In a February 24th blog post, we described Medicaid block grants and per capita caps in terms of A x B = C to demonstrate how those payment policies work. ‘A’ is the amount a state is paid per beneficiary, ‘B’ is the number of beneficiaries in a given state, and ‘C’ is the total state payment from the federal government. We have since been asked by numerous providers to describe the nuts and bolts of how a per capita cap, the current Medicaid financing structure in the proposed American Health Care Act, would work. For the Medicaid provider, the nuts and bolts of how they are paid would change very little while the amount they are paid might change a lot. Continue Reading Provider Payments Under a Medicaid Per Capita Cap
Rodney Whitlock is a veteran health care policy professional with more than 20 years of experience working with the US Congress, where he served as health policy advisor and as Acting Health Policy Director for Finance Committee Chairman Chuck Grassley of Iowa and, earlier, on the staff of former US Representative Charlie Norwood of Georgia. Rodney has been deeply engaged in health care reform legislation. In 2010, he became the Acting Health Policy Director for Senator Grassley, and shepherded the Medicare and Medicaid Extenders Act of 2010 into law.
On March 6, House Republicans revealed The American Health Care Act. It is their plan to repeal and replace the Affordable Care Act. The bill changes the structure of Medicaid financing from the Federal Medical Assistance Percentages (FMAP) system, in which states and the federal government each pay a percentage of Medicaid funding, to a per capita system.
Under current law, states get paid by the federal government for their Medicaid programs based on the amount of services they provide. As we stated in a previous post, that has created an incentive for states to use supplemental payment streams to maximize per service revenue. Under a per capita cap, states will be paid based on population. They get paid for every person on their Medicaid rolls regardless of the amount of services the individuals use. Therefore, states will now have an incentive to maximize their rolls.
This creates what we will call “The Walking Dead problem.” Continue Reading The Walking Dead in Medicaid
Currently, state Medicaid programs have flexibility in developing payment policies, including utilizing supplemental payments and non-federal supplemental payment mechanisms. Supplemental payments pay providers above what they receive for an individual service through Medicaid provider rates. Supplemental payments include disproportionate share hospital (DSH) and upper payment limit (UPL) payments and are a critical funding source for many safety net providers. States can fund the non-federal share of these payments through intergovernmental transfers, provider taxes, and certified public expenditures.
However, there is limited transparency and data available on supplemental payments. As a result, states can use these funding structures to increase their total federal Medicaid match. The total percentage of federal funding for each state’s Medicaid program is often referred to as the effective Federal Medical Assistance Percentage (FMAP). However, due to data limitations on supplemental payments, we do not know what any state’s effective FMAP actually is.
The American Health Care Act is the House Republican bill to repeal and replace the Affordable Care Act. Its details became available March 6th. This bill changes the structure of Medicaid supplemental payments, with the exception of DSH payments. States’ reaction to the bill will tell us more about Medicaid supplemental payments than we’ve ever known, and whether the financing system in the proposed bill will provide equivalent federal funding. Continue Reading Medicaid Supplemental Payments under The American Health Care Act
Medicaid expansion in the Affordable Care Act (ACA) required coverage of individuals with incomes from 0% of the federal poverty level (FPL) through 133% of the FPL. The requirement to cover this group was overturned in NFIB v. Sebelius. As a result, it is now up to states to determine whether they will offer Medicaid coverage to these individuals. This new category of eligible Medicaid beneficiaries is often referred to as childless adults.
A number of Republicans, both governors and those in Congress, have taken to using the term “able-bodied” to refer to this group. If you are able-boded, the theory goes, the Medicaid program should reasonably expect you to work. As a result, some Medicaid expansion and Medicaid reform proposals have included work requirements as an eligibility criteria for Medicaid. We can expect this topic to continue to be raised as we get deeper into ACA reform. Continue Reading Who Are the Medicaid Able-Bodied?
In the coming weeks, it is highly likely that House Republicans will come forward with Medicaid financing reform proposals, such as block grant or a per capita cap proposal, or some combination of both. How should these proposals be evaluated? The best way to understand these proposals is through the equation A x B = C. A is spending per person, B is the number of people, and C is total spending. This equation helps explain the difference between per capita cap proposals and block grant proposals. Essentially, A x B is per capita caps, while C is block grants. Both per capita caps and blocks grants have been touted by Republicans as mechanisms to rein in costs of the Medicaid program. However, the devil is in the details. Republicans will need to not only address these details head on in their Medicaid financing reform proposals, but also understand how these details will affect beneficiaries, states, and providers.
Health care services cost money. Often times, a lot of money. This fundamental truism captures the challenge facing Congressional Republicans as they consider coverage of low income populations as part of their so-called Repeal and Replace effort.
The Medicaid program covers more people than Medicare but spends less on health care services (MACPAC 2016a, MedPAC and MACPAC 2017). Additionally, Medicaid pays substantially less for health care services than private sector insurance plans (MACPAC 2016a). Recent growth in Medicaid spending is primarily due to growth in enrollment (MACPAC 2016b). State Medicaid programs depend on the altruism of the medical profession to provide health care services at a lower rate, which can be below cost. This leads to Medicaid beneficiaries often having less access than those covered by private insurance because financial pressures limit the ability of some providers to take Medicaid beneficiaries.
Republicans in Congress are contemplating moving coverage for the “able bodied” from Medicaid to private insurance. There are many questions to be answered before such a policy change could be implemented, but the threshold question is simple: how could such a policy proposal not cost more than current law?
Medicaid beneficiaries have limited ability to pay for services. An individual with an income of $15,800 is currently Medicaid eligible. Assuming that the policy does not increase financial expectations from the beneficiary, it does not seem possible that Congressional Republicans could write a policy that moves coverage of Medicaid beneficiaries into subsidized private insurance coverage without spending more money. This leads us to the real question for Congressional Republicans: what would they have to do to ensure that this change would not result in spending more money?
Demography remains a constant pressure on payments to stakeholders. While stakeholders might look at movement away from Medicaid to private insurance coverage for any population as positive, there is a very high probability that any shift from Medicaid to private insurance coverage will come with strings to limit provider payments.
Back in early October, we were all transfixed by the announced Mylan settlement with the U.S. Department of Justice (DOJ) over Mylan’s alleged underpayments of Medicaid Drug Rebates for the EpiPen. Although Mylan indicated that its $465 million settlement resolved all potential liability to government programs over EpiPen’s classification for Medicaid Drug Rebate purposes, DOJ would not confirm the specifics of the settlement and it appeared that no actual settlement documents had even been drafted. We blogged our thoughts that the “settlement” was actually a handshake deal that had not been reduced to writing, had not been agreed to by the states, and had left the extent of any releases and future compliance to be negotiated. And we said Congressional scrutiny would not end due to the announced settlement.
Multiple state and government officials decried the announced settlement as inadequate. Senator Grassley went so far as to schedule a Senate hearing on the settlement, but was forced to postpone it when no one from DOJ or Mylan would agree to attend and testify.
Then the election intervened, and EpiPen rebates were yesterday’s news. However, Senator Grassley, for one, is not letting go. But at this point, his focus is more on government action, or inaction, over drug classifications. And depending on what his inquiry reveals, it may end up hurting, not helping, any government case against Mylan, and potentially other drug manufacturers, based on classification of drugs for purposes of Medicaid Drug Rebates.
The Centers for Medicare & Medicaid Services (CMS) has withdrawn its controversial rule implementing the Medicare Part B payment demonstration. The agency stated that after consideration of the comments, it will not move forward with the demo.
The demonstration was intended to test new reimbursement methods for Medicare Part B drugs and to promote value-based and cost-effective drug purchasing. Despite its intentions, major patient, pharmaceutical, and physician groups criticized the scope of the rule and the speed in which CMS was implementing it. Many worried it would restrict or limit access to certain drugs. It also drew sharp criticism from several members of Congress, including President-elect’s nominee for the Secretary of Health and Human Services, Rep. Tom Price. Continue Reading The Medicare Part B Demo May be Dead, but Drug Pricing Concerns Still Linger
Before we all turn our full attention to the nominations of Representative Tom Price as Secretary of Health and Human Services, and policy consultant Seema Verma to lead CMS, we need to remember that there are still approximately 45 days remaining in the current administration. A perusal of the Federal Register reveals that in the wake of the election, federal agencies are issuing proposed and final rules at a swift pace.
So it may be wise to consider what HHS rules have been published, and what rules could still be acted on by the Office of Management and Budget (OMB) and published before the inauguration of the new administration. And we also need to consider what action Congress may take on those rules. Continue Reading Forty-Five Days and Counting for Current HHS Leadership: Implications for Rulemaking
There has been much controversy over the Medicare Part B payment demonstration proposed by the Center for Medicare and Medicaid Innovation (CMMI) in March 2016. As we await the release of the final rule, the fate of this demonstration will be in the hands of a Republican-held Congress and President-Elect Trump. To move forward, not only will CMMI need to finalize the implementing regulations, but the Part B payment demonstration will also need to survive review under the Congressional Review Act (CRA). Continue Reading The Future of the Medicare Part B Payment Demo under a Republican-held Congress