Expanding publicly subsidized coverage for low income adults

Maximizing use of Existing systems and infrastructure Public-private partnerships Federal funding

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Focus on low income uninsured

About 60% of Michigan’s uninsured population –

654,000 people* -- have incomes below 200% of the Federal Poverty level (FPL)

Non-elderly Uninsured in Michigan by Income (Percentage of Federal Poverty Level

Under 100%

100 - 149%

150 - 199%

200% +

* Rough numbers from 2005 CPS – need multi-year average

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A Brief Summary of the Model

Increase access to federally subsidized coverage for low income families persons with disabilities, and young adults (<21)

Makes scarce local and safety net resources available for those not able to be covered under federal programs

Reduce red tape and develop new opportunities for private contribution toward coverage for the uninsured to promote continuity of care (“pay in” option)

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Use existing public –private partnerships, systems and infrastructure

Public agencies determine eligibility and coverage, process some fee-for-service claims

Private, managed care health plans deliver most services to individuals with full coverage

Private pharmacy manager handles fee-for-service prescription claims

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Maximize federally-funded coverage

Federal Medicaid match

Federal government pays for more than half (56.59%) of of costs

$1.00 in state funds buys $2.30 of medical care

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Federal and State Contribution

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Gaps in the safety net

Three strategies

1. Phased in expansion of coverage

2. Phased in reduction in out of pocket cost (deductibles or spend-downs) for those not fully covered

3. Allow “pay in” by those not fully covered

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Cover low-income parenting adults in families with Healthy Kids- or MIChild-covered children (“the working poor”)

Strategy #1: Coverage expansions

Cover low-income persons with disabilities at the same income levels as parenting adults

Cover low-income young adults (19- and 20-year olds) until they are 21 & more likely to have access to employer-based coverage

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Phase 1: Cover parents and young adults with income below the federal poverty level

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Phase 2: Cover all eligible adults up to 150% of federal poverty level

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Phase 3: Cover all eligible adults up to 200% of federal poverty level

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Effects of expansion on the uninsured – starting point:

Non-elderly Uninsured in Michigan by Income (Percentage of Federal Poverty Level

Under 100%

100 - 149%

150 - 199%

200% +

Rough numbers from 2005 CPS – need multi-year average

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Phase 1

Phase 1: Non-elderly Uninsured in Michigan by Income (Percentage of FPL)

Rough numbers from 2005 CPS – need multi-year average

Parents & Young Adults up to 100% of FPL

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Phase 2

Phase 2: Non-elderly Uninsured in Michigan by Income (Percentage of FPL)

Rough numbers from 2005 CPS – need multi-year average

Parents, Adults with Disabilities, & Young Adults up to 150% of FPL

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Phase 3

Phase 3: Non-elderly Uninsured by Income Level (Percentage of FPL)

Rough numbers from 2005 CPS – need multi-year average

Parents, Adults with Disabilities, & Young Adults up to 200% of FPL

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Strategy #2: Phased in reduction in out of pocket cost for those not fully covered

Expand coverage under Medicaid with a Deductible (formerly known as “Spend-down” Medicaid)

periodic coverage for individuals with income in excess of the limit for full coverage

monthly deductible equals budgeted monthly income minus a “protected income level” (based on family size)

coverage begins only after verification that the monthly deductible is met

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Monthly Spend-down/Deductible = Budgeted Income - Protected Income Level

Example:

Single person with a disability and $850 per month budgeted income

Protected income level for an individual = $375

Monthly Deductible = $475

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The “spend-down problem”

Protected income levels are much lower than income limits for full coverage

Doesn’t provide coverage until medical expenses have driven the enrollees deep into poverty

100% of Federal Poverty Level

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The fix: increase income disregards for the medically needy

Federal law limits the amount of the Protected Income Level, based on historic family cash assistance levels

Income disregards may be used to reduce “budgeted” income by the difference between the income limit for full coverage and the Protected Income Level

Has the same effect as raising the PIL

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Phase-in: Increase disregards as the income limit for full coverage is increased

Phase #1: Deductibles only require “spend down” to 100% of federal poverty level

Phase #2: Deductibles require “spend down” to 150% of federal poverty level

Phase #3: Deductibles require “spend down” to 200% of federal poverty level

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Strategy #3: Allow purchase of coverage with premiums equal to monthly deductible

Problems with Deductible (Spend-down) system:

No continuity of coverage – Medicaid is approved only for certain days of the month

Providers can’t bill Medicaid until weeks or months later - after DHS workers process paperwork submitted by recipient

Recipients cannot be enrolled in managed care plans

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Strategy #3 (cont’d) “Pay-in” Option

Build on the existing MIChild system for processing premiums

Employers could pay premiums for low income employees

Reduces red tape and paperwork for enrollees and DHS

Allows for managed care enrollment Gives providers certainty re payment source Provides continuity of care

I. COVERAGE

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Number of people covered

Strategy #1 (Expansion of full coverage) Phase 1: 60,000* parenting adults and 11,000 young adults with

income below 100% of FPL Phase 2: 45,000* parenting adults, 3,400 young adults, and 9,000

adults with disabilities with income below 150% of FPL Phase 3: 53,000* parenting adults, 4,600 young adults, and 10,000

adults with disabilities with income below 150% of FPL

TOTAL decrease in the number of uninsured: 196,000 adults

Strategy #2 (Reduced Deductibles) - ???

Strategy #3 (Pay in Option) Coverage for ???000 adults

*Rough numbers from 2005 CPS – need multi-year average

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Portability and continuity of coverage

Full portability: individuals remain covered as long as income is within limits (or deductible/pay-in is met) and non-financial criteria are met (age, parenting, disability)

Wrap-around coverage when employer-based coverage or Medicare becomes available

Good continuity of care, subject to health plans’ geographic limits, and limits due to shortage of fee-for-service providers when

managed care is unavailable (e.g. private insurance or Medicare is primary, rural areas)

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Benefits

Physician visits Specialists Labs and diagnostic

testing Prescription drugs and

supplies Inpatient and outpatient

hospital care Home help services Nursing homes*

Current comprehensive benefits package available to Medicaid recipients

Mental healthDurable medical equipmentVisionHearingPhysical and occupational therapyDentalPodiatryChiropractic

* Most current nursing home residents with incomes below 200% of FPL are already receiving Medicaid

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Quality of care & effects on the delivery system

Quality under current programs varies and needs improvement overall

Shortage of fee-for-service providers and participating health plan providers in many areas (especially specialists and rural areas) due to low reimbursements

Increasing enrollment and creating a larger pool may increase the number of health plans willing to provide coverage in smaller, more rural counties

II. COST AND EFFICIENCY

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Resource and Budgetary Cost

Increased spending on a broad range of medical goods & services

State administrative costs More enrollees (applications), more providers

(claims) Modification and expansion of existing premium

collection system, to administer the buy in option

Need for increased payment rates to assure that coverage = access

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Resource and Budgetary Savings

Lower cost, early intervention prevents or reduces spending on higher cost care when health conditions progress or deteriorate, including expensive hospital-based treatment

Reduced mortality and disability

Increased productivity and reduced absenteeism for employed enrollees

Continuity of care & use of managed care plans reduced costs

Increased bargaining power with pharmaceutical companies due to larger pool of enrollees

Reduced administrative costs at DHS, through buy-in option

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Cost Containment

Features that promote cost containment:

Managed care

Disease management

Bargaining power of a large purchaser

Features that hinder cost containment:

Entitlement – number of enrollees will grow during economic slumps

Federal law prohibits some types of limits on services

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Implementation & Administration:

Uses existing infrastructure and systems Existing eligibility and enrollment system through DHS/MSA

Existing health plan choice/enrollment system through private contractors

Existing health delivery system through managed care health plans (with fee-for-service for auxiliary services and services for those with deductibles or other primary insurance); community mental health system

III. FAIRNESS AND EQUITY

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Access to coverage and subsidies

Provides equity within families (i.e. expands coverage to parents of children who currently are eligible)

Increases equity among many adult populations (i.e. expands coverage to parents & young adults at same income levels as disabled/elderly who currently are covered)

Does not provide equity for childless adults with no total & permanent disability

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Financing of costs

Increased public responsibility for subsidizing care to those with low incomes

Requires a tax-based mechanism for financing

Equity/fairness would depend on the specific taxes/funding mechanisms chosen

Potential to achieve greater equity and fairness reducing the burden on those with commercial

insurance to pay for the uninsured taxing employers who do not cover their low-wage

workers

IV. CHOICE AND AUTONOMY

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Consumer choice of providers and health plans

Choice of health plans, where available Current shortage in UP and some LP counties Increased enrollment may attract more plans

Choice of providers within plans (limited)

Choice of providers with fee-for-service (limited)

Higher reimbursement needed to attract more providers

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Provider autonomy

Same autonomy as private insurance (must accept the reimbursement allowed by health plan for enrollees in managed care or state, for fee-for-service enrollees)

Limits on clinical autonomy as in other managed care arrangements

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Government compulsion or regulation

Regulated to a higher degree than private insurance

Same as in current Medicare, Medicaid

No compulsory enrollment

V. VARIATIONS (& their effects)

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Adopt some strategies/phases and not others, to save on costs

EXPANSIONS - greatest beneficial impact on the very lowest income groups*

ADJUSTING DEDUCTIBLES - greatest beneficial impact on slightly higher, but still low-income groups*

BUY-IN OPTION - greatest beneficial impact on continuity of care and access for slightly higher, but still low-income groups* who have some degree of coverage – much less likely to be helpful if deductibles are not adjusted

* Excluding the childless adults who cannot be covered with federal Medicaid dollars

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Allow buy-in for higher income individuals

Allow uninsured individuals and employers of uninsured individuals who cannot afford private insurance rates to purchase coverage at the lower per capita Medicaid rate

Require that individuals be within a certain range of the Medicaid income eligibility limits