Texas Health Care Reform

Health Care Access in Texas:Current and Future Solutions

Maureen Milligan, Deputy Chief of StaffNovember 7, 2008

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Health Care Reform

• Background: The Current Situation

• Approach to Reform

• Reform Goals

• Reform Status

• Anticipated Time Line

• Next Steps

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Background

• Texas is the second largest state (about 24 million) and has the fastest growing population (numerically) in the country – it is larger and more diverse that most other countries. 24 times Massachusetts; 174 times Rhode Island.

• In part, because of its size, Texas is a strong local control state, with indigent care provided through an uncoordinated patchwork of local and state publicly funded programs.

• Nearly 6 million people or 25% of the population are uninsured. Texas’ uninsured population is larger than the total population of most other states and many countries. Roughly half of Texas’ population is either enrolled in public programs or is uninsured.

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Background

• Compared to other states, Texas has lower wages, higher premiums, and fewer employers offering insurance making access to insurance particularly challenging. – About 47 % of Texas employers offer insurance compared to 54%

nationally or 60 % in Massachusetts. – Only 31% of small firms with less than 50 employees in Texas offer

health insurance compared to the national average (43%), California (44%), and Massachusetts (56%)

– The average annual premiums for an individual enrolled in an employer-sponsored health benefit plan in Texas doubled between 1996 and 2004, from just more than $2,000 to more than $4,000; and doubled between 2001 and 2005 – ten times faster than incomes and the third highest increase in the country.

– In 2005, the average single premium cost in Texas was $4,108 versus average U.S premium cost of $3,991. Texas has the fifth-highest individual and third-highest family premium costs due to the state’s costs of care for the uninsured.

– A disproportionate number of Texans are poor (43 % have incomes below 200 % FPL; 21 % below 100 % FPL).

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Texas Employer Premium Rates

Average Texas Employer-Based Insurance Premium and Employee Contribution for a Single Plan

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

1996 1997 1998 1999 2000 2001 2002 2003 2004

Average Total Employee Contribution Average Total Employer Contribution

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Background

• Not surprisingly, Texas has one of the highest rates of uncompensated care in the country. Hospital reported uncompensated care charges doubled from $5.5 billion to $11 billion between 2001 and 2006.

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Private insurance paid by businesses, employees and tax offsets

Care for the Uninsured, if not paid by the individual, is paid for by local taxes, property taxes, hospital district taxes, tax offsets; commercial subsidies; and intergovernmental transfers (IGT) and federal match (Disproportionate Share Hospital (DSH) and Upper Payment Limit (UPL)) (5.5 million uninsured Texans)

Public programs financed by federal taxes (Federal Funds Participation (FFP)), state taxes (sales and other), and Medicare enrollee premiums. Medicaid alone will cover an average of 2.8 million Texans per month in 2007.

Health Care Financing

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• Increased premium costs and erosion of employer-based insurance leads to shift to uninsured and public programs

• Increases number of uninsured and uncompensated care burden

• Increases public insurance (which includes Medicaid) caseload

• Drives the need for commercial subsidies, which increases private premium rates

Shifting Insurance Coverage

Uninsured

Publicly Insured

Privately Insured

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Reform Goals

Goals:• Transform the system for more efficient health

care funding• Reduce the number of uninsured in Texas, by

making it easier for working families to buy employer-sponsored health coverage

• Restructure current federal funding to gain flexibility in federal funds expenditures to:– Redirect investments to focus on access to primary

and preventive care – Reduce the number of uninsured individuals– Reduce uncompensated care cost trends

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Current System InvestmentThe uninsured tend to forgo primary and preventive care until a high acuity, high cost

catastrophic health event occurs.

Acuity

Cost

Transforming Access and Quality for Health Care to Uninsured Texans

Health Care Access Continuum

Primary & Preventive Care

Hospital Inpatient Care

A Transformed System

• Increased access to primary and preventive care

• Increased care management

• Decreased need for more costly emergency and inpatient care

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Reform Status

• Concept Paper submission – December 2007• Waiver submission – April 16, 2008• Regular discussions with CMS• HHSC request for expedited process – July 2008• CMS response – August, 2008• HHSC executive meetings with the U.S. Department of

Health and Human Services Secretary’s office, Centers for Medicare and Medicaid Services (CMS), and Office of Management and Budget on September 3, 2008 – Discussion of high level principles and key waiver components

as the basis for go-forward negotiations

• Weekly staff meetings starting September 9, 2008

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Reform Status

• Outcomes of September meeting: – Obtained commitment from Acting Director for Medicaid and

State Operations within CMS to accelerate discussions more formally and for higher level CMS involvement to identify and resolve components that need to be discussed and negotiated

– Raised awareness and need for integrated, expedited negotiations and reviews at:

• CMS• Secretary of Health and Human Services office• Office of Management and Budget

– Established weekly staff calls with CMS to work through critical waiver components – funding, covered populations and benefits

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Reform Status

• Weekly calls have focused on:– Ability to use market based insurance coverage

options, including employer-sponsored insurance where available, affordable and qualifying

– Benefit package parameters and cost-sharing• Anticipate different requirements for two uninsured adult

populations based on CMS’ differing treatment of them: Parents and those who are not parents (Childless adults).

– Use and requirements for Unmatched State and Local Funds (also called Designated State Health Programs or DSHP)

– Revising financing and budget neutrality– Delivery systems and eligibility functions

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“Hypothetical Populations”

• CMS treats uninsured adults differently; affects benefits, and financing

– Parents – CMS defines them as an optional population; i.e., a state could choose to cover them under Medicaid and receive federal funding. They are “hypothetically” eligible.

– Adults without dependent children (childless adults) – are not optional; can not be covered and receive federal matching funds under a state plan.

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“Hypothetical Populations”

• In the waiver –– Texas seeks new federal funds (match) for some

parents – arguing that they are “hypothetically eligible.”

• Provides access to significant new federal funds.– CMS has more requirements for the “hypothetical”

population• E.g., CMS requires that the benefit meet “benchmark”

criteria – actuarial equivalency. – For childless adults; no new federal matching

funds.• Federal funding is from existing budgeted and negotiated

funds: DSH, UPL.• More flexibility in regard to benefits and other

requirements.

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Waiver Funding Illustration

FEDERAL FUNDING

Negotiated Federal Matching Funds

(DSH Swap, UPL Cap Gap)

FEDERAL FUNDING

Pass-through Federal Funds(available for the parent population,

which could be covered under Title XIX)

STATE FUNDINGExisting State and Local Tax-funded programs (DSHP), other

CHILDLESS ADULTS, GRANTS

PARENTS/ CARETAKERS

• Federal funds: Pass-Through for optional groups for whom the federal share is provided if there is sufficient state share; Federal funding for Childless Adults must be identified from within existing federal funds negotiated as part of budget neutrality

• State match: Existing state and local programs (federal buy-out of these programs provides for availability of state funds to draw down new pass-through or redeployed DSH, UPL, if approved), etc.

• The approved waiver will authorize significant new federal funding for Texas health care to begin transforming the system.

Illustrative Subsidy Options by Target Population

WAIVER Y EAR 1(XIX/XXI Parents Only)

Demonstration Population

XIX/XXI Parents with access to qualifying ESI

Employer-Sponsored

Insurance (ESI)* Commercial* Multi-Share

WAIVER Y EARS 2 - 5(XIX/XXI Parents, Other Parents, Childless Adults)

XIX/XXI Parents with access to qualifying ESI

ESI* Commercial* Multi-Share

* Healthy Texas

Other Parents with access to qualifying ESI

ESI* Commercial* Multi-Share

* Healthy Texas

Demo Pop

Childless Adults with access to qualifying ESI

ESI* Commercial* Multi-Share

* Healthy Texas

Demonstration Population

XIX/XXI Parents XIX/XXI Parents Other Parents Childless Adults

Demo.Pop.

Hypothetical Pass-through

Population

BenchmarkBenefit

Hypothetical Pass-through

Population

BenchmarkBenefit

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Reform Status

Waiver as Submitted April 16, 2008 Current Status

Seek federal authority and support to support investment in primary and preventive care.

No change.

Maximize support for Employer Sponsored Insurance.

No change.

Seek programmatic and financing flexibility so funding supports policy and wisely invests in systems to address health needs.

No change.

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Waiver as Submitted April 16, 2008 Current Status

HOP subsidy program for uninsured Texans age 19-64 at or below 200% FPL. Subsidies to begin in Year 3 of the waiver initially for uninsured parents at or below 133% FPL, and to childless adults at or below 100% FPL.

HOP subsidy program for uninsured Texans age 19-64 at or below 200%. Subsidies to begin in Year 1 of the waiver will be offered to parents of Medicaid/CHIP children. Subsidies in Year 2 will be available to other parents and childless adults.

Provide a catastrophic coverage benefit for parents whose medical bills make them eligible for a medically needy program.

Removed from the waiver to expedite discussions, and will be pursued as a separate state plan amendment, to be approved and implemented concurrently with the waiver.

Provide time-limited grants in Years 1-3 of the waiver for local and regional community-based health care programs to improve access to services, enhance quality of care, and coordinate services.

Provided time-limited funds in Years 1-2 of the waiver for local and regional community-based health care programs to improve access to services, enhance quality of care, and coordinate services.

Reform Status

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Reform Status

Waiver as Submitted April 16, 2008 Current Status

Implement a CHIP Premium Assistance (PA) program for CHIP-eligible children with access to employer-sponsored insurance (ESI) through a parent’s employer.

Removed from the waiver to expedite discussions, and will be pursued as a waiver amendment.

Blend existing program funds in Medicaid, HIPP, CHIP PA, and HOP subsidies to support families buying into ESI.

Removed from the waiver to expedite discussions, and will be pursued as a waiver amendment.

Establish a process for recognizing qualifying public expenditures for the uninsured. Public expenditures include state general revenue, local and other tax-based expenditures in unmatched programs providing health services to the uninsured.

No change.

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Anticipated Reform Time Line

Anticipated Implementation Timeline by Waiver Year

SFY 2010 SFY 2011 SFY 2012 SFY 2013 SFY 2014

9/09 – 8/10 9/10 – 8/11 9/11 – 8/12 9/12 – 8/13 9/13 – 8/14

Waiver Year 1 Waiver Year 2 Waiver Year 3 Waiver Year 4 Waiver Year 5

System Transformation Funds

HOP Subsidy Program for Parents of Medicaid/CHIP children

HOP Subsidy Program for Other Parents & Childless Adults

Related Non-Waiver Initiatives

Study with TDI and small employers

Work Group onUncompensated Care

Revised Hospital Uncompensated Care Reporting

HIPP and ESI program improvements

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Implications for Multi-share Programs

• Seeking ability to use ESI subsidies for multi-share programs

• Anticipate CMS criteria for use of funds that may be in the areas of:– Benefits and cost-sharing– Member appeals and other protections– Out of network care– Program authority and responsibility – public entity? – Status of claims if claims experience exceeds program

funding– Other

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Information

• HHSC will continue to provide regular updates throughout the waiver process

• For more information:– Sign up for updates and notification at www.hhs.state.tx.us– Visit our website at:

http://www.hhs.state.tx.us/medicaid/reform.shtml– Text of waiver:

http://www.hhs.state.tx.us/medicaid/Waiver_041708.pdf– For questions, e-mail medreform@hhsc.state.tx.us