Medicaid Transformation

In October 2008 the government projected the cost of Medicaid will grow at 7.9%, per year, for the foreseeable future – and that was before the economy took a downturn and unemployment shot up. Given the state of the economy and further increases in unemployment, some are now projecting Medicaid expenditures could grow more than 9% in 2009.

The size of Medicaid ($339 Billion in 2008) and rapid growth make it an attractive program for efforts to innovate. The Medicaid program has seen many reform efforts through the years, most recently in programs created by the Deficit Reduction Act of 2005. One initiative explicitly requiring innovation is the Medicaid Transformation Grant Program.

Medicaid Transformation Grant Program

The Deficit Reduction Act was signed into law in 2006, with changes to Medicaid intended to give states greater flexibility in running and reforming their Medicaid programs. The Medicaid Transformation Grant Program is intended to fund pilots that test innovative technologies and methods to improve the efficiency and effectiveness of Medicaid health care services. The statute gives examples of innovative methods the program should fund, including: electronic medical records, electronic clinical decision support tools, e-prescribing, debt recovery from estates of deceased, ways to reduce fraud and abuse, medication risk and therapy management, drug utilization review, and improving access to academic medical centers.

By September 2008, 49 grants had been funded in 35 states, the District of Columbia and Puerto Rico at a total cost of $150 million. A cursory review of the funded projects shows a wide range of technologies and methods being tested:

• 19 Health information exchange/EHR
  
• 4 Verification of eligibility/citizenship
  
• 4 E-prescribing
  
• 3 Fraud & abuse
  
• 3 Predictive modeling
  
• 3 Transparency/Value Based Care
  
• 3 Outcomes improvement/Prevention
  
• 2 Debt recovery
  
• 2 Medication management
  
• 1 Clinical decision system
  
• 1 Automated credentialing

Transformation Grant Update

The Centers for Medicare and Medicaid Services gave an update on the progress of the Transformation Grants in November 2008 at the Fall Conference of the National Association of State Medicaid Directors.

Early lessons from the program reported by CMS include:

• The program is too short as it has taken more time than expected to launch
  
• Health information exchange governance is very difficult to establish given the different interests of stakeholders, the fragmented health system, and other eHealth initiatives already underway
  
• Legal hurdles exist, such as HIPAA, state laws, and business agreements
  
• Roles and responsibilities need to be defined, otherwise there is neither process nor progress
  
• Government procurements take time to implementAutomation of manual processes takes enormous effort and resources

Health Reform Realities

All the Medicaid Transformation Grant projects are using technologies and methods already piloted elsewhere, in either commercial health care or other government programs. As co-chair of a government task force on health information technology I had first hand experience studying many of these efforts. We reviewed much of what has already been done and little in these Medicaid projects is truly novel. Other government demonstration programs, such as the Medicare Coordinated Care Demonstration, used electronic medical records, predictive modeling, clinical decision support, patient self-management tools, medication management, web-based patient and physician portals, and other technologies and methods. In fact, the update and “early lessons” discussed last month revealed nothing that hadn’t already been experienced in other pilots, except that the Medicaid programs are finally catching up to where the leading edge of industry has been for a few years.

Perhaps the true novelty is the fact that Medicaid is allowed to innovate? Relaxing federal regulations and seeding projects will spawn new thinking and allow state Medicaid programs to begin breaking the chains of government mandates that constrain innovation and conflict with how the health care system really works. In addition, as we learned the hard way in the Medicare demonstrations, chronic care coordination is very different for an elderly and low-income population than for commercial health insurance (one of the Medicare demonstrations I ran for my company had dual-eligibles, presenting unique challenges). The Medicaid Transformation pilots will help demonstrate how these technologies and methods work for low income and disabled persons.

What Next?

The next official, public update of the Medicare Transformation Grants will be at the first Medicaid Health System Transformation Summit on January 4-7. This is also an opportunity for the grant recipients to exchange information on what works – an important step for innovations to course correct and succeed.

The pilots are scheduled to end March 2009, but most of the grant awardees have requested extensions through Spring 2010, to allow completion of the projects. The future of the program, however, is not clear unless it is reauthorized by Congress. Other ways to fund the Transformation projects include new HIT grants in an economic stimulus package or as part of the SCHIP reauthorization in Spring 2009. Also, one of the Obama campaign promises was to spend $10 Billion annually on health information technology, which could be used to continue funding the Transformation projects.

President-Elect Obama in his upcoming Saturday (January 5) address to the country will continue to reiterate his interest in spending on HIT when he says "to save not only jobs, but money and lives, we will update and computerize our healthcare system to cut red tape, prevent medical mistakes and help reduce healthcare costs by billions of dollars each year."

Finally, some suggest state Medicaid programs should not be allowed to experiment with reforms - instead the federal government should implement a national reform for everyone. In the coming debate over health care reform it will be interesting to see which side prevails: supporters of federalism, or supporters of centralized authority.

What the new Administration means for States and their health programs

President-elect Obama's nomination of former Senate Majority Leader Tom Daschle (D-S.D.) for HHS secretary means that the administration is serious about significant health care reform and soon. In addition to Secretary of HHS, Senator Daschle will also serve at the President’s “Health Czar” and run the Office of Health Reform in the White House, answering to the President (see AP story).

This is not your typical “Czar” with all the accountability but no authority and staff – no siree – Senator Daschle will have the $700B HHS behind him and a direct line to the President that will avoid many of the internal conflicts that former Secretary Tommy Thompson described in this conversation with Health Affairs.

Not surprisingly, the Deputy Director of the new White House Office of Health Reform will be Jeanne Lambrew, who co-authored a book on health care reform with Senator Daschle (see picture). Dr. Lambrew is well-respected in health policy circles and she brings a focus on fairness and social justice in her conversations on health reform. She also worked on this issue at the White House during the Clinton administration and currently serves as a senior fellow at the Center for American Progress, a progressive think tank led by former Clinton Chief of Staff John Podesta.

These announcements by the President-elect and their likely impact on major reform are important on many levels: Senator Daschle was Senate Minority Leader during the failed 1994 health reform attempt and details many lessons learned in his book; the staff ties between the Senator and the President-elect are numerous and deep (see NY Times story); and the Senator knows the minutiae and has the relationships to get things done in Congress.

At the President-elect’s press conference, he noted that “this has to be intimately woven into our overall economic recovery plan,” Obama said. “It’s not something that we can sort of put off because we’re in an emergency. This is part of the emergency.” At the same press conference, the President-elect noted that he was supportive of major reform in 2009.

[It looks like the 'elephant of reform' is getting on the train - see previous post. ~BAA]

So what does this means for states? Well, first off, the President-elect’s transition team and Democratic congressional leaders have begun work on an economic stimulus package of about $500 billion of which about $40 billion will be dedicated to a temporary increase in the Federal match for Medicaid payments to avoid impending state cuts to safety net programs (see Families USA report). It is also expected that the stimulus package will include infrastructure funding for electronic health records and that the bill could be signed shortly after the inauguration (AP/Chicago Tribune, 12/11). Senator Daschle also discussed the need to quickly implement some stop-gap measures that expand affordable health insurance through S-CHIP and subsidies to help offset the high-cost of COBRA insurance for separated employees. This means that states can back away from the ledge and focus less on draconian cuts to their health programs and more on their role helping Congress implement meaningful reform later in the year.

Even though Senator Daschle and Dr. Lambrew have not made public statements in their new roles, one can gain an idea of their thinking from their book and previous statements on health reform. For example, in a recent report at the Center for American Progress titled ‘The Great State v. Federal Health Care Reform Debate,’ Dr. Lambrew’s argument would make President John Adams and other Federalists proud. She states:

But both efforts overlook a simple fact—an effective and efficient U.S. health system cannot be constructed one state at a time. States can and have reformed their health systems to improve access, affordability, and quality. Their myriad small successes and a few major ones shatter key myths. Special interests are not the unstoppable assassins of reform. Partisan divides can be bridged. And policy solutions can be found through a hybrid of public and private insurance as well as shared responsibility.

Yet, encouraging an assortment of state reforms will not add up to a solution to our systemic problems. The lessons from one state tend to be just that—applicable to one but not the rest. The idea that reform comes easier at the state level rather than the national level ignores structural barriers, such as balanced budget requirements among the states and federal laws that pre-empt states ones. This state-by-state approach tolerates inequity in the system. Poor states have more uninsured and can’t afford to do much about it. And 50 separate reform efforts complicate our already complicated health care system and inhibit efforts to simplify it.

No national policymaker should relegate health reform to the states. Hubert Humphrey’s exhortation on solving racial injustice 60 years ago—“get out of the shadow of states’ rights and to walk forthrightly into the bright sunshine of human rights”—also applies to health inequities today. States can illustrate the framework and feasibility of solutions. But it is time for our national leaders to step up to the challenge at the federal level to enact nationwide universal health care.

This means that the tide is shifting away from the petri dish model where each state experiments with their individual health programs to one where the Federal government picks up more of the tab and raises its expectations for standardization across states (the Federal government already finances about 57% of Medicaid costs). Does this mean the days of waivers and the growing use of flexibility provided by the Deficit Reduction Act (DRA) of 2005 are over? No…but the roles and expectations of waivers will change and I expect the new Administration will place a very high bar for states in order to implement state plan amendments related to the DRA.

So, the good news is that it looks like states will get significant and necessary relief but as they say, there are no free lunches…instead of being in the drivers seat, states will now be in the back seat trying to help the proverbial bull navigate through the china shop.

Resource: Mostly Medicaid website, LinkedIn group, and newsletter

Another time-saving resource for Medicaid professionals is the Mostly Medicaid website. At this website, you can sign up to receive quarterly newsletters that summarize Medicaid developments and even include nifty Medicaid crosswords. I gave one to my son but he got stuck on 1 down "freedom of choice waiver" (answer: 1915(b)).

Between MedicaidFrontPage and Mostly Medicaid, there is a lot of good information and if there are topics that you would like us to opine on at MedicaidFrontPage, please send me an email at the address in my profile. ~BAA

The Health Wonk Review is up!!! (12/10/08)

The Health Wonk Review (HWR) is a biweekly compendium of the best health policy blogs and for each issue, a rotating blogger summarizes the best posts of the past few weeks. The HWR is always interesting and often very entertaining as well. For those who do not live in the blogosphere, it is the best way to keep up to speed with the latest thinking.

This issue was hosted by Vince Kuraitis at the e-Care Management blog. Enjoy. ~BAA

'Louisiana Health First' - Governor Jindal's proposal to overhaul Louisiana's Medicaid program

Last month, Louisiana Gov. Jindal unveiled his plan - Louisiana Health First - for overhauling the state’s entire Medicaid program over the next 7 years. I had the pleasure of working with Gov. Jindal when we were both working at HHS and the two words that are most often used to describe him are ‘bright’ and ‘energetic.’ Politics aside (this is a policy blog after all), he is one of the prominent faces of the Republican Party and any effort to reform Medicaid by focusing on systems rather than individuals would make WE Deming proud.

This focus on systems is sound (see Alain Enthoven’s Health Affairs article) but the devil is in the details, so to speak. The real question is whether the state has the management capability and political will to keep these organizations on task so that they do not slide toward the dark side of managed care.

If there is one state that can use some fundamental changes in its health systems, it is Louisiana, which is one of the highest cost and least healthy states in the country (see recently released America’s Health Rankings and the infamous graph from the Baikler and Chandra paper of 2004).

The state's white paper is short of details but it is eerily similar to and builds upon lessons learned from Florida’s Medicaid Reform (not coincidentally, Alan Levine, Louisiana’s Secretary of Health and Hospitals was also Florida’s Secretary of Agency for Health Care Administration during its reform development). The basic idea seems to be that the state will move most existing TANF Medicaid children (Temporary Assistance for Needy Families) into managed care organizations and will also expand coverage for parents and caregivers of needy children from 12 to 50 percent of the Federal Poverty Level (FPL).

The managed care organizations are referred to as Coordinated Care Networks (CCNs), which consist of a patient-centered medical home (as defined by the National Committee for Quality Assurance) for each beneficiary coupled with an integrated network of providers.

These CCNs would be administered by either: a traditional Health Maintenance Organization (HMO), though the HMO would be required to have minority provider ownership; something akin to Florida’s Provider Service Networks (PSNs), which have to manage a comprehensive network of providers; or something like Florida's Minority Physician Networks (MPNs) or North Carolina's Community Care model, which operate like an enhanced primary care case management program. [Note: Community Care was a 2007 winner of a prestigious Ash Award for Innovations in American Government]

Also, like Florida’s Medicaid Reform, the CCNs could either receive a risk-adjusted rate per patient (to deter plans from ‘cherry picking’) or it appears they could receive an up-front administrative payment with a regular accounting of shared-savings from improvements in efficiency. These payment models replace the perverse incentives of fee-for-service care with another set of insidious incentives. For example, CCNs have an incentive to focus their resources where they get the greatest value – hospitalizations – at the neglect of valued public health measures and primary care. Building on lessons from Florida’s reform efforts, Gov. Jindal attempts to address this new set of potential problems with a requirement for medical homes and payment for performance.

Two other interesting aspects of the plan are that the state will encourage CCNs to reward beneficiaries for healthy behaviors, which the State of Florida has had difficulty administering itself but some Medicaid health plans successfully implemented. Also, it proposes to allow CCNs to develop ‘benchmark or benchmark-equivalent benefit packages,’ which allow prepaid CCNs to vary the amount, duration, and scope of traditional Medicaid services and thus, tailor benefit plans to meet beneficiary needs.

One thing that many states have learned (after many bruises) with managed care models is that choice and flexibility are good but that more choice is not always better – especially in Medicaid. A proliferation of managed care organizations leads to increased provider burden which counteracts one of the good aspects of Medicaid managed care - payment flexibility. A state needs enough managed care organizations to provide for choice, coverage, and competition but not enough that beneficiaries have a difficult time making good choices (see recent Kaiser update on Florida’s reform efforts). It should also seek a balance among its plans so that no plan gains a disproportionate share of the market for any reason other than its ability to help the state meet its financial and public health objectives.

Let’s hope that Louisiana, which is in negotiations with the Federal government on their reform proposal, continues to build upon the lessons learned from other states and not only implements sensible reform but also manages it well so that it achieves the promise of better value for the people of Louisiana.