Tennessee s Experience in Controlling Medicaid Costs. Darin Gordon, TennCare Director

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1 Tennessee s Experience in Controlling Medicaid Costs Darin Gordon, TennCare Director

2 Common Issues in Medicaid Fragmentation of care Fee for service (FFS) programs Mixture of FFS, PCCM & managed care programs Service carve outs Misaligned incentives Payment systems do not reward efficiency Often pays for quantity not quality of care

programs Service carve outs Misaligned incentives Payment

3 TennCare s Managed Care Model Brief Historical Overview of TennCare Managed Care TennCare addressed issues of fragmentation and misalignment of incentives by enrolling all Medicaid members into managed care. As a revolutionary model, this approach brought about some challenges. The lessons learned from these challenges allowed TennCare to evolve into a program that is able to contain costs while providing high quality care to its members. Integration of Medicaid Populations While many Medicaid agencies do enroll some populations into managed care, TennCare is the only Medicaid agency in the U.S. to enroll its entire population into managed care. This occurred in Prior to 1994, TennCare was entirely fee for service. Integration of Services Over the years, TennCare experienced many different service integration models. TennCare began with a relatively integrated model, then carved out selected services over time. Today, TennCare integrates physical, behavioral, and long term care services.

The lessons learned from these challenges allowed TennCare to evolve into a program that is able to contain costs while providing high quality care to its members.

4 Managed Care and Quality Though some skeptics said otherwise, TennCare has seen a significant increase in quality since moving to managed care. 100% TennCare Unadjusted Rate 90% 80% 70% 60% 50% 40% 30% 20% 10% Well Child Screening Rates TennCare Adjusted Rate Pre CHOICES Long Term Care Enrollment (3/1/2010) 17.5% 31.1% 82.5% 68.9% Nursing Facility HCBS Current Long Term Care Enrollment (11/3/2011) Nursing Facility HCBS 100% 2011 Member Satisfaction Survey 2011 HEDIS Results The 2011 HEDIS results showed over the last 5 years ( ): 90% 80% 70% 60% 50% Improvement in nearly all child health measures including: wellchild visits, access to primary care practitioners and immunizations Improvement in 7 of 8 adult diabetic measures including: HbA1c testing, retinal eye exams and LDL C screening and control Improvement in management of cardiovascular conditions including: cholesterol screening, cholesterol management and control of high blood pressure

9% Nursing Facility HCBS Current Long Term Care Enrollment (11/3/2011) Nursing Facility HCBS 100% 2011 Member Satisfaction Survey 2011 HEDIS Results The 2011 HEDIS results showed over the last 5

5 Managed Care and Cost Containment $8,500 $7,500 U.S. Expenditure on Health Care Per Capita Vs. Comparable TennCare Per Member Cost TennCare Medical Inflation Trend $6,500 $5,500 $4, % 8.00% 7.5% 9.0% 7.0% $3,500 $2, % 4.00% 3.8% 4.1% 3.2% U.S. (OECD Health Data 2011) TennCare (Cost of Comparable Services/Enrollment) 2.00% Actual Expenditures vs. McKinsey and Co. s Best Case Scenario Estimates 0.00% TennCare National Medicaid * Commercial Insurance** *Source: OMB 2012; Kaiser 2013 **Source: PricewaterhouseCoopers Expenditures $4.5 $5.4 $6.1 $6.9 $7.6 $8.6 $6.9 $7.1 $7.5 $7.7 McKinsey Est. $9.5 $10.6 $11.8 $13.1 * * The 2009 figure was calculated by continuing the trend. TennCare trend remains below national Medicaid trends even as many other states have made significant program reductions.

McKinsey and Co. s Best Case Scenario Estimates 0.

6 Managed Care Lessons Learned On Effective Contracting On Cost Containment 1. The MCO procurement process must be well thought out. 2. Contracts with MCOs must be detailed, with each requirement carefully defined, and with appropriate reporting and monitoring processes to ensure compliance. 3. New skill sets are required of staff as you shift from FFS to managed care more of a regulator function. 4. Whenever possible, developing requirements in partnership with the MCOs helps to ensure they are understood and can be operationalized. 5. Contracts should be routinely reviewed and amended continuous improvement. 6. Thorough readiness review processes are critical prior to any program implementation. 7. Program leaders must be willing to hold the MCOs accountable. There must be different types and levels of incentives and sanctions which are used when necessary to ensure compliance. Automated systems for tracking deliverables is recommended. 8. Program leaders should be respectful of their MCO partners and willing to take a look at issues when circumstances arise that could not have been foreseen. 1. Aligning financial incentives is key. 2. MCOs need multiple tools to manage benefits and cost. On Quality 1. Quality of care is improved when coordination of care is enhanced. 2. High quality care is more cost effective care. 3. Collection and analysis of reliable encounter data is a critical foundation for quality monitoring. 4. A comprehensive approach is needed to assure quality and track improvement over time. 5. Standardized evidence based outcome measures are essential. On Integration of Care 1. Integration of benefits results in improved coordination of care and reduces potential for duplicative services and/or cost shifting. 2. The MCO must be the single entity responsible for needs assessment and case management activities, and for ensuring timely access to quality services. 3. NF services must remain carved in with the MCO at risk.

New skill sets are required of staff as you shift from FFS to managed care more of a regulator function. 4.

7 Managed Care Model in Action Analysis of Cost Drivers Quality Improvement and Utilization Management Strategies Pharmacy Spend Pharmacy $2,500 $2,000 $1,500 $1,000 $500 $0 Prescription Limits Point of Sale Edits Preferred Drug List/Drug Rebates/Generics Narcotic Controls Pharmacy Lock in HH/PDN Spend Medical $400 $300 $200 $100 $ Benefit redesign Outlier Monitoring Prior authorization Medical Home Network Consolidation Disease Management Case Management

Narcotic Controls Pharmacy Lock in 2002 2003 2004 2005 2006 2007 2008 2009 HH/PDN Spend Medical $400 $300 $200 $100 $0 2004 2005

8 CHOICES in Long Term Care Program TennCare CHOICES in Long Term Care (LTC) allows the state to use existing dollars to offer more options to those in need of LTC. Program Overview Cost Savings TennCare CHOICES in Long Term Care integrates TennCare nursing facility (NF) services and Home and Community Based Services (HCBS) for the elderly and adults with physical disabilities into the existing managed care system offering more options for individuals in need of LTC. This better prepares the program to adapt to the state s growing aging population in the years to come. CHOICES was implemented statewide in August of 2010 and there has already been a noticeable shift in LTC enrollment from NF enrollment to HCBS enrollment. Often times the home is the most appropriate and cost effective setting to receive LTC services. The CHOICES program design allows more people to be served with existing funding so long as it can be done safely and cost effectively. $19,000 (average annual cost HCBS) vs. $55,000 (average annual cost level 1 NF

physical disabilities into the existing managed care system offering more options for individuals in need of LTC.

9 Addressing the Immediate Problem Review coverage of optional benefits Benefit Changes Benefit redesign (pharmacy, home health, PDN) Modify level of care criteria Limits on payments to hospitals and ED physicians for non emergent ED visits Changes in Provider Reimbursement & Contracting Strategies Single rate for vaginal vs. C section birth Non payment for hospital preventable conditions Changes in crossover reimbursement methodology Provider network redesign Suboxone dosage limits Pharmacy Controls Exclusion of acne products and prescription strength allergy products for adults More aggressive generic pricing and limiting reimbursement to $4 for drugs that are widely accessible for $4 on commercial formularies Enhanced pharmacy TPL recovery systems Fraud Control Implementation of electronic visit verification Deployment of recovery audit contract services

C section birth Non payment for hospital preventable conditions Changes in crossover reimbursement methodology Provider network redesign Suboxone dosage limits Pharmacy Controls Exclusion of acne

10 Looking Ahead Dual Integration: Duals would receive their Medicare benefits from the same MCOs that provide their Medicaid/TennCare services MCOs would be at full risk for Medicare services, as well as TennCare services With savings achieved from Medicare/Medicaid integration, TennCare would begin offering care coordination services to duals Multi Payer Partnerships: Identify commercial payers to partner on targeted initiatives Joint focus on incentivizing the improvement of select health care indicators Alternative Payment Methodologies: Alignment of incentives at provider level Reward quality Further promote integration at provider level

coordination services to duals Multi Payer Partnerships: Identify commercial payers to partner on targeted initiatives Joint focus on incentivizing the

Dual Eligibles and State Innovations in Care Management

Dual Eligibles and State Innovations in Care Management Ann Kohler, Director of Health Services National Association of State Medicaid Directors American Public Human Services Association Ann.Kohler@aphsa.org