Incremental Expansions in Maryland: Medicaid and Small Group Coverage

Dr. Rex Cowdry, Executive DirectorMaryland Health Care Commission

Stacey Davis, Deputy DirectorOffice of Planning, Medicaid

Maryland Department of Health and Mental Hygiene

State of the State in Early 2007

• Over 700,000 uninsured individuals• Public coverage of children relatively generous• Public coverage for parents, non-parental adults

relatively poor• Robust, modified community rated small group market

with participation rates just under 50%• Healthy underwritten individual market with an innovative

high risk pool• Rates approx 130-135% of standard risk• Rates below standard risk for low income populations• Non-HIPAA: Choice of pre-ex or a temporary premium surcharge

• Democratic governor (defeated Republican incumbent); General Assembly strongly Democratic but fiscally conservative

Working Families and Small Business Health Coverage Act (SB 6)

• Two main goals– Expand health coverage to low income Marylanders– Expand coverage among small, low income businesses

• Planning team principles for success:– Right-size the planning group.

• Team included Governor’s policy/legislative staff, key Senate and House committee chairs, Secretary of Health and Mental Hygiene and policy staff, Medicaid director, Insurance Commissioner, Health Care Commission ED

– Get out of town. • The brilliance of the SCI Coverage Institute Chicago strategy

• Passed during a Special Legislative Session, November 2007• SCI grant funds used for Medicaid expansion messaging and

small group subsidy modeling

Public CoveragePrior to SB 6

200

100

300

133

40

Age 65 and Over+

19610

250

PW

185

MCHP Premium

MCHP

Medicaid

Pregnant Women

Medicare

300

116

Note: This chart is for illustrative purposes only. Each coverage group has specific eligibility and some asset requirements, which are not shown.

Poverty Level:1 person = $10,8302 persons =$14,5703 persons = $18,3104 persons = $22,050

As of 1/23/2009

Medicaid & Medicare

Primary Adult Care Program – Limited Services

Major gap in public

coverage for low-

income families

Parents or disabled age 19 to 64

Public CoverageAs of July 2008

200

100

300

133

40

Age 65 and Over+

19610

250

PW

185

MCHP Premium

MCHP

Medicaid

Pregnant Women

Medicare

300

116

Note: This chart is for illustrative purposes only. Each coverage group has specific eligibility and some asset requirements, which are not shown.

Poverty Level:1 person = $10,8302 persons =$14,5703 persons = $18,3104 persons = $22,050

As of 1/23/2009

Medicaid & Medicare

Parents to 116% FPL

Primary Care for Other Adults to 116% FPL

Parents or disabled age 19 to 64

Phase I: Parents to 116% FPL

Public Coverage(Delayed implementation)

200

100

300

133

40

Age 65 and Over+

19610

250

PW

185

MCHP Premium

MCHP

Medicaid

Pregnant Women

Medicare

300

116

Note: This chart is for illustrative purposes only. Each coverage group has specific eligibility and some asset requirements, which are not shown.

Poverty Level:1 person = $10,8302 persons =$14,5703 persons = $18,3104 persons = $22,050

As of 1/23/2009

Medicaid & Medicare

Parents to 116% FPL _____________

Incremental Increases to other adults below 116%

Parents or disabled age 19 to 64

Childless Adults

Phase II: ED/Specialty

Phase III: Outpatient

Phase IV: Inpatient

Enrollment Changes to Medicaid

Changes in the Application Process

• No face-to-face interview• Income and childcare expenses are declaratory• Eliminated asset test• Accepted applications at both the local health

departments in addition to the local departments of social services

• Declaratory information is verified through automated systems

• Accuracy of eligibility claims will be examined in upcoming Medicaid fraud and abuse assessment

Medicaid Expansion for ParentsParent Enrollment Trends (Incomes between 30% FPL and 116% of

FPL)

Results of the Expansion:

Over 44,000 Parents have enrolled in One Year

20,950

24,513

28,781

32,00634,626

37,840

40,727

44,548

9,624

12,852

17,113

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Enrollment Trends are significantly higher than prior years - Economy is a factor also

810,000

758,000764,000

733,000715,000

707,000699,000

600,000

650,000

700,000

750,000

800,000

850,000

June 2007 Dec 2007 June 2008 Dec 2008 June 2009 (est.)

Excluding Expansion Parents

Expansion Medicaid Implementation - Lessons

• The economic downturn and the state budget deficit can stall the expansion of coverage.

• Phases II-IV have been modified. The second phase is limited to adding substance abuse services.

• Enhanced coordination is needed between health and social services departments to provide a true “no wrong door” enrollment process.

• Necessary revisions to legacy administrative systems can be challenging and expensive.

• Growth has exceeded expectations.• Calculating enrollment growth directly tied to Medicaid

expansion is difficult because of simultaneous economic downturn.

The Starting Point: MD Small Business More Likely to Offer Insurance Than in Many Other States --- Still, less than ½ offer insurance

Small Business Premium Subsidy Program

SB6- Small Business Subsidy

Design choices:– Target the uninsured or assist all

small businesses?– Target small businesses that are

least likely to offer insurance and most in need of premium assistance?• Low wage, low number of employees

– Subsidize employers or individuals?

– Offer choices of plans / promote competition?

– Administer through the tax code or through health plans?

Design guiding principles:– Achieve credibility with small

employers– Provide enough subsidy to

change behavior– Avoid sudden loss of eligibility /

subsidy (no cliffs)– Use insurance brokers or sell

directly through an insurance exchange.

– Inform and enroll this new “coverage” group in the subsidy option

• Governor’s initiative• Anticipated funding $15-30 million annually

Health Insurance Partnership

• Resulting design: target small businesses who:– have not offered insurance in the past year– have 2-9 eligible employees (including the owner)– have a low average wage (full subsidy up to $25,000, phased out at $50,000)

• Spouses and children eligible for subsidies in families with AGI under $75,000

• Choice of carriers and plans (any willing carrier)

• Pay plans directly to reduce complexity and fraud; subsidy passed through to employer and employee in the form of lower premiums

• Maximum subsidy is the lesser of 50% of the premium or an amount set by the Commission

• Subsidy phases out at renewal as firms grow in size and income

Enrollment in the Health Insurance Partnership:Swimming Upstream (or Uptorrent)

SB6

passes

Partnership

subsidy begins

Actual =

867 covered lives

Partnership Enrollment

Projected = 13,000 covered lives

S&P 500

Lessons from the Health Insurance Partnership

• Confirmation: price elasticity of demand for health insurance is very low among smallest employers.

• Non-offering employers require substantial subsidies - and in the face of a recession and economic uncertainty, even a 50% reduction in premium and extensive outreach are not enough.

• Employers are wary that a program may not be there in a year or two – and mistrust reassurances.

• As with any modified community rated market, adverse selection is expected, especially in smallest groups.

• Effective targeting requires complex eligibility rules.

• Complex eligibility rules complicate employer/employee outreach and affect enrollment.

• However, the Partnership has been a useful trial run for a state Health Insurance Exchange with individual responsibility, broker participation, carrier and plan choice, and income/wage-based premium subsidies.

Related Initiatives

• Kids First Act (HB 1391)

– Uses tax forms to identify uninsured children eligible for Medicaid

– Two types of outreach provided to families• Year 1: Letters Year 2: Letters & Applications

– Goal - create a system which identifies uninsured, Medicaid-eligible children and efficiently enrolls them in health coverage

• Maryland Health Quality and Cost Council (Executive Order)

– Develops strategic health policy reforms to improve the health and health care of Maryland’s citizens. Current foci:

• formulating a strategy to address chronic illnesses, • developing a patient centered medical home demonstration, and • identifying and implementing best practices in areas like infection control.

• COBRA and mini-COBRA subsidies

– ARRA enabled subsidies of both state and federal COBRA coverage

Moving Forward Despite the Economy(with a lot of help from ARRA)

Limited Medicaid expansion

• ARRA FMAP increase helps with enrollment growth

• Phase II - add substance abuse services to the Primary Adult Care Program – Dependent-less adults to 116% FPL

• Proposed coverage expansion: SSI individuals up to 300% FPL

Consider expansion of the Partnership to firms with 2-20 employees

Health Information Technology

• Health information exchange – Extensive policy, privacy, and security discussions, five comprehensive reports on issues

– Competitive planning and design process

– Implementation funding $10 million through Maryland’s unique all-payer hospital rate setting system

– State will apply for ARRA state implementation grant

– Policy to be set by a separate Policy Board with strong representation of public interests

• EHR adoption – CMS project on EHR adoption in small physician practices

– ARRA Medicare/Medicaid incentives

– Private payers in Maryland must also provide parallel incentives for EHR adoption

– MSO/ASP model for small physician offices

– Purchase of EHR system for state hospitals

The Long View of Health Care Coverage

Contingency planning for the state’s role in national health care reform• Procurement delays in state’s crystal ball acquisition

• Examination of individual and small group market reform proposals underway

• Health insurance exchange already modeled with SCI support

• Funding the planned Medicaid expansion challenging, even with enhanced FMAP

Dealing with the costs of our health care system• Enhance Maryland’s all-payer hospital rate setting system

– Particularly important in an era of hospital consolidations, oligopoly power

– Move beyond “Never Events” to “Potentially Preventable Complications” adjustments

• Change consumer incentives– Value-based benefit designs

– Price transparency and outcomes reporting

• Change provider incentives – bundled payments instead of FFS– Patient-centered medical home – with “shared savings” or “efficiency payments”

– Prometheus reimbursement (primary and specialist care)

– Accountable care organizations