Deficit Reduction Act Impacts - Mapping a Diverse and ...DRA Benchmark Benefit Impact Overview LTC Providers Constituents States Negative Postive As benefit packages and provider networks

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Deficit Reduction Act Impacts -Mapping a Diverse and Shifting Landscape

National Conference of State Legislatures

June 9, 2006

Mike Cheek

© Avalere Health LLCPage 2

Presentation Challenge from NCSL

State Legislators face a dizzying array of issues related to long term care and long term care populations – people with disabilities of all ages and seniors.

» These policy challenges compete with other pressing issues such as budgeting, education, terrorism, and pandemic concerns.

Provide a cogent overview of the Deficit Reduction Act of 2006 (DRA) implications for states, Legislators’ constituents, and the long term

care provider marketplace.

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0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2005 2010 2020 2030 2040 2050Years

Ages 65 - <Ages 85 - <

Incidence of disability and higher levels of acuity increase with age; only old-old will likely need NH care

Most significant population growth will be in lower age brackets who will have less intense service needs

Regarding the 85 and older group, while growing rapidly from 2020 – 2050, it is unclear whether this will lead to a significant increase in the need for traditional nursing home services

Bridge Period (2005 – 2015)

Demand Spike (2016 – 2050)

Possible NH Users

Demography and Demand Are Not So Clear Cut

Source: Avalere analysis of U.S. Census Bureau data.

% o

f ove

r age

65

popu

latio

n


Proportion of the Population with a Disability is Increasing

Reflects longevity, increased disease incidence, enrollment, other factors

Similar trends are evident in the Social Security Disability Insurance (SSDI) program.

Population Growth of Diabled Individuals vs. Total Population

0

1

2

3

4

5

6

7

8

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Year

SS

I Enr

ollm

ent

(in m

illio

ns)

0

50

100

150

200

250

300

350

US

Pop

ulat

ion

(in m

illio

ns)US Population

SSI Enrollment

Source: Avalere analsysis of Social Security Administration data.

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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


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 Small, but Attracts Focus on Medicare 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.

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Medicaid and Long Term Care Reform

Deficit Reduction Act

»DRA really contains three – not two – state plan options for expanding Home and Community Based Services (HCBS)

– Home and Community-Based Services and the fate of Section 1915(c) waivers

– Self-Determined Personal Assistance Services or Cash and Counseling State Plan Option

– Benchmark Benefit Plan Options

»Assets Transfer Provisions

»LTC Partnerships


DRA HCBS State Plan Option Impact Overview

LTC Providers

Constituents

States

NegativePostive

Persons with SMI could benefit most.

None Minimal Moderate Significant

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Key State HCBS SPO Considerations

Considerations include

» What are the implications of changing nursing home or intermediate care facility eligibility for persons with mental retardation (ICF/MR)?

» Do we have adequate HCBS provider capacity to significantly expand HCBS while reducing facility-based services?

» How will we control “woodwork” and total long term care budget growth?

» What are the implications for our Section 1915(c) HCBS waivers?

» Bottom-line: What does this option really offer us?


DRA Cash and Counseling Impact Overview

LTC Providers

Constituents

States

NegativePostive

Administrative burden challenges

Could create a tougher competitive environment


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Key State Cash and Counseling Considerations


» Does my state have a starting point for this approach?

– Robert Wood Johnson Cash and Counseling grant

– Individualized budgeting model in an existing waiver

» What other resources could be leveraged to explore this option?

– Money Follows the Person Grants

– Real Choice Systems Change Grants

» What are the key barriers?

– Nurse Practice Act


Benchmark Plans are Possible Vehicles for Benefit and Service Integration

State Medicaid Directors’ Letter 06-008 on March 31, 2006

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Duals could receive coverage through integrated MCOs

Medicaid FFS or MCO

Medicare FFSRetiree Health BenefitsMedicare+ChoiceMedigap

Beneficiary Cost Sharing

Medicaid Capitation Payment for all Medicaid Services

Medicare Capitation Payment for all Medicare services (Parts A, B, C, and D)

Medicare Plus Services Tailored to Target Population

Source: Avalere Health LLC

Current Delivery System

Integrated Special Needs Plan Delivery System

Part D Plan MA-PD or PDP


DRA Benchmark Benefit Impact Overview

LTC Providers

Constituents

States

NegativePostive

As benefit packages and provider networks are refined, consumer outcomes could improve.

State decisions about Medicaid managed care will drive impact on LTC providers


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Key State Benchmark Benefit SPO Considerations


» How could the state plan option approach differ from the 1115 option?

» How could we use the Benchmark Benefit Option to build a new Medicaid long term care structure?

– Vermont

– Kentucky

» Do we have managed care plans that know long term care populations and long term care services?


Assets policy changes have negative implications for providers

Under the DRA and in this scenario, potential period of Medicaid ineligibility doubles

LTC provider options

» Pursue Hardship Waiver under DRA

» Pursing private payment

» Beginning discharge under Nursing Home Reform Act protections

» Taking loss

2008

Nursing Home Admission – DRA Penalty Period

Begins

1/1/2010

Penalty Period Ends

Pre-DRA Penalty Period start would have been in 2006 and finished in 2008 when this person entered a nursing home

2006 – After DRA Enactment

Assets Transfer of $140,000

Post-DRA Penalty Period starts in 2008 at nursing home admission or Medicaid application

2009

DRA Penalty Period Continues

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DRA Assets Transfer Impact Overview

LTC Providers

Constituents

States

NegativePostive

Administrative burden challenges

Penalty periods have significant implications



Key State Assets Transfer Considerations


» Majority of Assets Transfer changes are mandatory but

– Penalty periods

– Hardship waiver and Bed hold options

» Do we have adequate eligibility worker FTE and related infrastructure to absorb the additional work load?

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DRA LTC Partnership Overview

LTC Providers

Constituents

States

NegativePostive

Savings will be long range

Providers strongly support infusion of private dollars



Key State LTC Partnership Considerations


» What sorts of beneficiary protections does our state provide to private LTC insurance purchasers?

» What sorts of tax incentives could we offer to encourage purchase?

» Have we considered strategies to make private insurance – under this option -- affordable for low income populations who could easily and quickly spend down to Medicaid?

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Summary of Preliminary Assessment of State DRA Impacts

HCBS

C&C

Benchmark

AssetsTransfer

Partnerships

NegativePostive



For LTC Providers, Public Payment Systems will Remain the Cornerstone

Key drivers

» Private long term care insurance market is immature and limited

» Reverse mortgages are useful to only a very small group of people

» Retirement planning is minimal

» Employers are likely to continue retracting retirement benefits

» People do not understand long term care or their options

» Family care giving capacity is likely to decline as the population ages

State and federal policies and programming are addressing some of these items but actual impact on private financing and planning has been limited and will remain so in the next five years

Bottom line: Will public reimbursement attract sufficient numbers of providers?

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For Constituents, must be prepared for two possible strategies

Waiver

» Development and renewal is time consuming and visible but

» Is likely to be much broader

» May be time limited (i.e., renewal considerations)

Use of DRA state plan options

» More incremental and less visible

» New policy tools that are not completely fleshed out

Key concerns under both approaches include

» Benefit reductions

» Loss of consumer control

» Potential for Increased cost sharing


States Should Take Bold Steps

High level statewide strategic planning efforts to fundamentally restructure Medicaid and Long Term Care

HCBS as the dominant service model and easier to access benefit

Broad-based prevention and wellness programs to slow disability progression

Encouraging self-reliance and personal planning

Partnerships with employers to encourage access to retirement benefits and/or private long term care insurance

Family Caregiver Support

Managed Integrated Care

Business as usual in Medicaid and Long Term Care is not an optionHCBS expansion alone “Tweaks” to eligibility or benefits access

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Some Basic LTC Reform Framework Questions

How can Legislators strengthen the spectrum of long term care services and be responsive to consumer preferences?

What specific policies Legislators should develop and promote to make Medicaid more sustainable?

» How can long term care strategies be better integrated with other critical services -- including acute care services, disease management and preventative services (such as Older Americans Act programs) – to create an array of Medicaid “diversion” tools?

What strategies should Legislators employ to balance efforts aimed at slowing Medicaid spending while providing -- and encouraging use of -- affordable alternatives?


Questions and Discussion

Michael Cheek

Voice: 202-262-7094

Email: [email protected]

Documents

Deficit Reduction Act Impacts - Mapping a Diverse and ...DRA Benchmark Benefit Impact Overview LTC Providers Constituents States Negative Postive As benefit packages and provider networks