MCHB 2006 Federal/State Partnership Meeting

The Future of State MCH and Medicaid Partnerships

October 15-18, 2006

SARA ROSENBAUM: I think you know who I am now, so I'll go to the next slide. Good morning everybody. It's really nice to be here, it's been a long time since I've been at a Maternal and Child Health Bureau meeting, and it's great to look out on the crowd and see a number of familiar faces. I'm going to try and keep my remarks pretty brief. The reason I'm going to do that is because I think for a set of legislative reforms of this complexity, the more time there is for question and discussion, the better off everybody will be.

So, of course, as you heard, when you met at this time last year, this legislation was just coming together. The legislation was finally assembled at the very end of the first session of Congress, just at the Christmas break. Congress went home, came back, and passed the bill, which was signed into law on February of 2006. Hence, it has the bizarre situation that faces some bills of being called the Deficit Reduction Act of 2005 but passed in 2006. It became a law in 2006.

The bill is, of course, very large, very complex, and has many, many moving parts in it that affect children and adults generally. It is the first time in many, many years that Congress enacted Medicaid Legislation that reduces coverage and reduces benefits, and essentially, in a significant way, withdraws federal financial participation, and for that reason, it's a real groundbreaking bill. The sense is that we could face another round of Medicaid Reform Legislation when the Medicaid Commission files its final reporting. Congress reconvenes next year.

I should tell you that I come from a very specific point of view when it comes to Medicaid, which is everything that changes in the program, affects children. So I am talking with you today about several provisions that are labeled "Children's Provisions," but if eligibility benefits or other changes are made that even potentially have an adverse impact on adults, inevitably, in fact it rolls over on to children. Now, do I think that if children were separated from adults, this wouldn't be true? No. I think children are just part of a residency population, part of a budget. I don't think it's possible to, in a structural way, insulate children from the bad effects of law. I think children are lifted best when everybody is lifted.

So I have picked, sort of arbitrarily, a few provisions to talk with you about today. But this still goes way, way beyond what I'm addressing. So just to set a little bit of context for you, this is just a few warm-up slides that I'm sure you're all accustomed to at this point. This is a great picture from the Urban Institute showing you that coverage, employment-base coverage for children, as it has been for adults, is of course going in totally the wrong direction. They lost a lot of ground during the first part of this decade, and only because of Medicaid have children, up until this past year, kept their head above water, and of course, that's not happening anymore now either. Several hundred thousand children have lost their coverage for a variety of reasons; so all the numbers are going in the wrong direction.

I think it's also interesting to note just as an aside, that the Kaiser Commission on Medicaid and the Uninsured reported last week, that Medicaid spending is essentially flat. So what you have to keep in mind is that the Deficit Reduction Act changes happened in an environment in which children were already losing ground in the program and spending was totally flat. Often, of course, with entitlement legislation, we have the benefit of 20-20 hindsight and this is one of those cases.

This table is in here just to show you, its figure shows you that we're not going to reverse course any time soon on employer-sponsored coverage. Workers' salaries and general inflation are of course climbing at a much lower rate than employee benefits are climbing in terms of their cost. This is another way of making the same point with the cost of employer-sponsored coverage continuing to rise at rates far faster than Medicaid. There was simply no way for low and moderate-income working families to do much in the way of keeping their benefits. This is sort of a long-term slide that began in the mid-70s and has continued on.

I've included this slide for one reason and one reason only, if you look at the cost of "Family Coverage for Workers by Plan Type", you will see that the average for all plans in 2006 was about $11,500. I mean that is just a lot of money. It's a lot of money for most of us, and of course, it's affordable for most of us, because we have an employer contribution. If you don't have an employer contribution, there's no way you're going to be able to afford this benefit. If you're trying to buy it with post-tax income and it's not subsidized by an employer, you can forget it.

Look down at the bottom. This is in a group now. These are the best rates. Look at the family rate for High Deductible Health Plans. These much vaunted approach to coverage that is somehow going to bring healthcare cost within reach for middle-income and lower-income working families. Family coverage is running $9,500 annually. Again, if you don't have employer-sponsored coverage, with an employer kicking in half or better of the premium and you're getting tax exclusions for your part of the premium, you're really sunk.

So there is no magic bullet here. You can limit coverage to the point where people have extremely narrow benefits and are responsible for an enormous amount of their own coverage on an out-of-pocket basis, and you're still not going to get to the point where care is affordable. It's the underlying pressures on the system. This is not simply fixed by bringing in a new product.

I want to turn now to the Deficit Reduction Act. And I'm going to highlight, actually, four things, two in-depth, but I will mention as an aside, that one of the things in the act is a brand new and good benefit for moderate-income families who have children with very significant disabilities and whose coverage is not sufficient to meet the cost of care. Congress included at least a slice of the Family Opportunity Act to allow states to offer benefits for families with children with disabilities on a sliding premium basis, and I assume that this afternoon in your workshop, you'll spend a little bit more time on this. I really want to focus my time with you on four changes that unfortunately are not so good for children. And these four changes are changes that have already began to roll over all of you, I am sure, at least with respect to the first one and the fourth one, although the fourth one we're still waiting for guidance, but the first change is in full swing. And that is the change that requires that citizenship or legal resident status of the kind needed for Medicaid coverage be documented, both the citizenship and legal residence status and identity.

As I'm sure you are all aware, it is very hard for families, often, to meet these kinds of requirements. A passport is the document that really does the trick. Naturalization papers will do the trick, but you've got to be able to show a citizenship and identity. States are in various phases of implementation of this provision which is actually a reduction in federal financial participation, not an eligibility requirement, but it's--six of one half does in the other, that's my point with Medicaid. You can call it a reduction in federal financial participation; in the end, if states are not going to qualify for financing anymore, they're not going to be able to run their programs.

I assume that either this afternoon or at another point in this meeting, you will talk about ways that Maternal and Child Health Agencies can be involved in assisting families who are struggling to provide the paper that's needed to prove both legal status and identity. I will tell you. I'm a resident of Virginia, and already it's been reported that after having experienced about 1,500-children-a-month more to Medicaid, we're now experiencing a 3,500-child-a-month decline.

And this provision, because of the exemptions for dual enrollees and Medicare beneficiaries, this exemption ironically will fall most heavily on children and their parents. And the assumption--we have a couple of different studies underway, The Center on Budget and Policy priorities has studies underway--to try and get a fix on the impact of this, both in terms of people lost, and who subsequently come back on because they were simply missing documents, or safety-net providers affected of course by the loss of revenue.

I was in Rhode Island yesterday. I saw Dr. (inaudible) in the back of the room, and the Rhode Island Primary Care Association, which is that state's Community Health Center Association showed me pictures of lost revenues just following the first few months of implementation. People are just not connecting the dots yet. They were not clear as to why it was that the revenues are dropping so badly. And this is one of the reasons why.

The second issue I want to talk about that I'm going to come back to is this issue with Medicaid benefit flexibility, an effort to transform Medicaid from a defined benefit into a purchaser of what's known as Benchmark Benefit Plans with EPSDT as a supplement, bringing the program into line really with the State Children's Health Insurance Program in terms of benefit design.

The third change, Premiums and Cost Sharing, is a shift, a marked shift in child health policy. It is now possible for states to impose cost sharing on near-poor families and premiums and cost sharing on families who are on the, sort of the upper tier of near-poor. And even more significantly in some ways, to also institute provider enforceability policies, allowing providers to deny treatment to families who cannot pay their co-payments at the point of service.

And finally, which another issue I will come back to is Targeted Case Management. The changes there are very sweeping, and very important for Maternal and Child Health Agencies if you've not already been aware of them.

EPSDT and Alternative Benefit States. So, this of course is the issue in states that are considering moving in the direction of becoming an alternative benefit state. There are a series of ground rules for who can become, and which populations can be covered through an alternative benefit arrangement. I will tell you that the general direction on the part of CMS, Centers for Medicare and Medicaid Services, appears to be to allow states in fact to enroll virtually everybody who is covered through an Alternative Benefit Plan, but then give opt-out rights to people who are exempt. So, in other words, put everybody in and allow people to opt out. If that's the case, then the reach of an alternative benefit approach is far broader than just certain defined populations of low-income children and potentially parents.

There is really no guidance yet on the relationship between the use of an alternative benefit arrangement and EPSDT. The statute, we could sit here like Talmudic Scholars with a statute out in front of us for the next 10 years, trying to divine the bizarre intricacies of how they drafted this provision. But, what I'm going to try and do is cut through the intricacies of the drafting and tell you how I would recommend that you think about this. You've got to sort of get a fix on how you're going to think about this issue, if you're going to be a Tiered Benefit State. I mean an Alternative Benefit State. I would think about the relationship between the Alternative Benefit and EPSDT as a Tiered Benefit. Okay?

If you're familiar with benefit tiering, then you know that the way benefit tiering works is you'll have a basic benefit, and you can get supplemental benefits if you're able to show a need for the supplemental benefit using evidence that is satisfactory to the sponsor. That's essentially a tiered benefit.

Now, in fact, a lot of states have, in some ways, broken the EPSDT benefit over the years, not in the tiering arrangement, in terms of who carries the burden of proof, but in terms of the practicalities of EPSDT. And those are the states that use Managed Care Plans that cover less than all benefits in the plan contract. In a lot of states, there are certain benefits, particularly for children with very severe conditions that are not part of the Managed Care contract; you get them separately. But what the Deficit Reduction Act really permits is the tiering of benefit. The word used is "wraparound". Why they used "wraparound" is not defined anywhere, I don't know, but really in the end, the little bit of Guidance that has been issued so far suggests that it would be okay to buy children a standard benefit plan, like a benchmark benefit, and then if the child's caregiver can justify medical need, the child gets "EPSDT."

So, two things are going to be very important. One is that EPSDT is not a unified benefit. It's got to be disaggregated. Certain parts of the EPSDT benefit design, as far as I'm concerned, need to be in that first tier. And the most vital of these is the developmental assessment. Certainly vision, dental, hearing, immunizations are in exempt, but in EPSDT, what makes the assessment stage so powerful is the developmental assessment. If that's not in the first tier, if it's set off as the second tier, not only does that make it much more difficult for the child to get, because then it's only a supplemental coverage, but the child in essence has to show a medical need. Now, in my view, that is contrary to the statute. The developmental assessment is part of the assessment; there cannot be prior authorization of EPSDT periodic assessment services. So in that sense, any state that attempts to impose a medical necessity test on the developmental assessment, I believe, is acting contrary to the EPSDT coverage rules themselves. But as a practical matter, if the developmental assessment is not on that first tier, it's going to be very hard for a child to get a thorough growing developmental assessment.

The second thing that's terribly important is the medical necessity standard that a state uses to get to the tier. If a state moves to a very stringent medical necessity standard, then once again, the tier is basically off-limits. And the patient is not only going to have to meet that standard, but meet it potentially with the burden of proof that is essentially insurmountable. There is already at least one state that has tested out a very, very high standard of proof for EPSDT and adult services. The key, again, and there's a lot written on this, is to make sure that if a state is going to use benefit tiering, that the medical necessity standard be the standard that is the EPSDT standard, which is the amelioration of conditions early. We've developed definitions, other people have developed definitions, there's lots of play and lot of starting points.

Finally, on Targeted Case Management, the amendments to, really three things. One is to clarify the meaning of Case Management, one is clarify the meaning of Targeted Case Management, and there's a lot of words written about, sort of, refining what the definition means. Some of which may affect programs and services that you're running, some of which may not, but the biggest one is a new limitation on federal financial participation. It is no longer federally permissible for a state to bill the federal government for the cost of case management services furnished by other public programs, with the exception of the Indian Health Service and the Ryan Wyatt Care Act. States are expected, if they are using other public programs to furnish case management services to have those programs float on their own bottoms. They cannot bill for covered targeted case management services. That seems to be the meaning of the statute. There is no Guidance yet. Nobody really knows what this means, nobody really knows how many Title V, Title XIX arrangements this unravels, and there is really no more to give you insight on except that in terms of the issue I was asked to address, which is the MCH partnership with Title XIX that goes all the way back to 1965 and the original link in the statute between Title V and Title XIX, it is not clear whether CMS is going to interpret this amendment as essentially trumping the original statutory amendments linking heath agencies and Title XIX agencies and of course the 1967 amendments, the EDSPT amendments that linked Title V and XIX, whether state Title V agencies will now no longer be able to get third party financing for case management services is not yet answerable.

So I think I will stop there and hopefully leave some time for questions.