1. State of Vermont Global Commitment to Health Waiver Program Summary January 2006

2. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 2 Presentation Goals Overview of: Vermont’s Medicaid Program (Statistics) Vermont’s Medicaid Program (Statistics) Context for GC Waiver Agreement Context for GC Waiver Agreement Financial Model & Organizational Structure Financial Model & Organizational Structure Impact on Program Design, Operations & Beneficiaries Impact on Program Design, Operations & Beneficiaries Implementation Timelines Implementation Timelines

3. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 3 Vermont’s Medicaid Program Stats 145,000 Covered Lives - 25% of Vermont’s Population 145,000 Covered Lives - 25% of Vermont’s Population 51,200 Children – 34% of Vermont’s Children 51,200 Children – 34% of Vermont’s Children $920 Million in SFY 2006 Total Medicaid Expenditures $920 Million in SFY 2006 Total Medicaid Expenditures Largest Insurer in Vermont (9,000 Enrolled Providers) Largest Insurer in Vermont (9,000 Enrolled Providers)

4. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 4 What is an 1115 Demonstration Waiver? Federal government can “waive” many, but not all, of the laws governing Medicaid, including eligible people and services Federal government can “waive” many, but not all, of the laws governing Medicaid, including eligible people and services The 1115 Demonstration waiver program is designed to encourage state innovation in the Medicaid program. The 1115 Demonstration waiver program is designed to encourage state innovation in the Medicaid program. Often, states identify ways to save Medicaid funds and are permitted to use the savings to expand coverage. Often, states identify ways to save Medicaid funds and are permitted to use the savings to expand coverage. Programs Developed under previous (VHAP) 1115 waiver Programs Developed under previous (VHAP) 1115 waiver Dr. Dynasaur – Up to 300% FPL Dr. Dynasaur – Up to 300% FPL VHAP – Up to 185% FPL VHAP – Up to 185% FPL Healthy Vermonters – Up to 400% FPL Healthy Vermonters – Up to 400% FPL

5. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 5 Context: VHAP Waiver 1115 VHAP Waiver rolled into GC Waiver 1115 VHAP Waiver rolled into GC Waiver Budget neutrality surpluses are diminishing; an alternative approach needed to continue federal funding for the expansion populations Budget neutrality surpluses are diminishing; an alternative approach needed to continue federal funding for the expansion populations

6. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 6 Context: Medicaid Expenditure Growth Without the new Waiver, current projections include a deficit in Medicaid expenditures (all Vermont programs) of: Without the new Waiver, current projections include a deficit in Medicaid expenditures (all Vermont programs) of: $60 million GF in FY07 $60 million GF in FY07 $370 million GF over next 5 years (cumulative) $370 million GF over next 5 years (cumulative) Projections based on: Projections based on: Past growth trends for most line items Past growth trends for most line items Slight decrease in OVHA growth rates Slight decrease in OVHA growth rates Expenditures over next 5 years projected at $4.18 billion (cumulative) Expenditures over next 5 years projected at $4.18 billion (cumulative) Major program changes would be needed to address deficit Major program changes would be needed to address deficit

7. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 7 Summary of New Global Commitment to Health Waiver Provides Vermont with: Provides Vermont with: Federal authority to continue VHAP-Uninsured, applicable pharmacy programs, and PCPlus programs Federal authority to continue VHAP-Uninsured, applicable pharmacy programs, and PCPlus programs Framework to initiate program reforms approved by the legislature, but does not require program changes Framework to initiate program reforms approved by the legislature, but does not require program changes Opportunity to invest in health care programs by OVHA becoming a Public Managed Care Organization (MCO) Opportunity to invest in health care programs by OVHA becoming a Public Managed Care Organization (MCO) Does not include new Long-Term Care Waiver, VPharm Wrap, DSH and SCHIP Does not include new Long-Term Care Waiver, VPharm Wrap, DSH and SCHIP

8. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 8 Financial Model

9. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 9 Budget Neutrality Ceiling Vermont Medicaid will operate under a 5-year budget neutrality ceiling (i.e., Waiver Spending Limit, Cap) Vermont Medicaid will operate under a 5-year budget neutrality ceiling (i.e., Waiver Spending Limit, Cap) Ceiling based on FY04 expenditures trended forward at 9% each year  $4.7 billion cumulative over 5 years (gross dollars -state and federal) Ceiling based on FY04 expenditures trended forward at 9% each year  $4.7 billion cumulative over 5 years (gross dollars -state and federal) VHAP surplus ($66m) as of 9/30/05 was “rolled forward” into the GC Budget Neutrality agreement VHAP surplus ($66m) as of 9/30/05 was “rolled forward” into the GC Budget Neutrality agreement Administrative costs are in the ceiling; however, traditional federal claiming rules will be used for administrative costs Administrative costs are in the ceiling; however, traditional federal claiming rules will be used for administrative costs Expenditure projections for the 5-year period are significantly below the 5-year ceiling, providing room for program growth Expenditure projections for the 5-year period are significantly below the 5-year ceiling, providing room for program growth

10. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 10 MCO Capitation (Premium) Payment AHS will pay the MCO (OVHA) a lump sum premium each month to provide all necessary services AHS will pay the MCO (OVHA) a lump sum premium each month to provide all necessary services Pursuant to federal managed care rules, AHS obtains actuarial certification of the premium amount Pursuant to federal managed care rules, AHS obtains actuarial certification of the premium amount Based on Vermont’s actual experience and regional experience, where appropriate Based on Vermont’s actual experience and regional experience, where appropriate Actuary certifies a range of rates, based on the benefits authorized and appropriated by the Legislature each year Actuary certifies a range of rates, based on the benefits authorized and appropriated by the Legislature each year State establishes the actual premium payment amount within the certified range State establishes the actual premium payment amount within the certified range

11. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 11 MCO Investments Each year, there will be state health care investment opportunities, depending on the difference between the actual program expenditures and the premium amount Each year, there will be state health care investment opportunities, depending on the difference between the actual program expenditures and the premium amount MCO savings can be invested in programs consistent with the following parameters: MCO savings can be invested in programs consistent with the following parameters: Reduce the rate of uninsured and/or underinsured in Vermont; Reduce the rate of uninsured and/or underinsured in Vermont; Increase the access of quality health care to uninsured, underinsured, and Medicaid beneficiaries; Increase the access of quality health care to uninsured, underinsured, and Medicaid beneficiaries; Provide public health approaches to improve the health outcomes and the quality of life for Medicaid-eligible individuals in Vermont; and Provide public health approaches to improve the health outcomes and the quality of life for Medicaid-eligible individuals in Vermont; and Encourage the formation and maintenance of public-private partnerships in health care. Encourage the formation and maintenance of public-private partnerships in health care.

12. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 12 MCO Investments continued Using these parameters, examples of programs in which the MCO can invest include: Using these parameters, examples of programs in which the MCO can invest include: Respite programs Respite programs Tobacco Cessation Tobacco Cessation Emergency Mental Health Services Emergency Mental Health Services Newborn Screening Newborn Screening Substance Abuse Services Substance Abuse Services Savings as a result of these health care investments will help us to afford our current Medicaid programs and expand to new populations Savings as a result of these health care investments will help us to afford our current Medicaid programs and expand to new populations

13. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 13 GC Waiver –v– Block Grants Block Grants Global Commitment A defined amount of funding, often less than traditionally spent in exchange for total flexibility A defined amount of funding, often less than traditionally spent in exchange for total flexibility Funds are not tied to amount of services provided Funds are not tied to amount of services provided Bush Block Grant: automatically decreased federal support to states over time Bush Block Grant: automatically decreased federal support to states over time Amount can be increased or decreased at any time Amount can be increased or decreased at any time A ceiling amount available for reimbursement based on historical expenditure growth A ceiling amount available for reimbursement based on historical expenditure growth Funds based on program expenditures and costs Funds based on program expenditures and costs Waiver ceiling increases annually based on 9% inflationary trend Waiver ceiling increases annually based on 9% inflationary trend Ceiling is permanent for 5-year term of agreement Ceiling is permanent for 5-year term of agreement Additional, but limited flexibility to operate program Additional, but limited flexibility to operate program

14. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 14 Waiver Savings Waiver savings = the difference between the Waiver ceiling (cap) and the premium amount paid to the MCO Waiver savings = the difference between the Waiver ceiling (cap) and the premium amount paid to the MCO If the state has general funds to draw down the federal funds, the state can propose new initiatives or populations for approval by CMS If the state has general funds to draw down the federal funds, the state can propose new initiatives or populations for approval by CMS If approved, these would be able to be included in the future years actuarially-certified rates for the MCO If approved, these would be able to be included in the future years actuarially-certified rates for the MCO

15. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 15 Summary 12345 Waiver Year Gross Expenditures Waiver Savings, or CNOM: Cushion above projected expenditures MCO Savings May be used for health-related expenditures under 4 broad parameters MCO Expenditures: Costs to provide existing services for existing populations Waiver Spending Limit (Cap) Actuarially Certified Capitation Rate

16. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 16 Organizational Structure

17. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 17 Organizational Structure Governor Legislature Agency of Human Services MCO (Office of VT Health Access) Medicaid Advisory Board Dept. of Disabilities, Aging and Independent Living  Long-term care  Home and Community- based Services  Developmental Services Department of Health  Mental Health  Substance Abuse Prevention and Treatment  Wellness/Prevention Initiatives Department of Education  School-based Health Services Department for Children and Families  Targeted programs for children and families IGA Organizations with specialized expertise for administering specific programs or initiatives approved by the legislature  Manages all Vermont Medicaid expenditures under capitated agreement  Oversees implementation of all approved policy and program changes  Adheres to all BBA MCO requirements and the terms and conditions of the 1115a Waiver  Administers the public health insurance programs (Medicaid, VHAP, Dr. Dynasaur) and pharmacy benefits  Through formal agreements, funds other organizations to provide specialty benefits Capitated payment for all Vermont Medicaid services Budget and Policy Recommendations Budget and Policy Approval

18. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 18 Authority for OVHA as a MCO FY06 Budget Bill approved the creation of OVHA as a Public MCO FY06 Budget Bill approved the creation of OVHA as a Public MCO Approval authorizes AHS to contract with OVHA to serve as a Public MCO Approval authorizes AHS to contract with OVHA to serve as a Public MCO OVHA must comply with the federal MCO requirements OVHA must comply with the federal MCO requirements

19. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 19 MCO Requirements Member Handbook Member Handbook Member Helpline Member Helpline Primary Care Home Primary Care Home Interpreter Services Interpreter Services Information about Advanced Directives Information about Advanced Directives Provider Directory Provider Directory Single Grievance and Appeal Process Single Grievance and Appeal Process Quality Assurance / Improvement Plans and Activities Quality Assurance / Improvement Plans and Activities Fiscal Reporting Fiscal Reporting

20. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 20 Vermont Experience with Public MCOs 1115 VHAP Waiver operated under an MCO model 1115 VHAP Waiver operated under an MCO model OVHA contracted with private health plans from October 1996 through April 2000 OVHA contracted with private health plans from October 1996 through April 2000 OVHA transitioned to a PCCM model, known as PCPlus OVHA transitioned to a PCCM model, known as PCPlus OVHA has operated under federal managed care rules for PCCM programs OVHA has operated under federal managed care rules for PCCM programs Because OVHA has been operating PCPlus, many managed care requirements already are met Because OVHA has been operating PCPlus, many managed care requirements already are met

21. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 21 Impact and Implementation Timelines

22. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 22 Program Design and Operations Provides Vermont with greater flexibility with regard to program design and operations Provides Vermont with greater flexibility with regard to program design and operations Program benefits in FY06 (and subsequent years) would continue as authorized by the Legislature Program benefits in FY06 (and subsequent years) would continue as authorized by the Legislature Departments will continue to receive appropriations through existing budget and legislative process Departments will continue to receive appropriations through existing budget and legislative process New flexibilities will be available to: New flexibilities will be available to: Cover health services not available under Title XIX Cover health services not available under Title XIX Explore alternative reimbursement approaches (e.g., case rates) Explore alternative reimbursement approaches (e.g., case rates) Invest funds in programs designed to improve health outcomes Invest funds in programs designed to improve health outcomes Encourage inter-departmental collaboration and consistency across programs Encourage inter-departmental collaboration and consistency across programs

23. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 23 Beneficiaries Will only experience changes if approved by the Vermont Legislature Will only experience changes if approved by the Vermont Legislature Does not authorize Vermont to change benefits for mandatory populations and mandatory benefits Does not authorize Vermont to change benefits for mandatory populations and mandatory benefits There is a 5% corridor for Vermont to make changes to the benefits provided to optional and expansion populations, if authorized by the Vermont Legislature There is a 5% corridor for Vermont to make changes to the benefits provided to optional and expansion populations, if authorized by the Vermont Legislature Program reforms approved by the Vermont Legislature that significantly increase or decrease program benefits or eligibility would require federal approval Program reforms approved by the Vermont Legislature that significantly increase or decrease program benefits or eligibility would require federal approval Some individuals previously not participating in PCPlus will be required to select a ‘medical home’ or PCP, pursuant to federal managed care requirements Some individuals previously not participating in PCPlus will be required to select a ‘medical home’ or PCP, pursuant to federal managed care requirements

24. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 24 Implementation Timelines October 1, 2005 October 1, 2005 Vermont Legislative approval (preliminary) to begin waiver implementation Vermont Legislative approval (preliminary) to begin waiver implementation Notification by CMS of Interim Premium Rates to be used until actuarial certification is completed and a rate is chosen by the State Notification by CMS of Interim Premium Rates to be used until actuarial certification is completed and a rate is chosen by the State IGA signed by AHS and OVHA IGA signed by AHS and OVHA Fiscal systems in place to draw federal funds under new arrangement Fiscal systems in place to draw federal funds under new arrangement November 17, 2005 November 17, 2005 Joint Fiscal Committee meets to Vote on Final Approval Joint Fiscal Committee meets to Vote on Final Approval Letter of Acceptance from State to CMS Letter of Acceptance from State to CMS December 13, 2005 December 13, 2005 Monthly Premium Amount Paid to the OVHA Established at $65,371,811 Monthly Premium Amount Paid to the OVHA Established at $65,371,811 By March 2006 By March 2006 IGAs signed between MCO and Departments IGAs signed between MCO and Departments Evaluation plan submitted to CMS Evaluation plan submitted to CMS Various Dates Various Dates MCO requirements implemented MCO requirements implemented

25. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 25 Bottom Line Establishes a 5-Year spending cap Establishes a 5-Year spending cap Includes a 9% Trend Includes a 9% Trend Allows for the continuation of Vermont expansions Allows for the continuation of Vermont expansions Allows benefit changes in a 5% Corridor Allows benefit changes in a 5% Corridor Places the State at risk for caseload, inflation, utilization Places the State at risk for caseload, inflation, utilization Provides flexibility regarding payment mechanisms, program re-structuring, etc. Provides flexibility regarding payment mechanisms, program re-structuring, etc.

26. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 26 Documents & Information Website: www.ovha.state.vt.us/globalhome.cfm

27. State of Vermont Global Commitment to Health Waiver Program Summary January 2006 27 Acronyms AHSAgency of Human Services CMSCenters for Medicare and Medicaid Services CNOMCosts Not Otherwise Matchable DSDevelopmental Services DSHDisproportionate Share Hospital FMAPFederal Medical Assistance Percentage FPLFederal Poverty Level FYFiscal Year GCGlobal Commitment GFGeneral Fund IGAIntergovernmental Agreement LTCLong Term Care MCOManaged Care Organization PCCMPrimary Care Case Management PCPPrimary Care Physician SCHIPState Children’s Health Insurance Program OVHAOffice of Vermont Health Access VHAPVermont Health Access Plan