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Medicaid Makeover Six Tough (and Unavoidable) Choices on the Road to Reform NASACT August 2006
©2006 Deloitte Consulting LLP 2 Medicaid Makeover - NASACT The Case for Focusing on Medicaid It’s sheer size and growth: –20% or more of most state budgets, and growing at super-inflationary rates Often the most audited program in state government –Frequently with significant audit findings Typically generates most of the payments made by a state government (in states that process their own claims) By most accounts, the most complicated and challenging program to run in all of government –Multiple, diverse stakeholders –Multiple, diverse beneficiaries –Federal and state governance requirements –Significant use of external contractors No-Brainer ^
©2006 Deloitte Consulting LLP 3 Medicaid Makeover - NASACT It’s the 800-Pound Gorilla
©2006 Deloitte Consulting LLP 4 Medicaid Makeover - NASACT State Medicaid Programs and the Fortune 500 …and 17 additional states would appear in the top 500.
©2006 Deloitte Consulting LLP 5 Medicaid Makeover - NASACT The Current Medicaid Landscape Medicaid and healthcare are the fastest-growing budget items for states –Federal matching funds give states incentives to expand their programs Recent federal legislation (the 2005 Deficit Reduction Act) gives states much-needed flexibility to redesign their programs –Kentucky, West Virginia, Idaho (and others?) are taking advantage of this flexibility –Many other states (South Carolina, Florida, Massachusetts, Vermont, California, and others) are implementing other major reforms
©2006 Deloitte Consulting LLP 6 Medicaid Makeover - NASACT The Many Plagues of Medicaid Rising Program Costs Program Complexity -Each state maintains its own eligibility requirements, benefits, etc. -Structural overhead of two levels of government oversight (federal and state) -Too Many Cooks in the Kitchen -Legislators, providers, program directors, etc. are all interested stakeholders who seek involvement in potential program change Aging Technology -Upgrading MMIS Systems is both expensive and risky Medicaid 24 x 7 -Beneficiaries are becoming more computer savvy and will soon expect the same convenience available in other areas (e.g. banking, shopping, etc.) Ripple Effect of a Boulder in a Swimming Pool -Because many other state programs receive their funding in large part from Medicaid, acting in many ways like private providers of services, those programs, and the state budgets that supplement them, suffer whenever Medicaid suffers.
©2006 Deloitte Consulting LLP 7 Medicaid Makeover - NASACT Six Tough Choices States Must Confront 1. What Should We Be Doing – and Not Doing? 2. Make or Buy? 3. Traditional or Expansive Benefits? 4. Which Levers to Pull to Restrain Costs? 5. Passive or Active Role in Influencing Health Care Costs? 6. Consumer Engagement in Reform?
©2006 Deloitte Consulting LLP 8 Medicaid Makeover - NASACT 1.What Should We Be Doing – and Not Doing? What should be the core functions of our state’s Medicaid program? –Claims processing –Policy-setting –Financial stewardship –Contract management “What kind of program do we really want to be?” Florida example: –Florida is rethinking its role in Medicaid, moving from claims processor to a policy and contract management role –Florida Governor Jeb Bush’s new Medicaid Initiative, Empowered Care, would allow health care networks to develop their own health care plans to compete for Medicaid patients –Each provider network would receive a set premium every month for each Medicaid beneficiary covered, with the amount varying to reflect each beneficiary’s individual risk, thereby shifting the burden of cost control and fraud reduction to participating networks
©2006 Deloitte Consulting LLP 9 Medicaid Makeover - NASACT 2. Make or Buy? Will our state directly manage the services in our program or will we contract for them? Which services will we contract for? States should take a strategic view and ask whether some functions can be better performed by partnering with private organizations Texas example: –Texas outsources most of the operations of its Medicaid program, including claims processing, Medicaid Management Information Systems (MMIS) administration, provider and client relations, third-party liability and recovery, drug program management, client enrollment, client outreach and education, and (soon) even eligibility determination Wisconsin example: –Wisconsin current uses EDS as its MMIS operator, claims processor, and fiscal agent, and the state is looking to expand the role of HMO’s The predominant majority of states use private sector companies to, at a minimum, maintain the state’s MMIS system, and most also use vendors to perform other functions
©2006 Deloitte Consulting LLP 10 Medicaid Makeover - NASACT 3. Traditional or Expansive Benefits? Where does our state want to be on the continuum between “traditional” Medicaid benefits and coverage and free health care for all low-income residents Tennessee example: –In 1994, TennCare was heralded as a national model for its unprecedented generosity and broad reach; its benefits even exceeded those of many private health plans –Unfortunately, TennCare was massively overburdened and soon had to revert to a more traditional Medicaid model Massachusetts example: –Governor Mitt Romney is undertaking a comprehensive health reform package that aims for universal coverage within Massachusetts –The uninsured who have incomes well above the poverty line will pay pre-tax premiums while those with incomes below the poverty line will gain insurance that functions more like traditional Medicaid programs
©2006 Deloitte Consulting LLP 11 Medicaid Makeover - NASACT 4. Which Levers to Pull to Restrain Costs? Which cost savings and policy levers will our state use to reduce, or at a minimum contain, the costs of our program? Potential cost levers to pull include: –Choosing the most cost-optimal program structure –Managing the optional populations served by the program –Managing the optional benefits provided by the program –Structuring reimbursement rates to provide cost-savings incentives and control provider costs –Identifying and implementing administrative and technological efficiencies –Implementing consumer choice and related mechanisms to secure quality and reduce unnecessary utilization of care *See graph on next slide for more detailed Medicaid expenditure growth information.
©2006 Deloitte Consulting LLP 12 Medicaid Makeover - NASACT Medicaid Spending Growth vs. National Averages
©2006 Deloitte Consulting LLP 13 Medicaid Makeover - NASACT 5. Passive or Active Role in Influencing Health Care Costs? Will our state move past simple program administration and use our Medicaid program to actively control the costs and quality of health care in our state? States must decide whether to invest in innovative arrangements (such as pooled purchasing deals) and more advanced contracting models to more systematically manage health care costs and outcomes Georgia example: –Realizing that prescription drug costs were quickly rising across state health plans, Georgia established the Department of Community Health to oversee health benefits for state employee health plans, Medicaid, the State Children’s health Insurance Program, and the Board of Regents –Multi-agency purchasing has enabled the state-contracted pharmacy benefit manager to negotiate deeper discounts and has generated significant savings
©2006 Deloitte Consulting LLP 14 Medicaid Makeover - NASACT 6. Consumer Engagement in Reform? To what degree will our state’s Medicaid recipients share the state’s burden of cost reduction and quality enhancement? States are experimenting with consumer-driven models of insurance and care management where more financial and decision-making responsibility is placed with consumers South Carolina example: –South Carolina’s new Medicaid choice initiative aims to sensitize beneficiaries to the cost of their health care and remove the economic incentive for patients to overuse services by establishing personal health accounts for most of South Carolina’s 850,000 Medicaid recipients.
©2006 Deloitte Consulting LLP 15 Medicaid Makeover - NASACT Medicaid Makeover Framework The following framework forms the foundation of The Medicaid Makeover: Medicaid Excellence Medicaid Administrative Excellence Medicaid Technology Excellence Medicaid Outcomes Excellence How well are state resources deployed and how well is the program operated? Are we maximizing health outcomes while minimizing client service costs? How well does our enabling technology support program goals? Program Goals and Performance Financial Stewardship Accountability to Stakeholders Quality Health Care Access to Care Direct Service Efficiency
©2006 Deloitte Consulting LLP 16 Medicaid Makeover - NASACT Medicaid Makeover Framework, cont. The following checklists are a key component of the framework: Administrative ExcellenceTechnology ExcellenceOutcomes Excellence Are we effectively evaluating program performance? Are we efficiently using all of our IT resources? Are our clients receiving quality health care? Does our program’s performance measure up to industry best practices? Are our systems enabling the timely and accurate delivery of services to stakeholders? Are prevention messages and services available and utilized? Are our operations aligned with our program strategy? Can we comply with changing federal reporting requirements and technical standards? Is client health improving as a result of being a part of a Medicaid program? What business processes do we manage, and how well do we manage them? Are we using new technologies to reduce the net cost of our program? Are our clients and providers satisfied with the service they receive? Is our program structured in the most effective and efficient manner possible? Are our systems providing the management reporting needed to inform decision-making? Are we saving money on initiatives that we hoped we would save? Do our staff resources, skill sets, and organization support our program strategy? Do we financially manage the program according to proven business principles?
©2006 Deloitte Consulting LLP 17 Medicaid Makeover - NASACT Next Generation Medicaid Current and upcoming changes in the Medicaid arena (including potential federal restructuring, dramatic demographic shifts, rising health costs, etc.) necessitate a need to re-think management of the program. The following principles will help state programs thrive into the next generation: Operate Medicaid less like a traditional government bureaucracy and more according to proven business principles –Long regarded as just one in a family of health and human services programs, Medicaid can no longer be managed in a typical bureaucratic fashion Focus on the core competencies required to run a modern Medicaid program –This step entails securing and fostering staff with skills in project management, contract management, and financial management Reassess and redirect resources to their best use –States should continuously reevaluate and deploy human and financial resources Arm managers with the information they need –Use state-of-the-art systems to cull information (not just data) from the program to support difficult policy decisions Rigorously measure performance and hold programs accountable –Clear performance expectations are critical to program success, but they require dedicated effort to develop and even more effort to continuously evaluate
©2006 Deloitte Consulting LLP 18 Medicaid Makeover - NASACT How Deloitte Works with States to Improve Medicaid Our current and recent Medicaid clients include: MaineTexasSouth CarolinaOhio PennsylvaniaWisconsinMassachusettsColorado IllinoisMichiganNorth Dakota Deloitte works with state Medicaid programs in the following areas: –Strategic program direction-setting –Cost savings identification and capture –MMIS procurement planning –MMIS implementation support (project management, IV&V, and QA) –Actuarial analysis and rate-setting –Operations improvement and organizational transformation –Medical management policies and programs to improve care and reduce costs –Eligibility systems and services
©2006 Deloitte Consulting LLP 19 Medicaid Makeover - NASACT For More Information… Matt Kouri Senior Manager, Deloitte Consulting Drew Beckley Principal, Deloitte Consulting Or Visit: marketplace.deloitte.com, select Industries, then Public Sector Home
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