Total = 375,943 MaineCare Expenditures Total = $2.2 Billion SOURCE: KCMU/Urban Institute estimates based on data from FY 2010 MSIS and CMS-64. MSIS FY 2009 data were used for CO, ID, MO, NC, and WV, but adjusted to 2009 CMS-64.

Figure 5 Disability and long-term care needs drive higher spending. Medicaid Payments Per Enrollee by Acute and Long-Term Care, FY 2010 $16,240 Acute Care Long-Term Care $6,203 $12,958 $9,344 $2,359 $63 $3,025 $2,296 $3,012 $12 $10,037 $3,615 Children Adults Individuals with Disabilities Elderly SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on data from FY 2010 MSIS and CMS-64 reports. Because 2010 data were unavailable, 2009 MSIS data were used for CO, ID, MO, NC, and WV, and then adjusted to 2010 CMS-64 spending levels.

Figure 6 Connecting People to Coverage

Figure 7 Medicaid Eligibility Milestones, 1965-2011 70 60 Millions of Medicaid Beneficiaries Section 1115 Waivers Expand Medicaid Eligibility (1991-1993) (67.3 Million Beneficiaries*) 50 40 30 20 10 Medicaid Eligibility Expanded to Women and Children (1984-1990) AFDC Repealed (1996) Recession and State Fiscal Crisis (2000) Great Recession and State Fiscal Crisis (2007) 0 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010* Medicaid Enacted (1965) SSI Enacted (1972) SCHIP Enacted (1997) CHIPRA Enacted (2004) ACA Enacted (2010) NOTE: * Projections based on CMS 2010 Actuarial Report. SOURCE: KCMU analysis of data from the Health Care Financing Administration and Centers for Medicare and Medicaid Services, 2011.

Figure 8 Medicaid plays a critical role for selected populations. Percent with Medicaid Coverage Nonelderly Below 100% FPL Nonelderly Between 100% and 199% FPL Families All Children Children Below 100% FPL Parents Below 100% FPL Births (Pregnant Women) Elderly and People with Disabilities Medicare Beneficiaries Nonelderly Adults with Functional Limits People with HIV in Regular Care Nursing Home Residents 45% 27% 36% 40% 46% 0% 20% 16% 50% 63% 71% NOTE: FPL-- Federal Poverty Level. The FPL was $23,050 for a family of four in 2012. SOURCE: Kaiser Commission on Medicaid and the Uninsured (KCMU) and Urban Institute analysis of 2012 ASEC Supplement to the CPS; Birth data from Maternal and Child Health Update, National Governors Association, 2012; Medicare data from MCBS Cost and Use file, 2009; Functional Limitations from KCMU Analysis of 2012 NHIS data; Nursing Home Residents from 2011 OSCAR data.

Figure 9 Medicaid s benefits reflect the needs of the population it serves. Low-Income Families Individuals with Disabilities Elderly Individuals Pregnant Women: Pre-natal care and delivery costs Children: Routine and specialized care for childhood development (immunizations, dental, vision, speech therapy) Families: Affordable coverage to prepare for the unexpected (emergency dental, hospitalizations, antibiotics) Child with Autism: In-home therapy, speech/occupational therapy Cerebral Palsy: Assistance to gain independence (personal care, case management and assistive technology) HIV/AIDS: Physician services, prescription drugs Mental Illness: Prescription drugs, physicians services Medicare beneficiary: help paying for Medicare premiums and cost sharing Community Waiver Participant: community based care and personal care Nursing Home Resident: care paid by Medicaid since Medicare does not cover institutional care

Figure 10 Medicaid is central for children s coverage. Employer/Other Private Medicaid/Other Public Uninsured Children Poor (<100% of Poverty) Near-Poor (100%-199% of Poverty) 13% 36% 73% 51% 14% 13% Parents Poor 16% 43% 41% Near-Poor 46% 19% 35% Adults without Children Poor 27% 30% 43% Near-Poor 40% 24% 36% Data may not total 100% due to rounding. SOURCE: KCMU/Urban Institute analysis of 2013 ASEC supplement to the CPS.

Figure 11 Medicaid provides access to care that is comparable to private insurance and better than access for the uninsured. Employer/Other Private Medicaid/Other Public Uninsured 55% 29% 29% 25% 18% 2% 3% 2% 2% 1% 1% 11% 11% 12% 11% 6% 4% 9% No Usual Source of Care Postponed Seeking Care Due to Cost Children Went Without Needed Care Due to Cost No Usual Source of Care NOTES: In past 12 months. Respondents who said usual source of care was the emergency room were included among those not having a usual source of care. All differences between the uninsured and the two insurance groups are statistically significant (p<0.05). SOURCE: KCMU analysis of 2013 NHIS data. Postponed Seeking Care Due to Cost Nonelderly Adults Went Without Needed Care Due to Cost

Figure 12 Even though adults with Medicaid are both poorer and sicker than low-income adults with private health insurance. Selected characteristics of adults <139% FPL: 82% 72%* ESI Medicaid Uninsured 57%* 48% 53% 11%* 36% 18%* 7%* 26% 12%* 32%* 19%* 21%* 29%* < 100% FPL Fair/Poor Health Fair/Poor Mental Health >1 Chronic Condition *Difference from Medicaid is significant at.01 level. SOURCE: Coughlin T et al., What Difference Does Medicaid Make: Assessing Cost Effectiveness, Access, and Financial Protection under Medicaid for Low-Income Adults, Kaiser Commission on Medicaid and the Uninsured, May 2013. Appendix Table 1, data from 2003-2009 MEPS. Any Limitation

Figure 13 Medicaid is also key to filling Medicare gaps for the elderly and people with disabilities. Medicaid Enrollment, 2010 Medicaid Spending, 2010 Premiums 3% Adults 27% Other Aged & Disabled 10% Dual Eligibles 14% Non-Dual Spending 64% Acute Care 9% Long-Term Care 24% Dual Spending 36% Children 49% Total = 66.4 Million Total = $383.0 Billion Prescribed Drugs 0.3% SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on data from FY 2010 MSIS and CMS-64 reports. 2009 MSIS data was used for CO, ID, MO, NC, and WV, because 2010 data were unavailable.

Figure 14 And Medicaid is a major financer of long-term care. Total National LTSS Spending = $357 billion, 2010 Other Public and Private, 18% Medicare Post-Acute Care, 21% Medicaid, 40% Home and Community-Based Services Institutional Services (in billions) $123 $111 $93 45% 41% 32% Private Insurance, 7% Out-of- Pocket, 15% 68% 59% 55% 2002 2006 2010 NOTE: Total long-term care expenditures include spending on residential care facilities, nursing homes, home health services, personal care services (government-owned and private home health agencies), and 1915(c) home and community-based waiver services (including home health). Long-term care expenditures also include spending on ambulance providers. All home and community-based waiver services are attributed to Medicaid. SOURCE: KCMU estimates based on FY 2011 Centers for Medicare & Medicaid Services (CMS) National Health Expenditure Accounts data.

Figure 15 Health Needs Drive Spending and Spending Drives Budget Concerns

Figure 16 Federal and state governments share Medicaid costs. AK CA OR WA NV ID AZ Federal Medicaid Matching Rates, FFY 2014 HI UT MT WY NOTE: FMAP percentages are rounded to the nearest tenth of a percentage point. These rates are in effect Oct. 1, 2013-Sept. 30, 2014. SOURCE: Federal Register, November 30, 2012 (Vol. 77, No. 231), pp 71420-71423, at http://www.gpo.gov/fdsys/pkg/fr-2012-11-30/html/2012-29035.htm. NM CO ND SD NE KS TX OK MN IA MO AR LA WI IL MS IN MI TN AL KY OH WV GA FFY 2014 FMAP PA SC VA NC FL VT NY ME NH MA RI CT NJ DE MD DC Maine FMAP: 61.55% 50 percent (15 states) 50.1-59.9 percent (12 states) 60.0-66.9 percent (13 states) 67.0-73.1 percent (11 states, including DC)

Figure 17 For Medicaid, cost is always a challenge. 12.7% Spending Growth Enrollment Growth 10.4% 10.3% 9.3% 9.7% 8.7% 8.5% 8.8% 7.7% 7.8% 6.8% 7.2% 7.5% 6.4% 5.8% 7.6% 4.7% 6.6% 5.6% 3.8% 3.8% 3.2% 4.3% 3.1% 4.4% 3.2% 3.2% 1.3% 2.5% 0.4% 1.0% -1.9% 0.2% -0.5% Adopted 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 NOTE: Enrollment percentage changes from June to June of each year. Spending growth percentages in state fiscal year. SOURCE: Medicaid Enrollment June 2012 Data Snapshot, KCMU, August 2013. Spending Data from KCMU Analysis of CMS Form 64 Data for Historic Medicaid Growth Rates. FY 2012-2014 data based on KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, October 2013.

Figure 18 Although Medicaid cost growth is slower than overall health care costs. Spending Growth, FY 2007-2011 5.3% 3.3% 2.3% Medicaid Medical Services Per Enrollee NHE Per Capita Private Health Insurance Per Enrollee SOURCE: Medicaid estimates from Urban Institute analysis of data from the Medicaid Statistical Information System (MSIS), Medicaid Financial Management Reports (CMS Form 64), and Kaiser Commission on Medicaid and the Uninsured and Health Management Associates data. NHE and private health insurance data from Centers for Medicare & Medicaid Services Office of the Actuary, National Health Statistics Group.

Figure 19 Medicaid spending per enrollee varies across states. (FFY 2009) AK WA OR NV CA ID UT AZ MT WY CO NM ND SD NE KS OK TX MN WI IA IL MO AR MS LA MI OH IN KY TN AL VT NY PA WV VA NC SC GA ME NH MA CT RI NJ DE MD DC HI FL NOTE: Spending includes both state and federal payments to Medicaid. These figures represent the average (mean) level of payments across all Medicaid enrollees. Spending per enrollee does not include disproportionate share hospital payments (DSH). Some enrollees are only eligible for a limited set of benefits. A small fraction of elderly and disabled enrollees in every state qualify only for assistance with their Medicare premiums and coinsurance. SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on data from FY 2009 MSIS and CMS-64 reports, 2012. $5000-$6000 (15 states) Under $5000 (14 states) $6000-$7000 (10 states) Over $7000 (12 states including DC)

Figure 20 Most Medicaid spending is driven by a few with high health needs. Bottom 95% of Spenders Bottom 95% of Spenders Top 5% Children 3.5% Adults 2.1% 5% Top 5% Children 0.3% Adults 0.3% Disabled 2.5% Elderly 1.9% Disabled 30.4% Elderly 17.6% 54% Enrollees FY 2010 Total = 66.4 million Expenditures FY 2010 Total = $369.3 billion SOURCE: KCMU/Urban Institute estimates based on data from FY 2010 MSIS and CMS-64. MSIS FY 2009 data were used for CO, ID, MO, NC, and WV, but adjusted to 2010 CMS-64.

Figure 21 State Options and Opportunities

Figure 22 States have flexibility to administer core Medicaid programs. Eligibility and Enrollment Benefits and Cost Sharing Care Delivery and Provider Payments Core Requirements Federal minimum coverage of certain low-income groups (pregnant women, children, elderly and disabled, parents) Maintenance of Eligibility (MOE) Streamlined and simplified enrollment procedures State Options Coverage beyond federal minimum levels ACA early expansion option for childless adults ACA Medicaid Expansion to 138% FPL (requirement with limited authority to enforce) Additional enrollment simplifications (e.g., ELE, 12-month continuous eligibility) Required benefits set in statute Optional benefits Cost sharing within federal rules Payments must be consistent with efficiency, economy, quality and access Some requirements for specific providers/services (FQHCSs, MCOs, etc.) Delivery systems (FFS, MCOs, PCCM, combination) New ACA options (CMMI, new grants) Premium assistance options Long-Term Services and Supports Nursing home coverage and quality standards Olmstead Resource and asset tests Level of need determinations Community-based care options (HCBS and new ACA requirements) Duals demos Federal Core Requirements and State Options in Medicaid: Current Policies and Key Issues. Kaiser Commission on Medicaid and the Uninsured, April 2011

Figure 23 Section 1115 waivers enable demonstrations. Section 1115 waiver authority provided for experimental, pilot, or demonstration projects, which are likely to assist in promoting the objectives of the program Secretary of HHS has authority to: Waive compliance with certain federal Medicaid requirements Provide federal matching funds for costs that would not otherwise be included as Medicaid expenditures Required to be budget neutral for the federal government Enforced through a cap on federal matching funds over the life of the waiver Approved through a series of negotiations between a state and HHS Generally approved for an initial five-year period Can be extended, typically for three years Can be amended, subject to federal approval

Figure 24 Approval Process Requirements for Section 1115 Waivers, Effective April 27, 2012 Timeline of Minimum Public Comment and Approval Requirements for Section 1115 Waivers: State Posts Waiver Proposal State Holds At Least 2 Public Hearings Earliest End Date for State Notice and Comment Period State Submits Application to CMS 0 Days 15 Days 30 Days 0 Days 15 Days 30 Days 45 Days 60 Days Latest Date for Federal Notice of Receipt to State End of Federal Notice and Comment Period* Earliest Date for Federal Approval* * If the federal government provides the notice of receipt to the state earlier than within 15 days of the state submission, the timelines for the end of the federal notice and comment period and earliest date for federal approval could be shorter.

Figure 25 Other Waiver Authorities in Medicaid Section 1115A: Center for Medicare and Medicaid Innovation (ACA) Waiver authority to test, evaluate, and expand different service delivery and payment methodologies to foster patient-centered care, improve quality, and slow cost growth in Medicare, Medicaid, and CHIP $10 billion in funding over 10 years Section 1915(b): To enroll many Medicaid beneficiaries in mandatory managed care Section 1915(c): To provide home and community-based services to people who would otherwise need institutional care Section 1916(f): To approve higher cost-sharing than otherwise allowed if a demonstration meets specified requirements and criteria

Figure 26 States are expanding their use of managed care in Medicaid through a range of actions. Number of states taking action: FY 2011 FY 2012 Adopted FY 2013 35 23 17 20 13 9 15 14 12 10 10 8 6 5 4 5 14 Any of these Changes Expanded Service Areas Added Eligibility Groups Added Mandatory Enrollment Managed Long- Term Care Quality Initiatives or Major Contract Changes NOTE: States were asked to report new initiatives or expansions in these areas; the data do not reflect ongoing state efforts in these areas. While states have reported managed care quality initiatives in the past, there was not a comparable count available for FY 2011. SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, October 2011 and 2012.

Figure 27 In 26 states, over half of Medicaid beneficiaries are enrolled in comprehensive risk-based plans. Penetration of comprehensive risk-based managed care, July 1, 2011: CA AK OR WA NV ID AZ UT MT WY NM HI CO ND SD NE TX NOTE: Comprehensive risk-based managed care includes Health Insuring Organizations (HIOs), comprehensive commercial and Medicaid managed care organizations (MCOs), and Program of All-Inclusive Care for the Elderly (PACE). SOURCE: Medicaid Managed Care Enrollment Report, Summary Statistics as of July 1, 2011, CMS, 2012. KS OK MN U.S. Overall = 51% IA MO AR LA WI IL MS IN MI TN AL KY OH WV GA 0% (14 states) SC 1-50% (11 states) 51-65% (10 states) PA VT VA NC FL NY ME NH CT RI NJ DE MD DC 66-80% (13 states, including DC) >80% (3 states) MA

Figure 28 Examples of Payment and Delivery System Changes Expanding managed care to high-need populations and more services, including long-term services and supports Supporting hospital delivery system improvements through safety-net care pools Delivery and payment system changes focused on coordinating care and changing financial incentives for plans and providers Many states are pursuing concurrent initiatives through the health homes state plan option and/or duals integration initiative under CMMI

Figure 29 States are also focusing on long-term services and supports. Enrollees Expenditures 2% 4% 94% 57% 22% 21% 43% Total = Series 66.4 million 1 Total = Series $369.3 2 billion People Who Did Not Use LTSS People Who Used Institutional LTSS People Who Used Community-Based LTSS NOTE: Individuals who used both institutional and community-based services in the same year are classified as using institutional services in this figure. SOURCE: KCMU and Urban Institute estimates based on data from FY 2010 Medicaid Statistical Information System (MSIS) and Centers for Medicare & Medicaid Services (CMS)-64 reports. Because the 2010 data were unavailable, 2009 data were used for CO, ID, MO, NC, and WV, and then adjusted to 2010 CMS-64 spending levels.

Figure 30 There are still waiting lists for Home and Community Based Services (HCBS). Medicaid 1915(c) HCBS Waiver Waiting Lists, by Enrollment Group, 2002-2012 Others Aged/Disabled I/DD 3% 43% 51% 1% 1% 53% 53% 47% 45% 6% 5% 41% 42% 53% 53% 26% 68% 28% 53% 47% 45% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 6% 6% 30% 64% 10% 29% 61% 9% 63% 8% 29% 62% 64% 10% 32% 58% Total: 192,447 180,347 206,427 260,916 280,176 331,689 393,096 365,553 428,571 511,174 523,710 NOTE: The Other enrollment group includes waiver enrollees who are people with physical disabilities, children, people with HIV/AIDS, people with mental health needs, and people with traumatic brain and spinal cord injuries. Percentages may not sum to 100% due to rounding. SOURCES: KCMU and UCSF analysis of CMS Form 372 data and program surveys.

Figure 31 New options are available to support community care. 46 *Approved states actively participating 29 16 12 8 2 Money Follows the Person Demonstration Health Home State Plan Option Balancing Incentive Program HCBS State Plan Option Duals Demonstrations Community First Choice State Plan Option SOURCE: KCMU internal tracking based on federal and state websites, as of October 2013.

Figure 32 Medicaid in Perspective Medicaid is the primary health coverage program for low-income Americans with significant health needs. Medicaid increases access to care and limits financial burdens for its 63 million beneficiaries. Medicaid is a critical source of financing for our health care system and safety net facilities. Medicaid spending is concentrated among a small number of beneficiaries with complex health needs. Medicaid cost growth needs to be managed with delivery and payment system reforms to improve care coordination and quality.

Figure 33 Contact Information Diane Rowland, Executive Vice President & Executive Director The Henry J. Kaiser Family Foundation Kaiser Commission on Medicaid and the Uninsured 1330 G Street, NW AnneW@kff.org 202.654.1323 Visit our new, improved site: www.kff.org twitter.com/kaiserfamfound facebook.com/kaiserfamilyfoundation