THE URBAN INSTITUTE Genevieve Kenney 2009 ACAP Medicaid Managed Care Policy Summit Hotel Monaco – Washington, DC July 15, 2009 Health Reform for Children: Medicaid/CHIP or the Exchange?

THE URBAN INSTITUTE 2 Health Care Reform Current proposals include: New subsidies for coverage, new enrollment approaches, some type of mandate, creation of a health insurance exchange Shifting Medicaid/CHIP children into commercial plans participating in new exchange, perhaps with wrap around services provided by Medicaid/CHIP Increased provider reimbursement in Medicaid, new enrollment approaches, and the inclusion of new populations in Medicaid

THE URBAN INSTITUTE 3 Background Achieving universal coverage would have more profound effects on coverage status of non-elderly adults than on children Non-elderly adults are twice as likely as children to be uninsured Among low-income families, non-elderly adults are 2.5 times as likely as children to be uninsured But, close to 8 million children are uninsured, most of whom are already eligible for Medicaid or CHIP

THE URBAN INSTITUTE 4 Health Care Reform Will Benefit Some Children: Due to reductions in uninsurance among children—this will depend in large part on increasing participation among children already eligible for Medicaid or CHIP Due to reductions in uninsurance among parents—this could increase take-up of children in coverage and reduce unmet needs of their parents, which should improve children's health status, health care use, and general well-being

THE URBAN INSTITUTE 5 But Need to pay special attention to the millions of children who get coverage through Medicaid/CHIP These children number as many as 25 million They are disproportionately poor or near poor, black and Hispanic, and are more likely than other children to have health problems and to have parents with limited English proficiency – Almost half live in poor families – Over half are either black or Hispanic – They are nearly 5 times as likely as those with private coverage to be in fair or poor health – Medicaid/CHIP covers 36% of all kids with special health care needs Given their characteristics, children with public coverage are more likely than other children to require – Broader benefits – Greater protection from cost-sharing – Additional assistance obtaining needed care

THE URBAN INSTITUTE 6 Public vs. Private Coverage Reimbursement rates to providers tend to be higher under private as compared to public coverage Private benefit packages tend to be narrower than the broad benefit available under Medicaid – EPSDT – Medical necessity definition – Coverage of targeted services (e.g., transportation, interpretation, etc.) Private coverage tends to involve higher cost-sharing in the form of copays, coinsurance, and deductibles CHIP benefit packages and cost-sharing more closely resemble Medicaid as opposed to commercial coverage Some states have provided supplemental/wraparound coverage – Questions about administrative costs, communication issues, and cost shifting – But no published evidence on effectiveness of this coverage

THE URBAN INSTITUTE 7 There are deficits in quality/access for both children with public and private coverage But public coverage has been lower cost and more effective than private coverage at providing preventive care to low-income children

THE URBAN INSTITUTE 8 Potential Implications of Shifting Medicaid/CHIP Children into a Health Insurance Exchange Potential gains: – Higher provider reimbursement rates, hence improved access to care – Less vulnerability to state-level problems – Greater continuity of care – Greater coordination with parental coverage

THE URBAN INSTITUTE 9 Potential Implications of Shifting Medicaid/CHIP Children into a Health Insurance Exchange Potential losses: – Reduction in covered benefits A narrower definition of medical necessity Fewer covered screenings and preventive visits No assurance of meeting children’s individual needs for care Less assistance overcoming challenges in obtaining care – Increased financial burdens for families – Less cultural and linguistic competence in care delivery – Less accountable systems of care and coverage

THE URBAN INSTITUTE 10 Key Questions That Need to Be Addressed Do the current legal protections of Medicaid or CHIP continue to apply after reform legislation is passed? Which public or private entity is legally responsible for providing children with necessary care? If such entities fail to perform their duty, what remedies are available? If two separate systems (i.e, the exchange and Medicaid) are responsible for distinct sets of covered services, does each system have an incentive to deny care and to shift costs to the other entity? If Medicaid or CHIP provides wrap-around services to fill gaps in services offered by highly diverse private plans participating in an exchange, how will these supplemental services be customized to take into account variations in covered benefits?

THE URBAN INSTITUTE 11 Key Questions That Need to Be Addressed, Cont. How will plans ensure that, when CHIP and Medicaid children encounter limits on covered services, the parents learn about available wrap-around coverage? How easy will it be for low-income families to seek and obtain coverage of supplemental services and limits on cost-sharing needed by their children? What data-gathering and other monitoring mechanisms are established to track how well the system is working?

THE URBAN INSTITUTE 12 Options Could place these children into an exchange where plans are paid at commercial reimbursement rates AND have these plans provide a full set of benefits with EPSDT and Medicaid medical necessity standards and cost-sharing protections, but commercial plans may be ill-equipped to provide services needed by many of these families, so would need to monitor If children are moved into exchange but plans are paid lower than commercial rates and are not required to provide full benefits, should use demonstration projects to test wraparound structures and impacts of moving children into an exchange In addition, it is critical to make investments to improve access to high value care within Medicaid and CHIP and address problems facing children with private coverage

THE URBAN INSTITUTE 13 Conclusion Moving children from Medicaid/CHIP into private insurance entails a number of risks This is worrisome given that these children include vulnerable groups who are already at risk for worse outcomes than other children Ideally, health care reform would promote emotional, cognitive, and physical health of all children: – Address deficits in current system – Enhance children’s health and development to strength their capacity to be healthy, high-functioning adults

THE URBAN INSTITUTE 14 Kenney, GM and Dorn, S. “Health Care Reform for Children with Public Coverage: How Can Policymakers Maximize Gains and Prevent Harm?” Washington, DC: Urban Institute. June

THE URBAN INSTITUTE Genevieve Kenney Senior Fellow Health Policy Center The Urban Institute (202)