Session 112 PD, Medicaid - Hot Topics. Moderator: Clay Farris

Transcription

1 Session 112 PD, Medicaid - Hot Topics Moderator: Clay Farris Presenters: Davis Burge, FSA, MAAA Sabrina H. Gibson, FSA, MAAA Christopher John Truffer, FSA, MAAA SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 2017 SOA Health Meeting Davis Burge, FSA, MAAA Sabrina Gibson, FSA, MAAA Christopher J. Truffer, FSA, MAAA Clay Farris 112- Medicaid Hot Topics Wednesday, 6/14/2017, 8:30 am - 10:00 am

3 Planned Topics 1. Margins 2. Potential changes to Medicaid Funding 3. Increased state flexibility in Medicaid- What could that mean? 4. Impact of recent changes on the Mega Rule 5. Maximizing LTSS expense savings in state programs 6. Integrating community services into Medicaid 7. Standardizing Medicaid administration costs across states 8. PDL management 9. IMD exclusion 2

4 Hot Topic 1: Margins 3

5 Margin Study 4

6 Society of Actuaries Health Meeting June 2017

7 Study Goals Examine the considerations for estimating adequate margins needed for a Medicaid MCO providing comprehensive benefits Produce objective measures and benchmarks that can be used when estimating required margin Facilitate understanding, quantifying and managing the risks associated with the Medicaid Managed Care rates Provide an analysis of the components of margin for an MCO and how they vary according to the characteristics of the MCO accepting the rates Summarize in a report that would be a comprehensive guide to the factors that contribute to needed margin and include discussion of the nature and extent of any adjustments to these factors

8 Study Method Researched margin formulas in the insurance industry Quantitative Phase: Reviewed state rate developments to determine the margin percentages included in the rates currently Analyzed financial statements of MCOs Qualitative Phase: Interviewed MCOs about margin needs and uses

9 Components of Margin in Study Cost of risk in the form of risk-based capital funding Cost of investment in existing infrastructure Cost of investment in new enterprises Return to owners/shareholders Contribution to community benefit

10 Observations in Study There was a marked disconnect between MCO margin goals and margin included in the current MCO capitation rate developments MCOs expressed the need for margins of 2% after tax, so approximately 3% pre-tax. 26 organizations representing 90 MCOs in 35 states were interviewed Current capitation rates contain on average approximately 1.2% pre-tax margin when viewed across all states

11 Margin in MCO Capitation Rates Straight Average = 1.2% Source: 2017 SOA Study - Medicaid Managed Care Organizations: Considerations in Calculating Margin in Rate Setting

12 Historic MCO Profit Historic MCO profit (using straight averages with each MCO weighted equally): 2013 = 0.3% 2014 = 0.4% 2015 = 1.7% Financial statements were used for this information, and there was some manipulation needed to pull out the margins, so refer to the report for the method

13 Comparison to Other Industries MCO 2013=0.3% 2014 = 0.4% MCO 2015=1.7%

14 Historic MCO Profit by Size: 2015

15 Historic MCO Profit by Type: 2014

16 NonProfit, Non-Provider Owned

17 Other Annual rebasing of rates MCOs concerned about impact MLR Guarantees impact the margins retained over an aggregate period lowering the margin Value-based payment model requirements shifting risk

18 Study Results Attempted to find quantitative method to develop margin, but no pre-determined formula for developing margin exists MCOs set their margins based on their internal needs and expectations, in alignment with their business strategies Given this lack of a defined formula, actuaries and others must use their own knowledge and judgement to develop margin in Medicaid capitation rates A list of actuarial considerations for developing margin assumptions is provided in the study

19 Example of Actuarial Considerations Component of Considerations for Margin Assumptions in Ratesetting Margin Insurance risk: Unanticipated deviation in health care delivery costs What level of margin is needed to cover the expected risk within the program? What is the probability that actual costs will be above or below projected costs? Do the assumptions used in rate development include any implicit margin? Will new populations, services, benefits or regulatory requirements be added to, or removed from, the current program that will increase or decrease uncertainty? Is there more uncertainty in future trends than in past years, due to new treatments, emerging conditions, or blockbuster drugs? Are risk adjustment or other risk mitigation mechanisms (e.g., reinsurance, risk sharing) effectively employed to reduce uncertainty and risk?

20 Potential Study Improvements Most actuaries may not have the knowledge/experience to set margin assumptions Benchmarking against current margins in rates or using an assumption provided by the state may not meet actuarial standards A second part to the study should be considered by group with the technical expertise to provide more quantitative results

21 Recommended Resources SOA Study - Medicaid Managed Care Organizations: Considerations in Calculating Margin in Rate Setting

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23 Hot Topic 2: Potential Changes to Medicaid Funding AHCA version 2.x Considerations for developing block grant or per capita funding Impact of marketplace/exchange dynamics 22

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28 6.6% Trend

29 Medical CPI and Medicaid Cost Trend

30 Hot Topic 2: Potential Changes to Medicaid Funding AHCA version 2.x Considerations for developing block grant or per capita funding Impact of marketplace/exchange dynamics 29

31 Hot Topic 3: Increased State Flexibility in Medicaid- What Could That Mean? New programmatic options Work requirements, premiums, copays Pace of change 30

32 Hot Topic 4: Impact of Changes on the Mega Rule What happens to the Mega Rule if ACA is repealed or significantly modified? Highlights from Mega Rule implementation schedule 31

33 Selected Mega Rule Provisions by Effective Date Already in effect July 1, 2017 July 1, 2018 May 2019 July 1, 2019 MH parity LTSS contract reqs Actuarial soundness IMD exclusion New OP rx rules Addl rate dev reqs Pass through payments MLR standards New state oversight reqs Cert by rate cell +/ 1.5% rate adj w/o recert Network adeq standards Quality ratings sytem (a la STARS) CMS rate review for 85% MLR floor Full schedule

34 Hot Topic 5: Maximizing LTSS Expense Savings in State Programs Program structure / design flaws State examples CMS perspectives during review of programs 33

35 Hot Topic 6: Integrating Community Services Into Medicaid How to integrate community resources to impact the social determinants of health Current data solutions Funding considerations 34

36 Hot Topic 7: Standardizing Medicaid Administration Costs Across States to Improve Efficiencies Encounter formats Quality measures Operational measures Poll the audience 35

37 Hot Topic 8: PDL Management Comparing costs of State run vs.. MCO run MDRP rebates as funding stream 36

38 Hot Topic 9: How Are States Handling the IMD Exclusion? Poll the audience 37

39 Panel Bios 38

40 Davis Burge, FSA, MAAA Actuary with Milliman s Seattle Health Practice Worked with Medicaid State Agencies in Hawaii, Idaho, Nevada, and Washington. He has developed analyses, risk-adjusted capitation rates, cost-effectiveness documentation, and reports for Medicaid-managed care rate-settings. He has worked on a variety of projects, including medical, long-term care, behavioral health, healthcare reform, and other state-specific analyses. He has developed rate structures for integrated (medical, mental health, chemical dependency, and long-term care) healthcare models for Medicaid recipients that improve healthcare and reduce expenditures, including CMS documentation of rates and rate structures.

41 Sabrina Gibson, FSA, MAAA Vice President and Chief Medicaid Actuary for WellCare Health Plans. Health care actuary for more than 20 years. Medicaid actuary for 10 years mostly with a health plan but also as a consulting actuary. Experience with 26 Medicaid and CHIP programs in 16 states. Active member of the American Academy of Actuaries (AAA) Medicaid workgroup and on the committee that developed the Actuarial Standard of Practice on Medicaid Managed Care Rate Setting ASOP 49. Active with the Medicaid SOA committee as a presenter of current Medicaid topics at Society of Actuaries meetings and webinars. Chaired the SOA Project Oversight Committee for the recently released Medicaid Managed Care Margin study.

42 Christopher Truffer, FSA, MAAA Deputy group director with Centers for Medicare & Medicaid Services Leads work on Medicaid, CHIP, BHP Projections of expenditures and enrollment for budget and annual Medicaid report Review of Medicaid managed care rates Member of ASOP 49 Task Force, SOA Regulatory Research Advisory Council

43 Clay Farris Practice Lead, Client Mostly Medicaid Clay s Weekly Medicaid News Roundup Monthly Webinars CMS (CARE) State of Georgia (CAID) Focuses on Medicaid financing Technology / data General Medicaid policy clay@mostlymedicaid.com