During the Medicare open enrollment period, which runs from October 15 to December 7 each year, beneficiaries can enroll in a plan that provides Part D drug coverage, either a stand-alone prescription drug plan (PDP) as a supplement to traditional Medicare, or a Medicare Advantage drug plan (MA-PD), which provides all Medicare-covered benefits including drugs. Of the nearly 41 million beneficiaries enrolled in Part D plans, about 6 in 10 are in PDPs and the rest in MA-PD plans.¹  This issue brief provides an overview of the 2017 PDP marketplace,²  based on our analysis of data from the Centers for Medicare & Medicaid Services (CMS).³  Key findings include:

• The average monthly PDP premium in 2017 will increase by 9 percent from 2016, to $42.17 (weighted by 2016 plan enrollment). This estimate includes premiums for both basic and enhanced PDPs, assumes current PDP enrollees remain in their same plan, and does not make assumptions about plan choices by new enrollees for 2017. The average Part D PDP deductible is projected to rise by 7 percent.
• PDP premiums will continue to vary widely across plans in 2017, as in previous years. Among the ten PDPs with the highest enrollment, average premiums in 2017 will range from a low of $16.81 per month, or $202 annually, for the Humana Walmart Rx PDP to a high of $71.66 per month, or $860 annually, for the AARP Medicare Rx Preferred PDP—an annual premium difference of $658 (Figure S1).

• Average PDP premiums will continue to vary across states in 2017, from a low of $31.27 in New Mexico to a high of $50.95 in New Jersey. Between 2016 and 2017, enrollees in some regions will see larger premium increases than in others, with average PDP premiums increasing by 6 percent or less in seven regions, but by as much as 18 percent in Arizona and 20 percent in California.
• Virtually all PDPs in 2017 have five cost-sharing tiers, as in recent years, but specific cost-sharing amounts vary widely across PDPs. Nearly all PDPs charge coinsurance for higher-cost specialty and non-preferred drugs, which usually results in enrollees paying higher out-of-pocket costs than when plans charge copayment amounts. About one-third of PDPs charge $0 for preferred generics to encourage use of these drugs.
• Medicare beneficiaries in each region will have a choice of 22 PDPs, on average, in 2017—fewer than in any year since 2006—yet still a substantial number of PDP options.
• On average, beneficiaries receiving the Low-Income Subsidy (LIS) will have a choice of 7 premium-free PDPs in 2017; 1.4 million low-income beneficiaries who are eligible for premium-free Part D coverage will begin paying Part D premiums in 2017, averaging nearly $24 per month or $286 per year, if they do not switch plans or are not reassigned to a new plan by CMS.

Part D Plan Availability

In 2017, beneficiaries across the country continue to have a substantial number of Part D plan choices.

• The average beneficiary will have a choice of 22 PDPs in 2017, down from 26 in 2016 and 55 at the peak in 2007 (Figure 1).⁴  This count includes two plans per region that are under sanction and thus not open to new enrollment. In 2016, beneficiaries had access to 16 Medicare Advantage prescription drug plans, on average.

• The number of PDPs per region in 2017 will range from a low of 18 PDPs in Alaska to a high of 24 PDPs in five regions (Figure 2; Appendix 1, Table A1). The number of plans is lower in every region compared to 2016; the largest reduction in 2017 (six PDPs) is in South Carolina, the smallest (one PDP) is in Alaska.

• A total of 746 PDPs will be offered nationwide in 2017, down by 16 percent from the 886 PDPs offered in 2016 and the lowest number of PDPs in the program’s history (Figure 3). The total number of PDPs in 2017 represents less than half the number offered at the peak level of 1,875 plans in 2007. The reduction in plan availability over time reflects both the cumulative effect of mergers among plan sponsors and the response to CMS policies that encourage plan sponsors to eliminate low-enrollment plans and to drop multiple PDPs that are not meaningfully different from each other.

• In 2017, there are eight plan sponsors offering 19 PDPs on a national basis. These sponsors account for 86 percent of all PDPs in the market and 93 percent of all PDP enrollees; most of the remaining PDPs are offered by Blue Cross Blue Shield plans in different regions (10 percent of plans, 7 percent of enrollment) or by other local or regional sponsors (4 percent of plans, but less than 1 percent of enrollment). The number of national or near-national plan sponsors is down from 18 in 2009, as a result of corporate acquisitions and some firms exiting the market after not achieving a substantial market share. In addition, more sponsors are now offering only two PDPs, whereas it was more common to offer three in the program’s early years.
• Plan counts for 2017 include two PDPs offered by Cigna in each region that are under sanction. In January 2016, the 68 PDPs offered by Cigna were placed under a sanction that banned marketing activities and all new enrollments. Its PDPs have about 950,000 enrollees in September 2016. The sanction will remain through the open enrollment period.

For 2017, only five new PDPs are entering the market (three new local PDPs in the Alabama/Tennessee and Michigan regions and the expansion by one plan sponsor into two additional regions), and 134 PDPs are exiting the program.⁵ 

• Among the 134 exiting plans, most are a result of market exits by two plan sponsors previously offering PDPs in most regions. United American, a plan sponsor since 2006, terminated its 91 PDPs; its 122,000 enrollees are being transferred to SilverScript PDPs unless they elect different plans. PDPs offered by Stonebridge Life in 30 regions under the Transamerica name (6,700 enrollees) are terminated. In addition, six PDPs offered by local sponsors (a total of 3,700 enrollees) left the program.
• PDPs previously offered by Symphonix Health, with about 400,000 enrollees, have been acquired by UnitedHealth. Some of these PDPs will operate under the Symphonix Value Rx name, while others will be rebranded by UnitedHealth as AARP MedicareRx Walgreens.

Premiums

National Premium Trends

The national average monthly PDP premium is expected to increase for the second year in a row—by 9 percent for 2017—after several years when premiums were essentially flat. Even if a number of beneficiaries switch or are reassigned to lower-premium plans for 2017, the average premium is likely to be higher in 2017 than in 2016, and the two-year increase over the 2015 average premium will mark a significant shift upward. Although beneficiaries and others tend to focus on premiums as the primary measure of plan cost, an individual’s total Part D costs are affected by the plan’s deductible, cost sharing, and whether their current drugs are on formulary.

• The projected average monthly PDP premium for 2017 will be $42.17 (Figure 4).⁶  This represents a 9 percent projected increase ($3.60) from the weighted average monthly premium of $38.57 in 2016, and a 62 percent increase from $26.04 in 2006, the first year of the Medicare Part D drug benefit. The 2017 estimate is weighted by September 2016 enrollment and assumes that beneficiaries remain in their current plan after the open enrollment period. It does not take into account the impact of the Low-Income Subsidy (LIS) which lowers or eliminates premiums for qualifying beneficiaries. The 62 percent increase in the weighted average PDP premium between 2006 and 2017 is significantly higher than the increase over these years in the medical care consumer price index (CPI) (45 percent) and the CPI for all items (23 percent).

• CMS reported that the average premium for standard Part D coverage offered by PDPs and Medicare Advantage drug plans will “remain stable” at an estimated $34 in 2017.⁷  The premium reported here differs from the CMS-published premium because it is based on PDPs only and includes PDPs offering both basic and enhanced coverage; enhanced plans typically have higher premiums than basic plans. Our premium estimate does not make any assumptions about plan changes by current PDP enrollees, reassignment of Low-Income Subsidy (LIS) enrollees by CMS, or enrollment decisions by new PDP enrollees.–In prior years, the average premium calculated after taking into account enrollment decisions made during the open enrollment period has been 4 percent to 6 percent lower than the projection made assuming beneficiaries remain in their current plan. The difference is a result of existing enrollees switching to a lower premium plan, new enrollees choosing low-premium plans, and reassignments of some LIS beneficiaries to cheaper plans. For example, the weighted average premium in February 2016, after plan elections for 2016 went into effect, was $39.21, which is about 5 percent ($2.25) below the projected premium of $41.46 calculated prior to enrollment changes.⁸  Applying a similar adjustment to our projected premium for 2017 would produce a lower average premium after open enrollment, but one that would still be higher than in any previous year.

• The weighted average premium in 2017 for enhanced benefit PDPs ($57.13) is much higher than for PDPs offering the basic benefit ($31.81), assuming no change in enrollment.⁹ 
• Beneficiaries who qualify for the Low-Income Subsidy pay reduced premiums, net of the subsidy; they pay no premium if they select a benchmark plan, as described below. Taking into account these LIS subsidies, nearly half (46 percent) of all PDP enrollees will pay a monthly premium of less than $20 in 2017, assuming no plan changes (Figure 5). Because of the subsidy, 92 percent of LIS enrollees are expected to pay premiums of less than $20 per month in 2017. By contrast, only 16 percent of non-LIS enrollees will have premiums this low.

• Fully one-third of all PDP enrollees receive drug coverage for no premium because of the LIS. But one quarter of all current PDP enrollees will pay $60 or more for monthly premiums in 2017 if they do not change plans.
• A growing share of PDP enrollees are paying premiums that are well above the national average. In 2017, over one-third of PDP enrollees not receiving the LIS (40 percent) are projected to have premiums of at least $60 per month if they stay in their current plans—a substantial increase from the 31 percent of enrollees paying premiums at this level in 2016 (Figure 6). Among them, nearly 470,000 (4 percent of non-LIS enrollees) are projected to pay premiums of at least $100 per month. By contrast, 16 percent of these PDP enrollees are scheduled to pay premiums of less than $20 per month.

Premium Variation and Changes for PDPs with the Most Enrollees

PDP premiums will continue to vary widely by plan in 2017, as in previous years (Figure 7, Table 1).

• Among the ten PDPs with the highest enrollment, average PDP premiums in 2017 will range from a low of $16.81 per month, or $202 annually, for the Humana Walmart Rx PDP to a high of $71.66 per month, or $860 annually, for the AARP MedicareRx Preferred PDP.
• Humana Walmart Rx has the lowest premium in every region in 2017. Nationally, the new PDP from UnitedHealth—AARP MedicareRx Walgreens—has the second lowest premium ($22.45). Several other national plan sponsors (Cigna, EnvisionRx, SilverScript, and UnitedHealth) offer PDPs with premiums under $20 in some regions.
• At the high end, 26 PDPs have premiums of at least $125 per month. The highest is $179 for Anthem Blue MedicareRx Premier PDP in Colorado. None of these PDPs, which are mostly offered by sponsors that serve only one region or a few regions, has more than 40,000 enrollees in 2016.

Changes to premiums from 2016 to 2017, averaged across regions and weighted by 2016 enrollment, also vary widely across some of the most popular PDPs (Table 1). These variations reflect factors such as higher premiums in older plans and substantial geographic variation.¹⁰  Although variation in benefits offered is also a factor, premium variation persists even among PDPs that offer benefits actuarially equivalent to the basic benefit defined in law.

• Average premiums for five of the ten largest PDPs will increase for 2017, by about $7 per month on average. In all five PDPs, the increase is at least 10 percent—higher than the increase in the national average premium. For two of these PDPs (SilverScript Choice and Aetna Medicare Rx Saver) the increase is at least 20 percent. Because both of these PDPs have below-average premiums, the dollar increase is smaller than some higher-premium PDPs.
• The highest increase, in percentage terms, is for SilverScript Choice, the plan with the most enrollees in 2016 (4.2 million). Premiums for this PDP have generally been flat over its history, and the premium remains well below the national average. But average monthly premiums for enrollees who want to stay in this plan in 2017 will rise 28 percent, from $22.78 to $29.12.
• Enrollees in the second largest PDP, UnitedHealth’s AARP MedicareRx Preferred (3.1 million enrollees), will face an 18 percent increase in the average monthly premium, from $60.79 to $71.66. Of the ten most popular PDPs, this plan is projected to have the highest monthly premium in 2017. In 2016, Humana Enhanced had the highest weighted average monthly premium among the top ten plans.
• The other five of the largest PDPs are lowering premiums modestly for 2017, by about $2 per month on average. Among these five PDPs are all three of Humana’s PDPs; for example, the average monthly premium for Humana Walmart Rx PDP will decrease by 9 percent for 2017, from $18.40 to $16.81.

Enrollees in some of the most popular PDPs could see larger or smaller premium increases than the national average, depending on the region where they live.

• The premium for UnitedHealth’s AARP MedicareRx Preferred PDP will be 6 percent higher in Oklahoma but 28 percent higher in Arizona (Figure 8). The range in how much premiums will change is even greater for CVS Health’s SilverScript Choice PDP, which will be 8 percent lower in Hawaii but 38 percent higher in New Mexico.

Monthly premiums for the most popular PDPs available since the start of the Part D program in 2006 have changed in different ways (Table 1).

• The average premium for Humana Enhanced PDP, with 980,000 enrollees in 2016, is more than four times higher than it was in 2006 (despite a modest decrease in 2017), having increased from $14.73 to $64.23.
• The average premium for UnitedHealth’s AARP Preferred MedicareRx PDP, the PDP with the second most enrollees in 2016 (3.1 million), has nearly tripled since 2006, from $26.31 to $71.66 in 2017.
• By contrast, the monthly premium for Aetna MedicareRx Saver, with 1.1 million enrollees in 2016, is 1 percent lower in 2017 ($31.35) than it was in 2006 ($31.53).

The entry of a new PDP from UnitedHealth for 2017 (AARP MedicareRx Walgreens) is the latest example of plans sponsors offering new PDPs at low premiums, presumably to attract new Medicare beneficiaries.

• The average premium for AARP MedicareRx Walgreens will be $22.45, the second lowest among all PDPs.
• Premiums for plans with relatively low premiums when entering the market often rise substantially after a few years. For example, AARP MedicareRx SaverPlus (also sponsored by UnitedHealth) entered the market with a $15.00 premium in 2013, but the premium has more than doubled to $37.34, on average, for 2017.
• Older plans, such as AARP MedicareRx Preferred and Humana Enhanced, are priced well above the national average, most likely as a result of retaining older enrollees who opt not to switch plans.

Premium Variation and Changes by Region

Average PDP monthly premiums, weighted by 2016 enrollment, will vary widely in 2017 across regions, along with the change in premiums from 2016 to 2017.

• Average PDP premiums will range from $31.27 per month in the New Mexico region (one of only three regions with an average under $35) to $50.95 per month in New Jersey and $47.24 in California (Figure 9; Appendix 1, Table A2). Two other large states (Florida and New York) also have projected average premiums above $45, well above the national average.

• Projected average premiums are higher in 2017 than in 2016 in every region, but the level of increase varies by region (Figure 10). For example, average premiums in Alaska are projected to rise by just 2 percent and by no more than 6 percent in seven regions. By contrast, average premiums will be at least 20 percent higher in California and 18 percent higher in Arizona.

Premium Increases and Decreases for Current Enrollees

Overall, fewer Part D enrollees are projected to face higher premiums in 2017, compared to the share of enrollees who were facing projected increases for 2016. At the same time, a larger share of enrollees face higher premiums in 2017 than lower premiums, if they stay in their current plans. (Figure 11).

• Among the 11.9 millionPart D PDP enrollees who are responsible for paying the entire premium (which excludes LIS recipients), about two-thirds (63 percent) are projected to have a higher premium in 2017 if they stay in their current plans, including 2.1 million (17 percent) who are projected to have a premium increase of at least $10 per month. Conversely, about 311,000 enrollees (3 percent) are projected to see their premiums decrease by $10 or more.
• For non-LIS enrollees facing a projected premium increase, the average monthly increase will be $8.84. Those projected to see lower premiums will experience a smaller change, on average (a reduction of $3.34).
• Taking into account all PDP enrollees, including the LIS enrollees whose premiums are fully or partially paid by the government, 65 percent are in plans in which premiums are projected to rise in 2017; this includes 12 percent in plans that will have an increase of $10 or more in their monthly premium in 2017. By contrast, only 3 percent of all PDP enrollees are in plans projected to have a premium decrease of $10 or more. 

Benefit Design

In 2017, for the third year in a row, all Part D PDPs will offer an alternative benefit design to the defined standard benefit, which has a $400 deductible in 2017 and 25 percent coinsurance for all covered drugs. Some plans modify or eliminate the deductible, and virtually all PDPs will have a benefit design with five tiers for covered generic and brand-name drugs.

Deductibles

The standard (maximum) Part D deductible is increasing by $40 in 2017 from $360 to $400, the same dollar increase as in 2016. The increase of $80 between 2015 and 2017 is greater than the net increase from 2006 to 2015. The large increase in the last two years results from a statutory formula that adjusts the amount each year based on the annual percentage increase in average per capita aggregate expenditures for covered Part D drugs. Other amounts for the standard benefit design parameters are increasing as well (Appendix 2).

• Nearly two-thirds of PDPs (62 percent) will charge a deductible in 2017, down from 67 percent in 2016 (Figure 12). But because beneficiaries are less likely to be enrolled in plans without deductibles, only 51 percent of Part D enrollees are in plans charging deductibles for 2017, if they do not change plans. Nearly half of all Part D enrollees are in plans that are increasing the deductible for 2017, mostly in accordance with the increase in the standard deductible.

• Most PDPs with a deductible will charge the standard $400 amount (48 percent), a somewhat lower share than in 2016. Another 15 percent of all PDPs have a deductible below the standard amount.
• Part D enrollees are projected to be in plans with a deductible of $195 in 2017, on average, up 7 percent from an average of $182 in 2016 (Figure 13). The weighted average deductible is up from $107 in 2006—an 82 percent increase, higher than the increase in the average premium.

Tiered Cost-Sharing Trends and Amounts in 2017

• For the third year in a row, all PDPs will use tiered cost sharing. In 2017, all but two PDPs (both local plans with few enrollees) will have five tiers: two for generic drugs, two for brand-name drugs, and one for higher-cost specialty drugs.¹¹  Five-tier formularies have been the most common type since 2013. Overall, PDP cost-sharing amounts in 2017 are relatively similar to 2016 levels.
• For generic tiers, the typical copayments are $2 for the preferred generic tier and $7 for the non-preferred generic tier.¹²  About one-third of PDPs charge $0 for preferred generics to encourage use of these drugs, whereas a few charge $5 or more. Copayments for non-preferred generics vary more widely—from $1 to $20.
• Use of coinsurance for preferred brand tiers has declined from 39 percent of PDPs in 2016 to 20 percent in 2017. For preferred brand tiers, the typical copayment in 2017 is $40 (20 percent coinsurance for those PDPs that use coinsurance), but copayments vary from $17 to $47.
• PDPs have increasingly charged coinsurance in place of flat copayments for non-preferred drugs (often more expensive drugs or those for which plans have not negotiated large rebates from manufacturers). In 2017, 98 percent of PDPs are using coinsurance for their non-preferred drug tiers (previously labeled non-preferred brands). The typical coinsurance PDPs charge for non-preferred drugs is 40 percent, but coinsurance rates range from 24 percent to 50 percent.
• Since 2006, nearly all PDPs have charged coinsurance for the specialty tier. In 2017, the threshold for drugs to qualify for placement on a specialty tier was increased to $670 for a one-month supply of the drug, the first such increase since 2008. For all PDPs, the specialty tier coinsurance ranges from 25 percent to 33 percent (the most allowed by CMS guidelines); most PDPs charge either 25 percent or 33 percent.

Tiered Cost Sharing in PDPs with the Most Enrollees

• Cost sharing for the ten largest PDPs varies across plans, and there are some notable changes between 2016 and 2017 (Table 2). Two of the largest PDPs (Humana Preferred and WellCare Classic) have a zero copayment for preferred generic drugs in 2017. Median copayments for non-preferred generics range from $2 to $14 among the ten largest PDPs.
• Eight of the ten largest PDPs charge copayments for preferred brands, varying from $21 (AARP MedicareRx Saver Plus) to $47 (First Value Part D Value Plus). One of the top PDPs (Cigna-HealthSpring Rx Secure) shifted in 2017 from 16 percent coinsurance to a $40 copayment for preferred brands.
• Coinsurance for non-preferred drugs varies in 2017 from 30 percent (AARP MedicareRx Saver Plus) to 50 percent, the maximum allowed by CMS guidance (SilverScript Choice and First Health Part D Value Plus).

• Six of the top PDPs use 25 percent coinsurance for their specialty tiers, the maximum allowed for plans with a standard deductible. The other four top PDPs change 33 percent coinsurance for specialty drugs.

The Coverage Gap

The coverage gap, or “doughnut hole,” has become a less salient feature of the Part D benefit design, as a result of changes made by the Affordable Care Act to eliminate the coverage gap by 2020. In 2017, manufacturer prices for brand-name drugs purchased in the gap phase of the benefit will be discounted by 50 percent, with plans paying an additional 10 percent of the cost and enrollees still responsible for 40 percent. Plans will pay 49 percent of the cost for generic drugs in the gap phase, with enrollees paying 51 percent. In 2017, most Part D plans will offer no gap coverage beyond what is required under the standard benefit.

• In 2017, about 72 percent of all PDPs will offer no additional gap coverage, a small decrease from 78 percent in 2016—meaning a slightly larger share of plans will offer some gap coverage in 2017 beyond what the basic benefit covers. The share of current enrollees who will have no additional gap coverage if they do not switch plans is 84 percent. One national PDP (Cigna-HealthSpring Rx Secure-Extra) added gap coverage, and UnitedHealth’s AARP MedicareRx Preferred added gap coverage for only the Florida and New York regions.

Tiered Pharmacy Networks

Most PDPs (85 percent) use tiered pharmacy networks. In these networks, enrollees pay preferred (lower) cost sharing for their prescriptions when they use selected network pharmacies and higher cost sharing in other network pharmacies.

• The share of PDPs with tiered preferred pharmacy networks in 2017 is essentially unchanged from 2016, but significantly higher than just a few years ago, when only a small share of PDPs used this type of preferred pricing (7 percent in 2011).
• The cost implications of tiered pharmacy networks for enrollees vary across PDPs in 2017.¹³  For example, the AARP MedicareRx Preferred PDP charges a $35 copayment for a preferred brand drug in a pharmacy that offers preferred cost sharing and $46 in another network pharmacy that does not offer preferred cost sharing. The Humana Walmart Rx PDP charges a $1 copayment for preferred generic drugs and $4 for non-preferred generics at a pharmacy with preferred cost sharing, compared to $10 and $20, respectively, at other network pharmacies where preferred cost sharing is not offered. These cost-sharing differentials are similar to 2016 levels.

Low-income Subsidy (Benchmark) Plans

In 2017, the total number of premium-free benchmark plans—that is, PDPs available for no monthly premium to Low-Income Subsidy (LIS) enrollees—will be slightly higher than in 2016, which was the lowest level in the program’s ten years (Figure 14; Appendix 1, Table A3).

• In 2017, 231 plans will be premium-free benchmark plans available for enrollment of beneficiaries receiving the LIS. This represents a modest increase of 5 benchmark plans since 2016, but a sizeable reduction compared to 2014 (121 fewer plans) and 2015 (52 fewer plans). But 25 of the benchmark PDPs in 2017 are offered by Cigna, which cannot accept new enrollees during open enrollment because it is under sanction.
• On average (weighted by enrollment), LIS beneficiaries have 7 benchmark plans available to them for 2017, or about one-third the average number of PDP choices available overall. All LIS enrollees can select any plan offered in their area, but if they enroll in a non-benchmark plan, they must pay some portion of their chosen plan’s monthly premium.
• Of the 231 benchmark plans in 2017, 24 plans qualify through the “de minimis” policy—fewer than the 57 de minimis plans in 2016. The de minimis policy makes it easier for plans to qualify by allowing them to waive a premium amount of up to $2 in order to retain their LIS enrollees.¹⁴ 
• Among the 2016 benchmark plans, 21 PDPs have lost their benchmark status for 2017 due to either higher premiums in 2017 or a lower regional benchmark amount for 2017. About 381,000 LIS beneficiaries (5 percent of LIS enrollment in PDPs in 2016) are enrolled in these 21 plans, meaning these beneficiaries may experience some disruption in their coverage for 2017. For 2017, 31 PDPs will newly qualify as benchmark plans, only one of which is entirely new to the Part D program.

Benchmark Plans by Region

The number of benchmark plans available in 2017 will vary by region, from just 3 benchmark PDPs in Florida (out of 20 PDPs overall) to 10 benchmark PDPs in Arizona and the Delaware/Maryland/District of Columbia region (out of 22 and 20 PDPs in these regions, respectively) (Figure 15).

• Benchmark plan availability will be unchanged in 15 of 34 regions between 2016 and 2017. Only three regions will experience a gain or loss of more than one benchmark plan (a gain of three in Hawaii, a gain of two in South Carolina, and a loss of two in Texas).

Benchmark Plans by Sponsor

The number of premium-free plans for LIS enrollees offered by the major Part D organizations has fluctuated substantially over the years (Figure 16).

• In 2017, about 60 percent of LIS PDP enrollees are in PDPs operated by just three plan sponsors (CVS Health, Humana, and UnitedHealth). All three sponsors offer PDPs that qualify as benchmark plans in at least 27 of the 34 PDP regions in 2017. UnitedHealth offers PDPs that qualify as premium-free in 27 regions in 2017, up from 15 in 2015. This increase is attributable, at least in part, to the acquisition by UnitedHealth of PDPs previously operated by Symphonix.
• For 2017, seven PDP sponsors will offer benchmark plans in at least half of the 34 regions.¹⁵  No sponsor will offer benchmark plans in all 34 regions in 2017; two sponsors (Humana and WellCare) offer benchmark plans in 33 regions, and two sponsors (CVS Health and Aetna) do so in 32 regions.

Impact of Benchmark Plan Changes for Low-Income Subsidy Enrollees

• About 1.4 million LIS beneficiaries—about one in six LIS enrollees in PDPs in 2016 (17 percent)—are enrolled in PDPs in 2016 that will not qualify as benchmark plans in 2017 (Figure 17). CMS will reassign those LIS enrollees who were randomly assigned by CMS to their current plan, and several states will help reassign those enrolled in their state pharmacy assistance programs (SPAPs).¹⁶  Effective for January 2016, CMS reassigned about one-fourth of those scheduled to pay a premium. Many other LIS beneficiaries who are currently not enrolled in plans that will be premium-free in 2017 must switch plans on their own or pay a premium if they remain in their 2016 plan. Those in the latter group will not be automatically reassigned by CMS because in the past they or someone assisting them made a choice to switch plans.

• On average, these 1.4 million LIS beneficiaries face PDP premiums that average $23.85 per month in 2017 ($286 per year) if they do not change plans or are not reassigned by CMS to new plans. In 2016, LIS beneficiaries in this situation paid $20.51 on average. Nearly half (48 percent) are projected to pay premiums of at least $20 per month, and 2 percent will pay at least $60 per month.
• Among the LIS beneficiaries who may pay premiums in 2017, 28 percent (381,000) are in benchmark plans in 2016; the remaining 72 percent (974,000) are currently enrolled in non-benchmark plans and thus paid a premium in 2016. No one in the latter situation will be eligible for reassignment by CMS to a premium-free plan. Over half (57 percent) of those who may pay premiums are in enhanced PDPs.
• About three-fourths of the 1.4 million LIS beneficiaries projected to pay premiums are currently enrolled in just five PDPs: AARP MedicareRx Preferred (30 percent), AARP MedicareRx Saver Plus (17 percent), EnvisionRx Plus (14 percent), Humana Enhanced (8 percent), and First Health Part D Value Plus (7 percent) (Figure 17). For two of these five PDPs, the affected LIS beneficiaries are projected to pay substantial premiums in 2017: $37.41 per month for the AARP MedicareRx Preferred PDP, and $32.16 for Humana Enhanced. Because they are enhanced PDPs, LIS enrollees in these two plans will not be reassigned to a new plan by CMS, so they must select a different plan in order to avoid paying these premiums.
• The number of LIS enrollees who will potentially pay a premium in 2017 unless they enroll in, or are switched to, benchmark plans (1.4 million) is down from the 1.9 million LIS enrollees who were in a similar situation at the time of open enrollment for 2016 (Figure 18). The number of enrollees in this situation varies annually depending on changes in the number of PDPs qualifying as benchmark plans and exiting the program.

• A larger share of LIS enrollees in Florida than in other regions will be required to pay premiums in 2017 unless they change plans (Figure 19). In part because one large plan lost benchmark status, 41 percent of Florida’s LIS beneficiaries are projected to pay a premium in 2017 unless they switch plans or are reassigned—much higher than the national average of 17 percent. In five other regions (Alaska, Georgia, Nevada, New Hampshire/Maine, and Virginia), a relatively larger share (at least 25 percent) of LIS beneficiaries are in this same situation. By contrast, a much lower share (less than 10 percent) of LIS beneficiaries will face premiums in 2017 in three regions (New Mexico, New York, and Pennsylvania/West Virginia).

Discussion

As Medicare Part D enters its twelfth year in 2017, a majority of Part D stand-alone drug plan enrollees face higher premiums if they stay in their current plans. Many also face higher drug deductibles and may pay higher cost sharing for their drugs, depending on the specific drugs they take and the formulary of the plan in which they are enrolled. In a program that offers drug benefits only through private plans, beneficiaries have a choice of 22 PDPs (on average) for which premiums differ by a large margin. Furthermore, the premiums they face vary based on the state where they live. Beneficiaries who receive the Low-Income Subsidy are guaranteed access to premium-free plans, but one in six will pay a premium unless they switch plans or are assigned to a different plan by CMS.

In 2017, two-thirds of PDP enrollees are facing premium increases, while the rest will see lower premiums if they stay in the same plan. In a year when higher drug costs are drawing much attention, it may seem noteworthy that some PDPs are lowering their premiums. For some plans, this may be a result of downward adjustments from previous premium increases that proved to be larger than necessary. The role of the federal reinsurance and risk corridors may also be a factor in how premiums are adjusted from year to year. Because the government reinsures 80 percent of drug costs in the catastrophic phase of the benefit for those enrollees who exceed the threshold, plans have a reduced incentive to manage spending on high-cost drugs. Risk corridors also mitigate the impact of increased costs. As a result, plan sponsors may be more strategic in setting PDP premiums at levels that can attract new enrollees.

In addition, some of the largest premium increases are for PDPs that have been in the program from its beginning; if they have a greater share of older enrollees, they may be experiencing a more rapid rise in drug costs relative to newer plans with a greater share of younger enrollees. Some of these same factors may help to explain the large variation across competing PDPs. Many of the highest-premium PDPs are those that have been in the program the longest.

Geographic variation in premiums is also a recurring pattern in Part D. Enrollees in some states will pay $10 to $20 more per month for the same plans offering the same benefits as those in other states. Although it is unclear exactly what accounts for such large premium differences for the same PDP across regions, possible factors include differences in enrollees’ health status that may not be fully captured in risk adjustment or different prescribing patterns in different regions. The level of market competition in a region is unlikely to be a major factor since mostly the same array of PDPs competes in each region.

Although premiums may be seen as the main measure of a plan’s cost, enrollees’ total out-of-pocket costs are driven as much or more by how much cost sharing they incur for the specific drugs they take, whether they face a deductible, whether their drugs are covered by their plan, and whether they are in a position to take advantage of lower cost sharing available at select pharmacies.¹⁷  These factors vary considerably across PDPs and not always in predictable ways. For example, among the PDP options offered by one plan sponsor, the higher-premium PDP has no deductible but charges higher cost sharing than the lower-premium PDP. Furthermore, if some drugs a beneficiary takes are not on the plan’s formulary, out-of-pocket costs are likely to be much higher than when their drugs are covered on formulary.

Beneficiaries have the opportunity to compare Part D plans each year during the open enrollment period. In doing so, they can take into account any recent changes in their own medications. Part D enrollees can compare the various plan features that will affect their costs, such as premiums, deductibles, cost-sharing requirements, tier placement, coverage requirements (such as prior authorization), and whether their usual pharmacy offers preferred cost sharing. The reduced number of PDPs for 2017 could make the process of comparing and reviewing plan options somewhat easier for beneficiaries to undertake, but the large number of PDP options in each region has historically discouraged some enrollees from reevaluating their choices.¹⁸ 

In 2017, despite the availability of premium-free (benchmark) plans, 14 percent of LIS beneficiaries will pay a premium, averaging $286 annually, if they do not switch to a different plan to avoid paying a premium. Some will be reassigned by CMS to new plans, but a large majority of this group is not eligible for reassignment in 2017. For some beneficiaries, it may be worth paying a premium to obtain better coverage for the drugs they take. But many others, especially those paying more than the average, would benefit from reviewing the premium-free PDPs available to them and switching plans.¹⁹ 

Finding ways to get more Part D enrollees engaged in comparing and reviewing plans and making changes that could save them money remains an ongoing challenge for CMS and policymakers. In 2017, some Part D enrollees who retain their current plans may benefit from lower premiums and lower overall costs. But more enrollees will face higher costs in their current plans and would benefit from the opportunity to shop during open enrollment.

Appendix 1: Information about Medicare Part D Stand-alone Prescription Drug Plans (PDPs) by State

Appendix 2: Medicare Part D Standard Benefit Parameters, 2006-2017

1. These enrollment counts include nearly 7 million Part D enrollees in employer-only plans, not otherwise included in this analysis. ↩︎
2. For analysis of the 2016 Part D marketplace, see Jack Hoadley, Juliette Cubanski, and Tricia Neuman, “Medicare Part D in 2016 and Trends over Time,” Kaiser Family Foundation, September 2016, available at https://modern.kff.org/medicare/report/medicare-part-d-in-2016-and-trends-over-time/. ↩︎
3. Centers for Medicare & Medicaid Services (CMS), “Medicare Advantage Premiums Remain Stable; Enrollment at All-Time High,” September 22, 2016; 2017 PDP, MA, and SNP Landscape Source Files and related files are available at http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/. ↩︎
4. The average is weighted by enrollment. ↩︎
5. In addition, the PDPs offered by WellCare changed contract numbers. ↩︎
6. Based on authors’ analysis using the CMS 2017 Part D Crosswalk file. ↩︎
7. CMS, “Medicare Projects Relatively Stable Average Prescription Drug Premiums in 2017,” available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-07-29.html. ↩︎
8. During 2016, the average premium continued to drop, most likely due to plan elections by newly eligible beneficiaries, who are likely to enroll in plans with below-average premiums. The average PDP premium fell from $39.21 in February to $38.97 in April to $38.57 in September, a net drop of 1.6 percent in seven months. ↩︎
9. The weighted average premium is projected to increase by 9 percent from $29.08 in 2016 to $31.81 in 2017 for basic-benefit PDPs and by 10 percent from $52.01 to $57.13 for enhanced-benefit PDPs. ↩︎
10. Jack Hoadley, Juliette Cubanski, and Tricia Neuman, “Medicare Part D in 2016 and Trends over Time.” ↩︎
11. Beginning in the 2017 plan year, CMS has suggested that Part D plans change the designation of the tier formerly labeled as non-preferred brand drugs to non-preferred drugs. This reflects the fact that some drugs in this tier are generics. Some plans label their tier for non-preferred generic drugs as simply generic drugs. ↩︎
12. We use weighted median amounts to characterize typical cost sharing. ↩︎
13. Because there are small differences in cost sharing for the same PDP across regions, PDPs in the Delaware/Maryland/DC region are used for these examples. ↩︎
14. Plans qualifying through the de minimis policy are eligible for new enrollees, but will not receive auto-assigned enrollees. ↩︎
15. These counts of benchmark plans include those designated as de minimis plans, which will not receive auto-assigned enrollees. ↩︎
16. Estimates for the total number of beneficiaries who are subject to paying a premium are based on plan data from the landscape and crosswalk files, together with CMS enrollment reports. Data from these files do not allow us to estimate how many will be reassigned. ↩︎
17. Jack Hoadley, Juliette Cubanski, and Tricia Neuman, “It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016,” Kaiser Family Foundation, December 2015, available at https://modern.kff.org/medicare/issue-brief/it-pays-to-shop-variation-in-out-of-pocket-costs-for-medicare-part-d-enrollees-in-2016/. ↩︎
18. Jack Hoadley, Elizabeth Hargrave, Laura Summer, Juliette Cubanski, and Tricia Neuman, “To Switch or Not to Switch: Are Medicare Beneficiaries Switching Drug Plans to Save Money?” Kaiser Family Foundation, October 2013, available at https://modern.kff.org/medicare/issue-brief/to-switch-or-not-to-switch-are-medicare-beneficiaries-switching-drug-plans-to-save-money/. ↩︎
19. Jack Hoadley, Laura Summer, Elizabeth Hargrave, Samuel Stromberg, Juliette Cubanski, and Tricia Neuman, “To Switch or Be Switched: Examining Changes in Drug Plan Enrollment among Medicare Part D Low-Income Subsidy Beneficiaries,” Kaiser Family Foundation, July 2015, available at https://modern.kff.org/medicare/report/to-switch-or-be-switched-examining-changes-in-drug-plan-enrollment-among-medicare-part-d-low-income-subsidy-enrollees/. ↩︎

Zika virus, a mosquito-transmitted infection that until recently had caused little concern, has become an urgent global challenge with widespread transmission occurring in the Americas, a region that had previously not seen any cases before 2015. Predictions that local transmission would spread to the continental United States by summer were met with the first cases identified in Miami in July.¹  Of particular concern is the discovery that Zika virus in pregnant women can cause microcephaly as well as other serious birth defects, prompting the World Health Organization (WHO) to declare a “public health emergency of international concern” on February 1^st of this year.² 

On the heels of the Ebola outbreak of 2014 – during which the U.S. government played a pivotal global role in the response including a request from the President and quick Congressional approval of more than $5 billion in emergency funds to combat Ebola^3 ,4  – the President sought to launch a similar response to Zika. On February 22, the President sent a request to Congress for almost $1.9 billion in emergency Zika funding for Fiscal Year (FY) 2016, which would support domestic (including U.S. territories) and international response efforts including: mosquito control (vector management), expanded surveillance of transmission and infections, research and development activities (vaccines, diagnostics, and vector control methods), health workforce training, public education campaigns, and maternal and child health programs.⁵  Following the President’s request, Congress considered several Zika funding bills but did not approve any additional funding until the end of September. While Congress debated supplemental funding for Zika, the Administration announced it had identified almost $700 million in existing sources (largely from unobligated emergency Ebola funding appropriated in FY 2015) to be used to address immediate Zika activity needs.^6 ,7 ,8  In September 2016, seven months after the President’s original request, Congress approved additional funding.

The Congressionally approved Zika funding, which was included as part of the “Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act” (P.L. 114-223), totals $1.1 billion.⁹  This brief compares approved funding levels to the President’s February 22^nd request, the House and Senate bills that passed each chamber in May, and a Conference Agreement that had been approved by the House in June, but was blocked in the Senate and opposed by the Administration (see Table 1). ^{10 ,11 ,12 ,13} 

• Total Funding Amount: Each of the proposals and the final bill provide different levels of funding for the Zika response. The final bill provides $1.1 billion for Zika, significantly below the President’s Request of $1.89 billion, but equal to the Senate and Conference Agreement levels (see Figure 1 and Table 2). The final funding level is nearly double the House bill ($622.1 million).

• New or Offset Funding: The President’s emergency request sought to obtain “new” appropriations for Zika (funding provided in addition to previous appropriations), rather than offset that funding from existing sources (e.g., through rescissions to prior appropriations). Each of the Congressional proposals and the final bill use a different approach with some requiring significant offsets to fund the Zika response (see Figure 2). For example, the House bill of $622.1 million would have been entirely offset through rescissions to previous congressionally approved appropriations ($352.1 million from unobligated emergency Ebola funding and $270 million from a non-recurring expenses fund at the Department of Health and Human Services). The majority of funding in the Senate bill would have been new with the exception of a $10 million rescission to unobligated emergency Ebola funding. Finally, the Conference Agreement would have been primarily funded through offsets (69%) through rescissions to emergency Ebola funding ($117 million), the non-recurring expenses fund ($100 million) at the Department of Health and Human Services (HHS), and the Affordable Care Act (ACA) ($543 million). The final bill, while including a number of rescissions, did not specify that these should be used to specifically offset Zika funding. If this is the case, the entire $1.1 billion would be new funding, although this remains to be seen.¹⁴ 

• Funding by Agency: Each of the Zika funding proposals and the final bill provide the majority of funding to HHS. The final bill provides more than 80% of funding to HHS, while the State Department and U.S. Agency for International Development (USAID) received the remaining funding (see Table 2). The final bill, the President’s request, and the original Congressional proposals, however, varied funding between agencies providing an indication of how each prioritized the U.S. response (see Figure 3). For instance, the Centers for Disease Control and Prevention (CDC) received the largest share of funding among all agencies (36%) in the final bill, similar to the President’s Request, Senate, and Conference Agreement, while the National Institutes of Health (NIH) accounted for the largest share of total funding (37%) in the House bill. The Public Health & Social Services Emergency Fund (PHSSEF) accounted for the second largest share (35%) in the final bill, whereas it would have received the third largest share in both the President’s Request (16%) and Conference Agreement (20%).

• Activities Supported: The President’s request included detailed information on the wide range of activities that would be funded both domestically and abroad through multiple agencies. These include: mosquito control (vector management) activities through CDC (both domestic and international) and USAID (international); research and development on vaccines, treatment, and diagnostics at NIH, CDC, FDA, and USAID; and support for maternal and child health activities through CDC (domestic only), the Centers for Medicare and Medicaid Services (CMS), and USAID (international). While the Congressional proposals provide much less detail, there are several notable differences from the President’s request, starting with the amount of funding, as discussed above. In addition, there are some substantive differences, such as $246 million requested by the President to support maternal and child health activities by CMS in Puerto Rico and other U.S. territories, which is not included in any of the Congressional proposals, and varying policy provisions (e.g., concerning whether prior spending for Zika can be reimbursed) as described below.
• Spending Period: Another difference between the proposals and final bill is the period of time for which funds would be available (see Figure 4 and Table 3). For instance, similar to the Conference Agreement, all of the funding in the final bill is available through FY 2017, whereas the majority of funding ($1.84 billion) in the President’s Request would have been available “until expended” meaning there would not have been a time limit on when the funds need to be spent. All funding in the House proposal would have been available only in FY 2016, the shortest period among all the proposals. The majority of the Senate proposal ($892 million) would have been available through FY 2017, with the remainder ($216 million; $211 million at USAID and $5 million at the State Department) available until expended.

• Policy Provisions: Each of the Zika funding proposals and the final bill included policy provisions placing restrictions on how the funding would be utilized. For instance, the final bill, the President’s Request, the Senate, and the Conference Agreement include some authorities to reimburse prior obligations associated with the Zika response; the House proposal does not include reimbursement authority. The Conference Agreement would have placed a restriction on some of the funding directed to HHS that, it had been argued, would have prevented funds going to organizations that provide family planning and reproductive health services, and would have re-directed funds from other health efforts, including from the ACA, cited as some of the reasons why Democrats in the Senate blocked the bill. The final bill did not include these provisions.¹⁵ 

1. Centers for Disease Control and Prevention (CDC). Florida investigation links four recent Zika cases to local mosquito-borne virus transmission; July 29, 2016. ↩︎
2. World Health Organization (WHO). WHO statement on the first meeting of the International Health Regulations (2005) Emergency Committee on Zika virus and observed increase in neurological disorders and neonatal malformations; February 1, 2016. ↩︎
3. White House. Letter from the President — Emergency Appropriations Request for Ebola for Fiscal Year 2015; November 5, 2014. ↩︎
4. Kaiser Family Foundation. The U.S. Global Health Budget: Analysis of Appropriations for Fiscal Year 2015; December 22, 2014. ↩︎
5. On February 8, 2016, the White House released u201cFact Sheet: Preparing for and Responding to the Zika Virus at Home and Abroadu201d providing initial details on the emergency Zika funding request that it would be submitting to Congress. The formal emergency funding request was sent to the House of Representatives on February 22. The Department of State released an emergency budget request justification with additional details on the Zika funding request on February 23, 2016. ↩︎
6. On April 6, 2016 the Administration announced it had identified $589 million in previously appropriated funding that could be used to support the Zika response effort. See White House Office of Management and Budget (OMB). Taking Every Step Necessary, As Quickly As Possible, to Protect the American People from Zika; April 6, 2016. ↩︎
7. On April 8, 2016, the Administration notified Congress of its intent to transfer unobligated FY15 emergency Ebola funding from the Economic Support Fund (ESF) to support Zika response efforts at CDC ($158 million, of which $78 million is for Zika and $80 million is for Ebola) and USAID ($137 million). See Congressional Research Service (CRS), Zika Response Funding: Request and Congressional Action; June 2, 2016. ↩︎
8. On August 11, 2016, the Administration announced its intention to reprogram $81 million in previous appropriations to support Zika vaccine research and development activities at HHS (see Congressional Research Service, Zika Response Funding: Request and Congressional Action; September 1, 2016). Of this $81 million, $76 million is in addition to the $589 million that had been previously identified (obtained through direct communication with White House Office of Management and Budget). ↩︎
9. P.L. 114-223, Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act; September 29, 2016. ↩︎
10. H.R.5243, Zika Response Appropriations Act, 2016; May 18, 2016. ↩︎
11. S. Amdt. 3900 to H.R. 2577, Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017; May 19, 2016. ↩︎
12. H. Rept. 114-640, Departments of Transportation, and Housing and Urban Development, and Related Agencies for the Fiscal Year Ending September 30, 2016, and for Other Purposes; June 23, 2016. ↩︎
13. Congressional Research Service (CRS). Zika Response Funding: Request and Congressional Action; September 30, 2016. ↩︎
14. Three of the rescissions included in the final bill (P.L. 114-223) had been included, at different levels, in the Conference Agreement. However, the final bill did not specify that these rescissions were to be used to specifically offset the Zika appropriations. ↩︎
15. Congressional Research Service (CRS). Supplemental Appropriations for Zika Response: The FY2016 Conference Agreement in Brief; July 14, 2016. ↩︎

Medicaid has long-played an important role in the U.S. healthcare system, accounting for one in every six dollars of all U.S. health care spending while providing health and long-term services and supports coverage to millions of low-income Americans.¹  Medicaid also plays an important role in states budgets as both an expenditure item and the largest source of federal revenue for states.

Since 2014, an improving economy and the implementation of the Affordable Care Act (ACA) have been the primary drivers of Medicaid enrollment and spending trends. Medicaid enrollment and spending peaked in FY 2015, the full state fiscal year for states implementing the ACA, but growth slowed significantly in FY 2016 and FY 2017. Across the country, states remain focused on the ACA, but also on other priorities such as payment and delivery system initiatives designed to control costs and achieve better health outcomes. These policy priorities are playing out in the context of broader state budgets and an economy that varies across states, with some states experiencing steady economic growth and others facing declines in state revenues.

This report provides an in-depth examination of Medicaid program changes in the larger context of state budgets in four states:

• Maryland
• Montana
• New York
• Oklahoma

These case studies build on findings from the 16^th annual budget survey of Medicaid officials in all 50 states and the District of Columbia conducted by the Kaiser Commission on Medicaid and the Uninsured (KCMU) and Health Management Associates (HMA). Additional research on budget activity, economic conditions, and other relevant health policy activity was collected to supplement survey responses.

Economic and Budget Outlook

Economy and State Revenues

Maryland’s economy has shown signs of continued recovery from the Great Recession. The state’s Gross Domestic Product (GDP) in 2014 was $350.3 billion, ranking 15th in the United States. Finance, insurance, real estate, rental, and leasing was the largest industry in Maryland, followed by government; professional and business services; and educational services, healthcare, and social assistance.²  The state had an unemployment rate of 4.3 percent in July 2016, down from 5.1 percent in July 2015 and below the U.S. average of 4.9 percent.³  The state experienced revenue growth of 3.9 percent in FY 2016 and projects 2.7 percent growth in FY 2017. This includes a projected 5.2 percent increase in revenues from the individual income tax in FY 2017 as well as a 2.1 percent projected increase in corporate income tax and sales tax revenue.⁴ 

State Budget

Governor Larry Hogan’s budget proposal of $42.3 billion for FY 2017 focused strongly on assuring that the state’s economic recovery stayed on track. Maryland faced $5.1 billion in accumulated structural deficit when the Governor took office in 2015, and addressing this deficit has been a primary focus for the Hogan Administration.⁵ 

The FY 2017 budget proposal included a tax and fee relief plan that would reduce general fund revenues in FY 2017 by $23.2 million. The budget proposal also included a 7 percent increase in state support for Medicaid. Even with these changes, the Governor’s proposed budget projected a surplus of $449 million for FY 2017 and an ending Rainy Day Fund balance of $1.1 billion. The Governor’s priorities included education, addressing transportation infrastructure, and spurring continued economic development. The budget as enacted included state general funds to offset the reduction in federal matching rate (from 100 percent to 95 percent FMAP) for the Medicaid adult expansion population, and reflected a 5.9 percent projected growth in total Medicaid expenditures.⁶ 

Update on the Affordable Care Act

Maryland Medicaid covers almost 1.3 million residents, including 258,000 adults who gained coverage as a result of Maryland expanding Medicaid eligibility under the Affordable Care Act. Like other states, Maryland saw higher growth than expected in the newly eligible adult population and some corresponding reduction in the rate of enrollment for other population groups, suggesting that some individuals were able to enroll through the income-only based category rather than depend on more complex eligibility under the aged, blind or disabled or other categories. The state is still evaluating the cost and utilization profile for the expansion adult population, which initially had a lower cost experience than the state expected.

Maryland experienced a slowing of enrollment during FY 2015 and FY 2016 due to resumption of eligibility redeterminations which had been temporarily delayed. Growth in the expansion population rebounded later in the fiscal year, and the state projects an enrollment increase of 17 percent in FY 2017 for this eligibility group.

Maryland implemented several new service options or grant programs under the ACA that target home or community based services for individuals with chronic or disabling conditions. In FY 2014, the state introduced health homes to support integration of physical and behavioral health care services for an estimated 15,000 individuals with behavioral health needs who are at high risk of additional chronic conditions. Health home providers can be psychiatric rehabilitation programs, mobile treatment service providers, or opioid treatment programs.⁷ 

The state also adopted the Section 1915(k) Community First Choice (CFC) benefit in FY 2014 to provide personal assistance services, accessibility adaptations, transition services and other supports for Medicaid beneficiaries requiring an institutional level of care. CFC services are provided in an individual’s home, including in assisted living settings. In FY 2015, the state implemented a new Section 1915(i) HCBS state plan option for children with Serious Emotional Disturbances (SED). This state plan option was implemented to sustain and refine the services that Maryland had offered under the Residential Treatment Center Waiver (RTCW).^8 ,9 

In addition, Maryland received a Balancing Incentive Program (BIP) grant, which provided an enhanced 2 percent rate of federal matching funds for all HCBS expenditures through September 30, 2015 to support state efforts to achieve a target that at least 50 percent of LTSS funds be spent on HCBS. By the second quarter of Federal FY 2016, Maryland reported that 60.5 percent of the state’s LTSS were for HCBS, a significant increase over the pre-BIP rate of 36.8 percent reported in Federal FY 2009.¹⁰  Other elements of BIP required development of a functional assessment for use in the state’s Medicaid LTSS programs, adoption of conflict-free case management in LTSS, and a No Wrong Door approach to providing information and entry for state residents seeking LTSS.

Health System Reform in Maryland

For many years, Maryland has pursued health system reform for Medicaid and other health care payers through a combination of two large federal waiver strategies.  Both waiver programs are undergoing further reforms to support achievement of improved health outcomes and reduced rates of cost growth.

Section 1115 HealthChoice Waiver

Maryland Medicaid has operated HealthChoice, a statewide mandatory managed care program for Medicaid enrollees, since 1997 under a Section 1115 demonstration waiver.¹¹  The HealthChoice program aims to provide patient-focused, coordinated care through medical homes. Over 80 percent of Maryland’s Medicaid beneficiaries are served through MCOs, including almost 97 percent of children and 94 percent of the expansion adult population. Enrollment in HealthChoice for physical health care services is mandatory for all children and non-Medicare eligible adults, including persons with intellectual and developmental disabilities, most adults with physical disabilities, most children with special health care needs and persons with a serious mental illness. (Note: Specialty mental health and substance use services are carved out of HealthChoice MCOs and managed by a single Administrative Services Organization. Long-term services and supports are provided in a fee-for-service arrangement outside the HealthChoice arrangement.)

In June 2016, Maryland filed a HealthChoice waiver renewal application with CMS (to cover January 2017-December 2019). Under a renewed waiver, Maryland is proposing a variety of system reforms designed to improve outcomes for covered individuals. These include but are not limited to:¹² 

• Residential treatment for adults with substance use disorders. As one part of a comprehensive approach to solving Maryland’s substance abuse epidemic, Maryland proposes to include coverage of residential treatment in facilities that would otherwise not qualify for Medicaid reimbursement under the federal financing exclusion for individuals in Institutions for Mental Disease.¹³ 
• Presumptive eligibility for individuals with criminal justice involvement to better connect individuals to health coverage at release and bolster efforts to prevent recidivism.
• Dental coverage for former foster youth up to age 26. Under current rules, EPSDT dental benefits end at age 21.

The renewal proposal also includes pilots to allow local entities to receive federal matching funds for care coordination and other services that address key social determinants of health. These include:

• Limited housing support services for up to 300 Medicaid beneficiaries statewide who are at risk of becoming or are currently homeless.
• Evidence-based home visiting for high-risk pregnant women and children.

CMMI Approved Maryland All-Payer Model

Maryland has operated an all-payer hospital payment system under its Health Services Cost Review Commission (HSCRC) since 1977, and is now the only all-payer hospital payment system in the country. This all-payer system has operated under a Medicare waiver, codified in Section 1814(b) of the Social Security Act, that exempted Maryland from the Medicare Inpatient Prospective Payment System and Outpatient Prospective Payment System and allowed Maryland to continue its state-developed approach to hospital reimbursement.¹⁴  In 2014, Maryland received a new waiver from the Center for Medicare and Medicaid Innovation (CMMI) that authorized the HSCRC to pursue more significant reforms to support state goals for health system improvement.¹⁵ 

Under the five-year waiver, Maryland is authorized to require every hospital payer, whether Medicare, Medicaid, a commercial payer, or an individual consumer, to pay the same charge for the same service. In addition, Maryland will shift all of its hospital revenue over the five-year performance period into global payment models. The state will limit all-payer per capita hospital growth, including inpatient and outpatient care, to 3.58 percent and the annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate per year for 2015-2018. Hospitals have committed to achieving significant quality improvements across all populations, including reductions in the 30-day hospital readmissions rate and hospital acquired conditions rate. Hospitals will submit annual reports of various population health measures.¹⁶  Maryland is responsible for submitting a plan for the progression of the All-Payer Model to the Centers of Medicare and Medicaid Services (CMS) by January 2017.

The state implemented an All Payer Claims databased (APCD) that includes enrollment, provider and claims data for Maryland residents enrolled in private insurance, Medicare or Medicaid MCOs. The APCD is a decision support tool for various state health reform partners, including the HSCRC and the Maryland Insurance Administration.¹⁷  In addition, the State’s designated Health Information Exchange (HIE), CRISP (Chesapeake Regional Information System for our Patients) allows clinical information to move electronically among disparate health information systems. The goal of HIE is to deliver the right health information to the right place at the right time – providing safer, more timely, efficient, effective, equitable, patient-centered care.

State Innovation Model

Maryland received a CMMI Round Two State Innovation Model (SIM) grant that is supporting state development of a strategy to integrate care delivery for individuals who are dually-eligible for Medicare and Medicaid. The state is engaging stakeholders to design an approach that is aligned with the All-Payer Model, will reduce service fragmentation, and will improve outcomes for individuals with complex health conditions.¹⁸  In an effort to mitigate the financial misalignment between Medicare and Medicaid, the all-payer model progression plan due at the end of 2016 to CMMI will include an implementation plan and timeline for including the duals in the future total cost of care calculations.

Addressing the Opioid Abuse Crisis

Maryland has placed a high priority on addressing the public health emergency resulting from abuse of opioid prescription drugs and heroin. In response to a dramatic increase in the number of deaths from overdose, Governor Hogan created the Opioid and Heroin Emergency Task Force (Task Force) in 2015 to engage experts and the broader public in identifying strategies to fight the problem. Under the auspices of an Inter-Agency Coordinating Council, Maryland state agencies work together to promote prevention, treatment and recovery efforts to reduce opioid overdose deaths. Strategies include identifying patterns of overdose activity through timely review and analysis of data from the Office of the Chief Medical examiner, improving access to substance use disorder treatment and recovery services, providing clinical education and training for healthcare providers, and implementing a Prescription Drug Monitoring Program. Effective October 1, 2015, physicians, advanced practice nurses, dentists and other providers with prescribing authority can prescribe Naloxone to any patient considered at risk of experiencing an opioid overdose or who is in a position to assist an individual at risk of overdose. This provision includes protections from civil lawsuits for prescribers and pharmacists who prescribe or dispense in good faith and according to statutory requirements. In addition, the law enhanced the Maryland Overdose Response Program, which trains and certifies community members in opioid overdose response with Naloxone.¹⁹ 

Maryland has continued to experience significant increases in heroin and opioid-related abuse; between 2014 and 2015, heroin-related fatal overdoses rose 29 percent and deaths from Fentanyl rose 83 percent²⁰ , while deaths from misuse of prescription drugs increased 6 percent. The Governor’s FY 2017 budget proposed $4.8 million in new funding to implement recommendations of the Task Force, including initiatives to enhance quality of care and expand access to treatment and support services. The Governor signed the National Governors Association (NGA) Compact to Fight Opioid Addiction in July 2016, and Maryland received a grant award in August 2016 from the U.S. Department of Health and Human Services under the Strategic Prevention Framework Partnerships for Prescription Drugs program.

The Maryland Medicaid program has established a workgroup on opioid harm reduction that includes both state staff and medical and pharmacy staff leadership from the Medicaid MCOs. This workgroup is engaged in developing a consistent set of prior authorization and step therapy strategies and is working to adopt the prescribing guidelines issued by the Centers for Disease Control, and in some cases go beyond the CDC recommendations. The state intends to expand use of prior authorization requirements for use of Fentanyl and Methadone in FFS arrangements in FY 2017 and all Fentanyl products in MCOs in FY 2017 and to add PA requirements in FY 2018 for Methadone and all long-acting opioid-based treatments, in both fee-for-service and MCO arrangements. In addition, MCO Medicaid prescribers will be required to check the Prescription Drug Monitoring Program before prescribing opioids in FY 2018. The state is implementing enhanced education efforts in both FFS and MCO arrangements in FY 2017, sending letters to patients and providers when patients are receiving high dose or other high risk combinations of drugs.

Economic and Budget Outlook

Economy and State Revenues

At the beginning of 2016, economists at the University of Montana Bureau of Business and Economic Research reported on the strong performance of Montana’s economy in 2015 noting that the state reached full employment with wage growth more than twice as strong as 2014 and experienced broad growth across most industries boosting state tax revenues and wages.²¹  While overall results were strongly positive, the economists also noted weaknesses in the energy, mining and agricultural sectors driven by falling prices for grains, oil and natural gas, weakened demand for coal and an associated slow-down in oil and gas-related energy activity. According to the Montana Department of Commerce, the state’s Gross Domestic Product (GDP) grew by 3.4 percent in 2014 and 2.8 percent in 2015²²  while the unemployment rate in July 2016 stood at 4.2 percent, below the national average rate of 4.9 percent.²³ 

Montana’s total state General Fund (GF) revenue is heavily reliant on individual income taxes which comprise over half of total GF collections. Although oil, gas and coal revenues make up less than 3 percent of total GF revenues,²⁴  oil production from the Bakken shale formation has brought a new oil boom to the state, making the price of oil an increasingly important variable impacting state revenue collections.²⁵  The state experienced robust GF revenue growth of 5.9 percent in FY 2015, but revenue collections weakened in FY 2016, finishing the year $79 million (3.6%) below FY 2015 levels and $142 million (6.3%) below the budgeted amount largely driven by declining oil prices which affected revenues and corporate income taxes.²⁶  GF balances were estimated to fall to $109 million by the end of FY 2017,²⁷  down from $455.1 million at the end of FY 2015.²⁸ 

State Budget

The Montana legislature meets only in odd-numbered years, when it addresses the full range of legislative issues and also must adopt a balanced biennial budget. Heading into the 2015 legislative session, Governor Bullock proposed a FY 2016-2017 budget that included a state general fund spending increase of 5.5 percent for FY 2016 and almost 3 percent for FY 2017, $300 million in public works projects statewide, and a projected FY 2017 general fund minimum ending balance of $300 million.²⁹   The most contentious issue in the Governor’s proposal was the adoption of the Medicaid expansion under the Affordable Care Act (described further below).³⁰  The biennium budget ultimately passed by the legislature included total general fund spending of $2.0 billion in FY 2016 and $2.05 billion in FY 2017, lower than the Governor’s proposal, but higher than FY 2015 spending levels.³¹ 

Montana’s ACA Medicaid Expansion

In January 2015, Democratic Governor Steve Bullock unveiled proposed legislation to create the “Healthy Montana Plan.”³²  The Governor’s proposal to expand Medicaid to approximately 70,000 adults and serve them through competitive state contracts with managed care companies was modeled on the Healthy Montana Kids program, which provides coverage for children in low-income families. Republican lawmakers had narrowly defeated a similar bill at the end of the 2013 session on the grounds that the state would eventually have to cover the costs. Despite having the support of the Montana hospitals³³  and a provision to terminate coverage if federal funding dropped below 90 percent; Republican lawmakers remained opposed and introduced a variety of alternatives to the Governor’s proposal, some that included the Medicaid expansion and others that did not (Big Sky Health³⁴ ). One proposal, the Montana Healthy Family Plan, would have covered an estimated 15,000 Montanans providing Medicaid coverage on a smaller scale with the commitment of serving the “neediest among us” before considering expansion of non-disabled adults without children.³⁵ 

A party-line vote (10-7) in the House Human Services Committee in favor of a “do not pass” motion, came after a marathon, six-hour hearing on the proposal, attended by scores of supporters who traveled from across the state to advocate for the measure.³⁶  A “do not pass” vote was described as a rarely used motion that made resurrecting a bill very unlikely as a three-fifths vote of the House rather than a simple majority is needed to overturn the motion and allow the full House to consider the bill.³⁷  Republicans held a 59-41 majority in the House. Three Republican alternatives to the Healthy Montana Plan were also voted down on the floor of the House that day. One Medicaid expansion bill survived, Senate Bill 405, the Health and Economic Livelihood Partnership (HELP) Act sponsored by Republican Senator Ed Buttrey. The HELP Act mirrored the Governor’s proposal calling for coverage of nearly 70,000 Montanans; however in an effort to obtain bi-partisan support the bill included measures intended to achieve a compromise and appeal to conservatives, most notably a jobs plan and premiums.³⁸ 

Despite its bi-partisan approach, the HELP Act was subjected to numerous procedural motions to prevent a floor debate. In the House, it took nine mostly procedural floor votes before Senate Bill 405 reached its final vote for approval.³⁹  Throughout the session, a group of Republicans joined with all Democrats to provide the majority needed to advance the bill through the process. On April 29, 2015, Governor Bullock signed the HELP Act into law.

Seven months later (on November 2, 2015) CMS approved Montana’s HELP program and 13 related state plan amendments, with coverage effective on January 1, 2016. The waiver expands coverage to approximately 70,000 parents and childless adults, aged 19 to 64 earning up to 138 percent of the federal poverty level (FPL).⁴⁰  With the exception of certain exempt groups of people⁴¹ , newly eligible adults receive services through a managed fee-for-service Third Party Administrator (TPA) arrangement (described below).  The HELP Program requires monthly premiums up to 2 percent of household income for newly eligible adults from 51 to 138 percent FPL receiving services through the TPA. Beneficiaries from 101 to 138 percent FPL may be disenrolled for failing to pay premiums after notice and a 90-day grace period. Re-enrollment is required (without a new application) upon payment of arrears or when the state Department of Revenue assesses the debt against income taxes. Beneficiaries subject to premiums receive a credit toward accrued copayments up to 2 percent of income. All cost-sharing is limited to 5 percent of quarterly household income. Finally, the waiver provides all HELP Program beneficiaries (including those exempt from the TPA) with twelve months of continuous eligibility to reduce the effects of churning between Medicaid and Marketplace coverage as income fluctuates. This continuous eligibility authority granted by an 1115 waiver is unique among states seeking Medicaid expansion waivers.

The Montana HELP Act also authorized the Montana Department of Labor & Industry (DLI) to administer a workforce program, HELP-Link⁴² , in conjunction with expanded health coverage. HELP-Link offers enrollees the opportunity to develop a customized employment plan, connect with local employers, and open access to training resources. As of June 30, 2016, 1,004 Montana HELP Plan participants have or are currently receiving workforce services from DLI through the HELP-Link program, the Workforce Innovation and Opportunity Act (WIOA) program, and the RESEA program (an Unemployment Insurance partnership program providing intensive employment services to Montanans who have recently lost a job).⁴³ 

Enrollment as of July 2016 (47,399) was nearly double Montana’s initial projection that 25,000 would enroll in the first six months. The state also reports that $5.3 million was saved by shifting 8,458 people from traditional Medicaid into the expansion.⁴⁴  Further, the HELP Act has also had a significant impact on the state’s insured rate. In 2013, approximately 195,000 Montanans, or 20 percent of the population, lacked health insurance. In 2015, before the Medicaid expansion took effect, an estimated 151,000 Montanans lacked health insurance (15% of the population). Under the HELP Act, the percentage of Montanans who are uninsured dropped to 7.4 percent, a 50 percent decline from 2015 to 2016.⁴⁵ 

Delivery System Reform

HELP Program Third-Party Administrator

Montana was the first state in the country to expand Medicaid using a private TPA arrangement where the TPA vendor receives an administrative fee but is not at risk for medical claims. Also, claims continue to be paid by the TPA on a fee-for-service basis. The state’s Healthy Montana Kids program, its Children’s Health Insurance Program uses a TPA model as well. Montana opted to contract with a TPA to deliver services to HELP Program enrollees using the provider network and administrative infrastructure of an insurer already providing services in the state. In order to implement the TPA and require enrollees to receive services from the TPA’s provider network, the state received approval to waive freedom of choice requirements (except family planning providers) using Section 1915(b) selective contracting authority.⁴⁶  To promote continuity of care between Medicaid and the Marketplace, the state chose an insurer that offered a qualified health plan on the Marketplace.

Other Medicaid Initiatives

Benefit Expansions

With the expansion of Medicaid in Montana, the Bullock Administration sought to ensure that newly eligible adults would have access to a comprehensive benefit package. One example is dental coverage, which Montana’s children, aged, blind, and disabled population had long benefited from. Newly eligible adults now have access to dental coverage of $1,125 per benefit year exclusive of diagnostic, preventive, denture and anesthesia services. In order to provide access to dental coverage for the expansion population and to maintain the unlimited benefit for the aged, blind and disabled, Montana is amending an existing Section 1115 waiver to leverage savings that have accrued under the waiver. As of May 12, 2016, less than six months into the HELP Program, 11,727 preventive dental exams had been provided.⁴⁷ 

In addition to dental services, Montana implemented changes to its behavioral health benefit to improve access to mental health and substance use disorder services. Limits on mental health therapies were removed and age limits for substance use disorder treatment were eliminated. Prior to the Medicaid expansion, substance use disorder services for the adult population were funded by the state mental health agency. Many individuals receiving these services were uninsured and therefore did not have access to a full benefit package. As a result of the Medicaid expansion and associated federal funding, these individuals now have access to a comprehensive benefit package and the state has realized savings in its state-funded mental health program.

Additional Medicaid policy actions taken in FY 2016 or planned for FY 2017 are described below.

Economic and Budget Outlook

Economy and State Revenues

The State of New York has the third largest economy in the United States (behind California and Texas) with a Gross Domestic Product (GDP) of $1.4 trillion in 2015.⁴⁸  Among the various industry sectors comprising the state’s economy, the education and health care sector is now the largest (in terms of employment), has steadily grown reaching 15.2 percent of total nonfarm payroll employment in 2015. By contrast, the manufacturing sector has decreased over the last 15 years to 4.9 percent in 2015. The financial sector is also very important to the overall health of the state’s economy but was especially hard-hit by the Great Recession (2007-2010). This sector has rebounded slowly as technology, stricter regulations, and high operating costs have inhibited hiring, accounting for 7.6 percent of total nonfarm payroll employment in 2015.⁴⁹ 

In line with the national economy, the New York economy has experienced slow and steady growth since the last recession with GDP growth of 1.2 percent in 2014⁵⁰  and 1.4 percent in 2015.⁵¹  Employment has also steadily grown since 2010 and the unemployment rate fell to 4.7% in July 2016.⁵²  In February 2016, the New York State Assembly Ways and Means Committee Economic and Revenue Report forecasted that state employment and personal income in New York would continue to grow in 2016 and 2017, but at somewhat more moderate pace.

State tax growth has been positive in recent years growing by 1.9 percent in FY 2015 and 5.1 percent in FY 2016.⁵³  While growth in FY 2017 was originally forecasted at 3.3 percent, that estimate was reduced to 2.4 percent in the first quarter update issued by the Division of the Budget in August 2016.⁵⁴  According to that report, through the first quarter of FY 2017, personal income tax collections fell $595 million below planned levels reflecting continued weak performance in the financial sector. Other taxes, however, remain on target with earlier estimates.

State Budget

Unlike most other states whose fiscal years begin on July 1, the State of New York operates on an April 1 – March 31 state fiscal year. New York’s enacted budget for FY 2017 of $96.2 billion⁵⁵  holds state spending to a 2 percent growth rate for the sixth consecutive year,⁵⁶  but grows school aid by $1.5 billion (6.5%)⁵⁷  and includes the largest state transportation plan ($55 billion) ever approved.⁵⁸  The enacted budget for FY 2017 also authorizes regional, phased-in increases to the state’s minimum wage to $15 an hour and the nation’s only 12-week paid family leave program.⁵⁹ 

The FY 2017 Medicaid budget growth of 3.4 percent reflects the continuation of the Medicaid spending cap (called the “Global Cap”) adopted in FY 2012 which limits year-to-year growth in the state share of Medicaid spending to the ten-year rolling average of the medical component of the Consumer Price Index (CPI).⁶⁰  The Division of the Budget currently estimates that projected CPI reductions will reduce the Medicaid Global Cap to 3.2 percent in FY 2018, 3.0 percent in FY 2019 and 2.8 percent in FY 2020.⁶¹  The FY 2017 Medicaid budget also includes additional funding to cover increased costs associated with the phased-in increases to the hourly minimum wage rate, which is expected to increase annual Medicaid spending, above previously forecasted Global Cap limits.⁶² 

The FY 2017 budget also authorizes new middle class tax cuts that take effect in FY 2018, including a reduction in the marginal tax rates on middle incomes from 5.9 percent and 6.65 percent to 5.5 percent and 6 percent. These cuts are expected to reduce tax collections by $236 million in FY 2018, growing to $1.5 billion in FY 2020, on a cash basis. When fully effective in CY 2025, the tax reduction is estimated to reach $4.2 billion on a liability basis.⁶³ 

ACA Implementation

New York is one of 31 states and the District of Columbia that have implemented the ACA Medicaid expansion and is one of 13 states that operate a state-based Marketplace.⁶⁴  In FY 2015, New York also implemented a new program under an ACA coverage option called the “Basic Health Plan” (BHP). Under this ACA option, states may offer health coverage to individuals with family incomes between 133 and 200 percent of the federal poverty level (FPL) and for individuals from 0-200 percent FPL who are lawfully present in the United States but do not qualify for Medicaid due to their immigration status. This coverage takes the place of subsidized coverage in the Marketplace. States electing this option receive federal funding equal to 95 percent of the premium tax credit and the cost-sharing reductions that would have been provided for Marketplace coverage.⁶⁵  New York is using the BHP authority and federal funding to offer the “Essential Plan” which has allowed the state to realize savings by transitioning certain Medicaid waiver populations and certain immigrants (previously covered with state-only dollars) to BHP coverage.⁶⁶ 

Medicaid Redesign Team

After years of rapid growth, New York’s Medicaid program had per enrollee costs in FY 2011 that were far in excess of those in other states, but these higher expenditures had not produced correspondingly high quality results or rankings.⁶⁷  To address these concerns, Governor Cuomo appointed the Medicaid Redesign Team (MRT) to design strategies to lower Medicaid expenditure growth and improve quality in the program. The 27 member MRT is led by the Medicaid Director and includes representatives from various health care providers and stakeholders.⁶⁸  Since its inception, more than 200 initiatives have been created as a result of the MRT addressing programmatic changes in the way health care is provided, reimbursed and managed to ensure that quality care is provided in the most efficient manner.⁶⁹  During that time, Medicaid spending growth has not exceeded the Medicaid Global Cap (described above).

In 2012, the MRT issued a multi-year action plan that incorporated three broad Medicaid redesign strategies: increased reliance on managed care, development of new service delivery mechanisms and use of value-based payments.⁷⁰ 

Medicaid Managed Care

New York began contracting with capitated managed care organizations (MCOs) in the late 1980’s, and by 2010, approximately two-thirds of all Medicaid enrollees were enrolled in “mainstream” MCOs offering acute care services but excluding coverage for most long term services and supports (LTSS), prescription drugs, some dental care and behavioral health services. There were also several MCOs at that time specializing in LTSS (some offering both acute care and LTSS) serving about 40,000 Medicaid enrollees who voluntarily enrolled. ⁷¹  In 2011, the MRT added prescription drugs, personal care, and some home health care to the mainstream MCO benefit package. Dental services (2012), hospice care (2013) and nursing home care (2015) were added later. Beginning in 2015, coverage of certain mental health services, including substance abuse treatment, began to be phased-in (through 2017). ⁷² 

Since 2011, managed care enrollment has also become mandatory for a number of previously exempt groups including HIV positive individuals (2011), homeless individuals, low birth-weight infants, persons with end-stage renal disease (2012), and some foster care children (2013). Mandatory enrollment for adults receiving home and community-based services (HCBS) for an extended period of time was phased-in during 2012 and 2013, was applied to adults entering a nursing home in 2015, and will be applied to children entering a nursing home in 2017. ⁷³  Also, in 2015, the state implemented a voluntary Financial Alignment Demonstration with the Centers for Medicare and Medicaid Services (CMS) for persons dually eligible for Medicare and Medicaid that provides a comprehensive benefit including Medicare and Medicaid acute care and LTSS on a capitated basis by Fully Integrated Duals Advantage (FIDA) plans.

More recently, the state has begun to phase-in mandatory managed care for persons with severe mental illness (in FY 2016 and FY 2017) by contracting with specialized MCOs called “Health and Recovery Plans” (HARPs). An estimated 140,000 persons will be served in these plans.⁷⁴  Also, as part of the Financial Alignment Demonstration referred to above, the state currently contracts with one “FIDA-IDD” plan to provide coordinated care, on a voluntary basis, for people with intellectual and developmental disabilities who are eligible for both Medicare and Medicaid services. The FIDA-IDD plan provides Medicare and Medicaid benefits through an integrated benefit design that includes a dedicated interdisciplinary team to address each individual´s medical, behavioral, long-term supports and services, and social needs.⁷⁵ 

Delivery System Reform Incentive Payment Program (DSRIP)

In April 2014, CMS approved an amendment to New York’s existing Section 1115 waiver allowing the state to reinvest over a five-year period (2015-2019) $8 billion of the $17.1 billion in federal savings generated by MRT reforms.⁷⁶  From this total, $6.42 billion is to be used to implement delivery system reform incentive payment projects (the “DSRIP program”), $1.08 billion is for Health Home development and investments in long term care, workforce and enhanced behavioral health services, and $500 million in one-time funding will be used to assist safety net providers.^{77  78}  New York’s DSRIP program is designed around 25 “Performing Provider Systems” (PPSs) – newly created provider partnerships who have agreed to cooperate and coordinate services for the Medicaid population in the counties they serve. The PPSs can receive DSRIP payments for implementing at least five reform projects from a list of 44 and meeting performance metrics.⁷⁹  PPSs are coalitions of providers with a lead organization that is often a major medical center. Among the most frequently selected projects are primary care/behavioral health integration, integrated delivery systems, chronic disease transitions, and adult cardiovascular high risk management.⁸⁰  As of October 2016, the PPSs have received 99.4% of all available funds to date.

Value Based Payments

As a condition for approval of the DSRIP Section 1115 waiver amendment described above, and to ensure the long-term sustainability of the improvements made possible by the DSRIP investments, CMS required the State of New York to submit a multiyear Roadmap for comprehensive Medicaid payment reform including how the state would amend its MCO contracts. In June 2015, the New York State Department of Health released “A Path Toward Value Based Payment: New York State Roadmap for Medicaid Payment Reform,” (the “VBP Roadmap”).⁸¹  The VBP Roadmap outlines the state’s strategy for assuring that 80-90 percent of MCO payments are shifted from fee-for-service (FFS) to VBP by 2020 and describes the new payment approaches and the types of provider organizations that will be involved.⁸²  In June 2016, the state released the results of MCO survey designed to get a baseline for measuring statewide progress toward the overall 80-90 percent VBP goal and towards a second goal that at least 35 percent of MCO payments to providers be risk-based VBP arrangements (at “Level 2 or 3” as defined in the VBP Roadmap).⁸³  Overall, the survey results indicated that 63.2 percent of MCO payments were FFS while 25.5 percent reflected VBP Levels 1-3. The remaining 11.3 percent reflected VBP “Level 0” (FFS payments with bonus and/or withhold based on quality scores)

Additional Medicaid policy actions taken in FY 2016 or planned for FY 2017 are described below.

Economic and Budget Outlook

Economy and State Revenues

In recent years, Oklahoma has typically accounted for more than 3 percent of total U.S. oil production and almost one-tenth of the nation’s natural gas production.⁸⁴  It is one of seven states, along with Alaska, Louisiana, New Mexico, North Dakota, Texas and Wyoming, in which the oil and gas sector’s share of the state’s Gross Domestic Product (GDP), personal income and payroll employment is more than 3.5 times larger than in the nation as a whole.⁸⁵  Because of their heavy reliance on the oil and gas sectors, the economies of these states have been adversely affected to varying degrees by the price of oil which began falling in mid-2014.⁸⁶  By December 2015, Oklahoma had lost 11,600 energy jobs and 59 percent of the state’s active oil and gas rigs.⁸⁷  While crude oil prices had partially rebounded by the end of August 2016, they remained below the price in effect a year earlier and less than half of the July 2014 price. ^{88  89}  Oklahoma’s unemployment rate rose for the sixth consecutive month in July 2016 to 5.0 percent (compared to 4.3 percent in July 2015), exceeding the national rate (4.9 percent) for the first time in 26 years.⁹⁰ 

⁹¹ Falling oil prices have also negatively impacted state General Revenue Fund (GRF) collections. At the end of FY 2016, state GRF collections were $541.3 million (9.4%) below official estimates and $521.9 million (9.1%) below prior year collections.⁹²  Oklahoma’s constitution prohibits revenue increases without approval of three quarters of both the House and Senate or a vote of the people, limiting the state’s ability to raise taxes in response to budget issues.⁹³ 

State Budget

On June 1, 2015, Governor Mary Fallin signed into law the FY 2016 budget, praising legislators for closing a $611 million shortfall without cutting funding for K-12 education. The FY 2016 budget was 1.03 percent less than the FY 2015 appropriated budget.⁹⁴  By December 2015, low GRF collections, triggered a “revenue failure” declaration which forced across the board spending cuts as well as a one-time appropriation of $500 million from the Day Fund and from other cash reserves to balance the budget.⁹⁵ 

As lawmakers worked to balance the FY 2016 budget, they were also faced with a $1.3 billion shortfall for the FY 2017 budget, the largest in the state’s history.⁹⁶  Public schools feared aid reductions of up to 20 percent while the Oklahoma Health Care Authority (OHCA), which administers the state’s Medicaid program, prepared to implement provider rate cuts of up to 25 percent that would have jeopardized the ability of some hospitals and nursing homes to remain open.⁹⁷  The final FY 2017 budget, signed into law by Governor Fallin on June 10, 2016, averted these outcomes maintaining current funding levels for the State Department of Education and adding $83.8 million in appropriations for the OHCA (one of four agencies to receive an increase), while also keeping the state’s eight-year transportation infrastructure plan intact.^{98  99}  The FY 2017 budget also eliminated or reduced various tax breaks, relies on a number of dedicated fund transfers including $66 million from the Rainy Day Fund, and $200 million in transportation bonds.¹⁰⁰   Overall, the FY 2017 budget of $6.8 billion is $360.7 million (5%) less than the FY 2016 budget prior to the mid-year revenue failure and $67.8 million (1%) less than the FY 2016 appropriations as adjusted by the mid-year revenue failure.¹⁰¹ 

When the state completed its final reconciliation of FY 2016 state revenues in July 2016, it determined that the mid-year reductions imposed in December 2015 and February 2016 were deeper than necessary and funds were returned to state agencies instead.¹⁰² 

ACA Medicaid Expansion

As a result of the 2012 Supreme Court decision, Oklahoma has not adopted the ACA Medicaid expansion. In April 2016, faced with dwindling reserves, enrollment growth, and budget deficits, Governor Fallin and the CEO of OHCA, Nico Gomez, proposed the Medicaid Rebalancing Act of 2020 legislation, an alternative Medicaid expansion proposal.  The plan would have provided coverage through a Private Option for Oklahomans age 19 to 64 with incomes at or below 138 percent of the federal poverty level (FPL) (similar to Arkansas using Medicaid funds to purchase coverage for enrollees from the Marketplace).  In addition, the plan called for 175,000 pregnant women and children with Medicaid coverage to transition to coverage in the Marketplaces. The proposed plan also called for creating member health savings accounts, called “HealthStead accounts,” that would help pay for medical expenses with financial incentives for healthy lifestyle choices, and partially finance it with an increase in the cigarette tax of $1.50 per pack.¹⁰³  The plan was expected to reduce the number of uninsured by 30 percent, stimulate the economy and generate state savings of $55 million.¹⁰⁴  The Plan failed to receive legislative approval, after some lawmakers labeled it a Medicaid expansion under the ACA. Legislators also could not agree on revenue enhancing measures such as a cigarette tax to help fund the proposal.¹⁰⁵ 

Medicaid Managed Care and Other Payment and Delivery System Reforms

In 1996, Oklahoma implemented managed care, branded as SoonerCare, which initially consisted of two programs: (1) SoonerCare Plus, which contracted with health plans in urban areas of the state using a fully capitated delivery system and (2) SoonerCare Choice – a primary care case management (PCCM) program – which provided services in rural areas of the state. In 2004, SoonerCare Choice expanded statewide and became the sole model of care in the state, supplanting the fully capitated risk based managed care system. This program provided most Medicaid beneficiaries with acute, primary, specialty, and behavioral health services on a fee-for-service (FFS) basis; care coordination services and limited primary care services were covered through a fixed per member per month fee paid to contracted primary care providers.

Since 2004, Oklahoma has implemented other initiatives to promote cost-effective care and improved health outcomes. In 2006, the state began the Health Management Program (HMP) to conduct intensive nurse case management with the highest need patients and facilitate practice transformation. Under the HMP, Oklahoma contracts directly with primary care physicians to provide primary care and care coordination services, and pays them a monthly case management fee that is risk-adjusted to reflect variations in the expected service intensity for patients served in each medical home. Three local non-profit organizations serve as Health Access Networks, which receive a nominal per member per month payment to provide care management to persons with complex needs, in addition to the monthly case management fee paid to individual primary care providers. In 2009, Oklahoma also adopted a patient-centered medical home model for SoonerCare Choice in which primary care providers are paid a bundled care coordination payment and are eligible for additional performance payments; all medical services continue to be paid on a FFS basis. Children and families, pregnant women, children and adults with disabilities, and older adults are mandatorily enrolled in the program; American Indians/Alaska Natives have the choice of selecting either an Indian Health Service (IHS) or non-IHS provider to under SoonerCare.

As of July 2016, 74.8 percent of total SoonerCare enrollees were enrolled in the state’s PCCM program. The state also operates Insure Oklahoma, an Employer-Sponsored Insurance (ESI) program where premium costs are shared by the state (60 percent), the employer (25 percent) and the employee (15 percent).¹⁰⁶ 

Recent Delivery System Reform Initiatives and Quality Improvements

Despite ongoing budget challenges, the OHCA continues to move forward with the delivery system reform and quality improvement initiatives described below.

SoonerHealth+: Care Coordination for the ABD Population

In 2015, the United Health Foundation’s Senior Health Rankings ranked Oklahoma 46th in the nation.¹⁰⁷  Several factors considered in this ranking include nursing home quality, hospital readmission rates, chronic health conditions, and community involvement. According to the report, there is a high prevalence of physical inactivity among Oklahoma’s senior population, and a low percentage of seniors in the state receive health screenings and recommended hospital care. This low health ranking suggests that Oklahoma will face additional challenges caring for the baby boomer generation in the years to come.

With the intent of providing better access to care, improving quality and health outcomes, and controlling costs for the Medicaid aged, blind, and disabled (ABD) populations, the state legislature passed legislation in 2015 requiring the OHCA to create an ABD care coordination program. The “SoonerHealth+” program will be a fully capitated program implemented statewide with services beginning in April 2018.¹⁰⁸  According to the 2015 legislation, members receiving institutional care will be phased-in two years after the initial program enrollment period. The state expects to release a Request for Proposals (RFP) that includes model contract standards for managed care organizations (MCOs) in November 2016. OHCA plans to use a third party options counselor to assist members with plan choice. PACE will continue to be an option for eligibles in lieu of an MCO. Behavioral Health Homes will also continue to serve qualified members in lieu of MCO enrollment, and MCOs will be required to have Patient Centered Medical Homes for their Medicaid members.¹⁰⁹ 

CMMI CPC and CPC+

Oklahoma is one of 14 states and regions recently awarded a Center for Medicare and Medicaid Innovation (CMMI) grant for the Comprehensive Primary Care Plus program (CPC+) program. The five-year multi-payer advanced primary care medical home model grant begins in January 2017 and builds on the earlier Comprehensive Primary Care (CPC) initiative that began in October 2012 and runs through December 31, 2016. The greater Tulsa region is one of seven markets participating in the CPC initiative.¹¹⁰  The CPC+ program will include advances in payment to support primary care practices to provide more comprehensive care that meets the needs of all of their patients, particularly those with complex needs.¹¹¹ 

CPC+ has two tracks for physician practices. Track 1 features a relatively simple financial model and less ambitious clinical goals than Track 2. Practices in both tracks are expected to make changes to address key CPC functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement, and (5) planned care and population health. Highlights of the Track 1 model include physician practices receiving a per beneficiary per month (PBPM) care management fee ranging from $6 to $30. In addition, a performance-based payment incentive as high as $2.50 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year. The Track 2 model includes a PBPM care management fee based on a five-tier risk-stratification scale. The lowest four tiers mirror the risk-stratification scale for Track 1, with fees ranging from $9 to $33. In the fifth tier, physician practices can earn a $100 PBPM fee for treating high-risk patients. In addition, a performance-based payment incentive as high as $4 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year.¹¹² 

Supportive Housing

Recognizing that stable housing is a critical element of healthy living, OHCA staff assist SoonerCare members with affordable housing support services.  In 2016-2017, OHCA will target persons with physical disabilities and persons with intellectual and developmental disabilities for this support, and has created a Social Supports and Outreach unit dedicated to assisting members with housing or other community supports.¹¹³ 

Additional Medicaid policy actions taken in FY 2016 or planned for FY 2017 are described below.

1. Centers for Medicare and Medicaid Services. National Health Expenditures (Washington, DC: Centers for Medicare and Medicaid Services, December 2015). http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/NationalHealthAccountsHistorical.html. ↩︎
2. U.S. Department of Commerce, Bureau of Economic Analysis. GDP for Maryland (Washington, DC: U.S. Department of Commerce, accessed September 27, 2016). http://www.bea.gov/regional/bearfacts/action.cfm?geoType=3&fips=24000&areatype=24000. ↩︎
3. U.S. Department of Labor, Bureau of Labor Statistics. Databases, Tables & Calculators by Subject (Washington, DC: U.S. Department of Labor, accessed September 27, 2016). http://data.bls.gov/timeseries/LASST240000000000003?data_tool=XGtable. ↩︎
4. State of Maryland Board of Revenue Estimates. Maryland General Fund Revenues September 2016 Update (Annapolis, MD: State of Maryland Board of Revenue Estimates, September 21, 2016).  http://finances.marylandtaxes.com/static_files/revenue/BRE_reports/FYI_2017/2016_BRE_September_Revision.pdf. ↩︎
5. The Office of Governor Larry Hogan. Governor Larry Hogan Announces Fiscal Year 2017 Budget (Annapolis, MD: The Office of Governor Larry Hogan, January 20, 2016). http://governor.maryland.gov/2016/01/20/governor-larry-hogan-announces-fiscal-year-2017-budget/ ↩︎
6. Maryland Department of Budget and Management. FY2017 Fiscal Digest (Annapolis, MD: Maryland Department of Budget and Management, accessed September 27, 2016). http://www.dbm.maryland.gov/budget/Pages/operbudget/2017-FiscalDigest.aspx. ↩︎
7. Maryland Department of Health and Mental Hygiene. Maryland Chronic Health Homes (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016) https://mmcp.dhmh.maryland.gov/pages/health-homes.aspx. ↩︎
8. The RTCW had been offered under a Congressionally authorized, but time-limited, 1915(c) waiver pilot to provide HCBS for children who would otherwise be served in an inpatient Psychiatric Residential Treatment Facility. ↩︎
9. Maryland Department of Health and Mental Hygiene. 1915(i) Intensive Behavioral Health Services for Children, Youth and Families (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016) https://mmcp.dhmh.maryland.gov/pages/1915(i)-Intensive-Behavioral-Health-Services-for-Children,-Youth-and-Families.aspx. ↩︎
10. Centers for Medicare and Medicaid Services. Balancing Incentive Program (Baltimore, MD: Centers for Medicare and Medicaid Services, accessed September 27, 2016) https://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and-supports/balancing/balancing-incentive-program.html. ↩︎
11. Maryland Department of Health and Mental Hygiene. 1115 HealthChoice Waiver Renwal (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016) https://mmcp.dhmh.maryland.gov/Pages/1115-HealthChoice-Waiver-Renewal.aspx. ↩︎
12. Links to the Maryland HealthChoice Waiver Renewal summary and full application can be found at: https://mmcp.dhmh.maryland.gov/Pages/1115-HealthChoice-Waiver-Renewal.aspx. ↩︎
13. On July 27, 2015, CMS issued a State Health Officials letter (SHO) that outlined an opportunity for such waiver coverage for states seeking to demonstrate the effectiveness of a comprehensive, evidence-based approach to substance use disorder treatment. The SHO can be found at: https://www.medicaid.gov/federal-policy-guidance/downloads/SMD15003.pdf. ↩︎
14. Centers for Medicare and Medicaid Services. Maryland All-Payer Model (Baltimore, MD: Centers for Medicare and Medicaid Services, accessed September 27, 2016) https://innovation.cms.gov/initiatives/Maryland-All-Payer-Model/. ↩︎
15. Health Services Cost Review Commission. Maryland All-Payer Model Agreement (Baltimore, MD: Health Services Cost Review Commission, February 11, 2014). http://www.hscrc.state.md.us/documents/md-maphs/stkh/MD-All-Payer-Model-Agreement-(executed).pdf. ↩︎
16. Centers for Medicare and Medicaid Services. Maryland All-Payer Model (Baltimore, MD: Centers for Medicare and Medicaid Services, accessed September 27, 2016) https://innovation.cms.gov/initiatives/Maryland-All-Payer-Model/. ↩︎
17. Maryland Health Care Commission. Maryland Medical Care Data Base (MCDB) (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016).  http://mhcc.maryland.gov/mhcc/pages/apcd/apcd_mcdb/apcd_mcdb.aspx. ↩︎
18. Maryland Department of Health and Mental Hygiene. Medicaid and Medicare Dual Eligibles Care Delivery Strategy (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016) https://mmcp.dhmh.maryland.gov/sim/Pages/Home.aspx. ↩︎
19. Maryland Department of Health and Mental Hygiene. Overdose Prevention in Maryland (Baltimore, MD: Department of Health and Mental Hygiene, accessed September 27, 2016)  http://bha.dhmh.maryland.gov/OVERDOSE_PREVENTION/Pages/Index.aspx. ↩︎
20. Meredith Cohn. Overdose Deaths in Maryland Continued Grim Spike Last Year (Baltimore, MD: The Baltimore Sun, June 9, 2016) http://www.baltimoresun.com/health/bs-hs-heroin-overdoses-20160609-story.html. Heroin-related fatal overdoses role 29 percent; deaths from Fentanyl rose 83 percent. ↩︎
21. University of Montana Bureau of Business and Economic Research. The State and National Economic Outlook: Back to Full Employment (Missoula, MT: Bureau of Business and Economic Research, 2016) http://www.bber.umt.edu/pubs/econ/CountyOutlooks/16MT.pdf; University of Montana Bureau of Business and Economic Research. Montana Economic Report (Missoula, MT: Bureau of Business and Economic Research, 2016) http://www.bber.umt.edu/pubs/Seminars/2016/EconRpt2016.pdf. ↩︎
22. Census & Economic Information Center. CEIC Industry Dashboard (Helena, MT: Department of Commerce, accessed September 27, 2016) http://ceic.mt.gov/Economics/IndustryDashboard.aspx. ↩︎
23. U.S. Bureau of Labor Statistics. Regional and State Employment and Unemployment Summary (Washington, DC: U.S. Department of Labor, August 19, 2016) http://www.bls.gov/news.release/laus.nr0.htm. ↩︎
24. Matt Volz. Montana’s Economic Health Emerges as Election Factor (Kalispell, MT: Flathead Beacon, September 7, 2016) http://flatheadbeacon.com/2016/09/07/montanas-economic-health-emerges-election-factor/. ↩︎
25. Governor’s Office of Budget and Program Planning. Governor’s Budget Fiscal years 2016 – 2017: Economic Overview (Helena, MT: Governor’s Office of Budget and Program Planning, June 2014) https://budget.mt.gov/Portals/29/execbudgets/2017_Budget/Volume_2.pdf ↩︎
26. Montana Legislative Fiscal Division. General Fund Updated Revenue Trends (Helena, MT: Legislative Fiscal Division, September 7, 2016) http://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/Sept-2016/lfd-revenue-trends-2016.pdf. ↩︎
27. Ibid. ↩︎
28. Montana Legislative Fiscal Division. FY 2015 FYE Report (Helena, MT: Legislative Fiscal Division, September 24, 2015) http://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/Sept-2015/FYE2015-Report.pdf. ↩︎
29. Governor’s Office of Budget and Program Planning. Governor’s Budget Highlights Fiscal Years 2016 -2017 (Helena, MT: Governor’s Office of Budget and Program Planning, November 2014) https://budget.mt.gov/Portals/29/execbudgets/2017_Budget/Orange%20Book.pdf. ↩︎
30. Jackie Yamanaka. Medicaid Expansion Passes House In Saturday Vote, Now Back To Senate (Missoula, MT: Montana Public Radio, April 12, 2015)  http://mtpr.org/post/medicaid-expansion-passes-house-saturday-vote-now-back-senate. ↩︎
31. Montana State 64th Legislature. An Act Appropriating Money to Various State Agencies for the Bienniums Ending June 30, 2015, and Ending June 30, 2017; And Providing Effective Dates (HB0002) (Missoula, MT: Montana State Legislature, 2015) http://leg.mt.gov/bills/2015/billpdf/HB0002.pdf. ↩︎
32. Lisa Baumann Gov. Introduces Proposal for Medicaid Expansion (Great Falls, MT: Great Falls Tribune, January 19, 2015) http://www.greatfallstribune.com/story/news/local/2015/01/19/gov-introduces-proposal-medicaid-expansion/22009775/. ↩︎
33. Eric Whitney. Why Montana Hospitals Back Bullocks Medicaid Expansion Plan (Missoula, MT: Montana Public Radio, March 3, 2015) http://mtpr.org/post/why-montana-hospitals-back-bullocks-medicaid-expansion-plan. ↩︎
34. Jackie Yamanaka. Montana Republicans Unveil Healthcare Plan, Minus Medicaid Expansion (Missoula, MT: Montana Public Radio, February 10, 2015)  http://mtpr.org/post/montana-republicans-unveil-healthcare-plan-minus-medicaid-expansion. ↩︎
35. Eric Whitney. Montana Senate Republicans Release Health Plan (Missoula, MT: Montana Public Radio, December 31, 2014) http://mtpr.org/post/montana-senate-republicans-release-health-plan. ↩︎
36. Josh Burnham. Governor’s Medicaid Expansion Bill Killed On Party Line Vote (Missoula, MT: Montana Public Radio, March 6, 2015) http://mtpr.org/post/governors-medicaid-expansion-bill-killed-party-line-vote. ↩︎
37. Steve Jess. Democrats Cry Foul Over Medicaid Expansion Vote (Missoula, MT: Montana Public Radio, March 9, 2015) http://mtpr.org/post/democrats-cry-foul-over-medicaid-expansion-vote. ↩︎
38. Steve Jess. Sen. Buttrey Seeks Compromise With His Health Care Plan (Missoula, MT: Montana Public Radio, March 20, 2015) http://mtpr.org/post/sen-buttrey-seeks-compromise-his-health-care-plan. ↩︎
39. Jackie Yamanaka. Medicaid Expansion Passes House In Saturday Vote, Now Back To Senate (Missoula, MT: Montana Public Radio, April 12, 2015) http://mtpr.org/post/medicaid-expansion-passes-house-saturday-vote-now-back-senate. ↩︎
40. Centers for Medicare and Medicaid Services. Montana Health and Economic Livelihood Partnership (HELP) Program Approved 1115 Waiver (Baltimore, MD: Centers for Medicare and Medicaid Services, December 30, 2015) https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/mt/mt-HELP-program-ca.pdf. ↩︎
41. Exempt groups include those with incomes at or below 50 percent FPL, American Indian/Alaskan Natives, individuals who are medically frail, those with exceptional health care needs as determined by the state, people who live in regions where there are insufficient number of providers contracted with the TPA, and people who require continuity of coverage not available or effectively delivery through the TAP. ↩︎
42. HELP Act Oversight Committee. Report to the Governor and Legislative Finance Committee (Helena, MT: Department of Public Health and Human Services, July 15, 2016,) http://dphhs.mt.gov/Portals/85/Documents/MedicaidExpansion/HELP%20Act%20Oversight%20Committee%20Report%20FINAL7_15_2016.pdf. ↩︎
43. Ibid. ↩︎
44. Ibid. ↩︎
45. Ibid. ↩︎
46. The Kaiser Commission on Medicaid and the Uninsured. Medicaid Expansion in Montana (Washington, DC: The Kaiser Family Foundation, November 20, 2015) https://modern.kff.org/medicaid/fact-sheet/medicaid-expansion-in-montana/. ↩︎
47. HELP Act Oversight Committee. Report to the Governor and Legislative Finance Committee (Helena, MT: Department of Public Health and Human Services, July 15, 2016,) http://dphhs.mt.gov/Portals/85/Documents/MedicaidExpansion/HELP%20Act%20Oversight%20Committee%20Report%20FINAL7_15_2016.pdf. ↩︎
48. Alex Gray. Which American state has a bigger economy than India (Geneva, Switzerland: World Economic Forum, July 8, 2016)  https://www.weforum.org/agenda/2016/07/american-state-bigger-economy-than-india/. ↩︎
49. New York State Assembly Ways and Means Committee. Economic and Revenue Report, Fiscal Years 2015-16 and 2016-17 (Albany, NY: New York State Assembly Ways and Means Committee, February 2016) http://assembly.state.ny.us/Reports/WAM/2016economic_revenue/2016ecrev.pdf. ↩︎
50. Bureau of Economic Analysis. New York (Washington, DC: U.S. Department of Commerce, accessed September 27, 2016) http://www.bea.gov/regional/bearfacts/pdf.cfm?fips=36000&areatype=STATE&geotype=3. ↩︎
51. Bureau of Economic Analysis. Gross Domestic Product by State: First Quarter 2016 (Washington, DC: U.S. Department of Commerce, accessed July 27, 2016) http://www.bea.gov/newsreleases/regional/gdp_state/2016/pdf/qgsp0716.pdf. ↩︎
52. New York State Department of Labor. Unemployment Rate Drops to 4.7% in May Lowest Level Since August 2007 (Albany, NY: Department of Labor, June 16, 2016) http://www.labor.ny.gov/pressreleases/2016/june-16-2016.shtm. ↩︎
53. HMA calculations based on fiscal year end results published by the New York State Division of the Budget in the Enacted Budget Financial Plan for FYs 2015, 2016 and 2017, Census table 3 (Albany, NY: Division of the Budget, accessed September 27, 2016) http://openbudget.ny.gov/budgetArchives.html. ↩︎
54. New York State Division of the Budget. FY 2017 Financial Plan First Quarterly Update (Albany, NY: Division of the Budget, August 2016) https://www.budget.ny.gov/budgetFP/FY2017FPQ1.pdf. ↩︎
55. New York State Division of the Budget. FY 2017 Enacted Budget Financial Plan (Albany, NY: Division of the Budget, May 2016) https://www.budget.ny.gov/budgetFP/FY2017FP.pdf. ↩︎
56. Office of Governor Cuomo. Governor Cuomo and Legislative Leaders Announce Agreement on 2016-17 State Budget (Albany, NY: Division of the Budget, March 31, 2016) https://www.budget.ny.gov/pubs/press/2016/pressRelease16_enacted.html. ↩︎
57. New York State Division of the Budget. FY 2017 Enacted Budget Financial Plan (Albany, NY: Division of the Budget, May 2016) https://www.budget.ny.gov/budgetFP/FY2017FP.pdf. ↩︎
58. Office of Governor Cuomo. Governor Cuomo and Legislative Leaders Announce Agreement on 2016-17 State Budget (Albany, NY: Division of the Budget, March 31, 2016) https://www.budget.ny.gov/pubs/press/2016/pressRelease16_enacted.html. ↩︎
59. Ibid. ↩︎
60. Ibid. ↩︎
61. New York State Division of the Budget. FY 2017 Financial Plan First Quarterly Update (Albany, NY: Division of the Budget, August 2016) https://www.budget.ny.gov/budgetFP/FY2017FPQ1.pdf. ↩︎
62. Ibid. ↩︎
63. Ibid. ↩︎
64. Kaiser Family Foundation State Health Facts. “State Health Insurance Marketplace Types.” Data Source: Data compiled through review of state legislation and other Marketplace documents by the Kaiser Family Foundation, 2016. Accessed September 27, 2017. https://modern.kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/. ↩︎
65. Centers for Medicare and Medicaid Services. New York Basic Health Program Blueprint (Baltimore, MD: Centers for Medicare and Medicaid Services, September 2015) https://www.medicaid.gov/basic-health-program/downloads/ny-blueprint.pdf. ↩︎
66. V. Smith, K. Gifford, E. Ellis, R. Rudowitz, L. Snyder and E. Hinton. Medicaid Reforms to Expand Coverage, Control Costs and Improve Care: Results form a 50-State Medicaid Budget Survey for State Fiscal Years 2015 and 2016. (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2015) http://files.kff.org/attachment/report-medicaid-reforms-to-expand-coverage-control-costs-and-improve-care-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2015-and-2016. ↩︎
67. Citizens Budget Commission. What Ails Medicaid in New York, And Does the Medicaid Redesign Team Have a Cure? (New York, NY: Citizens Budget Commission, May 20, 2016) http://www.cbcny.org/content/what-ails-medicaid-new-york-and-does-medicaid-redesign-team-have-cure. ↩︎
68. Ibid. ↩︎
69. New York State Department of Health. Redesigning New York’s Medicaid Program (Albany, NY: Department of Health, accessed September 27, 2016) https://www.health.ny.gov/health_care/medicaid/redesign/. ↩︎
70. Citizens Budget Commission. What Ails Medicaid in New York, And Does the Medicaid Redesign Team Have a Cure? (New York, NY: Citizens Budget Commission, May 20, 2016) http://www.cbcny.org/content/what-ails-medicaid-new-york-and-does-medicaid-redesign-team-have-cure. ↩︎
71. Ibid. ↩︎
72. Ibid. ↩︎
73. Ibid. ↩︎
74. Ibid. ↩︎
75. New York State Office for People with Developmental Disabilities. Fully Integrated Duals Advantage (Albany, NY: Office for People with Developmental Disabilities, accessed September 27, 2016) https://www.opwdd.ny.gov/opwdd_services_supports/people_first_waiver/care_management/FIDA_IDD. ↩︎
76. Citizens Budget Commission. What Ails Medicaid in New York, And Does the Medicaid Redesign Team Have a Cure? (New York, NY: Citizens Budget Commission, May 20, 2016) http://www.cbcny.org/content/what-ails-medicaid-new-york-and-does-medicaid-redesign-team-have-cure. ↩︎
77. New York State Department of Health. DSRIP Overview (Albany, NY: Department of Health, accessed September 27, 2016) http://www.health.ny.gov/health_care/medicaid/redesign/dsrip/overview.htm. ↩︎
78. Jocelyn Guyer, Naomi Shine, Robin Rudowitz, and Alexandra Gates. Key Themes from Delivery System Reform Incentive Payment (DSRIP) Waivers in 4 States. (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, April 2015) http://files.kff.org/attachment/issue-brief-key-themes-from-delivery-system-reform-incentive-payment-dsrip-waivers-in-4-states. ↩︎
79. Ibid. ↩︎
80. Citizens Budget Commission. What Ails Medicaid in New York, And Does the Medicaid Redesign Team Have a Cure? (New York, NY: Citizens Budget Commission, May 20, 2016) http://www.cbcny.org/content/what-ails-medicaid-new-york-and-does-medicaid-redesign-team-have-cure. ↩︎
81. New York State Department of Health. A Path Toward Value Based Payment (Albany, NY: Department of Health, June 2015) https://www.health.ny.gov/health_care/medicaid/redesign/dsrip/docs/vbp_roadmap_final.pdf. ↩︎
82. Rob Houston, Katherine Heflin and Tricia McGinnis, Navigating the New York State Value-Based Payment Roadmap (New York, NY: Medicaid Institute at the United Hospital Fund, November 2015) https://www.uhfnyc.org/assets/1439. ↩︎
83. New York State Department of Health. Managed Care Organization (MCO) Baseline Survey – Results (Albany, NY: Department of Health, June 28, 2016) https://www.health.ny.gov/health_care/medicaid/redesign/dsrip/vbp_library/docs/2016-07-25_mco_survey_results.pdf. ↩︎
84. Oklahoma Employment Security Commission. Oklahoma Economic Indicators (Oklahoma City, OK: Oklahoma Employment Security Commission, August 2016) https://www.ok.gov/oesc_web/documents/lmiEconIndPub.pdf. ↩︎
85. Chad Wilkerson. How is Oklahoma’s economy performing relative to other oil and gas states (Oklahoma City, OK: Federal Reserve Bank of Kansas City, June 9, 2016) https://www.kansascityfed.org/publications/research/oke/articles/2016/comparing-oklahomas-economy. ↩︎
86. Ibid. ↩︎
87. Office of Management & Enterprise Services. Weak GRF receipts to cause revenue failure this fiscal year (Oklahoma City, OK: Office of Management and Enterprise Services, December 15, 2015) https://content.govdelivery.com/accounts/OKOMES/bulletins/12b1e2f. ↩︎
88. Oklahoma Employment Security Commission. Oklahoma Economic Indicators (Oklahoma City, OK: Oklahoma Employment Security Commission, August 2016) https://www.ok.gov/oesc_web/documents/lmiEconIndPub.pdf. ↩︎
89. U.S. Energy Information Administration. Petroleum & Other Liquids (Washington, DC: U.S. Department of Energy, accessed September 27, 2016) https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D. ↩︎
90. Oklahoma Employment Security Commission. Oklahoma Economic Indicators (Oklahoma City, OK: Oklahoma Employment Security Commission, August 2016) https://www.ok.gov/oesc_web/documents/lmiEconIndPub.pdf. ↩︎
91. NewsChannel4. Oklahoma unemployment rate tops national average for first time in 26 years (Oklahoma City, OK: NewsChannel4, September 6, 2016) http://kfor.com/2016/09/06/oklahoma-unemployment-rate-tops-national-average-for-first-time-in-13-years/. ↩︎
92. Office of Management & Enterprise Services. Final FY 2016 revenues 9.4% below estimate (Oklahoma City, OK: Office of Management & Enterprise Services, July 27, 2016) https://content.govdelivery.com/accounts/OKOMES/bulletins/15930ad. ↩︎
93. Office of the State Treasurer. Oklahoma Economic Report (Oklahoma City: OK, Office of the State Treasurer, Volume 5 Issue 12, December 31, 2015) https://www.ok.gov/treasurer/documents/OER_12-31-15.pdf. ↩︎
94. Office of Governor Mary Fallin. Gov. Fallin Signs Budget Bill, Highlights Successes in 2015 Legislative Session (Oklahoma City, OK: Office of Governor Mary Fallin, June 1, 2015) https://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=223&article_id=15912. ↩︎
95. Oklahoma Policy Institute. Budget Trends and Outlook – March 2016 (Tulsa, OK: Oklahoma Policy Institute, March 4, 2016) http://okpolicy.org/budget-trends-and-outlook-march-2016/. ↩︎
96. Office of Governor Mary Fallin. Gov. Fallin Signs Budget Bill, Acts on Other Measures to Close out 2016 Legislative Session (Oklahoma City, OK: Office of Governor Mary Fallin, June 10, 2016)  https://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=223&article_id=22720. ↩︎
97. News9.com. Oklahoma Governor, Lawmaker Reach Budget Agreement (Oklahoma City, OK: News9.com, May 24, 2016) http://www.news9.com/story/32051727/oklahoma-lawmakers-reach-budget-agreement. ↩︎
98. Office of Governor Mary Fallin. Gov. Fallin Signs Budget Bill, Acts on Other Measures to Close out 2016 Legislative Session (Oklahoma City, OK: Office of Governor Mary Fallin, June 10, 2016)  https://www.ok.gov/triton/modules/newsroom/newsroom_article.php?id=223&article_id=22720. ↩︎
99. Ibid. (The Tax Commission, Elections Board and Legislative Services Bureau were the other agencies to receive an increase). ↩︎
100. Ibid. ↩︎
101. Ibid. ↩︎
102. Rick Green. Oklahoma governor decides against special session for teacher raises (Oklahoma City, OK: The Oklahoman, September 1, 2016) http://newsok.com/oklahoma-governor-decides-against-special-session-for-teacher-raises/article/5516389. ↩︎
103. Associated Press. Tobacco tax for Medicaid plan faces challenge in Oklahoma (Chicago, IL: Modern Healthcare, April 30, 2016) http://www.modernhealthcare.com/article/20160430/NEWS/304309937. ↩︎
104. Oklahoma Health Care Authority. Medicaid Rebalancing act of 2020 (Oklahoma City, OK: Oklahoma Health Care Authority, April 2016) https://www.okhca.org/about.aspx?id=18804. ↩︎
105. Rick Green. Oklahoma Health Care Authority official resigns, takes job with nursing home group (Oklahoma City, OK: The Oklahoman, August 31, 2016) http://newsok.com/article/5516184. ↩︎
106. Oklahoma Health Care Authority. Data and Reports – Insure Oklahoma Fast Facts (Oklahoma City, OK: Oklahoma Health Care Authority, August 2016) http://www.okhca.org/research.aspx?id=87&parts=7447. ↩︎
107. Oklahoma’s ranking dropped to 49th in the most recent 2016 report. United Health Foundation. America’s Health Rankings Senior Report (Minnetonka, MN: United Health Foundation, 2016) http://assets.americashealthrankings.org/app/uploads/final-report-seniors-2016-edition-1.pdf. ↩︎
108. The Pacific Health Policy Group, “Presentation to the SoonerHealth+ Stakeholder Meeting,” July 26, 2016; accessed at http://okhca.org/about.aspx?id=17366. ↩︎
109. Oklahoma Health Care Authority. Health Care Model Advances (Oklahoma City, OK: Oklahoma Health Care Authority, August 31, 2016) http://okhca.org/about.aspx?id=17366. ↩︎
110. Centers for Medicare & Medicaid Services. Comprehensive Primary Care Plus (Baltimore, MD: Centers for Medicare & Medicaid Services, accessed September 27, 2016) https://innovation.cms.gov/initiatives/comprehensive-primary-care-plus/. ↩︎
111. Centers for Medicare & Medicaid Services. Comprehensive Primary Care Plus (CPC+) Fact Sheet (Baltimore, MD: Centers for Medicare & Medicaid Services, April 11, 2016) https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-04-11.html. ↩︎
112. Ibid. ↩︎
113. V. Smith, K. Gifford, E. Ellis, R. Rudowitz, L. Snyder and E. Hinton. Medicaid Reforms to Expand Coverage, Control Costs and Improve Care: Results form a 50-State Medicaid Budget Survey for State Fiscal Years 2015 and 2016. (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2015) http://files.kff.org/attachment/report-medicaid-reforms-to-expand-coverage-control-costs-and-improve-care-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2015-and-2016. ↩︎

Medicaid plays a significant role in the U.S. health care system, now providing health insurance coverage to more than one in five Americans and accounting for one-sixth of all U.S. health care expenditures.¹  The Medicaid program continues to evolve as state and federal policy makers respond to changes in the economy, the broader health system, state budgets, and policy priorities, and in recent years, to requirements and opportunities in the Affordable Care Act (ACA). This report provides an in-depth examination of the changes taking place in Medicaid programs across the country. The findings in this report are drawn from the 16^th annual budget survey of Medicaid officials in all 50 states and the District of Columbia conducted by the Kaiser Commission on Medicaid and the Uninsured and Health Management Associates (HMA), in collaboration with the National Association of Medicaid Directors. This report highlights policy changes implemented in state Medicaid programs in FY 2016 and those implemented or planned for FY 2017 based on information provided by the nation’s state Medicaid directors. The District of Columbia is counted as a state for the purposes of this report. Key findings include the following:

Eligibility and Enrollment

Medicaid expansion under the ACA continues to affect state policies for FY 2016 and FY 2017. As of October 2016, 32 states had adopted the ACA Medicaid expansion. This includes 26 states that implemented the expansion in FY 2014, three states in FY 2015 (New Hampshire, Pennsylvania, and Indiana), two states in FY 2016 (Alaska and Montana), and Louisiana in FY 2017. Beyond eligibility changes tied to the ACA, in FY 2016 and FY 2017 states implemented or adopted only a few changes generally targeted to a limited number of beneficiaries. Medicaid policies related to beneficiary premiums and copayments changed little overall; most of the activity reported related to Medicaid waivers. In FY 2016, Montana implemented a Medicaid expansion waiver that included provisions to impose premiums or monthly contributions. At the time of the survey, Arkansas, Arizona, Kentucky, and Ohio had Medicaid waivers pending with premium provisions. HHS denied Ohio’s pending waiver on September 9, 2016 and the Arizona waiver was approved on September 30, 2016.

Many states have initiatives to expand coverage to criminal justice involved populations. In states that implemented the ACA Medicaid expansion, a greater proportion of this population is now eligible for Medicaid. Key initiatives include efforts to enroll individuals in Medicaid prior to their release and policies that maintain Medicaid eligibility during incarceration by suspending rather than terminating Medicaid coverage.

Managed Care and Other Delivery System Reforms

States continue to expand the use of MCOs and other delivery system reform efforts with goals to control costs, improve access to care and care outcomes, and ultimately improve population health (Figure ES-1). Many of these initiatives are targeted to high-need populations.

Reliance on risk-based managed care continues to grow as additional states use Managed Care Organizations (MCOs) to deliver care or enroll more populations. As of July 2016, 39 states contracted with risk-based managed care organizations (MCOs) to serve their Medicaid enrollees. (These states are referred to throughout the report as “MCO states.”) In 28 of the 39 MCO states, at least 75 percent of all Medicaid beneficiaries were enrolled in MCOs (an increase from 21 of 39 states in July 2015). Three states (Iowa, Rhode Island, and West Virginia) terminated their Primary Care Case Management (PCCM) programs in either FY 2016 or FY 2017 and shifted those populations into risk-based managed care. Alabama plans to implement a new MCO program in FY 2017 and Missouri plans to expand its MCO program statewide in FY 2017.

States sometimes exclude special populations and/or some behavioral health services from MCO contracts. This survey asked about populations with special needs that may be included or excluded from acute care MCO enrollment. States reported that of the special populations noted in the survey, pregnant women were most likely to be enrolled on a mandatory basis into acute care MCOs (28 states) while persons with intellectual or developmental disabilities (ID/DD) were least likely to be enrolled on mandatory basis (10 states) and also most likely to be excluded from MCO enrollment (7 states).

Many states are implementing quality initiatives encouraging or requiring MCOs to implement alternative payment models or screen for social needs. Thirty-six (36) of the 39 MCO states reported one or more select MCO quality initiatives in place in FY 2015 and 17 states in each of the survey years (FY 2016 and FY 2017) implemented or adopted new quality initiatives such as pay for performance, reporting MCO quality metrics or collecting adult and child quality measures. In FY 2016, five states identified targets in MCO contracts for the use of alternative provider payment models; 10 additional states intend to do so in FY 2017. States are also using MCO arrangements to increase attention to the social determinants of health. Twenty-six (26) states reported requiring or encouraging MCOs to screen for social needs and provide referrals to other services in FY 2016 and four states intend to do so in FY 2017. States commonly require MCOs to perform a health needs/risk assessment that includes information on social determinants as well as medical needs. In addition, five states reported that they have policies in place to encourage or require MCOs to provide care coordination services to enrollees prior to release from incarceration (Arizona, Iowa, Kentucky, New Mexico, and Ohio), and 10 states intend to add such requirements in FY 2017.

Over two-thirds of all states (36) have at least one delivery system or payment reform initiative in place and the majority of states are expanding current programs or adopting new initiatives. Twenty-nine (29) states in either FY 2016 or FY 2017 reported adopting or expanding one or more initiatives including patient-centered medical homes (PCMHs), Health Homes, Accountable Care Organizations (ACOs), and other initiatives to better manage the care of persons with multiple chronic conditions. Interest in Episode of Care initiatives also ticked upward for FY 2017 (7 states). These initiatives may be implemented through fee-for-service or managed care. Seven states had Delivery System Reform Incentive Payment (DSRIP) programs in place in FY 2015. Four states reported new or expanded DSRIP programs in FY 2016 and five states reported new or expanded DSRIP programs in FY 2017.

Long-Term Services and Supports

Nearly every state reported actions to expand the number of persons served in community settings in FY 2016 and FY 2017, primarily through increased enrollment in HCBS waivers and implementing new HCBS SPAs. New PACE sites or expanded enrollment in existing PACE sites as well as including specific rebalancing incentives into managed care contracts that cover long-term services and supports (LTSS) were also strategies to increase community-based care.

Twenty-three (23) states provided some or all LTSS through a managed care arrangement as of July 1, 2016. Fifteen (15) states offered managed LTSS (MLTSS) on a statewide basis for at least some LTSS populations. The most common model combines both acute care and LTSS in a single plan, providing a comprehensive approach to service integration. Five states offer a prepaid health plan that covers only Medicaid LTSS. In FY 2016, four states implemented MLTSS or expanded MLTSS to new parts of the state, and four states expanded MLTSS to new populations. In FY 2017, two states anticipate geographic expansion in MLTSS, while five states anticipate adding new populations to MLTSS. Enrollment into the MLTSS program is always mandatory for seniors in 13 of the 23 MLTSS states, for individuals who have full dual eligibility status in nine states, for nonelderly adults with physical disabilities in 12 states, and for individuals with I/DD in eight states. Thirteen (13) states with MCOs offering LTSS reported having LTSS quality measures in place in FY 2015. In FY 2016, a total of six states implemented new or expanded LTSS quality metrics; five states plan to expand quality measures for LTSS in FY 2017.

Provider Rates and Taxes

Changes in the economy continue to affect provider reimbursement rates, and states are also implementing reimbursement policies designed to promote quality. In FY 2016 more states implemented provider rate increases than implemented restrictions (45 and 38 states, respectively); however, as economic conditions become more challenged, slightly fewer states are implementing rate increases (40 states) than restrictions (41 states) in FY 2017. As part of efforts to improve the quality of health care and reduce costs, 21 states have or are adopting reimbursement policies in FY 2017 to reduce potentially preventable hospital readmissions in fee-for-service (FFS) and 11 of the 39 MCO states require or plan to require MCOs to adopt such incentives or penalties. Twenty (20) states have or are adopting reimbursement policies in FY 2017 designed to reduce the number of early elective deliveries in FFS and 14 states require or plan to require MCOs to adopt similar policies.

States continue to rely on provider taxes, with eight states using this financing mechanism to fund the state share of ACA expansion costs. All states except Alaska use at least one provider tax or fee to help finance Medicaid. In FY 2016 and FY 2017, 22 states increased or planned to increase one or more provider tax or fee and nine states are adding new provider taxes. Eight of the Medicaid expansion states (Arkansas, Arizona, Colorado, Illinois, Indiana, Louisiana, New Hampshire, and Ohio) reported plans to use provider taxes or fees to fund all or part of the costs of the ACA Medicaid expansion beginning in January 2017, when states must pay five percent of the costs of the expansion.

Benefits and Prescription Drugs

A total of 21 states expanded or enhanced covered benefits in FY 2016, and 20 states planned benefit expansions in FY 2017. The most common benefit enhancements reported were for behavioral health and substance use disorder services, telemedicine and tele-monitoring services, and dental services for adults. Far fewer states reported benefit restrictions.

With rising drug costs, many states are focused on pharmacy cost containment efforts. The vast majority of states identified high cost and specialty drugs as a significant cost driver for state Medicaid programs, most pointing specifically to hepatitis C antivirals. Many states are focused on refining and enhancing their pharmacy programs, including actions related to new and emerging specialty and high-cost drug therapies. A total of 31 states in FY 2016 and 23 in FY 2017 reported implementing or plans to implement pharmacy cost containment efforts. Thirty-three (33) of the 39 states with MCO contracts as of July 1, 2o16 reported that the pharmacy benefit was generally carved in, and another state reported plans to implement a full pharmacy carve-in in January 2017. States reported how they manage MCO pharmacy programs; in FY 2015, 13 states had uniform clinical protocols, 10 states had uniform prior authorization, and 10 states had uniform PDL requirements across fee-for-service and MCO programs. Many states reported expansions of these strategies in FY 2016 and FY 2017.

As part of the battle to address the nation’s opioid epidemic, a majority of states have adopted, and many are expanding, pharmacy management strategies specifically targeted at opioids. The CDC has developed and published recommendations for the prescribing of opioid pain medications for adults in primary care settings.²  Twenty-one (21) states reported adoption or plans for adoption in FY 2017 for their FFS programs. Of the 39 states with MCO contracts, 11 are requiring MCOs to adopt the CDC guidelines or are planning to do so in FY 2017. Many other states indicated these policies were under review for FFS and MCOs. States were also adopting strategies to expand access to naloxone, a prescription opioid overdose antidote that prevents or reverses the life-threatening effects of opioids. Almost all states reported specific opioid-focused pharmacy management policies. Imposing a quantity limit was the most common pharmacy management approach, used by almost all states (46) in FY 2015 for their FFS programs. Use of prior authorization (45 states), clinical criteria (42 states), and step therapy (32 states) were also widespread in FY 2015 for FFS. Significantly fewer states (12) reported having a requirement in place in FFS in FY 2015 for Medicaid prescribers to check their states’ Prescription Drug Monitoring Program before prescribing opioids to a Medicaid patient. Many states also reported MCO policies in place; however, it is unclear how many states require such policies.

Administration and Key Priorities for 2017 and Beyond

Medicaid provides health coverage for over one-fifth of all Americans and accounts for one-sixth of national health expenditures.³  Its administration involves complex systems, rules, and requirements. States indicated their most significant administrative challenges related to implementing the ACA, major delivery system reforms, new federal regulations, and new eligibility and IT systems. Medicaid directors noted that limited resources in terms of staff and funding for administration make it difficult to balance competing priorities and implement multiple significant initiatives. Despite the administrative and fiscal challenges, Medicaid directors listed an array of priorities for FY 2017 and beyond that focus on payment and delivery system initiatives designed to control costs and achieve better health outcomes.

Medicaid has become one of the nation’s most important health care programs, now providing health insurance coverage to more than one in five Americans, and accounting for over one-sixth of all U.S. health care expenditures.⁴  The Medicaid program continues to change, as policy makers in each state seek to improve their program, responding to changes in the economy, the broader health system, state budgets and policy priorities, and in recent years, to requirements and opportunities in the Affordable Care Act (ACA) as well as new guidance and regulations. In many ways, state Medicaid programs are national leaders in delivery and payment system initiatives designed to improve health care and outcomes, and to control health care spending.

This report examines the reforms, policy changes and initiatives that occurred in FY 2016 and those adopted for implementation for FY 2017 (which began for most states on July 1, 2016⁵ ). The findings in this report are drawn from the annual budget survey of Medicaid officials in all 50 states and the District of Columbia conducted by the Kaiser Commission on Medicaid and the Uninsured (KCMU) and Health Management Associates (HMA), in collaboration with the National Association of Medicaid Directors (NAMD). This was the sixteenth annual survey, which has been conducted at the beginning of each state fiscal year from FY 2002 through FY 2017.⁶  (Copies of previous reports are archived here.)

The KCMU/HMA Medicaid survey on which this report is based was conducted from June through August 2016. The survey was sent to each state Medicaid director in June 2016. Directors and their staff provided data for this report in their written survey response and through a follow-up telephone interview. All 50 states and DC completed surveys and participated in telephone interview discussions between June and August 2016. The survey instrument is included as an appendix of this report.

The survey collects some data about Medicaid policies in place during a base year, but focuses on changes from year-to-year. For FY 2017, the survey includes policy changes implemented at the beginning of the year, or for which a definite decision has been made to implement during the fiscal year; it does not include policy changes under consideration but for which a definite decision on implementation has not been made. Medicaid policy makers know that policies adopted for the upcoming year are sometimes delayed or not implemented for reasons related to legal, fiscal, administrative, systems or political considerations, or due to delays in approval from CMS. The District of Columbia is counted as a state for the purposes of this report; the counts of state policies or policy actions that are interspersed throughout this report include survey responses from the 51 “states” (including DC). Key findings of this survey, along with state-by-state tables providing more detailed information, are described in the following sections of this report:

• Eligibility, Enrollment, Premiums, and Copayments
• Managed Care Initiatives
• Emerging Delivery System and Payment Reforms
• Long-Term Services and Supports Reforms
• Provider Rates and Taxes
• Benefits and Pharmacy
• Administrative Challenges, Priorities, and Conclusion

Changes to Eligibility Standards

The ACA Medicaid expansion was one of the most significant Medicaid eligibility changes in the history of the program. As of October 2016, 32 states had implemented the ACA Medicaid expansion: 26 states implemented the expansion in FY 2014; three states (Indiana, New Hampshire and Pennsylvania) in FY 2015; two states (Alaska and Montana) in FY 2016, and on July 1, 2016 (FY 2017), the expansion became effective in Louisiana (Figure 1). Beyond the Medicaid expansion, states implemented or adopted only a few eligibility changes generally targeted to a limited number of beneficiaries.

Coverage Transitions

As a result of new coverage pathways (including both expanded Medicaid coverage and the availability of Marketplace subsidies), some states eliminated Medicaid coverage for beneficiaries with incomes above 138 percent FPL (most of this activity occurred in FY 2014 and was covered in earlier surveys). In addition, some individuals who had qualified through more limited Medicaid eligibility pathways, such as those related to pregnancy, family planning, spend-down, and the Breast and Cervical Cancer Treatment (BCCT), could be eligible for more comprehensive coverage through income based pathways in states that adopted the ACA Medicaid expansion. Even with alternative coverage options, many states have maintained most limited coverage options, although enrollment through these pathways may have declined. Changes to coverage above 138 percent of the FPL or to limited pathway coverage in FY 2016 or FY 2017 are listed below. Because individuals have access to Medicaid through another eligibility pathway or to other coverage options, these changes are not counted as positive or negative eligibility changes, but as “no change” (Tables 1 and 2).

• In FY 2016, Connecticut reduced Medicaid parent eligibility levels from 201 percent FPL to 155 percent FPL; many parents previously eligible at the higher levels should be eligible for Marketplace subsidies.
• New Hampshire plans to phase out its BCCT pathway in FY 2017.
• Pennsylvania eliminated spend-down for parents and adults with disabilities over age 21 as part of its Healthy PA waiver, but reinstated this coverage in March 2016.
• Ohio eliminated its family planning waiver in FY 2016. Michigan closed its family planning waiver to new enrollment in April 2014 and officially ended the program June 30, 2016.

Other Eligibility Changes

Other eligibility changes aside from the ACA expansion in FY 2016 and FY 2017 were limited and targeted to small numbers of beneficiaries (Tables 1 and 2). For FY 2016, a total of seven states made changes that expanded Medicaid eligibility and for FY 2017, seven states plan to implement Medicaid eligibility expansions (Figure 2). Key expansions include the following:

• Florida in FY 2016 and Utah in FY 2017 are implementing the option to eliminate the five-year bar on Medicaid eligibility for lawfully-residing immigrant children. Utah expects to cover an additional 750 children.
• Michigan implemented the Flint Water Group waiver, which extends Medicaid eligibility to children and pregnant women with incomes up to 400 percent FPL if they were exposed to tainted Flint water. (The waiver also expands benefits for existing eligible individuals by adding Targeted Case Management.)
• Maine will increase eligibility under its family planning pathway to 209 percent FPL in FY 2017.

Only two states in FY 2016 (Ohio and Virginia) and two states in FY 2017 (Arkansas and Missouri) made or plan to make eligibility restrictions. These are mostly targeted restrictions that would affect small groups of beneficiaries. Arkansas is seeking a modification to its “Private Option” waiver to, effective January 1, 2017, eliminate retroactive eligibility for expansion enrollees; the waiver is pending at CMS. Missouri plans to begin the process of suspending its family planning waiver in FY 2017 following legislative restrictions in the FY 2017 appropriations bill.⁷  The FY 2016 reduction in eligibility for waiver services in Virginia for seriously mentally ill individuals (GAP waiver program) was partially restored in FY 2017.

Coverage Initiatives for the Criminal Justice Population

With the ACA Medicaid expansion to low-income adults, many individuals involved with the justice system are now eligible for Medicaid. Connecting these individuals to health coverage can facilitate their integration back into the community by increasing their ability to address health needs, which may contribute to greater stability in their lives as well as broader benefits to the individual and society as a whole. An increasing number of states have efforts underway to enroll eligible individuals moving into and out of the justice system into Medicaid. In April 2016 guidance, the Centers for Medicare and Medicaid Services (CMS) clarified that incarcerated individuals may be determined eligible for Medicaid and that the state Medicaid agency must accept applications and process renewals for incarcerated individuals.⁸  Although individuals may be enrolled in Medicaid while they are incarcerated, Medicaid cannot cover the cost of their care, except for inpatient services. In its recent guidance, CMS clarified who is considered an inmate of a public institution and therefore only able to receive Medicaid coverage for inpatient care.⁹  This survey asked states about a number of initiatives to promote Medicaid coverage for individuals involved with the criminal justice system (Exhibit 1 and Table 3).

The vast majority of states (44) had policies in place as of FY 2015 to obtain Medicaid reimbursement for inpatient care provided to incarcerated individuals who are Medicaid eligible. Four additional states implemented these policies in FY 2016 or plan to in FY 2017.

Given that the Medicaid expansion has significantly increased Medicaid eligibility among individuals moving into and out of the criminal justice system, many states are newly adopting or expanding initiatives to connect this population to Medicaid coverage. States are adopting policies to suspend Medicaid eligibility (rather than terminate eligibility) during incarceration. In FY 2015, 25 states had these policies in place for at least some individuals entering jail or prison, and 41 states are expected to have suspension policies by the end of FY 2017.

Medicaid and corrections agencies are also working together to help connect individuals to coverage as they are released from jail or prison back to the community. Some of these approaches include providing outreach and enrollment assistance pre-release, expedited enrollment processes for individuals being released, and Medicaid eligibility staff dedicated to processing applications for this population. A number of states have such initiatives in place and some states reported expanding these enrollment activities in FY 2016 or 2017. The most common expansions involve increasing the geographic scope of jail initiatives or increasing the number of prisons where eligibility assistance is provided.

The survey did not ask states about initiatives specific to parolees and individuals residing in halfway houses. However, Colorado, Connecticut, and the District of Columbia specifically mentioned initiatives to cover individuals residing in halfway houses.

Medicaid Financed Births

For over three decades, Medicaid has been a key source of financing of births for low- and modest-income families. Women who would not otherwise be eligible can qualify for Medicaid coverage for pregnancy, delivery, and postpartum care due to higher income eligibility thresholds for pregnant women.¹⁰  Medicaid directors were asked to provide the most recent available data on the share of all births in their states that were financed by Medicaid. About half of states were able to provide data for calendar 2015 or fiscal year 2015.¹¹  Other states generally provided data from 2013 or 2014. On average,¹²  states reported that Medicaid pays for just over 47 percent of all births. Eight states (Arkansas,¹³  Louisiana, Mississippi, Nevada, New Mexico, Oklahoma, South Carolina, and West Virginia) reported that Medicaid pays for 60 percent or more of all births in their state, while nine states reported that Medicaid finances less than 40 percent of all births (Iowa, Kansas, Nebraska, New Hampshire, North Dakota, Pennsylvania, Utah, Virginia, and Wyoming).

Premiums and Copayments

States have flexibility to charge limited premiums and cost-sharing in Medicaid, subject to federal parameters. Premiums are generally prohibited for beneficiaries with income below 150 percent FPL. Cost-sharing for people with income below 100 percent FPL is limited to “nominal” amounts specified in federal regulations, with higher levels allowed for beneficiaries at higher income levels. However, certain groups are exempt from cost-sharing, including mandatory eligible children, pregnant women, most children and adults with disabilities, people residing in institutions, and people receiving hospice care. In addition, certain services are exempt from cost-sharing: emergency services, preventive services for children, pregnancy-related services, and family planning services. Total Medicaid premiums and cost-sharing for a family cannot exceed 5 percent of the family’s income on a quarterly or monthly basis.¹⁴ 

Details about state actions related to premiums and copayments can be found in Table 4.

Premiums

Medicaid generally is not allowed to charge premiums to Medicaid beneficiaries with incomes at or below 150 percent FPL, although in limited cases certain populations, generally with income above 100 percent FPL, may be charged premiums (sometimes referred to as “buy-in” programs). Forty-four (44) states have buy-in programs for working people with disabilities and most of these states impose premiums.¹⁵  States also have the option to implement buy-in programs for children with disabilities. States that reported implementing premium-based programs under the Family Opportunity Act (FOA) for children with disabilities in families with incomes that otherwise exceed Medicaid limits include Colorado, Louisiana, North Dakota, and Texas.¹⁶  More recently, some states have received approval or were seeking approval to impose premiums under a Medicaid expansion waiver.

Seven states reported that they implemented or plan to implement new or increased premiums in FY 2016 or FY 2017 (Table 4). Three of these premium changes are related to individuals with disabilities. In FY 2016, Iowa increased Medicaid premiums for working people with disabilities. Two other states (Michigan in FY 2016 and Colorado in FY 2017) implemented or plan to implement expanded coverage and premiums for individuals with disabilities.

Five states (Arkansas, Indiana, Iowa, Michigan, and Montana) have received federal waivers to require premiums/monthly contributions for Medicaid expansion enrollees.¹⁷  In some cases, monthly contributions may be imposed in lieu of point-of-services copayments.¹⁸ 

Other implemented or proposed changes in premiums or contributions are for the Medicaid expansion populations.

• Montana implemented the Medicaid expansion in January 2016 under a waiver that requires monthly premiums up to 2 percent of household income for newly eligible adults from 51-138 percent FPL.
• Arkansas has waiver amendments pending that would take effect in calendar year 2017. The proposed waiver would replace the current income-based monthly contributions to “Health Independence Accounts,” which are to be used to fund copayments instead of paying at the point of service, with a premium requirement of 2 percent of income for those with incomes above 100 percent of FPL.
• Arizona had a waiver pending that would impose monthly premiums of 2 percent of income or $25, whichever is less, on all Medicaid expansion adults from 0-138 percent FPL, paid into health savings accounts. The waiver was approved on September 30, 2016 and allows for premiums at 2 percent of income for non-medically frail 100-138 percent FPL; individuals that comply with a healthy behavior program could have premiums eliminated for six months.
• Ohio submitted a waiver request in June 2016 to change its traditional expansion to the Healthy Ohio program which would impose monthly contributions, equal to the lesser of 2 percent of annual income or $99 per year, as a condition of eligibility for all beneficiaries except pregnant women and those with zero income. On September 9, 2016 CMS denied the state’s waiver request.

Kentucky has a waiver pending with CMS that would add premiums to its traditional Medicaid expansion program, along with other changes, but the proposed effective date is not until July 1, 2017 (FY 2018) so it is not captured in this report.

Copayment Requirements

Most state Medicaid programs require beneficiary copayments, but to varying degrees. Twelve (12) states reported changes to copayment requirements in either FY 2016 or FY 2017 (Table 4). Key changes are described below:

• Five states reported new or increased copayment requirements for the Medicaid expansion population: Montana implemented new requirements in FY 2016, Louisiana plans to do so in FY 2017, Michigan plans to double copayments for Healthy Michigan Plan enrollees with incomes above 100 percent FPL in FY 2017, and New Hampshire planned copayment requirements for FY 2017 but these changes are included in waivers pending at CMS. The Ohio waiver that was denied would have increased copayments. The waiver approved in Arizona would allow for copayments (within state plan permissible levels) to be charged retrospectively for certain services such as non-emergency use of the emergency department, seeing a specialist without a referral, and use of brand name drugs when there is an available generic. Beneficiaries would get a quarterly invoice and be charged a monthly amount up to 3 percent of monthly income.
• In FY 2016, Indiana restored copayments for aged, blind, and disabled enrollees in managed care and Minnesota decreased copayment amounts for the Medical Assistance for Employed Persons with Disabilities (MA-EPD) group.
• In FY 2017, New Mexico plans to implement new copayments for non-emergency use of the emergency department for all Medicaid enrollees and new pharmacy copayments for all populations for brand name prescriptions when there is a less expensive generic equivalent available.¹⁹ 
• Four states are eliminating one or more copayment provisions in either FY 2016 or FY 2017 (North Dakota, New York, Oregon, and Vermont).

Table 1: Changes to Eligibility Standards in all 50 States and DC, FY 2016 and FY 2017

Table 2: States Reporting Eligibility Changes in FY 2016 and FY 2017

Table 3: Corrections-Related Enrollment Policies in all 50 States and DC, FY 2015-FY 2017

Table 4: States Reporting Premium and Copayment Actions Taken in FY 2016 and FY 2017

Managed care remains the predominant delivery system for Medicaid in most states. As of July 2016, all states except three – Alaska, Connecticut and Wyoming– had in place some form of managed care.²¹  Across the 48 states with some form of managed care, 39 had contracts with comprehensive risk-based managed care organizations (MCOs), unchanged from July 1, 2015. Three states (Iowa, Rhode Island, and West Virginia) reported ending their Primary Care Case Management (PCCM) programs leaving 16 states that administered a PCCM program as of July 1, 2016, down from 19 states a year earlier. PCCM is a managed fee-for-service (FFS) based system in which beneficiaries are enrolled with a primary care provider who is paid a small monthly fee to provide case management services in addition to primary care.

Of the 48 states that operate some form of managed care, seven operate both MCOs and a PCCM program while 32 states operate MCOs only and nine states operate PCCM programs only²²  (Figure 3). Wyoming, one of the three states without any managed care (i.e., without either MCOs or a PCCM program), does operate a limited-benefit risk-based prepaid health plan (PHP). In total, 24 states (including Wyoming) contracted with one or more PHPs to provide selected Medicaid benefits, such as behavioral health care, dental care, maternity care, non-emergency medical transportation, LTSS, or other benefits.

Populations Covered by Risk-Based Managed Care

The share of Medicaid beneficiaries enrolled in MCOs or PCCM programs or remaining in FFS for their acute care varies widely by state. However, the share of Medicaid beneficiaries enrolled in MCOs has steadily increased as states have expanded their managed care programs to new regions and new populations and made MCO enrollment mandatory for additional eligibility groups. The survey asked states to indicate the approximate share of specific Medicaid populations who receive their acute care in MCOs, PCCM programs, and FFS. As shown in Figure 4, among the 39 states with MCOs, 28 states reported that 75 percent or more of their Medicaid beneficiaries were enrolled in MCOs as of July 1, 2016 (up from 21 states in last year’s survey), including four of the five states with the largest total Medicaid enrollment. These four states (California, New York, Texas, and Florida) account for nearly four out of every 10 Medicaid beneficiaries across the country (Figure 4 and Table 5).²³ 

Children and adults (particularly those enrolled through the ACA Medicaid expansion) are much more likely to be enrolled in an MCO than elderly Medicaid beneficiaries or those with disabilities. Thirty-four (34) of the 39 MCO states covered 75 percent or more of all children through MCOs. Thirty-two (32) of the 39 MCO states covered 75 percent or more of low-income adults in pre-ACA expansion groups (e.g., parents, pregnant women) through MCOs. The elderly and people with disabilities were the group least likely to be covered through managed care contracts, with only 13 of the 39 MCO states covering 75 percent or more such enrollees through MCOs (Figure 4).

Of the 32 states that had implemented the ACA Medicaid expansion as of July 1, 2016, 27 were using MCOs to cover newly eligible adults. (The five Medicaid expansion states without risk-based managed care were Alaska, Arkansas, Connecticut, Montana, and Vermont.) The large majority (25) of these 27 states covered more than 75 percent of beneficiaries in this group through risk-based managed care. The remaining two states, which reported less than 75 percent MCO penetration for this group, were Colorado and Illinois.

Seven of the 16 states with PCCM programs also contract with MCOs. In most of these states, MCOs cover a larger share of beneficiaries than PCCM programs. However, Colorado and North Dakota are exceptions: as of July 1, 2016, a majority of Colorado’s enrollees were in the PCCM program, which is the foundation of the state’s Accountable Care Collaboratives, and approximately half (49 percent) of enrollees in North Dakota were enrolled in the PCCM program.

Populations with Special Needs

This year’s survey also asked states with MCOs whether, as of July 1, 2016, certain subpopulations with special needs were enrolled in MCOs for their acute care services on a mandatory or voluntary basis or were always excluded. On the survey, states selected from “always mandatory,” “always voluntary,” “varies (by geography or other factor),” or “always excluded” for the following populations: pregnant women, foster children, persons with intellectual and developmental disabilities (ID/DD), children with special health care needs (CSHCNs), adults with serious mental illness (SMI) and adults with physical disabilities. As shown in Exhibit 2 (and Table 6) below, pregnant women were the group most likely to be enrolled on a mandatory basis (28 states) while persons with ID/DD were least likely to be enrolled on mandatory basis (10 states) and also most likely to be excluded from MCO enrollment (7 states). Foster children were the group most likely to be enrolled on a voluntary basis (10 states) (although they were enrolled on a mandatory basis in a larger number of states).

Among states indicating that the enrollment approach for a given group or groups varied, geographic location and LTSS eligibility were the primary bases of variation. Six states (Colorado, Illinois, Missouri, Nevada, Utah, and Washington) specifically mentioned geographic variations and five states (Indiana, Kentucky, Louisiana, Ohio, and Texas) mentioned variations based on LTSS eligibility (or “level of care”).

Acute Care Managed Care Population Changes

In both FY 2016 and FY 2017, states continued to take actions to increase enrollment in acute care managed care, although fewer states reported doing so than in the last two surveys (in 2014 and 2015) reflecting full or nearly full MCO saturation in a growing number of states. Of the 39 states with MCOs, a total of 16 states indicated that they made specific policy changes in either FY 2016 (11 states) or FY 2017 (11 states) to increase the number of enrollees in MCOs through geographic expansions, voluntary or mandatory enrollment of new groups into MCOs, or mandatory enrollment of specific eligibility groups that were formerly enrolled on a voluntary basis (Exhibit 3).

Some of the notable acute care MCO expansions include:

• Three states (Iowa, Rhode Island, and West Virginia) terminated their PCCM programs in FY 2016 and shifted those populations into risk-based managed care. Iowa implemented statewide MCO coverage for almost all Medicaid enrollees on April 1, 2016 and ended its PCCM and behavioral health PHP programs.²⁵  Rhode Island eliminated its PCCM program for adults with disabilities (Connect Care Choice) in FY 2016 and transitioned the enrollees to MCOs. West Virginia ended its small PCCM program and also transitioned its SSI population from FFS to mandatory MCO enrollment in July 2016.
• Alabama plans to implement mandatory MCO enrollment for nearly all Medicaid enrollees (currently served through PCCM and FFS) in FY 2017, although the state recently requested CMS approval to delay implementation until July 1, 2017.²⁶  (Alabama’s fiscal year ends on September 30.)
• Missouri will extend its MCO program geographically statewide on May 1, 2017 for the populations eligible for managed care under current rules.

Geographic expansions of MCO service areas were reported in three states in FY 2016 (Iowa, Mississippi, and Utah), and in four states for FY 2017 (Alabama, Colorado, Mississippi, and Missouri).

In FY 2016 and FY 2017, states expanded MCO enrollment (either voluntary or mandatory) to additional groups. Some states added multiple groups. Some groups that states added or are planning to add include: foster care or adoption assistance children (Louisiana, Nebraska, Ohio, and Texas); persons eligible for LTSS (Nebraska, New York, and Washington); ACA expansion, newly eligible adult group (Louisiana and West Virginia); Breast and Cervical Cancer Treatment Program group (Ohio and Texas); children with special health care needs (Louisiana and Ohio); pregnant women (California); Native Americans (Louisiana); children (Mississippi); SSI population (West Virginia); persons with intellectual and developmental disabilities (Ohio).

Three states made enrollment mandatory in FY 2016 for specific eligibility groups that were formerly enrolled on a voluntary basis: New Hampshire (dual eligibles, disabled children, and foster care children), Rhode Island (SSI), and Utah (enrollees in nine new mandatory counties).

Although outside the period covered by this survey report, Oklahoma reported plans to implement risk-based managed care for the aged, blind, and disabled population after FY 2017.

Services Covered Under MCO Contracts

Behavioral Health Services Covered Under MCO Contracts

Although MCOs are at risk financially for providing a comprehensive set of acute care services, nearly all states exclude or “carve-out” certain services from their MCO contracts, most commonly behavioral health services. In this year’s survey, states with acute care MCOs were asked to indicate whether specialty outpatient mental health services, inpatient mental health services, and outpatient and inpatient substance use disorder (SUD) services are always carved-in (i.e., virtually all services are covered by the MCO), always carved-out (to PHP or FFS), or carve-in status varies by geographic or other factors.

For purposes of this survey, “specialty outpatient mental health” services mean services used by adults with Serious Mental Illness (SMI) and/or youth with serious emotional disturbance (SED), commonly provided by specialty providers such as community mental health centers. Depending on the service, about half of the 39 MCO states reported that specific behavioral health service types were carved into their MCO contracts, with specialty outpatient mental health services somewhat less likely to be carved in (Exhibit 4 and Table 7).

Of the nine states that indicated variation in the carve-in status of some behavioral health services, Texas and Washington cited geographic variation for all four service types; Ohio and Virginia indicated that outpatient mental health and SUD services were carved in only for dual eligibles in their Financial Alignment Demonstrations; Arizona reported that all four service types were carved out for children with a severe emotional disturbance; Missouri indicated variation based on diagnosis for children; New Jersey stated that inpatient medical detoxification services were always carved in while non-medical detoxification and short-term residential treatment for SUD were always carved out; South Carolina mentioned variation in specialty outpatient mental health services based on eligibility category, and also reported that psychiatric services in a freestanding hospital or dedicated unit are carved out, but psychiatric care during a hospital stay is carved in, and Wisconsin indicated that some specialty outpatient mental health services are carved in while others are carved out.

Seven states in both FY 2016 (Arizona, Louisiana, New Hampshire, New York, Rhode Island, Washington, and West Virginia) and FY 2017 (Alabama, Nebraska, New York, Rhode Island, South Carolina, Virginia and Washington) reported a new action to carve in, or plans to carve in, behavioral health services into their MCO contracts. Also, Wisconsin reported that, in an effort to promote care coordination, beginning in FY 2016, members receiving medication-assisted treatment for opioid addiction are no longer exempt from managed care enrollment, except for continuity of care reasons.

Institutions for Mental Diseases (IMD) Rule Change

The recently finalized Medicaid Managed Care final rule²⁷  allows states (under the authority for health plans to cover services “in lieu of” those available under the Medicaid state plan), to receive federal matching funds for capitation payments on behalf of adults who receive inpatient psychiatric or substance use disorder treatment or crisis residential services in an IMD for no more than 15 days in a month.²⁸ 

States were asked in the survey whether they planned to use this new authority. Of the 39 states with MCOs plus Alabama (which plans to implement MCOs in FY 2017), 16 states answered “yes,” six answered “no,” and 18 states said a decision had not yet been made. Maryland said “no” but indicated that the state had applied for an IMD waiver to offer residential services for persons with an SUD diagnosis.

Additional Services

States with MCO contracts reported that plans in their states may offer a range of services beyond those described in the state plan or waivers. Twelve (12) states reported that MCOs in their states provide limited or enhanced adult dental services beyond contractually required state plan benefits. Nine states reported enhanced vision services for adults. Vermont reported enhanced mental health and substance use disorder services and the District of Columbia reported telemedicine for behavioral health services. States also reported a wide range of other extra services, including car seats, wireless cell phones or smart phone applications, gym memberships, smoking cessation supports, nutrition education, transportation, adult vaccines, health and wellness outreach centers, equine therapy, and Native American healing benefits. Some states (including Arizona and California) reported that MCOs are not required to report non-covered services to the state, but have the discretion to offer them when the plan judges an additional service to be beneficial and cost-effective. New Mexico allows MCOs to provide additional services, subject to state approval.

Managed Care Quality, Contracts Requirements and Administration

Quality Initiatives

States procure MCO contracts using different approaches. States may set a capitation rate that meets the test of actuarial-soundness and contract with any MCO willing to meet state and federal requirements. Most states now competitively bid for Medicaid MCOs, in part because the dollar value is so large – in some cases the largest procurement ever undertaken by the state. In these procurements, states can specify requirements and criteria that go beyond price such as value-based payments, specific policy priorities such as improving birth outcomes, or strategies to address social determinants of health, as well as specific performance and quality criteria. In this year’s survey, states were asked if they used, or planned to use, National Committee for Quality Assurance’s (NCQA’s) Healthcare Effectiveness Data and Information Set (HEDIS®) scores as criteria for selecting MCOs to contract with. Of the 39 states with MCOs, 14 answered “yes.”

After contracts are procured, all states with MCO programs track one or more quality measures and require other health plan activities to improve health care outcomes and plan performance. States were asked to indicate whether they had selected quality strategies in place in FY 2015, to establish a baseline, and also to indicate newly added or expanded initiatives in FY 2016 or FY 2017. Thirty-six (36) of the 39 MCO states reported one or more select MCO quality initiatives in place in FY 2015. The most common strategies were the collection of adult and child quality measures and pay for performance (Figure 5 and Table 8).

In FY 2016, 17 states implemented new or expanded quality initiatives and 17 states plan to do so in FY 2017 (Figure 5 and Table 8). Of the 39 MCO states, a total of 38 states in FY 2016 and all 39 states in FY 2017 will have at least one of these initiatives in place. The most common new quality initiatives were pay for performance and use of quality measures pulled from CMS’s core measure sets for adults and children (which are available but not mandatory for states to use).

States were also asked if capitation withholds in MCO contracts were in place in FY 2015, added in FY 2016, or planned for FY 2017. Twenty (20) states indicated withholds were in place as of FY 2015. States were also asked to specify what share of MCO capitation payments were withheld in FY 2016 and FY 2017. One state added a new MCO capitation payment withhold tied to quality performance in FY 2016 (Iowa) and three states intend to add a new MCO withhold in FY 2017 (Alabama, DC, and Oregon). Withhold amounts typically ranged from 1 percent (Massachusetts, Michigan, Texas, and Washington) to 5 percent (Georgia, West Virginia, and Minnesota). Tennessee reported using withholds in a range from 2.5 percent to 10 percent.

Contract Requirements

Alternative [Provider] Payment Models (APM) within MCO Contracts

Alternative provider payment models to advance value-based purchasing (VBP) strategies are a sharp focus of Medicaid programs, as states pursue improved quality and outcomes and reduced costs of care within Medicaid and across payers. Many states have included a focus on adopting and promoting alternative provider payment models as part of their State Innovation Models (SIM) projects, and some states have considered specifically how Medicaid MCOs can play a part in achieving improved accountability in the health care delivery system.²⁹  The survey found that:

• Five states (Arizona, Delaware, Hawaii, Iowa, and South Carolina) identified a specific target in their MCO contracts for the percentage of provider payments, network providers, or plan members that plans must cover via alternative provider payment models in FY 2016; and
• Ten (10) additional states (California, Kansas, Louisiana, Michigan, Nebraska, New York, Oregon, Pennsylvania, Rhode Island, and Virginia) intend to include a target percentage in their contracts for FY 2017.

Further, 12 states had contracts that encouraged or required Medicaid MCOs to adopt alternative provider payment models in FY 2016, with eight additional states intending to encourage or require alternative provider payment arrangements within MCOs in FY 2017. The following box provides state examples of alternative provider payment targets.

Social Determinants of Health

In 2016, the CMS Center for Innovation announced a new Accountable Health Community model that represents the first CMS innovation model that focuses on social determinants of health. The goal of the five-year program is to raise awareness of and access to community-based services for Medicaid and Medicare beneficiaries.³⁰  This development reflects growing awareness and interest on the part of CMS to seek improved health outcomes and reduced costs by linking beneficiaries to social services and supports to address issues such as housing and food insecurity, among others, that can impact the ability of individuals to achieve health goals. States have also been focused on addressing social determinants of health, so federal and state activity are occurring simultaneously.

The survey found that 26 of the 39 states that contract with MCOs required or encouraged plans to screen enrollees for social needs and provide referrals to other services in FY 2016. Several states required MCOs to perform a health needs/risk assessment that includes information on social needs as well as medical needs. The following box provides state examples.

Four states (Hawaii, Maryland, Nebraska, and New York) plan to require or encourage MCOs to screen and/or refer to social services and other programs in FY 2017. For example, Nebraska will require all MCO staff to be trained on how social determinants affect members’ health and wellness, including issues related to housing, education, food, physical and sexual abuse, violence, and risk and protective factors for behavioral health concerns.

Criminal Justice Involved Populations

Five of the 39 states with MCO contracts encourage or require MCOs to provide care coordination services to enrollees prior to release from incarceration (Arizona, Iowa, Kentucky, New Mexico, and Ohio), and 10 states intend to add such requirements in FY 2017. Ohio described a system in which pre-release care coordination is provided for enrollees with serious health conditions. An MCO care manager develops a care-focused transition plan to help facilitate access to needed services in the community, and a videoconference is conducted as a means to establish a relationship between the enrollee and the care manager. The care manager will follow up with the enrollee post-release to identify and remove barriers to care. Arizona noted that, in CY 2016, the requirement for pre-release care coordination services were limited to the behavioral health carve-out plan, but indicated that it would be extended to apply to all MCOs in CY 2017. In the letter approving the Arizona waiver on September 30, 2016, CMS said they would continue to work with Arizona on the delivery system reforms to integrate physical and behavioral health for Medicaid beneficiaries leaving the justice system.

While Florida does not require MCOs to provide pre-release care coordination, the state has a multi-agency project in place to implement pre-release care coordination to incarcerated Medicaid enrollees.

Administrative Policies

Minimum Medical Loss Ratios

The proportion of total capitation payments received by an MCO that is spent on clinical services and quality improvement is known as the Medical Loss Ratio (MLR). In 2016, CMS published a final rule that requires states to develop capitation rates for Medicaid so as to achieve an MLR of at least 85 percent in the rate year.³¹  This is consistent with the minimum MLR established in the ACA for commercial health plans in the Marketplace and for small group and individual plans in the private market and with the minimum MLR applied to Medicare Advantage plans. There is no federal requirement that states require Medicaid plans to remit payment if they fail to meet the MLR standard, but states have discretion to require remittances. The minimum MLR requirement for Medicaid takes effect for rating periods and contracts starting on or after July 1, 2017.³² 

As of July 1, 2016, 20 of the 39 states that contract with comprehensive risk-based MCOs already specified a minimum MLR. Eighteen (18) of these 20 states applied the MLR requirement to all MCO contracts, while two states applied it on a limited basis (in Virginia, for the Financial Alignment Demonstration (FAD) only; in Massachusetts, for the Senior Care Options (SCO) program only). Thirteen (13) of the 20 states with minimum MLR requirements always require remittance payments to the state if the minimum MLR is not achieved; three states require remittances under some circumstances.

Medicaid MLRs vary by state but are most commonly set at 85 percent. A few states noted that their minimum MLRs varied by type of plan or population. For example, in New Jersey, the MLR is calculated separately for each population covered. Fourteen (14) states count some or all care management costs as medical (rather than administrative) expenses in the calculation of the MLR. For example, New Mexico spells out a broad set of activities that can be counted as medical expenses, including face-to-face and telephonic interactions between a care coordinator and a member; comprehensive needs assessment, development of a care plan, case management, health education, disease management, and costs associated with Community Health Workers.

Table 9 provides state-specific information regarding the use of a minimum MLR.

Auto-Enrollment

Generally, beneficiaries who are required to enroll in MCOs must be offered a choice of at least two plans. Those who do not select a plan are auto-enrolled in a plan by the state. The proportion of MCO beneficiaries who are auto-enrolled, which may reflect the level of consumer understanding and engagement or design aspects of the managed care program, varies widely across states. Three of the 39 states with MCOs had auto-enrollment rates of 10 percent or less (Georgia, New York, and Pennsylvania) while seven states auto-enrolled 75 percent or more of new MCO enrollees.³³  State auto-enrollment algorithms also vary, but they are usually designed to take into consideration previous plan or provider relationships, geographic location of the beneficiary, and/or plan enrollments of other family members. In addition, over half (23) of MCO states reported that their auto-enrollment algorithms were designed to balance enrollments among plans.

As of July 1, 2016, 10 states took plan quality rankings into consideration in the auto-enrollment algorithm, and Illinois plans to incorporate plan quality into its auto-enrollment algorithm during CY 2017 (Exhibit 5). This is an increase from eight states a year earlier. California noted that it makes auto-assignments based in part on MCO compliance with encounter data reporting requirements and plan inclusion of safety net providers in their provider networks. Michigan reported incorporating MCO performance on the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey.³⁴  Exhibit 5 shows use of selected components in state auto-enrollment algorithms.

PCCM and PHP Program Changes

Primary Care Case Management (PCCM) Program Changes

Of the 16 states with PCCM programs, three reported enacting policies to increase PCCM enrollment in FY 2016 or FY 2017: Colorado reported continued growth in its PCCM-based Accountable Care Collaboratives in both FY 2016 and FY 2017; Montana enrolled its ACA expansion population into its PCCM program in FY 2016, and Massachusetts allowed members in the CarePlus (ACA expansion) program, who were previously required to enroll in an MCO, to enroll in either the Primary Care Clinician plan (PCCM) or an MCO. Also, Alaska – one of only three states without either an MCO or PCCM program as of July 1, 2016 – reported plans to implement a PCCM program in FY 2017.

In contrast, five states (Alabama, Iowa, Rhode Island, Washington, and West Virginia) have taken actions to decrease enrollment in their PCCM programs in FY 2016 or FY 2017. Four of these states (Alabama, Iowa, Rhode Island, and West Virginia) ended or plan to end their PCCM programs and transition PCCM enrollees to risk-based managed care. Nevada stated that it was evaluating the cost-effectiveness of its PCCM program before making any policy changes and Oregon reported that it was working with nine federally recognized tribes to determine whether to pursue PCCM for tribal members and Tribal Health Centers.

Limited-Benefit Prepaid Health Plans (PHP) Changes

In this year’s survey, the 24 states contracting with at least one PHP as of July 1, 2016, were asked to indicate the services provided under these arrangements. As shown in Exhibit 6 below, the most frequently cited services provided were outpatient behavioral health services (13 states) and inpatient behavioral health services (12 states), followed by substance use disorder treatment and non-emergency medical transportation (NEMT) (10 states each). “Other” services reported included maternity care (Alabama), primary care (Colorado), behavioral health-related “diversionary” services (Massachusetts), incontinence supplies and vision care (Wisconsin), and mental health wrap-around services for children with emotional disturbances (Wyoming).

Four states reported implementing policies to increase PHP enrollment in FY 2016 or FY 2017. Michigan expanded or will expand its dental PHP program to additional counties in both FY 2016 and FY 2017. In FY 2017, California is implementing a waiver to provide substance use disorder services under a county-based PHP arrangement;³⁵  Colorado implemented a primary care PHP in one region; Indiana is planning to implement an NEMT PHP. While not counted in this report as an expansion, Massachusetts noted that allowing newly eligible adults to enroll in the PCCM program could also result in higher enrollment in its behavioral health PHP. Also, Arkansas and Nevada are planning to implement dental PHPs in FY 2018.

Five states also reported actions to decrease PHP enrollment in FY 2016 or FY 2017. Four states reported ending a PHP and folding the covered services into MCO contracts – Iowa (behavioral health) in FY 2016 and Alabama (maternity care), Nebraska (behavioral health), and Texas (behavioral health) in FY 2017. Also, Washington reported that PHP enrollment decreased in FY 2016 and will decrease further in FY 2017 when the state converts behavioral health PHPs to fully integrated MCO contracts in two counties.

Table 5: Share of the Medicaid Population Covered Under Different Delivery Systems in all 50 States and DC, as of July 1, 2016

Table 6: Enrollment of Special Populations Under Medicaid Managed Care Contracts for Acute Care in all 50 States and DC, as of July 1, 2016

Table 7: Behavioral Health Services Covered under Acute Care MCO Contracts in all 50 States and DC, as of July 1, 2016