Policy Update
Governor's Medicaid Plan Getting Attention
6/28/2005
From Nelson Mullins
Greetings from the Gold Dome! Legislators are interested in the Governor’s proposal to revamp the State’s Medicaid program. Thus, the House Appropriations’ Health Subcommittee convened on Thursday, June 23, 2005 to hear more from the Department of Community Health and the Governor’s Health Policy Advisor.
The Subcommittee, chaired by Rep. Jeff Brown (R-LaGrange), held a lengthy meeting with Members Rep. Len Walker, Rep. Jay Shaw, Rep. Mickey Channell, Rep. Ron Stephens, Rep. Donna Sheldon, and Rep. Mark Butler listening. Rep. Pat Gardner was also in attendance. Due to scheduling issues, Commissioner Tim Burgess was unable to attend.
Rep. Brown mentioned at the beginning of the meeting that a Georgia State University survey had been sent to Members and each was encouraged to complete the survey. Also, a copy of the Department of Community Health Board Minutes, from the June 9, 2005 meeting, was distributed to Members.
Members were also provided a copy of the communication prepared by the Chairman of House Appropriations Ben Harbin to Departments about use of money appropriated in the Budget. Apparently, there is concern that some Departments are not necessarily using money in the Budget as the General Assembly intended.
The meeting was one of presentations to the Subcommittee. Few questions or statements were permitted from the audience.
Medicaid Modernization
Rep. Brown stated that he thought the Governor’s proposal presented to the federal administration was a good plan and was also consistent with his philosophy that consumers should play a more active role in their healthcare.
Abel Ortiz, Health Policy Advisory to Governor Perdue, presented the concept paper to Members which previously was discussed with CMS. The concepts propose changes to the State’s Medicaid program. No plan has been developed on eligibility or benefits. Thus, details of this proposal have not been finalized. Georgia is looking at other states’ Medicaid programs in an effort to find best practices around the country.
Four values were identified to guide the decision to be made (predictable growth, personal choice and responsibility, market place transparency, and quality healthcare outcomes). The goal is to control growth in spending and numbers of Medicaid eligibles. Currently, new revenue is being “eaten” by Medicaid and the Governor wants to change the proportion of growth allocated to Medicaid.
In an effort to develop a plan, it is necessary to look at Georgia’s spending over time. To make the changes, the proposal has been to develop a “base year” (an agreed upon date with CMS) and cap spending on that particular date (with certain adjustments for inflation and eligibility) but allow Georgia to have flexibility in developing programs and services in its Medicaid program.
Legislators questioned why the State would wish to voluntarily cap money it receives from the federal government. Mr. Ortiz explained that there are currently inefficiencies in the system due, in part, to regulations governing the Medicaid program. Governor Perdue believes that with flexibility, more can be done with the same amount of money. Essentially, it is necessary to bring Georgia to a “budget neutrality” point.
Dollars will increase somewhat, but there will be a slowing of the growth trend. Cost avoidance and becoming more efficient is necessary. If no cap is placed, then State money also continues to grow as it is necessary for the State to appropriate matching dollars to draw down federal funds. Mr. Ortiz also explained that Georgia needs to look at alternatives to entitlement.
For instance, he explained that long term care can be handled better through community services than in nursing homes in many instances and it becomes much more cost effective. However, nursing home care is an entitlement. Long term care in Georgia is one of the biggest cost drivers.
New ideas include personal choice for Medicaid recipients and the establishment of a “medical home” so that physicians and patients can determine the best course of treatment and medical needs.
The goal is to promote prevention and routine care, steering folks away from the costly emergency room settings. Georgia has communicated this idea to CMS which has expressed interest in the open communication between patients and physicians.
There is also a need for more market place transparency (patients need to know which providers provide the best care). Currently, Medicaid recipients do not know how much healthcare costs. The goal is to allow quality to drive provider choice.
This will require substantial computer needs in order to determine eligibility status, cost sharing ideas (like information on immunizations), etc. Pilot dollars for computer needs are available now through CMS. Tennessee has already taken advantage of such pilot program funding. Such transparency would reduce medical errors and duplication of services.
Georgia also inquired if CMS would provide a waiver on quality outcomes (basing healthcare outcomes of patients on how much healthier Georgians become). One idea was to track specifically children ages zero to five. Georgia intends to negotiate further with CMS on this issue.
The Governor’s staff met with Secretary Levitt with CMS on May 25, 2005 and again last Tuesday (June 21, 2005) on possible best practices. Only the Governor’s staff attended the first meeting; at the second meeting, the Governor’s staff, Dept. of Community Health (Mark Trail, Commissioner Burgess, Carie Summers, and Jason Bearden) and Dept. of Human Resources (Ken Jones, Gene O’Callaghan, and Maria Greene) personnel attended.
CMS is to provide Georgia with more information on other states’ best practices. A “team” has been developed to work on Georgia’s idea so that a more comprehensive idea with details will be prepared by the first of 2006. It will be necessary, per Mr. Ortiz, to get both community and legislative input and support.
There will be six teams in Georgia used to develop the proposed 1115 Medicaid waiver (services; information technology; long term care; outcomes; and financial issues). There will be public hearings held on the waiver proposal.
Mr. Ortiz explained that he had a legislative input meeting with the Senate Majority Leader Sen. Tommie Williams and House Majority Leader Rep. Jerry Keen. It is anticipated that monthly updates to legislators will be made on this issue and Mr. Ortiz indicated that legislators could participate in each of the six teams.
Mr. Ortiz also noted that before the actual submission of the waiver, it was intended that a joint resolution would be introduced to support the waiver (so that Legislators could debate the issue). However, no statutory changes are necessary to pursue this waiver.
Rep. Shaw expressed his anger with the way the concept paper had been handled. He told Mr. Ortiz that he was unaware, as were his fellow Subcommittee Members, of the existence of the concept paper and the meeting in Washington with CMS.
As elected officials, he and others are the ground troops and need to know that these types of proposals are being discussed. Rep. Shaw also was concerned that Rep. Brown had not been included on one of the teams. Rep. Brown indicated that he would speak with Rep. Keen about inclusion of folks on the “teams” and asked Members to notify him of their particular interests.
Rep. Channell inquired about the plan’s mention of PeachCare. The PeachCare program is not a part of Medicaid, however it was included in the concept paper presented to CMS. Mr. Ortiz explained that the Governor wanted flexibility for Georgia’s SCHIP program, PeachCare, as well and wanted to look at best practices of other states’ SCHIP programs. Thus, any best practices found could potentially be applied to both Medicaid and PeachCare. Rep. Channell reminded Mr. Ortiz that PeachCare was totally subject to State appropriation.
Mr. Ortiz also explained how the meeting occurred in Washington with CMS. If a waiver is to be requested, the first step is preparation of a concept paper to begin discussions. This paper prepared by Georgia is dated June 18, 2005.
A condensed version of the concept paper was actually presented, although a lengthier version of the paper has been circulating (it apparently contains more information and history about the Medicaid program as well as ideas on how to implement a waiver). Rep. Brown asked Mr. Ortiz to provide to each of his Subcommittee Members the lengthier version of the paper. Another meeting with CMS is planned for August 1.
Rep. Brown also noted an article of interest that his Subcommittee should read. It is an Atlanta Journal-Constitution article dated June 5, 2005 on Medicaid costs and enrollment.
Medicaid Care Management Organizations and Other Procurements
Kathy Driggers, with the Department of Community Health, presented an update to the Subcommittee on the State’s proposed use of managed care on the Medicaid program. A request for proposal for care management organizations was issued previously which is being managed by the Department of Administrative Services. Procurements made through the Department of Administrative Services have detailed provisions.
More than 300 boxes of materials have been submitted by potential care management vendors. Ten applications proposed coverage in the six regions. One bid provided coverage in five regions; one bid covered three regions; and eight bidders proposed coverage in all six regions. Bidders are: Aetna; Amerigroup; Blue Cross Blue Shield of Georgia; Coventry (Southcare); Centene (Peach State); Select Health; Unisom; United Healthcare; OmniCare; and Well Care.
Bids are now in the final cost review stage which is being conducted by Mercer Consulting and the Department of Administrative Services. The goal is to identify “winners” hopefully next week. However, the winners will not be made public until contracts are signed (and bonds and letters of credit are obtained) which may take an additional couple of weeks. Thus, it could be mid-July before the winners are made public.
There will be some services, such as those provided to the Aged, Blind and Disabled population, that will be done on a fee-for-service basis.
The bids reviewed by Mercer and the Department of Administrative Services will be evaluated on cost. Once costs are known, the Department of Community Health will be able to determine whether to forge ahead with the managed care initiative. Ms. Driggers indicated that savings would be found and the program would go forward. Ms. Driggers was questioned if possible bidders were aware of information that they may have been named as “winners.”
She stated nothing has been told to the bidders but if bidders are contacting healthcare providers in Legislators’ districts it is an attempt to get ready to conduct business (Rep. Shaw stated that a hospital in his area had been told that it would have to contract with LabCorp for work).
A second procurement effort underway within the Department of Community Health is one for an enrollment broker for the Medicaid program. Four bidders have submitted responses to supply the services as the enrollment broker: ACS; Maximus; PSI; and Automated Health System. This broker would be responsible for education, outreach, and membership.
A third procurement is one for disease management services. Five proposals were received for the proposed two regions. Bidders are Peasant; APS; Peach State; United (Lifemaster); and Health System One. There has been a delay in selecting a winner because of the administrative process. The Department of Community Health does not control the procurement process.
A State plan amendment on the Medicaid program is necessary to be approved by CMS and CMS has not made that approval (it is anticipated that CMS approval will be made by mid-summer). Thus, fall implementation will occur with this program which will cause a budget impact. Legislators projected a $32 million savings by implementing a disease management program. With the delay, 25% of this projected savings will be forfeited.
A pharmacy benefit manager procurement has also been underway. Five bids were received last Friday by the Department. Those bids are now being reviewed by the Department of Administrative Services.
The technical evaluation is to be completed by the end of July and notice of the award should be made by mid-September. It is anticipated that the new pharmacy benefit manager will be implemented on the Medicaid program by January 1, 2006.
Bidders are: Express Scripts; 1st Health; Wellpoint; Procare; and Med-Impact Healthcare. Merck Medco did not bid. This new pharmacy benefit manager will be implemented on the Board of Regents Health Plan and State Health Benefit Plan on January 1, 2007.
A new network and third-party administrator procurement is underway for the State Health Benefit Plan. This procurement package was posted on May 25, 2005. More than 240 questions were received from potential bidders on June 15, 2005. The actual proposals are due on July 13, 2005 with a winner announced August 8, 2005.
A public notice of the winner will be announced mid-August. There is a January 1, 2006 implementation and no impact is expected on the mid-October open enrollment period. The Board of Regents Health Plan will continue using its current network for another year.
PeachCare
Carie Summers provided an update on the PeachCare issues. Ms. Summers provided Subcommittee Members information on the lockout currently being used by the Department of Community Health, which oversees the PeachCare initiative, when premiums are not paid.
In July 2004, the Department implemented a policy that basically stated if premiums were not received by the 1st day of the month and not by the grace period deadline (the 13th day of the month), then coverage was cancelled for those children. Persons were not eligible for reinstatement into the program for three months and only then if premiums were paid. The three-month lockout numbers declined over the course of the year.
The Department reviewed federal dollars for the program and the deficits. In FY 2005, there was a $31 million dollar deficit; in FY 2006, there is a $135 million dollar deficit. Lapsed federal dollars at the federal level which states did not access were redistributed to states which have SCHIP programs. States, however, have expanded their SCHIP programs. Thus, the lapsed dollars other states did not use has slowly diminished.
The Department also looked at income levels – those well below the poverty level as well as those barely eligible for the program. It found that generally the lockout was roughly three percent for all income levels.
The new policy concerning lockout goes into effect on August 1, 2005. This program was reviewed too in anticipation of the State’s rollout with its managed care initiative. Premiums will still be due on the first day of the month prior to coverage. Premiums must post by the 15th of the month. If premiums are not paid by the day that the Department conducts its “eligibility run,” then the child’s coverage is cancelled. The child is not eligible for reinstatement for one month. Premiums must be paid for reinstatement.
In the Budget, language was added for a “yes” to add back money to eliminate the three month lockout. Thus, there were no actual dollars attached to the Budget item. The State believes the new policy will cost approximately $5.3 million in State funds or a total of $19.3 million with federal funds.
In FY 2007, there will also be a deficit of federal funds. In this allotment methodology, eighteen states will be impacted. Georgia will be one of the impacted states. With enrollment growth, there has been competition for money. The lessening of federal dollars to be redistributed will mean fewer dollars for Georgia.
The SCHIP program is also to be reauthorized by Congress in FY 2007. Congress needs to provide the funds or it will cause changes to be made to PeachCare. Georgia could potentially have to cut its program by one-third in order to meet funding requirements. It is anticipated that the reauthorization could take place in September or October. There have also been discussions on moving the reauthorization for another year.
The National Governor’s Association is working on determining what other states are in the same position as Georgia. Georgia has expressed the need to find relief with Secretary Levitt. A conference call was held last week on the issue according to Mr. Ortiz.
Indigent Care Trust Fund
A lengthy presentation was made by Carie Summers on the State’s Indigent Care Trust Fund. She began by discussing the basics about the disproportionate share hospital (“DSH”) funding program. Federal dollars are matched with intragovernmental transfers (“IGTs”) made by participating facilities.
There is also an Indigent Care Trust Fund (“ICTF”) Committee appointed by the Department of Community Health Commissioner. This group generally meets at least annually but in 2005 it met twice.
There are both federal and State criteria for a facility to participate in the Indigent Care Trust Fund program. There are two federal criteria which must be met by a participant:
1) provide non-emergency obstetrical services to Medicaid recipients (if those services were provided on December 22, 1987) and
2) have a Medicaid inpatient utilization rate of at least one percent. In addition to the federal criteria, applicants must meet at least one of the State criteria:
1) have an inpatient Medicaid utilization rate greater than the mean rate plus one standard deviation; 2) have a low-income inpatient utilization rate greater than 25 percent; 3) have Medicaid charges greater than 15 percent of total charges; 4) be a hospital with the largest number of admissions in its area; 5) be a children’s hospital; 6) be a hospital designated as a regional perinatal center; 7) be a hospital designated a Medicare rural referral center and a Medicare DSH provider; 8) be a State-owned and operated teaching hospital or 9) be a small, rural public hospital with a Medicaid inpatient utilization rate of at least one percent.
A hospital’s DSH limit is equal to its Medicaid unreimbursed cost and uninsured cost of care. The FY 2005 calculations used 2003 data which had been inflated two years. The Georgia Department of Audits conducted surveys of facilities subject to desk reviews.
Uncompensated cost of care is double the current federal dollars which are actually available. There were problems this year as calculations were made using 2003 data. Additionally, private hospitals have been told that they could no longer participate in 2006 as they cannot make intragovernmental transfers.
In December 2004 when the Department announced the DSH facilities which were eligible, some facilities made a decision not to make intragovernmental transfers. The Department withheld making all the payments because of concerns over the data used in making the determination and the audits which were in question by the facilities.
Thus, 75% of the FY 2005 allocation was made. A 15% “stop loss” and “stop gain” has been applied based on the FY 2004 allocations (the federal authorities were apparently satisfied with this idea). In February 2005, the Indigent Care Trust Fund Advisory Committee reconvened.
On site reviews of facilities were made when there was a 25% change in the allocation; when the facility was a safety-net facility; or if it was one of the thirteen newly eligible facilities which could participate. Thus, 85 hospitals had reviews. There were no predetermined outcomes, per Ms. Summers.
Additionally, hospitals lacked certain detailed information on patients (at least 40%of the participating hospitals had this problem). There were some Medicaid receipts included in the data that are not paid for in inpatient or outpatient hospital care (an example provided was pharmacy).
Rep. Brown inquired if a problem on the gathering of patient data was due to HIPAA. Yes, HIPAA was part of the problem. However, the data used mostly pre-dated HIPAA implementation. 36 hospitals saw an increase in their DSH allotments. The swings in payment caused some concerns. There is currently a smaller pool of ICTF dollars; thirteen additional facilities participating; new data being used; and changes in hospital business practices (through collecting more revenue and reduction of costs by elimination of cost centers). All of these areas have caused swings in the payments.
Some Legislators also expressed concern that rural hospitals were not receiving a 100% of their allotments. Another issue for hospitals was the switch in accounting processes by the Department (from accrual to cash). Legislators also inquired if the safety-net hospitals were harmed in this process.
Ms. Summers indicated that she and Commissioner Burgess worked on fairness and equity for all facilities. However, each knew that some facilities would not be pleased. Therefore, the final decision was made to apply the “stop loss” and “stop gain” to 2004 payments. A 7% stop loss was applied to individual facilities’ DSH limits; if uncompensated cost went up in FY 2005 over FY 2004, then the gain was capped at 14% of 2004. On Monday, June 20, 2005, the Department released information on the final payments for FY 2005 to be made to DSH facilities.
There were eight facilities with DSH limits less than what they were paid in January 2005. Many of the eight were rural facilities. Thus, a decision was made to hold these facilities harmless and not attempt to recoup the money (this amount foregone was approximately $2.6 million).
The DSH limit used was $772 million. There are 35 hospitals subject to the stop gain; 46 hospitals subject to the stop loss; 10 hospitals had no impact; and 13 hospitals were new participants so there was no application of stop loss or stop gain. In the final payments, no facility will see more than a 9% gain and no facility will see more than a 10% loss.
IGTs are due on June 27, 2005 and payments will be made on June 28, 2005. If all transfers are made, then the Department will pay out $128 million. If all transfer
s are not made, then no payments will be made in June and the dollars will roll to the FY 2006 Indigent Care Trust Fund.
Perhaps it would be better if the Department went back to an accrual basis of accounting. Ms. Summers noted that the Medicare Modernization Act contains language concerning the Department’s requirements to conduct audits. There are still lingering questions on whether an attestation is necessary from an independent accounting firm.
One suggestion has also been to expand the Indigent Care Trust Fund Advisory Committee participants. There also must be a determination made on the DSH allocation methodology. The Department also intends to review other states’ DSH programs.
Legislators did inquire why one hospital could hold up the entire payment of this second payment. Ms. Summers stated it was because of state plan requirements.
Upper Payment Limit (“UPL”)
Ms. Summers stated that there was good news about upper payment limit money. The Department had negotiated with CMS on UPL and in 2004 reached an agreement whereby DCH got a surplus to shore up shortfalls due to ACS.
UPL (non-state millions)
FY 2004
Inpatient $432.6
Outpatient $111.3
Total $543.9
Nursing home $115.3
Total $659.2
FY 05
Inpatient $382.9
Outpatient $152.8
Total $535.7
Nursing home $108.4
Total $644.1
FY 2005 as a Percentage of FY 2004
Inpatient 88.5%
Outpatient 137.3%
Total 98.5%
Nursing home 94.1%
Total 97.7%
CMS would like to eliminate the UPL program as it is concerned about its financing. To get 98% of the FY 2004 dollars in FY 2005 is a major accomplishment.
Facilities net approximately 17% above their donation or about $88 million in the aggregate for participating hospitals ($68.8 million inpatient; $19 million outpatient). Nursing homes get $18.1 million. Critical access hospitals (“CAH”) get 100% of UPL. There is also a deficit in the FY 2006 Departmental Budget of $146 million.
The FY 2005 surplus will roll to cover such. However, next year, states cannot ‘overmatch’ dollars.
Hospitals have been advised to be conservative in budgeting UPL. CMS regulations will have to address ‘governmental’ entities definition (regarding which types of facilities may make transfers). The Subcommittee also inquired about the managed care impact. Ms. Summers indicated that the CMO provider fee would fill the hole created by the UPL loss. However, there has been no decision made on how to share that money with providers.
Jimmy Lewis, with Home Town Health, stated that many private facilities have stated that they may have move to the acceptance of EMTALA patients only in their emergency rooms. Thus, not all patients will be accepted in emergency rooms.
Ms. Summers indicated that CMS was not concerned about the nursing homes “bed tax” as those IGTs are apparently satisfactory to CMS.
There was also an inquiry relating to the School Nurse Program which is not an IGT. Ms. Summers argued that this nurse money did not actually pull down federal funds.
Ms. Summers stated that there were 55% of payments made to hospitals through the CMO (care management organization) while 45% of the payments made to providers were for the Aged, Blind, and Disabled population which was still on a fee-for-service basis (and still eligible for UPL).
Financial Audit Status
The Department is working with its auditors on 2004. The auditors received the financial statements in early June. Two problems on the 2004 audit were the conversion to the ACS system and the issues relating to the “no opinion” provided on 2003 financials. ACS has done work to help correct system problems. The Department has also made calculated estimates and provided that information to the auditor (regarding claims payments).
The Department received a disclaimer by the auditors on the 2003 financials. Additionally, the State Health Benefit Plan also received an unqualified opinion on the 2003 numbers. The Department is trying not to get a disclaimer for the 2004 year as such would impact the State’s sale of bonds. Ms. Summers stated that a “best case” situation would be for the Department to receive a qualified opinion on 2004 ending balance (because the opening balance relates to 2003).
Bond rating agencies generally look at improvement and moving from a disclaimer to an unqualified opinion would be an improvement. The Department intends to begin work on the 2005 audit as soon as the fiscal year ends on June 30. It is the goal to have an opinion on 2005 by December 31, 2005.
Members indicated that they were still receiving complaints from providers about ACS. The ACS hot line is apparently not providing help in a timely fashion. It would appear that one group most affected in Rep. Butler’s district is a group of obstetricians.
Rep. Stephens inquired about tracking encounter data.
A suggestion was made to have the Chief Information Officer make a presentation at the next Subcommittee meeting.
Jimmy Lewis stated that this was a three-year legacy of turmoil on cost data. It will take between two and five years to work through the cost report issue on overpayments and underpayments to providers.
Other
Rep. Brown noted that two study committees would be meeting soon. A Certificate of Need Study Commission will hold its first meeting on June 27, 2005. A second study committee on prescription drug costs and use of prior authorization and drug formularies will meet for the first time on July 12, 2005.
This Health Subcommittee will meet again after August 1, 2005. It will hear more on the Governor’s proposal to modernize the State’s Medicaid program; have an update on the DSH and UPL matter; get an update on PeachCare; and get an update on the Healthshares Volunteers in Medicine program.
Please contact Stanley S. Jones, Jr. Jeffrey C. Baxter or Helen Sloat at 404-817-6000 for further information on legislative happenings. Gold Dome Reports will be available daily during the Session at www.nelsonmullins.com.