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Medicaid Opportunities & Challenges Task Force
May 14, 2013
Jeff Bechtel, Senior Consultant
Cost Sharing in Medicaid and Health Insurance Exchange
• Medicaid Cost-Sharing Rules
• Current South Dakota Cost Sharing Amounts
• Cost Sharing in Medicaid vs. Exchange
• Proposed New Federal Rules
• Opportunities for Waivers of Federal Limitations
• Discussion Items
Presentation Overview
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• States have the option to establish cost sharing requirements within federal guidelines for Medicaid enrollees. May include copayments, coinsurance, or deductibles.
• Copayments or coinsurance are charges that beneficiaries pay when they receive a service.
• Premiums are periodic payments beneficiaries must pay to be enrolled in health coverage.
• The ACA did not change cost-sharing rules, so existing federal cost-sharing policies apply to the newly-covered populations (adults up to 138% FPL).
Medicaid Cost-Sharing Rules
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• Federal rules do not allow cost-sharing for several groups including pregnant women who earn less than 150% FPL, terminally ill individuals receiving hospice care, low-income children, and foster children.
• Additionally, cost-sharing cannot be imposed for emergency services, family planning services, preventive care for children, or pregnancy-related care.
• American Indians receiving services through IHS or upon IHS referral are exempt from co-payments.
Medicaid Cost-Sharing Rules (cont’d)
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Current Medicaid Cost-Sharing Rules Overview
Medicaid Cost Sharing for Adults
Income under 100% FPL Income 100-138% FPL
Preventive Services Nominal* Up to 10% of the cost of service or a nominal charge
Outpatient Services Nominal Up to 10% of the cost of the service or a nominal charge.
Institutional Services Per admission, 50% of the cost the agency pays for the first day of care.
Per admission, 50% of the cost the agency pays for the first day of care or 10% of the total cost the agency pays for the stay.
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Current Medicaid Cost-Sharing Rules Overview
Medicaid Cost Sharing for AdultsIncome under 100% FPL Income 100-138% FPL
Emergency Services Not allowed Not allowedNon-Emergency use of ER Nominal Up to twice the nominal
amount.
Prescription Drugs Nominal NominalPremiums Not allowed Not Allowed
Cost Sharing is Enforceable
No Yes
Aggregate Cap 5% of family income (Cap on Total Premium and Cost Sharing Charges for all family members)
*Maximum Nominal Out-of-Pocket Costs are $2.65 deductible, $3.90 copayment, or 5% coinsurance. Maximum based on what state pays for that service.
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• Within federal parameters, South Dakota imposes cost sharing requirements on its consumers to promote the efficient use of services.
• However, as a result of South Dakota’s limited eligibility policy, and the broad exemptions included in federal law, the state has a very low number of Medicaid enrollees to whom copayments are applicable.
• Examples of South Dakota Medicaid copayment amounts include the following:• Non-generic prescription drugs: $3.30• Generic prescription drugs: $1.00• Durable Medical Equipment: 5%• Non-emergency dental services: $3 co-pay, $1,000 annual limit for adults• Inpatient Hospital: $50 per admission• Non-emergency outpatient hospital services, which includes emergency room use for non-
emergent care: 5% of billed charges, maximum of $50
• Copayments are collected by the provider and the payment for the service is reduced by the copayment amount.
Current South Dakota Medicaid Cost-Sharing
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• A total of 45 states have copayment requirements, including five states (DE, LA, MD, NH and WV) that impose copayments only on drugs.
• Only six states (CT, HI, NV, NJ, RI and TX) report no copayment requirements at all. • A number of states proposed or implemented increases or new copayment
requirements in recent years.
• Source: Policy Brief, Premiums and Cost-Sharing in Medicaid, Kaiser Commission on Medicaid and the Uninsured (February 2013); http://kff.org/medicaid/issue-brief/premiums-and-cost-sharing-in-medicaid/
Cost-Sharing in Other State Medicaid Programs
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• In January, HHS released a proposed rule that includes proposed changes to streamline Medicaid premium and cost-sharing regulations and give states additional flexibility.
• Proposed changes include increases in the nominal cost-sharing amounts: • For individuals with incomes below 100% of FPL, the rule would increase nominal cost-
sharing for outpatient services to a flat rate of $4.00. • For non-exempt individuals with incomes between 100% and 150% of FPL receiving
non-exempt services, CMS would allow states to impose cost-sharing at a rate of up to 10% of the amount the state pays for the service.
New, Proposed Federal Cost-Sharing Flexibility
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• Proposed changes also include increases in cost-sharing for nonemergency use of the emergency department. For individuals with incomes between 100% and 150% of the FPL, states could establish cost-sharing of up to $8.00 for non-emergency ED services.
• Proposed rule also seeks comments on alternatives to current policy for inpatient cost-sharing because inpatient services are high cost for low-income populations, and services can generally not be avoided or prevented.
New, Proposed Federal Cost-Sharing Flexibility (cont’d)
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• States are only allowed to request waivers of certain Medicaid requirements.
• Waivers are not intended to change fundamental aspects of the Medicaid program.
• California was recently denied a request to impose enforceable, significant copayments on its Medicaid patients beyond federal limits because the Centers for Medicare and Medicaid Services was “unable to identify the legal and policy support” for the request. Bloomberg, Obama Blocks California from Charging for Care in Medicaid (February 6, 2012); http://www.bloomberg.com/news/2012-02-06/california-can-t-charge-medicaid-patients-for-hospital-care-u-s-says.html
• Due to the significant research on the drawbacks of cost-sharing for Medicaid recipients, future waivers are doubtful.
1115 Waiver (In)Flexibility
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• A large body of research shows that premiums and cost sharing can act as barriers for low-income population in obtaining, maintaining and accessing health coverage and health care services.
• These barriers can result in increases in uninsured, unmet health care needs and adverse health outcomes.
• State savings from cost-sharing and premiums may accrue due to declines in coverage and utilization more so than from increases in revenues.
Effect of Cost-Sharing on Medicaid Population
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• These changes can strain the health care safety-net and effectively reduce reimbursement for providers serving the Medicaid Program. Co-pays are extremely hard to collect.
• Source: Issue Paper, Premiums and Cost-Sharing in Medicaid: A Review of Research Findings, Kaiser Commission on Medicaid and the Uninsured (February 2013); http://kaiserfamilyfoundation.files.wordpress.com/2013/02/8417.pdf
Effect of Cost-Sharing on Medicaid Population (cont’d)
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• Exchange Cost-Sharing Re-cap• Premium Credits• Cost-Sharing Assistance • Payments to Increase Actuarial Value• Summary Chart
• Observations
Cost Sharing for Medicaid Consumers vs. Exchange Consumers
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• The amount will vary from person to person: it depends primarily on household income and the premium for the plan in which the person is enrolled.
• The amount of premium is capped as a percent of income. Examples:• 100-133% FPL – 2% of income • 133.1% FPL – 3% of income • 150% FPL - 4% of income• 250% FPL – 8.05% of income
Exchange Cost-Sharing – Premium Credits
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• People who qualify for premium assistance tax credits will also be eligible for cost sharing assistance if they enroll in a silver plan. Federal rules set an out-of-pocket maximum contribution based on IRS limits for high-deductible plans.
• Out-of-pocket maximums are: one-third of IRS limit for families between 100-250% FPL, one-half of IRS limit for families between 250-350% FPL, and two-thirds of limit for families between 350-400% FPL.
• Examples if out-of-pocket caps were available in 2011:• 100 to 133% - $3,967 / year (family of 3)• 133.1% - $3,967 / year • 200% - $3,967 / year• 300% - $5,950 / year• 400% - $7,933 / year
Exchange Cost-Sharing – Cost Sharing Assistance
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• Federal payments will be made to health insurers to increase the actuarial value of the plan for people with incomes under 250% of poverty.
• For example, for people with incomes between 100 and 150% FPL, the actuarial value of the plan will be increased to 94%.
• This means that in addition to keeping within the lower out of pocket maximums, insurers must make other changes to increase the actuarial value of the coverage.
• Most likely this will mean reducing plan deductibles, coinsurance or copayments in order to meet the higher actuarial value requirements.
Exchange Cost-Sharing – Payments to Increase Actuarial Value
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Exchange Cost-Sharing Summary
Income Level Premium as a % of Income
Reduction in Out of Pocket Liability
Actuarial Value
Up to 133% FPL 2% 2/3 of maximum 94%133-150% FPL 3 - 4% 2/3 of maximum 94%150-200% FPL 4 - 6.3% 2/3 of maximum 87%
200-250% FPL 6.3 – 8.05% 1/2 of maximum 73%250-300% FPL 8.05 – 9.5% 1/2 of maximum 70%300-400% FPL 9.5% 1/3 of maximum 70%
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• Family of 3 • Income Below 138% of FPL ($26,344)• Premium for Second Lowest Cost Silver Plan : $9,000 (estimate)• Family Pays: $526 Premium (2% of Income)• Government Pays: $8,474 (premium less family maximum contribution)• Maximum Out-of-Pocket Cap: $3,967 (1/3 of limit for IRS high-deductible plans) • Premium Plus Out-of-Pocket Cap: $4,493 ($526 Premium plus $3,967 out-of-
pocket cap)• Required Actuarial Value of Plan: 94%
Exchange Cost–Sharing Example
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• Premium Tax Credits and Cost Sharing subsides are intended make health insurance coverage more affordable for low-income people through the Exchanges
• Premiums and out-of-pocket costs may be significant, however, for lower-income individuals seeking coverage through an Exchange.
• Individuals from 100 – 138% FPL in States that choose to Expand Medicaid will be subject to much lower out-of-pocket costs (due to restrictive Medicaid cost-sharing requirements) and will not pay premiums.
Observations – Medicaid vs. Exchange Cost Sharing
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Discussion
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Questions?
Sellers Dorseysellersdorsey.com
Jeff BechtelSenior ConsultantSellers [email protected]
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