Budget Analysis


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  • According to the Governor’s Office of Health Transformation, payments for physician and clinical services in Ohio is .3% less than the U.S. average. Executive budget features such as accountable health homes and emphasis on health and wellness may be of interest to physicians.
  • According to the Governor’s Office of Health Transformation, Ohio’s Medicaid per capita spending for hospitals is twelve percent (12%) greater than the U.S. average and in SFY 2010, twenty-eight percent (28%) of total Ohio Medicaid expenditures went to hospitals. The Executive budget proposes to continue the hospital franchise fee to draw down federal matching funds but does not redistribute all of the money solely to hospitals. Further, policy changes will subject hospitals to reimbursement cuts through “Modernization of Hospital Payments” noted above.
  • According to the Governor’s Office of Health Transformation, individuals covered by both Medicare and Medicaid consume forty-six percent (46%) of Medicaid long-term care spending and sixteen percent (16%) of behavioral health services spending.
  • According to the Governor’s Office of Health Transformation, Ohio’s Medicaid per capita spending for nursing home care is fifty-two percent (52%) greater than the U.S. average with only five (5) states spending more per capita. Seventeen percent (17%) of Ohio’s Medicaid expenditures in SFY 2010 went to nursing facilities.
  • According to the Governor’s Office of Health Transformation, Ohio’s per capita spending for home health care is 8.3% less than the U.S. average and comprised fourteen percent (14%) of Ohio’s Medicaid expenditures in SFY 2010. The Executive budget would engage Miami University’s Scripps Gerontology Center to complete an evaluation of the cost effectiveness of the PACE program, which serves approximately 750 people. Further, Ohio will pursue an initiative to share savings with Medicare for dual eligibles. No further enrollment will occur until complete.
  • The Executive budget will place greater responsibility on managed care plans to administer quality improvement programs. For example, it proposes to create a pay-for-performance program, continues to require accountability for preventive services (e.g., well-child visits and prenatal care), and establishes a withhold of one (1) percent of the capitation payment for plans to earn back as an incentive payment tied to performance. The Executive budget proposal assumes that expansion of managed care to include children with disabilities (a transition component of establishing pediatric accountable care organizations) will allow health plans to spread their administrative expenses across more lives.
  • Information from the Ohio Governor’s Office of Health Transformation appears to focus primarily on involving children’s hospitals. However, many other hospitals in Ohio provide significant pediatric services and could also be brought into the process of developing pediatric ACOs. Such hospitals should look for opportunities to participate in the legislative and regulatory development of the pediatric ACOs to ensure they will also have the opportunity to establish or participate in the ACOs.
  • According to the Governor’s Office of Health Transformation, adults with serious mental illness represent ten percent (10%) of Medicaid population but account for 26% of total Medicaid expenditures.
  • Budget Analysis

    1. 1. Key Factors Driving the Executive Budget <ul><li>Projected all funds $8 billion deficit </li></ul><ul><li>Previous state budget contained $5 billion in one-time funds </li></ul><ul><li>Ohio lost 450,000 jobs from March 2006 to December 2009 </li></ul><ul><ul><li>State regained only 62,900 jobs through January 2011 </li></ul></ul><ul><ul><li>“We’re going to transform this state.” </li></ul></ul><ul><ul><li>Governor John Kasich </li></ul></ul><ul><ul><ul><li>State of the State Address – March 8, 2011 </li></ul></ul></ul>
    2. 2. Addressing the $8 Billion Deficit <ul><li>Medicaid savings </li></ul><ul><li>Agency reductions </li></ul><ul><li>Redirecting revenue to GRF </li></ul><ul><li>Revenue growth </li></ul><ul><li>Selected other means: </li></ul><ul><ul><li>Debt restructuring </li></ul></ul><ul><ul><li>Privatization of five state prisons </li></ul></ul><ul><ul><li>Transferring state’s liquor franchise to JobsOhio </li></ul></ul><ul><ul><li>Education reform </li></ul></ul><ul><ul><li>Collective bargaining reform </li></ul></ul>
    3. 3. Addressing the $8 Billion Deficit <ul><li>Important Numbers: </li></ul><ul><ul><li>Reductions in Local Government Funds and Property Tax Replacement Funds for school districts and local governments over the biennium: More than $2.2 billion </li></ul></ul><ul><ul><li>Reductions in 250 of the 371 line items in the state budget over the biennium: More than $2.3 billion </li></ul></ul><ul><ul><li>Federal stimulus dollars contained in the second year of the budget: $0 </li></ul></ul><ul><ul><li>Estimated savings to local governments from collective bargaining reforms: $1 billion annually </li></ul></ul><ul><ul><li>Preservation of two-year income tax cut effective January 1, 2011: $800 million </li></ul></ul>
    4. 4. Medicaid Reform -- Highlights <ul><li>Medicaid is the largest program in the state budget: </li></ul><ul><ul><li>$15.8 billion total spending in SFY 2010 across six agencies </li></ul></ul><ul><ul><li>Accounts for 30% of total state government spending </li></ul></ul><ul><ul><li>Ohio per capita health spending is 8% greater than US average </li></ul></ul><ul><li>Funds are 63.69% federal, 36.31% state </li></ul><ul><li>Executive budget saves $4.3 billion in Medicaid spending </li></ul>
    5. 5. Medicaid Reform -- Highlights <ul><li>Incorporates many policy changes similar to federal health care reform: </li></ul><ul><ul><li>Patient-centered care </li></ul></ul><ul><ul><li>Accountable health homes </li></ul></ul><ul><ul><li>Price and quality transparency </li></ul></ul><ul><ul><li>Reimbursement rewards value </li></ul></ul><ul><ul><li>Performance measures </li></ul></ul><ul><ul><li>Electronic information exchange </li></ul></ul><ul><ul><li>Shifts focus of long-term care to home and community-based services </li></ul></ul><ul><li>Integrates a significant portion of funds previously allocated among six different agencies into the Ohio Department of Jobs and Family Services </li></ul>
    6. 6. Medicaid Reform -- Physicians <ul><li>No across the board cuts </li></ul><ul><li>Effective July 1, 2011 Medicaid will reduce physician payments to 100% of the Medicare fee schedule where the current Medicaid payment exceeds the Medicare payment. </li></ul><ul><li>Saves $3.1 million </li></ul><ul><li>Physicians will be affected by changes to Medicaid payment rates for dual eligibles which will be reduced to the level that Medicaid would have paid if it were the primary payor </li></ul>
    7. 7. Medicaid Reform -- Hospitals <ul><li>Adopts OHA methodology for hospital franchise fee </li></ul><ul><ul><li>Continues the hospital franchise fee (set to expire on June 30) which leverages $781 billion in federal matching dollars and results in $437 in GRF funds </li></ul></ul><ul><li>Policy changes reduce hospital payments by $478 million </li></ul><ul><ul><li>$157 million by basing outlier inflation rates on most recent 3-year average increase in charges per discharges </li></ul></ul><ul><ul><li>$126 million from reductions in inpatient capital rates </li></ul></ul><ul><ul><li>$94 million from reducing reimbursements for cross over claims to level Medicaid pays as primary payor </li></ul></ul><ul><ul><li>$66 million from changing percentage-based outpatient reimbursement to each hospital’s specific cost-to-charge ratio </li></ul></ul><ul><ul><li>$308,000 from denial of payment for conditions acquired while in the hospital </li></ul></ul>
    8. 8. Medicaid Reform -- Hospitals <ul><li>Eliminates earmarked funding for children’s hospitals ($33 million) </li></ul><ul><li>Requires Medicaid reimbursement to default to fee-for-service rates for hospitals not contracted with Medicaid managed care plan ($120 million) </li></ul><ul><li>Resets DRG rates effective January 1, 2013 </li></ul><ul><li>Reauthorizes HCAP until October 2013 </li></ul>
    9. 9. Medicaid Reform -- Long-Term Care Care Coordination <ul><li>Creates Individual-Centered Integrated Care Delivery System (ICDS) </li></ul><ul><ul><li>“ Cornerstone” of state’s efforts to achieve balanced delivery system that offers </li></ul></ul><ul><ul><li>Aimed at simplifying and coordinating care for dual-eligibles and “dual-like” individuals on Medicaid who currently receive services through fragmented health physical and behavioral health systems </li></ul></ul><ul><ul><li>Initial focus will be on 113,000 dual eligible residents of nursing facilities, enrollees in home and community-based services who need nursing facility care, and individuals with severe mental illness </li></ul></ul><ul><ul><li>Program will be implemented in September 2012 and will require federal waivers </li></ul></ul>
    10. 10. Medicaid Reform -- Nursing Facilities <ul><li>Changes to nursing facility payment methodology will save $427 million - (7%) reduction </li></ul><ul><ul><li>Keeps price for most services at 25 th percentile of historical peer group cost experience for direct care, ancillary and support services and capital. </li></ul></ul><ul><ul><li>Incorporates consolidated services per diem into direct care price resulting in higher reimbursement to facilities that serve higher acuity individuals. </li></ul></ul><ul><ul><li>Increases portion of per diem that is related to direct care and quality from 50% to nearly 60% </li></ul></ul>
    11. 11. Medicaid Reform -- Nursing Facilities <ul><ul><li>Increases quality incentive from 1.7% to 8.75% of the per diem rate and links to patient-oriented quality measures </li></ul></ul><ul><ul><li>Decreases “leave day” rates from 50% of the facility’s rate for up to 30 days/year/resident to 25% of the rate for up to 15 days </li></ul></ul><ul><ul><li>Medicaid payment rates for dual eligibles will be reduced to the level that Medicaid would have paid if it were the primary payor (i.e. 100% of the facility’s per diem rate) </li></ul></ul><ul><li>Nursing home franchise fee is retained and reduced from current $11.95/bed/day to $11.38 in SFY 2012 and $11.60 in SFY 2013 </li></ul>
    12. 12. Medicaid Reform -- Home and Community-Based Services <ul><li>Creates a “Unified Long-term Care System” (component of ICDS) </li></ul><ul><ul><li>Replaces multiple home and community-based services waivers with a single waiver incorporating self-direction, unified access, simplified enrollment and seamless delivery for individuals needing long-term services </li></ul></ul><ul><ul><li>Consolidates funding into ODJFS budget </li></ul></ul><ul><li>Reduces home health “base rate” for nursing (from $54.95 to $48.93) and home health aide (from $23.98 to $22.50) services to save $35 million </li></ul><ul><li>Reduces PASSPORT, PACE and assisted living rates by 3% </li></ul><ul><li>Reduces PASSPORT emergency services rates by 30% </li></ul>
    13. 13. Medicaid Reform -- Managed Care <ul><li>Reform of Medicaid managed care: </li></ul><ul><ul><li>Reduction of administrative component and use of the lower boundary of the medical cost inflation trend will save $144 million in capitation payments </li></ul></ul><ul><ul><li>Including pharmacy in managed care benefit, payment to non-contracting hospitals at fee-for-service levels and elimination of children’s buy-in program will save $243 million </li></ul></ul><ul><ul><li>Medicaid managed care sales and use tax will generate $135.4 million </li></ul></ul><ul><ul><li>Move to national performance measures (HEDIS) and acceptance of NCQA accreditation will reduce administrative burdens on Medicaid managed care plans </li></ul></ul>
    14. 14. Medicaid Reform – Pediatric ACOs <ul><li>37,544 disabled children served through Ohio’s fee-for-service Medicaid program </li></ul><ul><li>Complex medical and behavioral health needs for this patient population but primary care and care coordination is lacking </li></ul><ul><li>Current cost $313 million per year </li></ul><ul><li>$375 million in expenses associated with move from retroactive to prospective payment </li></ul><ul><li>$288 million in savings from better utilization control </li></ul><ul><li>Net expense of $87 million in SFY 2013 </li></ul><ul><li>Three phase implementation </li></ul>
    15. 15. Medicaid Reform – Pediatric ACOs <ul><li>Phase I - Disabled children not residing in an institution or receiving home and community-based waiver services will be enrolled in Medicaid managed care beginning in July 2012 </li></ul><ul><li>Phase II - Managed care plans will be encouraged to contract with developing ACOs which will be responsible for care coordination and will assume portion of risk for children enrolled in the ACOs </li></ul><ul><li>Phase III – ACOs will contract directly with state, assuming care coordination and financial risk </li></ul>
    16. 16. Medicaid Reform -- Behavioral Health <ul><li>Phases in integration of funding for behavioral health (ODADAS and ODMH) with physical health benefits (ODJFS) and for individuals with severe mental illness </li></ul><ul><li>Policy changes will result in $242 million in savings </li></ul><ul><ul><li>Tier reimbursement for multiple units of service on the same day with subsequent units reimbursed at 50% of the initial unit rate (beginning with community psychiatric supportive treatment) - $60 million </li></ul></ul><ul><ul><li>Limit use of V-codes to crisis intervention and diagnostic assessment – $8.1 million </li></ul></ul><ul><ul><li>Create a defined benefit package - $135.1 million </li></ul></ul><ul><ul><li>Eliminate separate community health reimbursement for residents of nursing facilities - $39.1 million </li></ul></ul>
    17. 17. Medicaid Reform -- Behavioral Health <ul><li>State will pursue a federal planning grant and explore other opportunities to coordinate care for those with severe mental illness (managed care, ACOs, health homes, etc.) </li></ul>
    18. 18. Questions? <ul><li>Contact Squire Sanders using the contact link at the top of the page. </li></ul>