Author: Lucien Wulsin

The OSHPD data for 2008-2011 that we reported last week showed California’s hospital inpatient days and visits declining by 11 and 2.5% respectively while California’s community clinic visits increased by 20%, particularly for managed care patients. According to a recent Health Affairs blog[1], this is part of a national trend. It could augur well for states that most effectively implement the coverage expansions and payment and delivery system reforms of the Affordable Care Act.

The authors identified five factors at play: 1) coordinated, collaborative care, 2) standardized, evidence based care, 3) care redesign, 4) optimal service distribution and 5) value based payments. They pointed to effective models in Chicago, Southern California, Seattle and the Maryland, Virginia DC region. Minnesota was the biggest decline, reporting a decline of more than 13%. The Minnesota State Legislature and state health systems have pioneered new care and delivery system models, leading to a state ranking of # 4 in the nation for access, prevention, lower costs of care and avoidance of hospital use.[2]

This ITUP analysis uses data from the California Office of Statewide Health Planning and Development to asses safety net hospitals’ and clinics’ utilization and revenue. The charts and tables provide data by payer and display trends over the last several years. The data are available for hospitals (inpatient and outpatient utilization), hospital emergency room use, and community clinics.

For hospital inpatient and outpatient data:

For hospital emergency room data:

For safety net clinic data:

The summary is available for download:
Summary and Analysis of SB X1 3.pdf

This is the Administration’s effort to authorize bridge plans (i.e. Medi-Cal managed care plans that participate in the Exchange for limited purposes). HHS issued guidance that “bridge plans” could be authorized for two purposes: 1) allow individuals who lost their Medi-Cal coverage to retain their plan and provider network in the interests of continuity of care and 2) allow families with children in Medi-Cal or CHIP and parents who are in the Exchange to enroll the entire family in the same plan and provider network.[1] The goals are to provide continuity of care and coverage as well as to assure coverage of the entire family in a single plan and provider network.

This bill requires the Exchange to contract with “bridge plans”, requires bridge plans to be a Medi-Cal managed care contractor, meet Knox Keene requirements, meet federal “qualified health plan requirements”, have a 85% medical loss ratio and enroll only bridge plan eligible subscribers.[2]

The bridge plan eligible subscribers under the proposed legislation are the parents and other family members of Medi-Cal/Healthy Families children, those losing Medi-Cal, and those with incomes under 200% of FPL.[3] The first two groups of eligibles are know as the “narrow bridge” and are expected to be readily authorized by the federal government.[4] The third tier is known as the “broad bridge” and is not authorized by the federal government.[5] Individuals in the first two tiers can only enroll in the Medi-Cal managed care plans with which they or their family members are already connected.

The bill exempts bridge plans from the requirements to offer all five tiers of coverage and from the requirements to market their plans inside and outside Covered California.[6] The effect of this is that bridge plans would be able to market the most heavily subsidized plans (silver and bronze) to the most heavily subsidized individuals (those with incomes under 200% of FPL) and only through the Exchange (which will do the marketing for the bridge plans).

The bill exempts bridge plans from the guaranteed issue, guaranteed renewal, open enrollment, no pre-existing condition exclusions, no creaming or skimming or selective marketing requirements in the ACA and SB X 1 2 (Hernandez) and AB X 1 2 (Pan).[7] It is unclear why the Administration and the bridge plans would want to exempt the bridge plans from these vital consumer protections and highly unlikely that they would be approved by the federal government.

According to the Senate Health Committee analysis, bridge plans would bid after the rates for the full scope plans are established.[8] It is unclear why bridge plans should be given this particular bidding advantage.

The operating assumption is that bridge plans will be able to offer more affordable coverage because they are built on Medi-Cal provider networks whose rates and costs of care are significantly less than commercial insurance networks. This assumption is as yet untested and unproven. The fear and concern that some have expressed is that their lower premiums will devalue the subsidies available in the Exchange for other forms of coverage and have adverse financial impacts on all other subscribers than the bridge plan members.[9] The perceived advantage of bridge plans is that they will offer more affordable coverage for moderate-income individuals and families who otherwise would face affordability barriers.[10]

Download the report here:
Summary of FMAP for the Newly Insured.pdf

Summary of Final Federal Rules on FMAP (Federal Medical Assistance Percentage) to the States for the Newly Insured Medi-Cal Eligibles.

42 CFR 433, CMS 2327 FC, RIN 0938-AR 38

Under the ACA (Affordable Care Act), states receive 100% FFP (federal financial participation) for the new Medicaid eligibility categories for the first three years (2014, 2015 and 2016), then slowly phasing down, 95% in 2017, 94% in 2018, 93% in 2019, to 90% FFP in 2020 and thereafter. The new regulations implement this and give states guidance on how to document who are the new and who are the existing eligibles.

This is reasonably straightforward for new eligibility categories, such as the MIAs (medically indigent adults), but it also applies to other existing groups of Medicaid elgibles, such as: medically needy share of cost (Medicaid spend down), disability applicants, individuals newly eligible due to the elimination of the assets test, pregnant women, parents with incomes between the state’s 12/09 eligibility standards (e.g. for California 100% of FPL) and 133% of FPL, and 18-21 year old adults between 100 and 133% of FPL. For these latter groups, states will be eligible for 100% match for new eligibles between the 12/1/09 Medicaid (Medi-Cal) threshold eligibility and the ACA’s MAGI (Modified Adjust Gross Income) eligibility. The new regulations are summarized below.

• 42 CFR 433.10 (6) establishes the new matching rates at 100% for 2014-16, phasing down to 90% in 2020 and thereafter for newly eligible individuals.
• 42 CFR 433.10 (7 and 8) set the matching for expansion states (like Massachusetts, Vermont and New York that covered expansion eligibles pior to passage of the ACA); California is not one of those.
• 42 CFR 433.204 defines newly eligible individuals as an adult between the ages of 18 and 64 who is eligible under 42 CFR 435.119 and would not have been eligible for full scope benefits under the state’s plan (threshold methodology) in effect on December 1, 2009.
• 42 CFR 433.206 defines the threshold methodology.
  • A state’s Medicaid income eligibility limits and the average value of all state income disregards are combined to calculate the state’s income threshold. CMS will make a calculation and submit it to each state, which may either use the federal calculation or develop and submit its own calculation to CMS for approval.
  • When a parent, guardian or other caretaker relative applies, the state determines whether their income is above the threshold and below the federal MAGI limit (138% of FPL), if so the state receives 100% FFP.  If their income is below the threshold, the state receives its regular FMAP (50% in California).
  • An individual, who under the old rules was otherwise eligible for Medi-Cal, but only for partial benefits (e.g. pregnancy only or Medi-Cal share of cost, also known as Medicaid spend down, but not emergency only benefits) would be eligible for 100% FFP for the new full scope benefits under the new rules.
  • Individuals who are MAGI (Modified Adjust Gross Income) eligible, but are also applying for disability coverage, will be eligible for 100% FFP during the period after their application until their disability is determined.
  • States also receive 100% FFP for persons with excess resources (e.g. bank account, car or property) who would have been ineligible under the state’s 12/1/09 Medicaid plan, but are eligible under the ACA due to the elimination of the assets test. For example a family with $6,000 in savings for their child’s college education would have been ineligible for Medi-Cal for the parents, but their children would be eligible for Healthy Families or Medi-Cal; effective 1/1/14, the parents will be eligible for Medi-Cal or the Exchange. There are no requirements that the families’ eligibility is assessed under the new rules, then the old rules. The numbers of newly eligble families are determined by statistically valid sampling conducted post eligibility determination. This can be done based on a state data sample prior to 1/1/14 or a data sample post 1/1/14.
  • The state can also secure 100% FFP for spend down eligibles if an individual’s income was greater than the state’s medically needy income level (spend down) level but eligible for full scope Medicaid coverage. For example, families with spend down (share of cost) incomes between 67% and 138% of FPL will be new Medicaid (Medi-Cal) eligibles under the ACA and the state will receive 100% FFP. On the other hand, a family with income at 150% of FPL who have spend down (share of cost) Medicaid eligibility will be Exchange eligible. If they choose to stay on Medicaid spend down, the state will only receive a 50/50 match.

Summary: Assuming I understand these regulations correctly, it works as follows.

• For the MIAs (18-64), the state receives 100% FFP.
• For those applying for disability, the state receives 100% FFP for all care until an individual is determined eligible for disability coverage.
• For those parents, guardians and other caretaker adults with incomes above the 12/1/09 eligibility threshold and under 138% of FPL, the state receives 100% FFP.
• For those who would be ineligible due to resources but would now be eligible due to the MAGI no assets test, the state receives 100% FFP.
• For current spend down (share of cost) eligibles with incomes up to 138% of FPL, the state receives 100% FFP.

This assumes that California adopts the Medicaid expansion option as it has strong incentives to do.

Under the federal rules and guidance,[1] there will be no need for states to conduct dual eligibility tests, one under the 12/1/09 standards and another under the new 1/1/14 standards. The financial impact of the asset test will be assessed by a statistically random sample. The financial impact of the new MAGI income eligibility test is that income is assessed individually. To make this concrete, let’s assume the state’s income level is 100% of FPL and let’s assume the average disregards for persons with incomes from 75% to 100% of FPL is 5%, California would receive 100% FFP for parents and other caretaker adults with incomes from 105% (the Medicaid “threshold”) to138% of FPL (the ACA limit). The complexities of the old 12/1/09 standards and income disregards are eliminated by simply averaging the income disregards for people whose incomes fall within 25% below the state’s old income level.

The full report is available for download:
Summary and Analysis of Milliman Report.pdf

The Affordable Care Act makes a number of changes to assure access for everyone to the individual market; these include guaranteed issue, guaranteed renewal, no pre-existing condition exclusions, essential health benefits, refundable tax credits and the Exchange (a purchasing pool for individuals). Features such as guaranteed issue and no pre-existing condition exclusions increase the cost of coverage because they allow individuals who are excluded due to their medical condition to purchase coverage. Features such as refundable tax credits that pay both for the cost of premiums and for individuals’ out of pocket costs (copays and deductibles) reduce the costs of care and coverage. These changes impact the individually insured and the uninsured Californians with incomes in excess of 133% of the federal poverty level (FPL).

Milliman has recently released its actuarial analysis of the impact of these reforms on the California individual market. California’s existing regulation of the individual market is quite minimal as compared to other states; this allows for lower premiums and more frequent exclusion of individuals with some form of medical condition or medical treatment.

The following chart displays the small employer and individual underwriting reforms that are contained the Assembly Bill X1 2 and Senate Bill X1 2.

The following paper provides ITUP’s Commentary on Assembly Bill X1 2 (Pan) and SB X1 2 (Hernandez), health care reform bills that will help protect consumers and expand coverage.

We are within seven months of launch when up to 6 million uninsured Californians can begin to enroll in coverage, when two million private individually insured Californians can enroll in more affordable coverage and when all small employers and their employees will have a wider choice of coverage options. So much has been done at the national and state levels. It has taken us a century to get here, but this has been a terrific start and we should celebrate together.

We should celebrate California’s leadership in their commitments to implement coverage for all California citizens and legal permanent residents. We must urge and hope that our leaders will move more swiftly in implementing the full scope of the reforms: improvements in the low reimbursement rates for primary care; simplification, modernization and expansion of Medi-Cal program coverage for working parents and other adults (the MIAs) and greater commitments to make the Exchange a dynamic purchaser offering better, more affordable coverage for small businesses. We must particularly thank our federal leaders for their steadfast courage and commitment to see this through.

The following paper provides ITUP’s Commentary on Assembly Bill X1 1, which was introduced in the California Assembly by Speaker John A. Perez, and Senate Bill X1, which was introduced in the California Senate by Senator Ed Hernandez and Senate President pro Tempore Darrell Steingberg.

It appears increasingly likely that Congress and the President will not reach agreement on preventing the sequestration cuts, but let us not yet lose hope that they will do so. So we should at least understand what they are. The total is $1.1 trillion over the next 10 years. For this year, about $85 billion will be cut.

The cuts are apportioned equally between defense and domestic discretionary spending plus Medicare. “Domestic discretionary” means programs like WIC, Head Start, TSA, the FBI, and food inspections.

Defense will be cut by 10% this year and declining amounts in future years (e.g. 8.5% in 2021). Medicare payments to doctors, hospitals, nursing homes and other providers will be cut by 2% a year; services will not be eliminated and seniors and the disabled will not be cut off the program. Entitlement programs like Social Security, Medicaid, SSI (Supplemental Security Income), TANF (Temporary Aid to Needy Families) and Food Stamps will not be cut. Discretionary domestic will be cut by 7.8% this year, declining to 5.5% in 2021.

Who gets cut by how much this year? NIH (National Institutes of Health) is cut $1.6 billion, CDC $323 million, and FDA $206 million. Head Start is cut $406 million and special education is $840 million. Public Housing is cut $1.94 billion and 600,000 women and infants will be cut off WIC. Long-term unemployment benefits would be cut by 9.5% for 3.5 million long-term unemployed workers.

GDP growth will be slowed. By about 0.6%, in other words if the economy was scheduled to grow by 2%, it will now grow by 1.4%.

Where are the parties? Democrats and President Obama have suggested a mix of revenue increases by closing tax loopholes and domestic and defense cuts. Republicans have suggested exempting defense from the cuts and adding domestic entitlement programs such as Food Stamps and Medicaid to the list of programs to be cut.

Prepared by: Lucien Wulsin, ITUP,
February 26, 2013

See CBO, Estimated Impact of Automatic Budget Enforcement Procedures Specified in the Budget Control Act (CBO, September 12, 2011; and http://www.businessinsider.com/sequestration-cuts-2013-2#up-to-38-million-people-receiving-emergency-unemployment-compensation-benefits-will-see-their-benefits-slashed-by-as-much-as-94-percent-13 and http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/20/the-sequester-absolutely-everything-you-could-possibly-need-to-know-in-one-faq/