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FY 2012 Hospital Rate Setting

Wisconsin Department of Health ServicesDivision of Health Care Access and Accountability

Bureau of Fiscal ManagementMarch 22, 2011

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Agenda

1. Rate Setting Timeline2. Governor Walker’s 2011-2013 Budget Request3. FY 2011-2013 Hospital Budget4. Policy Issues5. FY 2011 Pay-For-Performance Measures for

Acute Care, Children and Rehab Hospitals6. FY 2010 Hospital Assessment7. FY 2011 Hospital Assessment8. Next Meetings Agenda

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FY 12 Rate Setting TimelineMarch 22nd – Kick Off Meeting

Overview of Governor Walker’s MA Budget ProvisionsApril 20th

Present DRG Weights Discuss Policy Decisions Announce FY 2011 Pay-For-Performance Measures

May 31st Present State Plan Present Draft Hospital Rates

June 21st Present Final Hospital Rates Announce FY 2012-2013 Pay-For-Performance Earn-Back Measures

July 1st – FY 12 Rates Effective

Medical Assistance 20011-13 Biennial Budget:

Medical Assistance Program Parameters

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Key Elements of Medicaid Programs

Eligibility Eligibility requirements are based on income and age; certain programs having disability-related requirements. The American Recovery and Reinvestment Act of 2009 (ARRA) and the Patient Protection and Affordable Care

Act of 2010 (ACA) impose requirements on the extent to which states can restrict eligibility standards. Medicaid programs have mandatory eligibility groups for whom the state must provide health care benefits and

optional groups for whom the state may expand coverage.

Benefits Eligibility determines the benefit plan of members, which in turn determines benefits received. Benefits are provided through a wide range of individual practitioners, hospitals, nursing homes, managed care

organizations and local governmental entities such as county public health departments and school districts. Providers must be certified by the Medical Assistance Program.

Payments State Medicaid rates and benefit plan utilization establish the maximum fee paid to providers for Medicaid

covered benefits. The federal medical assistance percentage (FMAP) is the portion of the total payment for covered services

supported by federal matching funds.

Efficient Health Care PurchasingThe department continually seeks to reduce MA costs for providing quality health care by promoting cost-effective services and maximizing the receipt of federal revenue.

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Cost Comparison by Population Type

Cost Comparison for SFY 2010 by Major Enrollment Categories

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Enrollment Cost

Aged

Disabled

BC+ Adults

BC+ Children

Medical Assistance 20011-13 Biennial Budget:

Enrollment & Expenditure Trends

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ExpenditureHistory for Medical Assistance

Over the past five years, expenditures for the Medicaid programs have increased an average of 11 percent per year, growing from $4.4 billion all funds in fiscal year 2006 to $6.6 billion in fiscal year 2010.

FY06 FY07 FY08 FY09 FY10General Program Revenue 1,361 1,766 1,756 1,102 1,286 Federal Revenue 2,706 2,774 2,906 3,879 4,675 Program Revenue 7 9 45 64 67 Segregated Revenue 360 127 212 876 635

4,434 4,676 4,919 5,921 6,663

Change over prior year 5% 5% 20% 13%

Medicaid and BadgerCare Plus($ in millions)

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The economic recession that began in December 2007 caused a prolonged spike in MA enrollment for states across the country.

The federal government relieved enrollment pressure by providing higher federal matching payments (FMAP) through the American Recovery and Reinvestment Act.

The enhanced FMAP is scheduled to end July 1, 2011, leaving states to fund a greater share of persistently high enrollment.

Aged and Disabled

Family Coverage (MA/BadgerCare+)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Med

icaid

Enr

ollm

ent

Unemployment Rate

March 2001 Recession

December 2007 Recession

BadgerCare Plus Implementation

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Medical Assistance Shortfall Actions in Other States

The scheduled reduction of FMAP payments to states has created fiscal problems nationally and forced states to contemplate severe reductions to medical assistance programs.

Arizona has proposed suspending Medicaid coverage for 280,000 people.

New York State is proposing a 2% across-the-board decrease in Medicaid funding.

Georgia has proposed dropping dental and vision coverage.

California has proposed cutting Medicaid by $1.7 billion, in part by reducing provider payments by 10%.

Maryland proposes cutting payments to hospitals by $264 million – on top of $133 million in hospital cuts over the past three years.

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The Governor’s plan for Medicaid will reduce expenditures by $500 million in the next biennium compared to the pre-recession trend. For future years, those savings continue to grow, totaling $1.2 billion all funds by fiscal year 2017.

Bending the Cost Curve Through Medicaid Reform

$9,541.0

$3,531.3

$8,321.7

$6,809.7

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

SFY 2002 SFY 2004 SFY 2006 SFY 2008 SFY 2010 SFY 2012 SFY 2014 SFY 2016

All

Fund

s (in

mill

ions

)

Expenditures Based on Current Inflationary Trend Expenditures Based on Governor's Request and Growth at the Rate of CPI

Projected Expenditures Based on Recent Pre-Recession Trend

(FY 2002-2008 Average Increase)

Projected Expenditures Based on Governor's Recommendation and growth rate of CPI

(CY 2002-2010 Average CPI Increase)

Governor Walker’s Medical Assistance20011-13 Biennial Budget Proposal

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For Wisconsin, the FY 2011–2013 MA budget will need an additional $1.26 billion in GPR over the biennium just to replace lost federal funding.

Combined with cost increases, the Medicaid budget would require an additional $1.8 billion in additional GPR over the biennium, representing 7% of estimated FY2011-13 general fund tax revenue.

Medicaid Budget Pressures2011-13 Biennium

-

5001,000

1,500

2,0002,500

FY11 FY12 FY13

$ in

Mill

ions

(GP

R)

Cost Growth

FMAP

Base Funding

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Eligibility Reform versus Eligibility Limits

The Patient Protection and Affordable Care Act (PPACA) allows for states experiencing a budget deficit to lower eligibility limits and drop coverage for any non-pregnant, non-disabled adults with family income above 133% FPL.

This means that beginning on July 1, 2011 the federal government would allow Wisconsin to eliminate coverage for approximately 70,000 enrollees who meet these parameters -- the cost savings of dropping their coverage is estimated to be $57 million annually.

  PPACA does not allow Wisconsin to make other, less severe,

changes to eligibility in order to avoid eliminating coverage for thousands of adults. If given the flexibility to adjust eligibility standards, Wisconsin could retain coverage for these adults.

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Flexibility to Modify Eligibility Requirements (cont’d)

In lieu of eliminating coverage for many adults, DHS is preparing a package of reasonable, targeted eligibility changes to ensure that program resources are targeted to those most in need who have no other means to access health care. These include:

Reviewing the standards for state residence;

Revising retroactive eligibility and eligibility grace period policies; and

Enforcing current policies to improve the accuracy of eligibility determinations.

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Flexibility to Modify Eligibility Requirements

To achieve significant savings in the MA program, Wisconsin needs authority from the federal government to waive certain federal maintenance of effort (MOE) requirements contained in PPACA.

PPACA essentially freezes state MA eligibility standards to what was in effect on March 23, 2010; thus, Wisconsin is prohibited from using many of the cost containment tools that would otherwise be available.

DHS is seeking a waiver for the MOE restrictions from the federal government.

If the federal waiver is not approved by January 1, 2012, DHS will be forced to eliminate coverage for non-pregnant, non-disabled adults within family incomes above 133% FPL as of July 1, 2012.

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Modifying or Eliminating Optional Benefits

There are mandatory and optional services that all states are required to or have the option to provide.

Optional benefits include, but are not limited to: prescription drugs, vision services, dental services & dentures, clinic services, chiropractic services, therapies, durable medical equipment and supplies, respiratory care for vent-dependent members and community-based long-term care services such as personal care.

States have the flexibility to ask the federal government to expand or reduce the optional benefits they provide, and some states are eliminating optional benefits in order to reduce their program costs.

At this time, DHS is not pursuing the elimination of any optional services.

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Reductions in Provider Reimbursement

MA reimburses providers through rates set in the department’s maximum fee schedules depending on the services provided.

A number of states have imposed either targeted rate cuts for specific provider types or broad across-the-board reduction applied to many if not all provider types.

Another option is better alignment of Wisconsin’s rates to the rates paid through the federal Medicare program.

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Realigning Provider Incentives to Achieve Better Outcomes

The department will review reimbursement policies to better realign provider incentives with improving care outcomes.

The goal of this effort will be to ensure the appropriate care is provided in the appropriate setting at the appropriate time.

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Aligning Coverage with Other Private Payers’ Policies

Reducing the Crowd-Out of Other Health Insurance:

MA has traditionally been the payor of last resort. However, recent program expansions have loosened these requirements, allowing individuals to choose between coverage through MA over coverage available through other options.

For BC+, this will mean that young adults eligible for coverage on their parents policies will need to sign up for that coverage. All Funds Savings Estimate: FY 12: $3.25 million FY 13: $3.26 million

For SeniorCare, it will require seniors eligible for Medicare Part D to participate in that program in order to be eligible for SeniorCare. The Program will still be available to interested seniors and can provide wrap-around benefits to augment coverage available under their Part D plans. All Funds Savings Estimate: FY 12: $18.3 million FY 13: $36.6 million

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Improving Care Coordination

The department can achieve both fiscal savings and improved quality of care through the increased use of care coordination.

The department will develop models of service delivery, including health homes, to more effectively manage the care of recipients.

The department will also implement systems to coordinate care across Medicaid and Medicare for individuals eligible for both programs.

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Changes in Family Care Enrollment

Family Care began as a 5-county pilot program in 2000 that began to rapidly expand beginning in the 2007-09 biennium.

At the end of the 2009-11 biennium, Family Care will be available in 57 of Wisconsin’s 72 counties, covering 79% of the state’s adult population.

Amidst this broad expansion there has been no adequate review of the effectiveness of the program in meeting the care needs of the clients and providing services in a cost effective manner.

The non-partisan Legislative Audit Bureau is now conducting just such a comprehensive review. Until that review is complete the department will defer all further expansion of the program.

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Administration of Medical Assistance

Determining eligibility and providing on-going case maintenance for Wisconsin’s income maintenance (IM) programs varies by county and eligibility group. Levels of performance and customer service vary from county to county.

The Governor proposes consolidating these functions, creating a state-administered IM service delivery model, consolidating all administrative functions and using state-workers for oversight and public worker mandated functions. Goal is to make administration more cost effective and work with community partners for outreach and better customer service.

These changes will improve the accuracy and timeliness of eligibility determinations, while reducing the total IM and decreasing the number of income maintenance staff.

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Health Care Efficiency Measures

DHS will need to implement a wide array of health care efficiency measures during the next biennium to contain costs while maintaining and improving quality.

To identify and develop these efficiency measures, DHS will seek input from providers and advocates.

These measures will include a review of everything from improving administrative processing procedures to the provision of medical services and ways to strengthen efforts to reduce recipient and provider fraud and abuse.

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MA Biennial Base ReestimateGeneral Purpose Revenue Funding

DHS September Request: $0.5 billion

With Changes to Request: $1.8 billionIncreased CaseloadDecreased FMAP AssumptionFroze Hospital AssessmentDeleted Rate Reform 3.0

DOA Governor’s Request: $1.3 billion` Eligibility and Efficiency Reforms and/or Reductions

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Governor Walker’s 2011-2013 Hospital Budget Request

*Final budget numbers will be based on the budget which is subject to legislative changes

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2011-2013 Hospital Budget

Fee For Service FY 2011 FY 2012 FY 2013 VarianceAs a %

Total Hospital Budget $727,950,287 $696,120,268 $667,895,311 -4%

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Hospital Budget Components

1. Caseload Assumption

2. Intensity Assumption

3. Assessment Payments

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Hospital Caseload Assumptions (Annualized Percent Change)

9/15/2010 3/1/2011DHS Req. DOA

-6.0% FY 12: 0% FY 13: -1%-9.0% FY 12: -4.5 % FY 13: -3%-2.0% 1.0%-2.0% -2.0%-1.6% -1.6%Disabled Population

Badger Care Plus KidsBadger Care Plus AdultsPregnant WomenAged Population

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Hospital Intensity Assumptions

The Governor’s Budget Request changed the Hospital Intensity from 2% to 0% with an additional 1% withheld.

The 1% withheld will be available for Hospitals to Earn-back by performing well on several Pay-for-Performance Measures.

9/15/2010 3/1/2011DHS DOA2% 0%Hospital Rate Intensity

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Intensity Pay-For-Performance Earnback Provision

Hospitals will be able to earn back 1% of the intensity 2012 and 2013.

Source to Measure Data: FY 2009-2011 Medicaid Claims Data

The department is currently reviewing the data and Medicare Performance Measures to determine which measures will be chosen.

There may be different measures for different types of hospitals.

Hospitals will be given a chance to review data for completeness.

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Hospital P4P Earn-Back ProvisionPerformance Data

Historical Medicaid Claims DataPossible Performance Measures

1. Hospital Readmissions within 30 Days2. Appropriate ER Usage3. Maternity Indicators (Discharge Follow-up)4. Mental Health Indicators

Hold-Back Amount 1% of Hospital Rates will be available to win back

under this provision.

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Medicare Part A Cutback The Governor’s Budget assumes the Medicaid

Program will begin to cutback on Medicare Part A claims.

This proposal will limit what Medicaid pays Hospitals for Medicare Part A Coinsurance.

The All Funds cost savings in the Governor’s Budget Request :

FY 2012 FY 2013$15.2 million $21.6 million

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Health Care Efficiency Measures

DHS will need to implement a wide array of health care efficiency measures during the next biennium to contain costs while maintaining and improving quality.

To identify and develop these efficiency measures, DHS will seek input from providers and advocates.

These measures will include a review of everything from improving administrative processing procedures to the provision of medical services and ways to strengthen efforts to reduce recipient and provider fraud and abuse.

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FY 2011-2013 Hospital Assessment Budget Assumptions

The Governor’s Budget Request holds the Hospital Assessment Amounts steady at the FY 2011 levels.

The tax percentage will likely decrease for FY 12 and FY 13.

9/15/2010 3/1/2011DHS DOA

$476 million $414 million$772 million $672 million

Hospital TaxHospital Access Payments

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2012 Policy Issues

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FY 2012 Policy Issues

Modify Current Trim Points. Review how budget is set for Critical Access

Hospitals vs. Acute Care Hospitals. Move to Ambulatory Payment Classification for

Outpatient Rates starting 1/1/2012. Pay Labs on Max Fee Schedule. Other Ideas?

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2011 Pay-for Performance

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FY 2011 Pay-For-Performance Measures for Acute Care, Children’s and Rehab

Hospitals

For FY 2011, $5,000,000 has been allocated for Pay-For-Performance Measures

Payment will be based on CheckPoint Data DHS will work with WHA to determine

appropriate measures. The methodology will focus on Performance

rather than Reporting.

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Hospital Assessment

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FY 2010 Hospital Assessment The department submitted the FY 2010

Hospital Assessment Report to the Legislature in January.

The department shut off access payments for 2010 claims on February 11, 2011.

Report is available as handout. If you have any questions regarding the

report, please contact Krista Willing by email at KristaE.Willing@wi.gov or (608) 266-2469.

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FY 2011 Hospital Assessment

The department will provide a projection of the FY 2011 Hospital Assessment at the April Rate Setting Meeting.

At least partial HMO Payments will be made for both May and June this year.

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Next Meeting Agenda

Present DRG Weights Discuss Policy Decisions Announce FY 2011 Pay-For-Performance

Measures FY 2011 Hospital Assessment Update

April 20th 9:00am-12:00pm1 West Wilson Street

CR 751