ALTCIActuarial Study — Final Results

September 14, 2005

Mercer Government Human Services Consulting 2

Actuarial Study Objectives

Determine key cost drivers

Identify financing options that promote the goals of ALTCI

Recommend a Medi-Cal rate structure that will best match payment to the risk of the enrolled population

Assess adequacy of Medicare reimbursement for ALTCI population

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Key Considerations

Individual health plan risk is driven by a number of factors, including

– Program design Who will be eligible (population subgroups)? What services will be covered? Integration with Medicare?

– Contracting approach Mandatory vs. optional enrollment Number of health plans competing

– Operational Issues Enrollment and screening/assessment process Case management and care coordination requirements Administrative responsibilities

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Assumptions

For our analysis, we assumed

– Mandatory enrollment (for completeness purposes only - i.e., so that the entire population would be subject to analysis, allowing creation of a reimbursement model that would work for a voluntary program)

– All adult SPD eligibles (21 and older)

– All services, except specialty mental health, dental, and DD waiver services

– ALTCI participating health plans would also have to participate in Medicare

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What’s New from the Previous Presentation?

Change in population definitions

– Medicare Part B only population included in Medi-Cal only population group

– Blended IHSS, MSSP, and Home Care together to create a rating category of Community At Risk

Chronic condition analysis for Medi-Cal community population

Medicare sufficiency analysis

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Methodology

Review historical Medi-Cal and Medicare CY1998 – 2000 FFS data

Adjust data to include only populations and services expected to be covered under ALTCI

Project data forward to CY2007 by category of service

Adjust data for significant program changes including Medicare Part D

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ALTCI Eligibles (81,700)

DD5%

At Risk15%

NH8%

Not At Risk72%

CY2000 Medi-Cal DataSan Diego County

Nursing Home Residents, DD, and At Risk account for 28 percent of the total ALTCI membership in San Diego, but 74 percent of the total San Diego Medi-Cal expenditures

ALTCI Medi-Cal Expenditures ($434M)

Not At Risk26%NH

46%

At Risk24%

DD4%

Not AtRisk

DD

At Risk

NH

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San Diego CountyCY2000 Dually Eligible vs. Medi-Cal Only* ABD Membership

Duals48%

Medi-Cal Only52%

Dually Eligibles

DD4%

At Risk18%

NH14%

Not At Risk64%

* Includes recipients with Part B only coverage.

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San Diego CountyCY2000 Dually Eligible vs. Medi-Cal Only* ABD Medi-Cal Expenditures

Duals45%

Medi-Cal Only55%

Dually EligiblesDD2%

At Risk24%

NH70%

Not At Risk4%

* Includes recipients with Part B only coverage.

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San Diego CountyCY2000 Elderly vs. Disabled Membership

Elderly36%

Disabled64%

Elderly

DD0%

At Risk16%

NH14%

Not At Risk70%

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San Diego CountyCY2000 Elderly vs. Disabled Medi-Cal Expenditures

Elderly37%

Disabled63%

Elderly

DD0%

At Risk20%

NH70%

Not At Risk10%

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Chronic Condition Analysis

Reviewed 23 chronic disease categories

Analyzed 3 years of data from CY1998 – CY2000 for 3 counties (Alameda, Contra Costa, and San Diego) to enhance credibility

Separate analysis for Community At Risk and Not At Risk

Reviewed cases with annual Medi-Cal costs in excess of $100,000

Findings show highest cost condition overall for Medi-Cal is ventilator dependents

Of the cases in excess of $100,000 annually, 20% were ventilator dependent

Recommendation is to consider a separate risk adjustor for ventilator dependents in the community

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San Diego CountyCY2000 Medi-Cal ALTCI PMPM Costs

Total $443

Total

NH $2,487

Community $261

Setting

NHC

$2,487

Frailty DD

$367

At Risk

$731

Not At Risk

$157

Medi-Cal Only*

$4,230

Dual

$2,099

Medicare Status

Medi-Cal Only*

$438

Dual

$238

Dual

$542

Medi-Cal Only*

$1,003

Dual

$26

Medi-Cal Only*

$253

Aged

$2,240

Disabled

$1,789

Aged

$3,188

Disabled

$4,589

Category of Aid

Aged

$513

Disabled

$564

Aged

$694

Disabled

$1,135

Aged

$23

Disabled

$28

Aged

$119

Disabled

$304

Aged

$215

Disabled

$238

Aged

$1,998

Disabled

$438

*Includes Part B only recipients.

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San Diego CountyDually Eligible vs. Medi-Cal Only CY2000 PMPM ALTCI Medi-Cal and Medicare Costs

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450

Other

Inpatient

Outpatient

Inst LTC

Comm LTC

Physician

Pharmacy

Medi-Cal Only Dual Medicare Dual Medi-Cal

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Medicare Sufficiency Analysis

Used base data (1999 and 2000) to calculate estimated Medicare reimbursement for 2000

Utilized 2005 Medicare Reimbursement Rules

Compared estimated Medicare reimbursement to actual Medicare FFS costs for 2000

Reviewed by population subgroup

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Medicare Sufficiency Findings

In 2000, Medicare reimbursement would have been sufficient for the ALTCI population in total (across all population subgroups)

Sufficiency of Medicare reimbursement is highly variable by population subgroup

See details on the next slide

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San Diego CountyCY2000 ALTCI Medicare Sufficiency

All ALTCI Dual Eligibles 2000 Costs $725 Rate $730 Sufficiency 0.67%

Total

*Includes only recipients with both Part A and B coverage.

NH

$1,366 $986-28%

SettingCommunity

$634$694 9%

NHC$1,366$986-28%

Frailty At Risk$1,115$914-18%

Not At Risk$513$64125%

DD$282$49576%

Dual*$1,366$986-28%

Medicare Status

Dual*$1,115$914-18%

Dual*$513$64125%

Dual*$282$49576%

Aged$1,304$1,082-17%

Disabled$1,463$834-43%

Category of Aid

Aged$1,100$980-11%

Disabled$1,128$857-24%

Aged$438$67955%

Disabled$580$6065%

Aged$1,120$780-30%

Disabled$280$49477%

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Medicare SufficiencyOther Points

Need to update the analysis

Because Medicare beneficiaries would not be forced to select an ALTCI Plan, the mix of the population that chooses is important

Medicare still working on a frailty adjuster for non-PACE plans. This will not be implemented before 2007

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ResultsKey Medi-Cal Cost Drivers

Identified 10 key rating categories

Setting — Nursing Home vs. Community

Frailty — Nursing Home Certifiable/At Risk vs. Not At Risk and DD

Medicare Status — Dually Eligible vs. Medi-Cal Only

Category of Assistance — Aged vs. Disabled

Chronic High Risk Conditions — Ventilator Dependents

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Recommendations

Reimbursement needs to be sufficiently sophisticated to promote program goals

– Utilize multiple capitation risk groupings

– Include some risk adjustment mechanism

Incentives should be included to promote increased community based services

Savings achievable through more appropriate use of hospital, emergency room and nursing home services

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Recommendations (continued)

Administrative costs should be reflected in rates with sufficient consideration of start up costs

Increased care management should be supported and funded

Implement early reinsurance or risk sharing

Capitated model should allow for flexibility of both Medi-Cal and Medicare funding sources

Reimbursement mechanisms should continue to be refined as the program matures