Session 175 PD, Medicaid and the ACA. Moderator: Kristi M. Bohn, FSA, EA, MAAA

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Session 175 PD, Medicaid and the ACA


Kristi M. Bohn, FSA, EA, MAAA


Zachary Christian Aters, ASA, MAAA

Andrew Louis Gaffner, FSA, MAAA

Michelle L. Raleigh, ASA, FCA, MAAA


Unique Risk associated with

Medicaid Population and

Programs: Actuarial Perspective

Zachary Aters, ASA, MAAA

Discussion Outline

 Medicaid Populations M di id P

 Medicaid Programs  Unique Risks

 Various Delivery Systems  Case Study: Private Option



Medicaid Populations

 Temporary Assistance for Needy Families (TANF)

 Pregnant Women

 Parent Adults

 Children (Medicaid Children no CHIP)

 Children (Medicaid Children no CHIP)

 Foster Care

 Aged, Blind, and Disabled (ABD)

 Fragile/Aged population

 Medicare and Medicaid eligible

 Medicaid only eligible

 Nursing Home Certifiable


 Children Health Insurance Program (CHIP)

 Children from higher income families

 Expansion Population

 Adults without Dependent Children (AwDC)

Medicaid Programs

 Physical Health

 Mental Health/ Substance Abuse  Long Term Services and Support

 Designed for the Nursing Home Certifiable population

 Includes Home and Community Based Services (HCBS)

 Dual Demonstrations

 Integrates Medicare and Medicaid Services


 Integrated Programs


Unique Risks

 Each Medicaid Population has unique risk related to the various Medicaid programs

Medicaid programs

 Foster Care, ABD, and AwDC

 May have higher prevalence of mental health and substance abuse utilization  If these needs are not met, these populations could have high Physical Health

Utilization for some services

 Medicare and Medicaid Eligible Population

 Most of the Nursing home population is within this population

 V tl t St t M di id i i f N i H d W i


 Very costly to States, Medicaid is primary payer for Nursing Home and Waiver Services

 TANF populations

 Integrating Behavioral Health and Physical Health programs may help lower overall utilization

Medicaid Delivery Systems

 Fee for Service

 Tend to have higher utilization

 L i b t f id d

 Lower reimbursement for care provided  Access to Care issues

 Managed Care (Capitation)

 May have higher reimbursement for care provided  Control utilization

 Quality of Care and Access to Care is generally improved

 Coordinated Care Organizations


Coordinated Care Organizations

 Capitation arrangements (similar to Managed Care)  Could contain Shared Savings arrangement


Case Study: Private Option

 Medicaid members purchase coverage via exchange

 Commercial Carriers take on risk of managing the care for the Medicaid populations

 Some populations may be excluded from the Private Option

 Requires Commercial Carriers to have understanding of unique risk associated with Medicaid populations



 How will the Medicaid Expansion impact the already existing unique risk associated with Medicaid programs?

 What approaches will the Actuary take to mitigate some of these risks?

 What unique risk will the Expansion populations have?  What risk will the State’s be exposed to with regard to the

Expansion populations?


Medicaid Rate Setting and ACA

Considerations of ACA in State Rate Development

Presented by

Andrew L. Gaffner, FSA, MAAA Actuary

October 23, 2013


Primary care physician increase

Health Insurer Fee

Expansion population

“Woodwork” effect

Dual Demonstration



Primary Care Physician Payment Increase

Effective January 1, 2013

2-Year program

PCPs paid an “enhanced” Medicare rate

– Limited to certain E&M codes and Vaccine Administrative Codes – Payment = 2009 CF * 2013 RVU

Models for paying capitated plans

– Model 1: Full risk prospective capitation

– Model 2: Prospective capitation with risk-sharing that incorporates

3 October 23, 2013

Model 2: Prospective capitation with risk sharing that incorporates retrospective reconciliation

– Model 3: Non-risk reconciled payments for enhanced rates

Primary Care Physician Payment Increase

 Federal match

– 100% match from 2009 fee schedule to enhanced Medicare rate


Health Insurer Fee

 Annual excise tax beginning in 2014 based on market share

 Medicaid plans included in tax

 Not tax deductible Some exceptions apply

 Not tax deductible – Some exceptions apply

 Based on previous year revenue

 Estimated $8 billion in 2014; rising to $14.3 billion in 2018

 Rates to include tax in payment – Some options are:

– Pay fee as pass-through

– Incorporate estimate of fee in capitation rate and true-up

5 October 23, 2013

– Incorporate estimate of fee in capitation rate with no true-up

 Likely a retroactive adjustment to rates in 2014

 Potential for double taxation

Health Insurer Fee

Federal government taxing state government

Assuming Federal Medical Assistance Percentage (FMAP) of 64%, transfer is $0.55 for every $1.00 of Health Insurer Fee


Expansion Population

New Eligibility: Ages 19 – 65 From 100% – 138% FPL

Fully funded by federal government for three years; phase in to 90% by 2020

Modified Adjusted Gross Income (MAGI) mandated

Optional for states (Supreme Court decision)

Rate development CMS concerns

– Current population < 100% FPL Encounter data (if available)

7 October 23, 2013

– Encounter data (if available) – Risk Mitigation

“Woodwork” Effect

Additional populations due to mandate to buy insurance

Government advertising options to obtain insurance

Possible strains on state government


“Woodwork” Effect

9 October 23, 2013

Source: New England Journal of Medicine 2011; 365: 100-102

Dual Demonstration

Three year program beginning in late 2013 or 2014

New program to fully integrate coverage for members eligible for both Medicare and Medicaid

Health plans will receive Medicaid and Medicare payment

Rate calculation

– Projected costs in absence of demonstration

– Assumed savings for coordination of benefits increasing by year – Financial incentives to shift members out of nursing facilities into

10October 23, 2013

Financial incentives to shift members out of nursing facilities into Home & Community Based Services (HCBS)



California Medicaid


Michelle Raleigh

Michelle Raleigh CFO ASA MAAA


Michelle Raleigh,

Michelle Raleigh, CFO, ASA, MAAA


Gold Coast Health Plan

Gold Coast Health Plan


Oxnard, CA




•• Background


•• Eligibility


•• Benefits


•• Population Costs

Population Costs

•• Population Costs

Population Costs

•• Managed Care

Managed Care

•• ACA Expansions

ACA Expansions




• California Medicaid = Medi-Cal

• Nation’s largest Medicaid program

Approximately 11.4 million members or 17% of U.S.

Medicaid enrollment

Estimated spending of $55 billion or 13% of U.S.

Medicaid spending


Y k i

t l

t t


t l 5 6


New York is next largest at approximately 5.6 million

members and 8% of U.S. Medicaid enrollment

(where estimated spending is similar to CA)

Source: Kaiser State Health Facts, FY2010 (10/1/09-9/30/10) for enrollment and FY2011 for spending






Population Costs

Population Costs






$8,000 $12,000 $16,000



Per Enrol

lee Per Y



Source: Kaiser State Facts, FY2010

$1,136 $1,585 $3,025



Aged Disabled Adult Children



Population Costs

Population Costs

Managed Care

Managed Care

Established networks of organized systems of care, which emphasize primary and preventive care.

Managed care plans are a cost-effective use of health care resources that improve health care access and assure quality of care

In CA, approximately 4.5 million Medi-Cal beneficiaries in 30 counties receive their health care through three models of managed care:


oCounty Organized Health Systems (COHS), and

oGeographic Managed Care (GMC)


Managed Care

Managed Care

Managed Care

Managed Care

• Capitation Rate Development Process

Data SourcesFee-for-serviceEncounterFinancialIndustry AdjustmentsPolicy/ProgramData Completeness TrendUtilization

Unit Cost

Capitation Rates

Add Non-Medical Load (NML) including administrative expenses, profit, risk and contingencies

• Actuarial Resources

 CMS Checklist (7/2003)

 SOA Practice Note (8/2005)


ACA Expansions

ACA Expansions -- Populations



(prior LIHP)

ACA Expansions

ACA Expansions –

– Populations, Cont.

Populations, Cont.

Medi Cal Expansion Population

1. MEDI-CAL (prior LIHP)

Historical county information (if deemed credible), supplement with Medi-Cal (e.g., “Adult-like”) plus adjustments Medi-Cal Expansion Population

Data Sources for Capitation Rate Development

Blend together to arrive at

2. MEDI-CAL (prior TBD)

Medi-Cal (e.g., “Disabled like”) plus adjustments

capitation rate


ACA Expansions

ACA Expansions –

– Populations, Cont.

Populations, Cont.

Side Effect

Side Effect

Side Effect

Side Effect

1. MEDI‐CAL  (prior LIHP)

• LIHP is a current County‐run program – when population moves 

to Medi‐Cal on 1/1/14, there will be a loss of funds for the 

County (e.g., 10k people x $400 PMPM = $48M)

• State approved Assembly Bill #85 in last budget session which 

outlined a process for the realignment of county‐state health 

funds whereby health plans will provide County entities with: 1. Membership: 75% default assignment of non‐LIHP 

members not selecting a PCP

2. Additional Funding for total Medi‐Cal expansion:

• 100% cost reimbursement 

• Difference between bottom and 75thpercentile of rate 


2. MEDI-CAL (prior TBD)

ACA Expansions

ACA Expansions -- Benefits


Mental Health – expansion of benefit due to Affordable Care Act and Essential Health Benefits

Current benefit reflected in managed care contracts included only basic primary care type services

Expansion expected to cover outpatient, therapy, etc.

Actuaries developing utilization and cost assumptions to update capitation rates paid to health plans

to update capitation rates paid to health plans • Exact data is difficult to obtain

• Assumptions are difficult to estimate (e.g., utilization)