medicaid and the post acute care marketplace dan mendelson ... · medical inflation often grows in...

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Medicaid and the Post Acute Care Marketplace

Dan MendelsonMedicaid CongressJune 6, 2006

© Avalere Health LLC

Agenda

Environmental Imperatives

» Fiscal / Demographic

» Payment systems

» Quality / pay for performance

Emerging Models of Reform

» Managed care

» Post-Acute Care Unification

» De-institutionalization

» State Medicaid experimentation

Implications for LTC providers


Control of Health Entitlements is the Only Way to Balance

Military16%

Other Discretionary

19%

Social Security21%

Health Entitlements

(Medicare and Medicaid)

23%

Other Mandatory12%

Net Interest9%

Source: OMB, FY 2006 President’s Budget

… of course tax policy could help as well


Looming Fiscal Crisis, or Rational Allocation of Wealth?

0

2

4

6

8

10

12

1970

1975

1980

1985

1990

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060

2065

2070

2075

2080

Shar

e of

GD

P (%

)

Part A Part B Part D

Source: 2006 Medicare Trustees Report

Medicare’s Share of GDP

Bridge

Boom

Insolvency


1.7 1.7 1.9 2.5 2.8 3.14.0 4.1 4.2

5.3 5.7 5.9

10.9 10.8

13.2

15.2 14.715.7

8.4 8.8 8.79.9 9.9

11.2

0

5

10

15

20

1999 2000 2001 2002 2003* 2004*

Dolla

rs (in

billi

ons)

Long-term care hospitalsInpatient rehabilitationSkilled nursing facilityHome health

Sector is Relatively Small, but Attracts Focus on Growth

Note: These numbers are program spending only, and do not include beneficiary copays.*EstimatesSource: Centers for Medicare and Medicaid Services, Office of the Actuary.


As Medicaid Spending Increases, States are Pursuing Innovative Reforms to Increase Efficiency & Reduce Costs

Medicaid Spending by Service, 1990-2015*

$0

$100

$200

$300

$400

$500

$600

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Billio

ns

Total Medicaid Hospitals Nursing HomesPhysicians Prescription Drugs

Actual Projected

Hospitals

Nursing Homes

Prescription Drugs

Physicians

* Source: CMS, National Health Expenditures. Years 2006 and beyond are projections

Total Medicaid SpendingMedicaid is currently the biggest item

in state budgets – a trend expected to continue in future years


Inconsistent Payment Systems Offer Varied Incentives

Long-Term Acute Care Hospitals

Skilled Nursing Centers

Home Health

Assisted and Independent Living Settings

Hospice Care

Inpatient Rehabilitation


Trending and Strong Policy interest in De-Institutionalization

Comparison of Medicaid Long Term Care Expenditures

0%

10%

20%

30%

40%

50%

60%

70%

FY 1993 - $42 Billion FY 2004 - $89 Billion

NHICF/MRHCBS

Source: Avalere analysis of MEDSTAT Group data


Quality Imperative Remains Strong

Policy evolving rapidly for hospital (pay for quality)

Physician sector moving more slowly (difficulty of measures, fiscal matters)

Pressure on health plans at a global and payer level

LTC status is evolving

» Negative bias historically

» No common, established measures across settings

» Quality First pledge = motion in the right direction

– AHCA, Alliance, AAHSA


Future of Self Financing is Murky at Best

Moderate to lower income Americans are saving less over time

» Home is largest asset with 78% of net work, median $85,516 for over 65

– Avalere research: reverse mortgage helps only a few

» 36% of all households had no retirement assets; median is $10,000 (AOA)

Those with assets will tend to shelter in advance of a disability

Medical inflation often grows in excess of assets

Resulting reductions in use of assets to pay for LTC

» Personal spending on LTC fell from 15.2% in 1998 to 12.5% in 2004 (CRS)

» Use of LTC insurance fell from 10.8% in 1998 to 7.3% in 2004 (CRS)

Growth of CCRCs, though, shows there is a market and demand for self pay


Medicare Part D: Operational Complexities

Shift of drug spending for duals from Medicaid to Medicare

Introduction of multiple formularies and multiple plans

Serious operational complexities introduced

» Enrollment of residents into plans

» Formulary compliance

» State law requiring pharmacy access

Change in role of long-term care pharmacies

» Rebates under fire by CMS

» Difficulty navigating plans as business partners (e.g., Omnicare suit)

» Pricing implications going forward


Emerging Models for Change

Federal Focus

» Managed Care

» Post Acute Care Unification

» De-institutionalization

» Tax incentives, asset test restrictions

State Models

» Managed Care (FL)

» Consumer Director and Managed Care (SC)

» State global budgeting (VT)

» Elimination of categorical eligibility (ID)

» “Healthy Lifestyles”

» Increased savings (e.g., NE health savings accounts)


Managed Care Organizations Will Emerge As More Dominant Payers of Long Term Care

States Exploring or Implementing Managed LTC Options

MMIP States

PACE StatesCurrent Managed LTC States

Multiple ActivitiesNo known activity

CA

AZ

OR

COUT

TX

NM

WAMT

KS MO

MN

MIWI

PA

WV

OH

SC

FL

GA

NCTN

IN

NY

VT

ME

RICT

DEMD

MANH


296 Special Needs Plans Approved296 Special Needs Plans Approved

SNPs Emerging, Focus on Duals and Institutionalized People

226 Dual Eligible226 Dual Eligible

13 Chronic Condition 13 Chronic Condition

37 Institutional37 Institutional

Cardiovascular Disease

Cardiovascular Disease DiabetesDiabetesCongestive

Heart FailureCongestive

Heart Failure

OsteoarthritisOsteoarthritis Mental IllnessMental Illness ESRDESRD HIV/AIDSHIV/AIDS


Commercial plan response has been moderate

CMS signed contracts with 91 distinct corporate entities

» 42 states, DC, and Puerto Rico have one or more SNP offerings

– Eight states, DC and PR have one or more SNPs in each county

» Overall number of plan offerings is large in some states (NY - 42 & FL - 35)

» But larger companies (except United) still thinking and positioning

Interest is due to

» Medicare Advantage Risk Adjuster and pending frailty adjuster

» Potential to control both Medicare and Medicaid services and dollars

» Potential to control both acute and long term care services

» Capacity to target capitation and benefit package

Shift from inpatient setting can increase demand for SNF


Multiple types of SNPs will be offered in many states in 2006

Chronic Condition SNP OnlyDual & Institutional SNP

Dual & Chronic Condition SNP

Institutional SNP OnlyDual Eligible SNP Only

All 3 Types of SNPsNo SNP

Source: CMS “Special Needs Plan: Maps” Updated 11-9-2005. http://www.cms.hhs.gov/healthplans/specialneedsplans/default.asp


Two Difficult Policy Goals: PACU and De-Institutionalization

Post Acute Care Unification has been an elusive target

» Concern about double paying relative to acute, perverse incentives

» No unified post-acute care assessment tool

» Strong interest by CMS in demonstrations, research

» LTACH payment issues showed willingness of Congress to engage

De-institutionalization / HCBS evident in many policies

» CMS demo: Money Follows the Patient (MFP)

– $1.7 B / 3-5 years; Medicare demonstration

– States get funding, pass to care coordinators

– Goal is to shift patients out of NF, SNF, ICF-MR

– Effect primarily on working aged people with disabilities


HCBS State Plan Option Encourages De-Institutionalization

Need not be statewide

State may limit enrollment

Service must be “comparable” across all enrolled populations

For self-direction, state must develop a “risk management technique”

De-links level of care between HCBS SPO and institutional test but not to existing Section 1915(c) waivers

Need not be statewide

State may limit enrollment

State may limit by population – i.e., aged, disabled, MR/DD, TBI, or MH

Answerable to statutory “health, safety, and welfare” requirements”

Eligibility tied to institutional level of care

Preliminary DRA HCBS SPO InterpretationSection 1915(c) Waiver

* CMS will implement both the HCBS and Cash and Counseling State Plan Options via State Medicaid Directors’ Letters and technical guidance. States may begin to move before the NPRM will be available for comment.


Planned or Proposed

Waiver Proposal

No Activity

States Are Implementing Programs that Create Incentives for Beneficiaries to Make Good Behavioral Health Choices

AK

HI

CA

AZ

NV

OR

MT

MN

NE

SD

ND

ID

WY

OK

KSCOUT

TX

NMSC

FL

GAALMS

LA

AR

MO

IA

VA

NCTN

IN

KY

IL

MIWI

PA

NY

WV

VT

ME

RICT

DEMD

NJ

MANH

WA

OH

D.C.

Healthy Lifestyle Programs 2006


Implications for Post Acute Care Markets

Long term fiscal pressures will challenge public reimbursement, demand

Motion to less intensive sites of care will continue

» Opportunities to partner with states on $1.7B from MFP demonstration

» CCRCs will continue to grow, perhaps public under full capitation

Managed care has emerged and will continue to grow in LTC markets

» Experience in capitation; change of incentives

» Advantage to having access to different settings

» Site of service shift starts in the inpatient setting

Post-acute care unification is a strong goal, but will proceed slowly

» Differential payment rates will persist over the next 5 years

Consumer financing is an idea worth nurturing but won’t solve the problem

medicaid and the post acute care marketplace dan mendelson ... · medical inflation often grows in...

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