Money Follows the Person (MFP) is a federal Medicaid demonstration designed to incentivize states to shift Medicaid long-term services and supports spending from institutional to home and community-based settings.  MFP was first authorized in the Deficit Reduction Act of 2005, and then extended through 2016 in the Affordable Care Act. Under the demonstration, participating states receive one year of enhanced federal funding for home and community-based and transition services for every Medicaid beneficiary who moves from an institution to a community-based setting. Currently, 44 states (including the District of Columbia) are participating in MFP. A companion report, Money Follows the Person: A 2015 State Survey of Transitions, Services, and Costs, summarizes 2015 survey data on enrollment trends, services, and per capita spending and describes the interactions between MFP and new and expanded home and community-based services options under the Affordable Care Act as well as managed long-term services and supports.

Based on interviews conducted in spring 2015, the profiles of five MFP participants residing in Colorado, Iowa, Pennsylvania, and Texas are presented here to highlight the diverse experiences of people with long-term services and supports needs who transition from nursing facilities to the community. These personal stories add a human dimension to the ongoing conversations among federal and state policymakers about supported transition, community integration, and expanding access to Medicaid home and community-based services. We extend our appreciation to the individuals who helped coordinate the interviews and the MFP participants who so generously shared their time and stories.

Silas, age 63

Denver, CO

Silas worked for many years as a warehouse manager and forklift operator, but he was forced to retire early as a result of a serious head injury sustained when he was the victim of a violent crime. After the attack, he was hospitalized and in a coma for one month. Upon discharge from the hospital, Silas entered a nursing facility to receive physical and speech therapies. Silas recalled that while he was pleased with his rehabilitation progress over his one-year stay in the nursing facility, he had a strong desire to return to the community.

“My [MFP] transition coordinator is the first person I would call if I had any problems.” – Silas

Silas first heard about the Colorado MFP program when a transition coordinator visited the nursing facility and felt the program would be a good fit given his desire to return to living in the community. For Silas, his six-month transition process felt “slow,” and locating affordable, community-based housing was the primary transition barrier. He noted that returning to the community would have been difficult without the transition support and services provided by MFP. With the help of his MFP transition coordinator, Silas secured a housing subsidy and was able to move into an apartment, which he will share with a roommate. Silas furnished his bedroom and common areas with items that were in storage. Using MFP funds, Silas’ transition coordinator purchased housewares such as pots, pans, and dishes. Silas currently receives personal care services for 2 hours per day, five days per week to help with cooking and household chores.

Silas shared that he is in good health overall and feels he is at “about 75%” compared to before the attack. He takes medication for high blood pressure and has recently started experiencing periodic episodes of numbness in his feet due to poor circulation. Silas began having seizures while in the nursing facility but takes anti-seizure medication and has not had a seizure since transitioning to the community. For exercise and social interaction with neighbors, Silas enjoys walking around his neighborhood.

Silas is certain that he could not afford the care he needs without Medicaid, given his limited income. As questions or issues arise, Silas feels comfortable contacting his MFP transition coordinator, who is in touch with him about twice a month. For Silas, the best part about being home is that he is free to come and go as he pleases. Looking to “get away from city life,” Silas hopes to move to a rural Colorado county in the future to be closer to friends. He also hopes to continue his automobile repair hobby.

Stephen, age 47

Hamburg, PA

Stephen has a significant mobility impairment that resulted from mosquito-borne encephalitis at age 9. As a younger adult, Stephen lived alone, worked, and was able to get around on one crutch. Over the years, walking became increasingly difficult for Stephen, and he was no longer able to work. Stephen now uses a wheelchair to get around.

Prior to moving into a nursing facility, Stephen lived with his sister and her family because he could no longer afford to live alone. Stephen moved to a nursing facility when space constraints in his sister’s home made it difficult for him to complete his physical therapy exercises. While Stephen was pleased with the care he received during his 11-month stay in the nursing facility, he knew he wanted to return to the community. For Stephen, locating affordable and accessible community-based housing was the primary barrier to his transition.

Stephen first learned about Pennsylvania’s MFP program from a nursing facility social worker. A case manager from the local Center for Independent Living helped Stephen navigate the MFP transition process. After securing a public housing subsidy, Stephen moved to his current apartment where he receives home health aide services eight hours daily. With MFP transition funds, Stephen was able to purchase some household items, such as bed and bath linens. Stephen noted that he would not have enough money to live independently in the community without Medicaid.

“I have a life to live … I am still a young man.” – Stephen

Stephen shared that he was happy with his overall MFP transition experience. For Stephen, the best part about living in the community is “the freedom to come and go” and the ability to see his 12-year old son on a regular basis. While in the nursing facility, Stephen missed being able to play his favorite heavy metal music at full volume and entertain loved ones in his home. Stephen will continue to focus on increasing his physical strength and would like to get married someday.

Becca, age 42

Evansdale, IA

Becca has diabetes and a mental health condition. According to Becca’s mother, Becca has experienced challenges with managing her diet and prescription medications, and last year she lapsed into a diabetic coma while living alone. Becca recovered from the coma, and upon hospital discharge, she entered a nursing facility to regain her strength and improve her balance.

Becca’s mother felt that Becca received good care in the nursing facility, and with assistance from the staff, Becca developed many of the self-care skills she needed to live independently in the community. With the help of her mother, nursing facililty staff, and an Iowa MFP transition specialist, Becca moved into a small group home approximately one year after entering the nursing facility. Using MFP transition funds, Becca was able to have kitchen utencils, bedding, and towels available on move-in day. Becca lives with two housemates, and enjoys her independence. Becca participates in shared household chores, does her own grocery shopping, and is able to prepare simple meals. Becca also receives Medicaid adult day health care services six hours a day, five days per week.

“We are so fortunate to have access to MFP.” – Melanie, Becca’s mother and legal guardian

In her free time, Becca enjoys solving word search puzzles and listening to country music. Becca and her mom speak by phone often, and Becca enjoys gathering with family at her mother’s home. Becca is also in regular contact with the MFP transition specialist who, according to Becca’s mother, was a “tremendous help” during the smooth transition process. Without Medicaid and MFP, Becca’s mother is not sure how long it would have taken Becca to move back to the community. It gives Becca’s mother peace of mind to know that Becca lives in a safe community and has help managing her diabetes.

Danny, age 48

Fort Worth, TX

At age 22, Danny had an accident at his home that resulted in partial quadriplegia. In 2014, Danny and his brother were in a serious car accident; Danny was hospitalized with a broken right leg and ankle. Shortly thereafter, following a re-hospitalization for an embolism and an infection, Danny was transferred to a nursing facility. He stayed in the nursing facility for three months before transitioning to the community via the Texas MFP program.

“Without supports for Danny, the future is not too bright. Without MFP, we couldn’t have gotten things in place for him.” – Carrie, Danny’s mother and caregiver

Through MFP, Danny moved to a house with his mother, who is retired. In preparation for Danny’s transition, his family built an outdoor wheelchair ramp and converted the first floor living room into a bedroom. Despite some transportation challenges – Danny’s wheelchair-accessible van is in need of repair – Danny is pleased to be back in the community.

Danny home health aide services, including assistance with bathing, eating, and dressing. Prior to the car accident, Danny was able to manage his personal finances; now his mother manages his bills.

His mother described Danny’s current health status as good. Danny is able to control his muscle spasms with medication but is frustrated that he is not more independent at this point. Danny recently fulfilled a personal goal of locating his late father’s biological family (his father was adopted at a young age) and is looking forward to meeting these relatives in the near future. Danny also wants to return to work, preferably in a setting like a Boys & Girls Club where he worked prior to the car accident, and enroll in college to study information technology.

For Danny, the best aspect of living in the community is that he is able to be closer to his siblings, children, and grandchildren. Danny’s mother shared that Danny “lights up” when he is surrounded by his family and that she is grateful to Medicaid and MFP for giving her son a chance to thrive.

DeAnn, age 50

Waterloo, IA

Known for her sense of humor, DeAnn moved to a small community-based group home for people with intellectual and developmental disabilities in 2014 with the help of MFP, following an almost six-month stay in a nursing facility for rehabilitation post-knee replacement surgery. According to DeAnn’s legal guardian, DeAnn received good care in the nursing facility. While DeAnn enjoyed making new friends and participating in group activities at the nursing facility, her goal was to return to the community as soon as possible.

DeAnn’s legal guardian first heard about Iowa’s MFP program from the county mental health office administrator who put her in touch with an MFP transition specialist. DeAnn’s legal guardian described the transition specialist as helpful and efficient throughout DeAnn’s month-long transition process; the transition specialist continues to be in contact with DeAnn at least monthly. DeAnn’s physician also was very suppportive of the transition.

Aside from arthritis and ongoing issues with her knee that affect her gait and balance, DeAnn is in good physical health. In addition to an intellectual disability, she also has a mental health condition. In the home she shares with two roommates, DeAnn receives assistance with laundry and managing her prescription medications. DeAnn makes full use of the household items, such as furnishings and basic kitchen supplies, purchased with MFP transition funds.

“DeAnn received good care at the nursing facility but wanted to get back to life as she knew it could be.” – Peg, DeAnn’s legal guardian

DeAnn works part-time at a local Goodwill retail store, and Medicaid funds door-to-door transportation for her to get to and from work. In her free time, DeAnn enjoys making plastic canvas crafts for gifts. DeAnn’s legal guardian noted that DeAnn also loves to get out into the community, attend concerts, and participate in church activities. For DeAnn, the best part about spending time in the community is her independence and interactions with people in her neighborhood. DeAnn’s legal guardian notes that without Medicaid and MFP, DeAnn would not have been able to move back to the community.

There are currently 44 states, including the District of Columbia, participating in the Money Follows the Person (MFP) demonstration.  MFP provides states with enhanced federal Medicaid matching funds for 12 months for each Medicaid beneficiary who transitions from an institution to the community.  The current funding allocation for MFP is set to expire in 2016, leaving some questions about whether states will be able to continue to offer all of the services that MFP funds if the program is not re-authorized.  Nevertheless, states will continue to rely on the lessons learned from the MFP demonstration to help shape the future of long-term services and supports (LTSS) as well as broader health system reforms.  This report is based on a survey of MFP states conducted by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured in the spring and summer of 2015.

Key Findings

As of mid-2015, 52,140 Medicaid beneficiaries had enrolled in MFP and another 10,265 transitions were in progress.  The majority of MFP participants are individuals with physical disabilities (38%) and seniors (37%), while one in five MFP participants is an individual with an intellectual/developmental disability (I/DD).  On average, MFP participants were 57 years old, took four months to transition, and most often moved to an apartment.  States reported an eight percent average reinstitutionalization rate across all target populations.

States are steadily increasing transitions among individuals with mental illness, realizing a 77 percent increase in cumulative transitions for this population in less than two years. Just under half (19) of MFP states reported trying to increase the number of transitions for people with mental illness, relying on a number of strategies to do so.  These include outreach to nursing facilities; adding new demonstration services such as substance abuse treatment, peer support, and enhanced adult foster care; working with managed care organizations to coordinate services and prioritize transitions for this population; and leveraging financial incentives by using enhanced funding from MFP and the Balancing Incentive Program (BIP).

States identified service coordination/case management as the most critical service for MFP beneficiaries both pre- and post-transition.  Just over half of the states reported making changes to MFP benefits over the past year, with 16 states expanding services and seven states eliminating services or reporting a neutral change.  Forty states are offering self-directed services, but only an estimated 16 percent of MFP participants chose this option in 2015, with self-direction participation rates varying widely across the states.

The average monthly per capita cost of serving an MFP participant in the community was $3,609 in 2015, down from an average of $3,934 in 2013 and $4,432 in 2012.  Average monthly MFP costs were highest for people with I/DD ($7,899) followed by individuals with mental illness ($3,476), individuals with physical disabilities ($3,221), and seniors ($2,660).  No state reported that institutional care was less expensive than HCBS for MFP participants.

States are focused on helping MFP beneficiaries find housing, administering MFP within the context of managed LTSS programs, and leveraging MFP funds and experience to strengthen other rebalancing efforts.  Twenty-five states reported finding affordable, accessible housing to be the number one barrier to transitions.  Housing has remained a consistent challenge since the inception of MFP, and 31 states use MFP funds to employ one or more housing coordinators.  States also are focused on coordinating MFP with managed LTSS programs, with 23 states operating or planning to operate such a program and five states reporting challenges coordinating a managed LTSS program with MFP.  States also credit MFP with creating or expanding nursing facility diversion or transition programs by increasing the availability of HCBS and the number of state staff in such programs.  Eighteen states participate in both MFP and BIP and report using MFP funds to build on the LTSS delivery system infrastructure changes required by BIP.  States also are using lessons learned from MFP in designing the service package included in the Community First Choice (CFC) attendant care benefit.

While MFP has helped states make progress in LTSS rebalancing, the impending expiration of the program in FY 2016 creates some questions about the sustainability of transition activities going forward.  Loss of enhanced federal funds for pre- and post-transition services and the loss of administrative funding for staffing, such as outreach and housing coordinators, were the most frequently cited concerns about MFP’s expiration.  A number of states reported plans to add key demonstration services, such as transition coordination, to their Section 1915(c) waivers and the CFC option to continue transitions when MFP expires.  States also noted that some demonstration services will terminate when MFP expires.  States were hopeful that they could sustain MFP staff positions through their legislative processes; however, all future funding commitments are subject to administration and budgetary priorities once MFP funding ends.

Conclusion

MFP states have collectively transitioned over 52,000 Medicaid beneficiaries from institutions to a community home over the course of the last eight years with the help of enhanced federal funding under MFP. MFP has given states a foundation upon which to improve existing transition programs, launch new strategies, and continue to rebalance LTSS in favor of community-based services. Despite steady growth in the number of transitions, states also face transition challenges related to lack of safe, affordable, and accessible housing, low participation rates in self-directed service options, and sustainability of the demonstration as federal funding expires. MFP funding runs through September 2016, and although states can continue to transition individuals through 2018 (with CMS approval) and have through 2020 to use their remaining funding, states may be pressed to continue funding at current service levels and with existing staffing once MFP expires. MFP Project Directors reported working to sustain successful elements of the demonstration, such as strong transition coordination and continued inter-agency coordination, to continue to support transitions beyond MFP and to strengthen ongoing LTSS rebalancing efforts.

There are currently 44 states, including the District of Columbia, participating in the Money Follows the Person (MFP) demonstration (Figure 1). Authorized as part of the Deficit Reduction Act of 2005, MFP has bolstered state efforts to increase spending on home and community-based services (HCBS) and helped transition thousands of Medicaid beneficiaries from an institutional setting to a community home. The MFP demonstration provides states with enhanced federal matching funds for 12 months for each Medicaid beneficiary who transitions from an institution to the community. To qualify for an MFP transition, individuals must reside in an institution for more than 90 consecutive days. MFP participants must transition to a qualified community setting including a house, apartment, or group home with less than four non-related residents. States have used MFP funding to test the services and strategies that best contribute to a successful transition. The current funding allocation for MFP is set to expire in 2016, leaving some questions about whether states will be able to continue to offer all of the services that MFP funds if the program is not re-authorized.  Nevertheless, states will continue to rely on the lessons learned from the MFP demonstration to help shape the future of long-term services and supports (LTSS) as well as broader health system reforms.

As of March 2015, 33 (of 43) MFP states reported earning $1.7 billion in federal matching payments. Under the Affordable Care Act (ACA), MFP was extended by five years, through September 2016, and an additional $2.25 billion in federal funds ($450 million for each federal fiscal year from 2012-2016) was allocated for the demonstration. Funding is available to states for the fiscal year they receive the award and four subsequent years. Any unused grant funds awarded in 2016 can be used until 2020. This report is based on data collected through a national survey of MFP states conducted by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured. For more information about the survey see the methodology text box at the end of this report and Appendix A. A companion paper, Medicaid’s Money Follows the Person Demonstration: Helping Beneficiaries Return Home, profiles the experiences of five MFP participants.

Key Findings

Transitions

Total cumulative transitions surpassed 52,000 individuals by early 2015, as MFP states continue to increase the number of transitions each year and expand LTSS options in favor of HCBS. As of mid-2015, 52,140 Medicaid beneficiaries had enrolled in MFP and another 10,265 transitions were in progress (Figure 2). This represents an increase in cumulative enrollment of 16,740 individuals since 2013, up from 35,400 in 2013 and nearly 17,000 in 2011 (Figure 3). Most transitions (38%) occurred in three states (TX, OH and WA). These three states have consistently been the leading states in cumulative transitions since the demonstration began. MFP participant numbers vary widely across states, depending on factors such as length of program operation, size of eligible population, and state capacity and experience in operating transition programs. States with newer demonstrations, such as South Dakota and Montana, had the fewest number of cumulative transitions in 2015.

The majority of states (30 of 43) reported being on pace with annual transition targets. Thirteen states reported that they were not on pace to meet their annual projections. Reasons for this included lack of safe, affordable, accessible housing, higher acuity of nursing facility residents, provider capacity issues, and successful diversion efforts. Newer grantee states, those implementing after 2013, were more likely to report coming up short with annual transition projections compared to more established MFP states. These states may have faced initial transition hurdles in the early phase of the demonstration when MFP programs were not yet fully staffed and provider capacity and other community resources were first being tested.

Twenty-one states expect the rate of enrollment growth to increase over the next year, down from 34 states in 2013. Thirteen states anticipated no change in annual enrollment, and eight states did not know. No state anticipated a decrease in enrollment. Among the top 10 states in cumulative MFP enrollment that responded to the survey (including TX, OH, WA, CT, MI, MD, PA, IL, GA, and NY), Illinois experienced the largest change in cumulative enrollment since 2013 (97%) while Georgia experienced the smallest enrollment growth (6%) since 2013. Illinois credited its transition increase to the use of a cloud-based care management system that allowed for improved interagency communication, more efficient follow-up with referrals, and expanded access to case-specific information. Georgia attributed its slowed progress to a moratorium on transitions during 2014 that delayed the transition of individuals with behavioral health needs and developmental disabilities living in state institutions. Nine of these ten states experienced enrollment growth greater than 25 percent between 2013 and April 2015.

“The benchmark for this year has increased, as it will for next year, but attainment of even higher MFP transition rates is becoming less assured.” – MFP Project Director

In 2014, the Centers for Medicare and Medicaid Services (CMS) awarded additional funding to five states (MN, ND, OK, WA, and WI) for the MFP Tribal Initiative to help tribal groups in their states establish transition programs for their communities. The MFP Tribal Initiative offers existing MFP states and tribal partners the resources to build sustainable community-based LTSS specifically for Indian country. Most states were still in the planning phases of the Tribal Initiative at the time of this survey. Minnesota was the only state to report transitioning a participant through a Tribal Initiative.

Participant Characteristics

In 2015, MFP Project Directors reported the following characteristics of MFP participants:

• The majority of MFP participants are individuals with physical disabilities (38%) and seniors (37%), while one in five MFP participants is an individual with an intellectual/developmental disability (I/DD). Seniors and people with physical disabilities also lead the number of transitions in progress.
• The average age of MFP participants was 57 years old. The average age of senior MFP participants was 75. MFP participants with I/DD were younger (on average 42 years old) than individuals with a mental illness or a physical disability, who averaged 44 and 51 years old, respectively.
• MFP participants averaged four months to transition back to the community, up from 3.5 months reported in 2013 and 2012. Individuals with I/DD, mental illness and people with physical disabilities took longer to transition home compared to seniors.
• MFP participants most often transitioned to an apartment. Seniors were more likely to transition to a house (their own or a family member’s) or an apartment, whereas individuals with I/DD more often transitioned to a small group home with four or fewer residents.

The average reinstitutionalization rate was eight percent, down from 11 percent reported in 2013 and on par with what states reported in 2011 and 2012 (Figure 4). Reinstitutionalization is defined as returning to a nursing facility, hospital, or ICF/DD, regardless of length of stay, during the beneficiary’s MFP participation year. Across all target populations, seniors were most likely to be reinstitutionalized, and individuals with I/DD were the least likely to return to an institutional setting.

Transitions for Beneficiaries with Mental Illness

States are steadily increasing transitions among individuals with mental illness, realizing a 77 percent increase in cumulative transitions for this population in less than two years. While individuals with mental illness (along with those with I/DD) represent a smaller percentage of MFP participants due to their typically more extensive medical and LTSS needs, as of mid-2015, the overall number of transitions climbed to 3,174 for individuals with mental illness (up from 1,790 in 2013). Over time, the percentage of MFP participants with mental illness has risen from just 1.4 percent in 2010 to 6 percent of total MFP transitions in 2015.

Just under half (19) of MFP states reported trying to increase the number of transitions for people with mental illness, relying on a number of strategies to do so. States cited increased outreach and education to nursing facilities as a way to generate MFP transitions for this population. Maryland hired a behavioral health specialist who is responsible for building relationships with behavioral health providers, advocates, and consumers; training providers on coordinating behavioral health services; and providing direct support to beneficiaries during the transition process. Other state efforts to target people with mental illness include adding new demonstration services such as substance abuse, peer support services, and enhanced adult foster care services (such as overnight care and medication support). Ohio is a leading state in transitioning individuals with mental illness, helping over 1,900 individuals return to community living under MFP. Ohio’s MFP program works closely with the Ohio Department of Mental Health & Addiction Services through the “Recovery Requires a Community” program that provides additional non-Medicaid services such as debt elimination to MFP participants who have mental health or substance abuse issues. Due to demand and population size, Ohio expects transitions for those with mental illness to continue to increase.

States with managed LTSS (MLTSS) programs reported working with managed care organizations (MCOs) to help coordinate service provision and to prioritize transitions for this population. For example, in Texas, MCOs are now responsible for providing mental health rehabilitative services, mental health targeted case management, and nursing facility services, in addition to being responsible for transitions. By carving-in these benefits, MCOs have the opportunity to serve beneficiaries with behavioral health needs across a range of settings. Additionally, the state has conducted trainings with MCOs to incorporate best practices learned from its MFP behavioral health pilot – a program that integrates mental health and substance abuse services with HCBS. Other states reported expanding Medicaid provider networks (in both fee-for-service and managed care environments) so that individuals with mental illness have more choices in behavioral health providers.

States also reported leveraging financial incentives to help foster transitions for people with mental illness. Washington has had “some success” in helping move children and young adults out of state hospital settings by providing financial incentives through a combination of MFP enhanced match and MFP rebalancing funds. Illinois used funding from the Balancing Incentive Program (BIP) to expand mental health services to MFP participants in under-served communities. Assertive Community Treatment and Community Support Team services are available to some participants in Illinois; these include counseling services with an emphasis on community living skills, assistance with medication management, identification of risks, and connection to resources. These services may include visits from mental health agency staff, sometimes daily in the initial weeks after transition.

Outreach, Referrals, and Transition Support

By 2015, most MFP states had several years of experience transitioning participants back to the community and have learned which outreach and enrollment strategies are most successful in identifying potential MFP participants. These initiatives are paving the way for more individuals to live in their choice of setting. We asked states to describe these strategies and the most frequent responses included:

“The most successful outreach is based on partnerships and a promotion of a philosophical framework which supports the person in choosing where they receive their LTSS, rather than the system deciding for them.” – MFP Project Director

• Statewide communication and outreach to nursing facilities, institutions for mental diseases, and intermediate care facilities for individuals with intellectual disability (ICF/DDs) (14 states);
• Presence of transition teams in nursing facilities to help with outreach and education to potential participants and their families (including peer outreach and options counseling) (12 states);
• Partnerships with local Aging and Disability Resource Centers (ADRCs), Centers for Independent Living (CILs), and long-term care (LTC) ombudsman programs (11 states);
• Including MFP with Minimum Data Set Section Q requirements (regarding residents’ interest in learning more about a return to community living) (10 states);
• Advertising and recruitment materials, including brochures, websites, and television ads that promote the demonstration (9 states); and
• Working with MCOs to prioritize transitions (5 states).

Nevada’s most successful outreach strategy is the use of a weekly level of care report. This report provides state staff with information about the most recent Medicaid beneficiaries who have been screened for nursing facility placement.

Tennessee requires staff responsible for coordinating care in its MLTSS program to assess individuals for their desire and ability to transition at least annually. In addition, to further incentivize MCOs, contracts with the state offer incentive payments upon (1) successful transition of each demonstration participant, and (2) community living for the entire 365-day demonstration period, without re-admission to a nursing facility.

Benefits

Using MFP enhanced funds, all MFP states (43 reporting) offer HCBS waiver services to MFP participants, and 36 states offer HCBS to MFP participants under their state plan benefit package to successfully transition individuals home and keep them living in the community. Services that qualify for the MFP enhanced federal matching rate during a beneficiary’s MFP participation year are those waiver and state plan services that will continue once the individual’s MFP transition period has ended. Common Medicaid HCBS are personal care, adult day health care, case management, homemaker services, home health aide services, habilitation, and respite.

Thirty-nine states offered MFP demonstration services in 2015, which are additional Medicaid HCBS reimbursed at the enhanced MFP federal matching rate during a beneficiary’s 12-month MFP participation period. MFP demonstration services are provided in a manner or amount beyond what a typical Medicaid HCBS beneficiary receives and are not otherwise available to a Medicaid beneficiary. For example, transition coordination services help MFP participants secure housing, pay for moving expenses, and secure assistive technology. After the beneficiary’s transition year ends, states are not obligated to continue MFP demonstration services but may choose to fund them through Medicaid at the state’s regular federal matching rate.

Nineteen states offered MFP supplemental services or services which are not necessarily long-term care in nature. MFP supplemental services are only offered during the beneficiary’s demonstration transition year and are reimbursed at the state’s regular federal matching rate. Eighteen states reported offering both demonstration and supplemental services. These services include benefits such as coverage of one-time housing expenses (such as security deposits, utility deposits, and furniture and household set up costs), assistive technology, employment skills training, 24-hour back-up nursing, home-delivered meals, peer-to-peer community support, and LTC ombudsman services.

Just over half (23 of 43) of the states reported making changes to MFP benefits over the past year, up from 14 states making benefit changes in 2013. Of the states making benefit alterations, 16 states reported expanding services and seven states reported eliminating services or a neutral change. Examples of restructuring of services included adding first month’s rent to transition assistance, informal caregiver’s support, peer support, and adaptive technology as demonstration services and increasing pre- and post-transition funding for environmental accessibility adaptions, pre-transition staff training, and supports coordination fees. One state reduced some of the services funded through MFP, such as physician consultation, healthcare communication, and legal consultation, due to their non-usage. The state attributed the non-usage to decreased need as a result of transition coordinators’ growing knowledge of community-based resources and relationship building with service providers over the course of the demonstration.

“Staff retention of the transition coordinators has proven invaluable to community networking and referral/resources building which has lessened the need for MFP to pay for some of the categories that were originally funded.”
– MFP Project Director

States identified service coordination/case management as the most critical service for MFP beneficiaries both pre- and post-transition. The 2015 survey asked states to describe the most critical strategies or innovative services that help MFP beneficiaries successfully transition to the community. Services were grouped into pre-transition services and post-transition services. Pre-transition services are offered to MFP participants to help position them for the greatest opportunity for success. Post-transition services include all Medicaid HCBS waiver services as well as MFP demonstration and supplemental services that support individuals living in the community.

The most frequently cited essential pre-transition services were support from transition specialists (also known as transition coordinators or navigators); transition coordination services that may include a transition budget for household items, set-up fees, or deposits for utility access; and housing assistance. Access to a transition coordinator before discharge is critical so that MFP participants can have paid and non-paid supports set up in the community before they are discharged home. Other critical pre-transition supports identified by states include: options counseling (provided by locals Area Agencies on Aging (AAAs) and CILs), intensive case management (that may include a readiness assessment to develop a plan for successful transition), peer mentorship, independent living skills training, assistive technology, and access to non-medical transportation to obtain documentation for housing and/or locate housing.

“Extensive needs assessments while in the facility help to develop a plan for successful transition.” – MFP Project Director

• Colorado uses multi-disciplinary transition teams made up of the beneficiary, providers, family, friends, or anyone else the beneficiary would like to have on their team. The team provides support to the MFP participant, addresses questions/concerns, and helps identify risks/mitigation plans to ensure a successful transition and high quality of life upon transition.
• In Illinois, transition engagement specialists provide outreach and education about MFP to work with nursing facility residents. In completing their assessments, the specialists “improve the quality of the referrals received,” while also promoting collaboration across state programs in order to address the complex health conditions and physical limitations of the MFP participants.

“Early in the demonstration it became clear that for many participants, this on-going intensive case management, including 24/7 care coordination, would be instrumental to the success of participants in the community.” – MFP Project Director

The most commonly reported strategy, with regard to post-transition services, was the use of “more intensive” transition coordination/case management services. The role of the transition coordinators post-transition is to monitor the MFP participant with follow-up visits and ensure services are received in a timely manner, as scheduled, and with trained caregivers. A more intensive follow along is designed to ensure that the MFP participant has the appropriate level of monitoring and that changes to their service and risk mitigation plans can be made as needed. Several states extend transition coordination for the full 365 days after transition. In New York, transition coordinators communicate with MFP participants for a two-year period post-transition. Other notable post-transition strategies/supports include access to crisis response services (including a 24-hour back-up system to provide support and assistance for services that were not delivered), the provision of basic furnishings, groceries, and housewares to the new home, increased capacity or “slots” for HCBS waiver programs, and a focus on community engagement through social and vocational opportunities. Twenty-six states offer employment supports and services to MFP participants who are interested in returning to work or who want to pursue volunteer opportunities, although a 2012 study found a small share of MFP participants ever accessed employment services.¹ 

In Missouri, all information about MFP participants from the initial referral, options counseling, all the way through the transition, and post-transition is entered into a web-based system. MFP staff, regional staff, and transition coordinators all have access to the system. This system allows the state to see why individuals who are interested in returning to the community cannot, and, the underlying reason if a transition was not successful. The system also captures such things as, what type of housing the participant is using, if they are living alone, if they are self-directing their HCBS, any hospitalizations, date and cause of death, age, etc. There are also note areas for transition coordinators to leave anything that might have an important bearing on the case.

Forty states are offering self-directed services, but only an estimated 16 percent of MFP participants chose this option in 2015, down from an estimated 19 percent in 2013 and 22 percent in 2012. Only three states responded that self-direction was not an option in their MFP demonstration. Self-direction is an alternative to the provider management service delivery model which offers Medicaid beneficiaries the authority to make decisions about some or all of their services, including who provides services and how they are delivered. For example, an MFP participant may be given the opportunity to recruit, select, and supervise direct service workers. Participants may also have decision-making authority over how the Medicaid funds in a budget are spent.

Self-direction participation rates varied widely across the states. Three states (DE, MA, and OH) reported 100 percent participation in self-direction due to the fact that one-time home set-up funding was categorized as a self-directed service. Seventeen states reported the percentage of MFP participants who self-direct services to be 5 percent or less. Thirteen states reported an increase in the percentage of participants who utilized self-directed options over the past year, up from nine states in 2013 and eight states in 2012. Twenty-two states reported no change in the percentage of MFP participants who self-direct and four states reported a decrease.

Financing

The average monthly per capita cost of serving an MFP participant in the community was $3,609 in 2015 (Figure 5), down from an average of $3,934 in 2013 and $4,432 in 2012. Average monthly per capita costs varied across states from a low of $1,260 to a high of $8,737 per person per month, based on responses from 25 states. Differences in per capita costs may be attributable to differences in covered services and/or a reflection of the diverse needs of the target populations. In comparison, the national average per user spending on Medicaid HCBS only, including Section 1915(c) waivers and the home health and the personal care services state plan benefits and excluding other Medicaid-covered services, was $17,174 in 2011.²  Average MFP monthly costs were highest for people with I/DD ($7,899) followed by individuals with mental illness ($3,476), individuals with physical disabilities ($3,221), and seniors ($2,660).

When asked to compare per capita costs for MFP participants with per capita costs for other Medicaid beneficiaries receiving HCBS, 18 states said costs were comparable, eight states reported that per capita costs were higher for MFP participants, and six states reported per capita costs were lower for MFP participants. The remaining states did not answer the survey question. When asked to compare the per capita costs for Medicaid beneficiaries who reside in institutions to per capita costs for MFP participants, thirty states reported that per capita costs were lower for MFP participants. Two states reported that the two costs were comparable (due to equal capitation rates for beneficiaries enrolled in managed care living in the community or in an institution), and no state reported that institutional care was lower. Responses to this survey question have remained consistent over time, with the majority of MFP states reporting MFP per capita costs for beneficiaries receiving HCBS to be lower than those residing in institutions.

MFP Staffing and Key Partnerships

“The expertise of the contracted staff and their knowledge of community resources is key to making the transition a success.” – MFP Project Director

MFP has enabled states to add program staff to help grow their transition programs and more effectively respond to transition challenges. States rely on numerous MFP staff and key partnerships to conduct outreach, coordinate efforts across state agencies, monitor quality, and assist in LTSS rebalancing efforts. Each state tailors their MFP program to meet specific needs, however, all MFP states employ a project director, and sometimes an associate/assistant project director, with MFP administrative funds. The Project Director’s role is to oversee all aspects of the demonstration including financial management, outreach/training, staffing, evaluation, project planning, and submission of required federal reporting. Other frequently reported MFP staff positions hired with 100 percent administrative funds included transition coordinators, outreach and education coordinators, housing specialists, data/fiscal analysts, quality specialists, and administrative support staff. Eight states employ an MFP quality assurance specialist. Maryland hired two quality and compliance specialists whose duties are to ensure new applicants are moving through the eligibility process in a timely manner, which includes monitoring time frames for medical assessments by the local health departments, plan of service review, provider and participant enrollment, and the eligibility determination process.

“Including a housing coordinator as part of the transition team has been found to be a critical strategy in successfully transitioning individuals to the community.” – MFP Project Director

Thirty-one states employ a housing coordinator to help with transitions, and some states employ multiple housing coordinators. These individuals function as a critical link between MFP participants and local housing resources. They can help individuals locate housing in preferred areas, negotiate lease terms with landlords, and assist with completing and acquiring needed documents for housing applications. Hawaii’s MFP housing coordinator developed a “housing stabilization tool” to assure quality transition planning and follow-up stabilization progress in the community by assessing issues such as finances (bills and rent paid on time) and safety (keeps house clean, knows how to use equipment). MFP staff are beginning to train health plan service coordinators and community case managers to use this tool.

Aside from MFP-funded positions, states rely on a number of partnerships to further their efforts to transitions individuals out of institutions and back to the community. These partnerships include working closely with local AAAs, CILs, other state agencies (such as public housing and behavioral health), LTC ombudsman programs, community stakeholders/advocacy groups, and family members.

Quality

States identified the CMS Quality of Life (QoL) survey as their main tool to measure quality and satisfaction among MFP participants, although only a handful of states (8) reported using the results from the QoL survey to make changes to their MFP demonstrations. This survey is administered within 30 days of transition and at 11 and 24 months post-discharge. The data from the QoL survey informs states about MFP participants’ health challenges, satisfaction with certain aspects of their lives in the community, their extent of independence and control over their circumstances, and the service and support gaps that result in their needs and wants not being met. Examples of changes that states made based on QoL survey findings include adding new demonstration services such as peer supports services to help with community integration and informal caregiver supports and training to address the needs of family and friends providing services. Hawaii added supportive employment services, based on the QoL question concerning the desire to work or volunteer. In doing so, the state has “developed a better relationship” with the Division of Vocational Rehabilitation and the state First-to-Work Program that provides employment preparation and support services to TANF households. New Jersey developed a Risk Review Form, based upon the responses received from the MFP QoL surveys, that was designed to indicate if an individual’s health and safety might be in jeopardy. The Risk Review Form is given to the MFP quality assurance specialist who is responsible for the follow-up with the appropriate staff and for documenting all responses and resolutions. In addition, if a Risk Review Form is generated from a first or second year follow up QoL survey administered to an individual who has been re-institutionalized, then the MFP quality assurance specialist arranges a face-to-face visit with the individual to further assess their quality of life in the institution and ascertain if the individual has any interest in returning to the community.

States also reported embedding MFP participants into the traditional quality standards – Medicaid quality improvement and quality assurance processes – that are in place through Section 1915(c) waivers and state plan assurances. Other examples of quality activities include monitoring the rate of reinstitutionalizations and the use of intensive case management for each participant during the demonstration year to monitor the delivery and quality of services. Additionally, some states conduct their own evaluations separate from CMS requirements. For example, Missouri gathers information on MFP participants that leave the program to gain insight into the reasons for their leaving. This information is used to identify trends and aids in the development of supports and services to help maintain support for individuals living in community settings. The state also noted that this insight will be important as individuals with more complicated needs return to the community. In New Jersey, MFP participants with intellectual disabilities transitioning from a Developmental Center to a community setting have the added benefit of an enhanced monitoring process – the Olmstead Review Process – that follows an individual’s transition to the community with a face-to-face follow-up review after 30, 60, and 90 days. Data collected at each review helps guide decisions about needed modifications to plans of service to mitigate issues, and to inform infrastructure decisions.

Issues Facing MFP in 2015 and Beyond: Housing, HCBS Providers, and Managed LTSS

Twenty-five states reported finding affordable, accessible housing to be the number one barrier to transitions. Housing has remained a consistent challenge since the inception of MFP. This is because MFP participants often have ongoing and persistent cognitive and physical impairments and chronic conditions that result in the need for assistance with activities of daily living and also lack adequate income and resources to afford fair market rent on their own (since Medicaid does not pay for housing in the community). Each year more MFP states have hired housing coordinators (or housing specialists) to assist individuals interested in transitioning with locating and securing housing. Other strategies to address housing shortages include partnering with state housing authorities and the federal Department of Housing and Urban Development (HUD) to help secure Housing Choice vouchers for MFP participants, provide training on housing issues, assistance in finding housing, and assistance with the development of new housing resources. States reported securing HUD Section 811 grant funding to provide interest-free capital advance and operating subsidies to nonprofit developers of affordable housing for people with disabilities and project-based rental assistance.

• Illinois has been awarded Section 811 Project-Based Rental Assistance Demonstration funding and is in the process now of awarding Section 811 rental assistance contracts in areas needed and preferred by the participants. In addition, the state is collaborating with several local Public Housing Authorities to implement projects combining project-based and tenant-based vouchers dedicated to MFP participants. A web-based housing search system exists, and a new wait list system to prioritize and filter participants for matches with available Section 811 units came online June 1, 2015.
• Maryland is working to implement the MFP Bridge Subsidy Program that will provide a total of $2 million in rental subsidies for MFP-eligible individuals transitioning from nursing facilities and state residential centers back to the community through the use of HCBS waivers. The MFP Bridge Subsidy will offer rental subsidy for three years. After the three years, the Public Housing Authority will offer the individual a Housing Choice Voucher. Maryland also developed the Partnership for Affordable Housing to coordinate efforts for the MFP population and engage in training and outreach at the case manager level as well as systems level advocacy with developers, public housing authorities, and other housing financers.

Other housing supports include access to rental assistance programs, security deposit guarantee programs, housing counseling services, accessibility modifications, and assistive technology. A number of states also reported using MFP funds to enhance housing resource websites.

• Ohio’s Temporary Ramp Project provides modular aluminum ramps for MFP participants with an immediate need for this assistance. Depending on the participant’s specific situation, different types of vouchers, short-term rental subsidies, monetary support, and Emergency Rental/Utility Assistance are available. Also, Ohio was recently awarded HUD Section 811 funding and will be partnering with the Ohio Housing Finance Agency to develop over 500 units targeting individuals with low incomes who are transitioning through MFP.

About half (22) of MFP states reported an adequate supply of direct care workers in the community in 2015, down from tw0-thirds of states in 2013. States recognize that workforce initiatives are a critical component of successful community-based transition programs and are actively addressing challenges such as high turnover rates, shortages of direct service workers in rural areas, and language barriers between workers and MFP participants whose primary language is something other than English. One state noted a shortage of workers who have the skills set and experience to work with persons with behavioral health needs. Current efforts to address direct services worker shortages focused on Medicaid provider recruitment from existing HCBS organizations and continued education/training/certification at the local level. Ohio established a Direct Service Workforce initiative in 2012 using MFP funding and in collaboration with several state departments (Medicaid, Aging, Developmental Disabilities, Health, Mental Health & Addiction Services, Education, and Board of Regents) as well as non-governmental organizations. The initiative involves identifying core competencies for all direct service workers in the health care arena, including those in institutional settings, with the goal of increasing interest in direct service careers by building a career lattice to increase options for upward and lateral career mobility. Other state examples included developing “realistic job preview videos” for use by HCBS providers (West Virginia) and creating supply and demand projections for institutional and community workforce by town (Connecticut). In states that have implemented MLTSS, such as New Jersey, the MCOs are contractually required to establish and maintain an adequate network of providers, including HCBS providers. MCO care managers are responsible for identifying any service gaps and ensuring MCOs have adequate provider networks in place to address beneficiaries’ needs.

Twenty-three MFP states reported operating or plans to implement an MLTSS program that will include MFP participants. These initiatives include enrollment of new populations into Medicaid managed care and new or expanded use of MLTSS. While some states said it was too soon to determine the impact of managed care on MFP participants, one state noted, “making MFP part of managed care has increased our transitions…the MCO’s are better able to identify potential participants than we were able to do prior to managed care.” Still, expansion of managed care has not been seamless for individuals with complex health and LTSS needs. These systems changes require continued close coordination and introduction of new partners and new roles for coordinating and promoting community options. Five states reported challenges coordinating an MLTSS program with MFP, up from two states in 2013. Lack of access to encounter data and challenges with distribution of transition funds were examples of the challenges reported. One state acknowledged initial difficulty coordinating transition services that needed to be in place for the MFP participant on the day of discharge from the nursing facility. With the implementation of MLTSS, these services were scheduled to begin after enrollment into MLTSS and not before the transition. To address this issue, MFP participants were enrolled into MLTSS while still residing in the nursing facility and then allowed to transition any time after that. Another challenge mentioned was a result of MFP participants’ ability to change their MCO providers, which can create challenges for consistent service provision. One state with a relatively high percentage of potential MFP participants with mental illness noted the potential challenges of consistent service provision under managed care, given their ongoing challenges with mental health services capacity in the community.

MFP and Progress in LTSS Rebalancing

“We totally reorganized the transition system after looking at data reported under the MFP demonstration.” – MFP Project Director

As a result of MFP, 16 states have added transition programs to their LTSS rebalancing activities, and 27 states have used MFP to strengthen and expand existing nursing facility diversion and/or other transition programs. States with existing transition programs reported that MFP has increased the visibility of and need for such programs through improved communication, training, and marketing efforts. Federal financial support under the MFP demonstration has broadened the scale of existing transition programs, increased state staffing, and expanded HCBS availability. With the addition of MFP, states also expanded the populations of institutional beneficiaries who may be able to relocate to the community beyond those with physical disabilities to include seniors,individuals with mental illness, and individuals with I/DD. States reported learning lessons from earlier transition initiatives and have built stronger transition mechanisms that better support specific populations. For example, North Carolina reported stronger, more consistent training in transition practices, clearer expectations related to pre- and post-transition case management activities, stronger interdisciplinary collaboration, and refined service definitions that better support the needs of individuals transitioning to the community.

“MFP created a platform for discussion, ideas, collaboration, improved data integrity, and other funding options to assist in improving LTSS rebalancing.” – MFP Project Director

States reported leveraging MFP dollars and transition experience to strengthen ongoing rebalancing efforts, including other Medicaid HCBS options. Several years after MFP was established, the ACA included a number of new and expanded LTSS options that offer states the ability to take advantage of federal funding to rebalance their delivery of LTSS toward HCBS and away from institutional care. Some of these options include the Community First Choice state plan option (CFC), BIP, the health home state plan option, and the Section 1915(i) HCBS state plan option.³  This year’s survey asked states to report on how MFP helped create new or built on existing LTSS rebalancing efforts. Most often, states reported leveraging MFP rebalancing funds and building upon infrastructure changes made with MFP to apply for and implement BIP. Similar to MFP, BIP provides a mechanism for states to earn enhanced FMAP payments (2% or 5%) through the provision of HCBS. All of the eighteen states participating in BIP are also participating in MFP. This resulted in additional staff and funding to implement a No Wrong Door/Single Entry point system, a core standardized assessment tool, and a conflict free case management system (all of which are structural requirements of BIP) as well as created inter- division/agency collaboration to improve LTSS.⁴  States also reported relying upon lessons learned from the implementation of MFP demonstration and supplemental services when determining which services would be covered under the CFC option, in order to continue MFP-like transition efforts when the MFP demonstration expires in 2016. In the District of Columbia, MFP has collaborated with Medicaid health home efforts on housing and mental health data, in particular relative to nursing facility residents, and, in the implementation of the Section 1915(i) HCBS state plan option for adult day health program services.

Sustainability Post-2016

While MFP has helped states make progress in LTSS rebalancing, the impending expiration of the program creates some questions about the sustainability of transition activities going forward. This year’s survey asked states what impact the expiration of MFP will have on state rebalancing efforts and the beneficiary transition experience. The MFP demonstration is set to expire at the end of FY 2016, although states have the option to request to transition MFP participants through December 2018 and to spend unused funds until 2020. Loss of enhanced federal funds for pre- and post-transition services and the loss of administrative funding for staffing were the most frequently cited concerns about MFP’s expiration. One state said its housing coordinator position would not be extended after MFP funds run out and noted that “the housing challenge will continue and [the expiration of MFP] will be a loss to the state without finding some sustainability. Housing and HCBS go absolutely hand and hand. No home to go to, no transition.” Another state feared losing the expertise of outreach specialists unless it can find another source of funding for those positions. States operating MLTSS programs were hopeful the expiration of MFP would have little impact on transition efforts since most of the MFP transition services are available through managed care. Going forward, these states are looking for transitions to continue with the assistance of the MCOs. States also noted that other Medicaid and/or state-funded transition initiatives that operate concurrently with MFP would continue after MFP expires.

“MFP has been an active catalyst for pushing culture change for the nursing home population – pushing for and allowing more consumer autonomy and choice.” – MFP Project Director

At the time of this survey, all states were in the sustainability planning process to determine existing authorities through which transition services or activities could be continued post-MFP. To minimize the impact of the expiration of the demonstration on rebalancing efforts and beneficiary transition experience, CMS required states to submit an MFP sustainability plan by April 30, 2015. The sustainability plans were developed to maintain transition efforts from CY 2016 through CY 2020 and beyond. Approval of such plans was expected in August 2015. A number of states reported plans to add key demonstration services to their Section 1915(c) waivers, as well as to the CFC option, in order to continue transitions when MFP expires (although states also noted that some demonstration services would be terminated when MFP expires). Specifically, states mentioned ensuring the continuity of transition coordination services or transition management services. Additionally, states were hopeful that they could sustain MFP staff positions through their legislative process; however, all future funding commitments are subject to administration and budgetary priorities once MFP funding ends.

Conclusion

MFP states have collectively transitioned over 52,000 individuals back to a community home over the course of the last eight years with the help of enhanced federal funding under MFP. MFP has given states a foundation upon which to improve existing transition programs, launch new strategies, and continue to rebalance LTSS in favor of community-based services. This year’s survey found: an increasing number of transitions among individuals with mental illness; reliance on case management services to ensure successful transition back to the community; an increasing number of states adding MFP participants to managed care (with a few states reporting coordination problems to date); and the leveraging of MFP dollars and transition experience to strengthen ongoing rebalancing efforts, including BIP, CFC, and other Medicaid HCBS options.

Despite steady growth in the number of transitions, states also face transition challenges related to lack of safe, affordable, and accessible housing, absence of mental health services/providers in some areas, low participation rates in self-directed service options, and sustainability of the demonstration as federal funding expires. MFP funding runs through September 2016, and although states can continue to transition individuals through 2018 (with CMS approval) and have through 2020 to use their remaining funding, states may be pressed to continue funding at current service levels and with existing staffing once MFP expires. MFP Project Directors reported working to sustain successful elements of the demonstration – strong transition coordination and continued inter-agency coordination – in order to continue to support transitions beyond MFP and to strengthen ongoing LTSS rebalancing efforts.

Methodology

During the spring and summer of 2015, the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured surveyed MFP states about basic program information, including MFP services, transitions, and costs, as well as evaluation activities, post-2016 sustainability plans, and the lessons learned from MFP in support of other Medicaid LTSS rebalancing/delivery system reform efforts. Each MFP state received the written survey instrument, and 43 (of 45) states submitted a complete questionnaire. Two states (AR and CA) opted not to participate in the survey. Oregon completed the survey, and its responses are included in this report, but the state has since terminated its program, effective June 30, 2015, bringing the total number of states participating in MFP to 44. The data summarized here were provided directly from MFP Project Directors and other state staff. The full survey instrument can be found in Appendix A of this report. This report was supplemented with data provided by state officials in previous Kaiser MFP surveys conducted between 2008 and 2013.

1. Carol V. Irvin et al., “Money Follows the Person 2012 Annual Evaluation Report,” Mathematica Policy Research (Oct. 15, 2013), available at http://www.mathematica-mpr.com/~/media/publications/pdfs/health/mfp_2012_annual.pdf. ↩︎
2. Terence Ng, Charlene Harrington, MaryBeth Musumeci, and Erica L. Reaves, Medicaid Home and Community-based Services Programs: 2011 Data Update (Washington, DC: KCMU, Dec. 2014), available at https://modern.kff.org/medicaid/report/medicaid-home-and-community-based-services-programs-2011-data-update/. ↩︎
3. For more information, see Molly O’Malley Watts, MaryBeth Musumeci, and Erica L. Reaves, How is the Affordable Care Act Leading to Changes in Medicaid Long-Term Services and Supports (LTSS) Today? State Adoption of Six LTSS Options (Washington, DC: KCMU, April 2013), available at https://modern.kff.org/medicaid/issue-brief/how-is-the-affordable-care-act-leading-to-changes-in-medicaid-long-term-services-and-supports-ltss-today-state-adoption-of-six-ltss-options/; Medicaid Long-Term Services and Supports:  An Overview of Funding Authorities (Washington, DC: KCMU, Sept. 2013), available at https://modern.kff.org/medicaid/fact-sheet/medicaid-long-term-services-and-supports-an-overview-of-funding-authorities/. ↩︎
4. Molly O’Malley Watts, Erica L. Reaves, and MaryBeth Musumeci, Medicaid Balancing Incentive Program: A Survey of Participating States (Washington, DC: KCMU, June 2015), available at https://modern.kff.org/medicaid/report/medicaid-balancing-incentive-program-a-survey-of-participating-states/.   ↩︎

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. Medicaid also plays an important role in states budgets as both an expenditure item and the largest source of federal revenue for states.

The years 2015 and 2016 continue a period of significant change and transformation for Medicaid programs. With slow but steady improvements in the economy following the Great Recession, Medicaid programs across the country were focused on implementing a myriad of changes included in the Affordable Care Act (ACA), pursuing innovative delivery and payment system reforms with the goals of assuring access, improving quality and achieving budget certainty, and continuing to administer this increasingly complex program.

However, these changes to Medicaid policy take place in the larger context of states budgets. Unlike the Federal government, states generally have balanced budget requirements, taking into account the amount of revenue coming in from a state’s own resources as well as federal revenues. State lawmakers must balance competing priorities across budget expenditure categories. Even in years of economic growth, state lawmakers face this pressure of balancing priorities.

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

• Alaska
• California
• Tennessee

These case studies build on findings from the 15^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 conducted by KCMU and HMA staff members; each case study was submitted to its respective state for review and comment.

Economic and Budget Outlook

Economy

In many ways, Alaska is a unique state, with its vast size, sparse population density and richness in natural beauty and natural resources, on which its economy relies heavily, specifically oil. In 2014, the oil industry was responsible for one-third of all employment and 38 percent of all wages.¹  The federal government also plays a significant role in the state’s economy, with an active military presence, a substantial portion of land in the state owned by the federal government, and high per capita federal employment in the state.²   Due to these influences, Alaska’s economy has taken a trajectory different from the one seen at the national level. Going back almost a decade, Alaska’s economy was negatively affected by the economic downturn – the unemployment rate increased to 8.0 percent for several months in 2009 and 2010 and the state’s GDP declined during this same period – but the impact was comparatively less and shorter in duration, as the economy was bolstered by increased oil production, higher oil prices and increased revenues to support the state budget.

However, the recent decline in oil prices and federal deficit reduction actions have had a negative effect on the state’s economy. Oil production in the state fell from 729,000 barrels per day in 2008 to 544,000 per day in 2013,³  depressing the state GDP.⁴  Additionally, job growth slowed, driven in part by declines in federal employment in the state; 2015 was forecast to be the 5^th consecutive year of decline in federal employment.⁵  These economic forces have presented major challenges to state lawmakers in enacting state budgets.

State Budget

Alaska funds its budget unlike any other state in the nation. It is one of seven states without a personal income tax, one of five states without sales tax, and the only state that has neither. Alaska relies almost entirely on revenues from oil taxes and royalties to fund the state portion of its expenditures – about 88 percent of 2014 general fund revenues were derived from oil revenue.⁶  Recent reductions in oil production and prices have negatively affected the state’s economy and in turn state revenues; according to a Pew Charitable Trust analysis, 2014 4^th quarter revenue in Alaska was over 80 percent lower than the 2008 peak.⁷  This has resulted in a state budget crisis.

Alaska has experienced general fund budget deficits since 2013 that have grown each year.⁸  In FY 2015, the state ended the year with a deficit of $2.7 billion, which was covered by drawing down funds from the state’s Statutory Budget Reserves Fund.  The Statutory Budget Reserves Fund was created to build a “rainy day fund,” setting aside surplus revenues during earlier periods of economic growth and investing for periods of economic downturn.⁹ 

When the FY 2016 budget was being developed, the state again faced a multi-billion dollar general fund deficit. The Statutory Budget Reserves Fund had been largely depleted. The Governor’s proposal included a series of spending cuts as well as exploring new sources of revenue and tapping into the Constitutional Budget Reserve Fund (a second rainy day fund which requires three-fourths majority approval to use). The Governor, fulfilling a campaign promise, also proposed adopting the ACA Medicaid expansion, highlighting new federal revenue and potential savings within the state budget. (More detail on this is provided in the next section.)

After two special sessions and much debate, the legislature passed a budget that was signed into law by the Governor.  For FY 2016, Governor Walker used his line item veto authority to reduce operating appropriations by $200 million for a total annual budget of $4.95 billion. This represents a 19 percent reduction ($1.1 billion) from FY 2015 budget levels. In spite of the reduction, the state expects a spending deficit of $3.7 billion, partially offset by a $1 billion transfer from the Public Education Fund, reserves used for advance funding of school districts. The remaining $2.7 billion will be covered from the Constitutional Budget Reserve Fund.¹⁰ 

While the state’s reserves can sustain the current expenditure trends until sometime in FY 2018,¹¹  the state recognizes the need to make fundamental shifts for long-term viability. The spending imbalance has prompted the administration to engage state policymakers in a discussion about strategies to return the state to long-term fiscal stability.

Alaska’s Medicaid Expansion

Governor Bill Walker, in keeping with a central campaign promise he made while running for governor as an independent, proposed adopting the Medicaid expansion. In his state of the budget speech, the Governor noted that by expanding Medicaid, the state would be investing in the health of Alaskans and that the expansion would have positive effects on the economy as well as provide additional federal funds and direct general fund savings for budget.¹²  The Governor’s proposal received support from a number of stakeholders, including the Alaska Chamber of Commerce.¹³  However, there was much debate between the Governor and legislature over the Medicaid expansion. The Governor put forward the proposal as part of his budget amendments¹⁴  and as separate legislation.¹⁵  Legislative leaders expressed concerns with expansion related to systems issues as well as a desire to implement additional Medicaid reforms ahead of implementing the expansion.¹⁶  After the two special sessions, the legislature reached a budget compromise in June that funded the budget deficit but did not include the Medicaid expansion. The Governor signed the budget into law in June, avoiding a government shutdown.¹⁷ 

In July 2015, Governor Walker moved to expand Medicaid by executive action since Alaska’s legislature had not done so. In an attempt to block the Governor’s actions, the Alaska Legislative Council comprised of House and Senate legislators, voted to sue the governor for exceeding his executive authority and asked the judge to temporarily halt the expansion pending the outcome of the litigation.¹⁸  On August 28, the Superior Court judge rejected the Council’s request, and the Alaska Supreme Court concurred on August 31.¹⁹  The court rulings cleared the path for the “Healthy Alaska Plan” and for enrollment to begin as planned on September 1, 2015.²⁰ 

The Healthy Alaska Plan expands coverage to approximately 42,000 uninsured adults, aged 19 to 64, in families earning up to 138 percent of the federal poverty level.²¹  The Healthy Alaska Plan originally put forward by the Governor and the Alaska Department of Health and Social Services in February 2015 estimated that over half (55 percent) of eligible individuals have incomes below 100 percent of the federal poverty level, and thus would not qualify for premium subsidies to purchase health insurance through the ACA Marketplace. It projected that approximately 21,100 would enroll in FY 2016 with enrollment climbing to 26,500 by 2021.²²  In addition, the expansion was expected to provide economic benefit to the state by adding $1.1 billion in new federal revenue, creating 4,000 new jobs; adding $1.2 billion in wages and salaries; and stimulating $2.49 billion in economic activity throughout the state. The Healthy Alaska Plan also noted that the Medicaid expansion was expected to exert downward pressure on the cost of health care and health insurance by reducing the amount of uncompensated care provided by hospitals.²³  Additionally, the Healthy Alaska Plan noted that the Medicaid expansion would provide additional federal funds that would facilitate reform efforts to increase cost-effectiveness bend the cost-curve and improve value.²⁴ 

Delivery System Reforms

Growth in the state’s Medicaid expenditures is reflective of factors affecting the cost of healthcare in general within the state. With 16 percent of the United States’ land mass but only 0.2 percent of its population, Alaska’s vast size, rural/frontier nature and arctic climate add a unique level of complexity in providing health care services to its state residents. In its 2011 “Findings on Health Care Cost, Pricing and Reimbursement in Alaska,” the Alaska Health Care Commission found that physician reimbursement was 60 percent higher than in other highly rural/frontier Western states, commercial reimbursement for private sector hospital services was 37 percent higher, and commercial insurance premiums were roughly 30 percent higher.²⁵  Higher prices are driven in part by the state’s higher cost of living (20-30 percent higher than in the comparison states), higher salaries for health care workers, and by the limited number of providers, particularly in some specialties, resulting in a lack of competition.²⁶   These structural challenges make it difficult to implement cost-effective ways to deliver coordinated care. In fact, Alaska is one of only three states (along with Wyoming and Connecticut) that does not use a comprehensive managed care delivery system for any of its Medicaid enrollees. However, Alaska has embarked on a number of Medicaid reform initiatives to enhance access to care, improve population health and moderate cost growth.

Alaska Medicaid Coordinated Care Initiative

The state has initiated the Alaska Medicaid Coordinated Care Initiative (AMCCI), a voluntary program providing one-on-one case management services including care coordination, scheduling appointments, addressing barriers, and referrals to specialists and social service supports.²⁷  The initial focus of the program will be on decreasing the inappropriate use of emergency rooms. “Super utilizers” account for about three percent of Alaska’s Medicaid population, but about 22 percent of all Medicaid hospital emergency room expenditures. Around 6,000 enrollees had five or more emergency room visits within a one year period.²⁸  The state contracted with MedExpert International, Inc. in December 2014 to provide case management services for participants.

Medicaid Redesign Initiative

In July 2015, Alaska’s Department of Health and Social Services launched the “Medicaid Redesign” initiative with the goals of developing recommendations for reform, by January 2016, that will optimize enrollee health outcomes, drive increased value in the delivery of services and contain costs in the Alaska Medicaid program.²⁹  During the recommendation development process, the state is exploring a variety of delivery system and payment reform options (e.g., managed care models, patient centered medical homes, accountable care organizations and other shared savings models).

Tribal Health System Partnership

Work is currently underway with the Tribal Health System on the development of two Section 1115 waiver initiatives. Initially, the Alaska Department of Health and Social Services intended to develop two Section 1115 waiver initiatives. The first, with a target implementation date of July 2016, would develop medically necessary transportation case management services to facilitate timely and efficient delivery of health care services to Alaska Natives and American Indians (AI/AN) with a 100 percent federal match if the services are coordinated by a Tribal provider. The second waiver, with a target implementation date of July 2018, would expand the scope of Medicaid-reimbursable services available to AI/ANs, and enhance referral coordination.³⁰  Alaska is seeking approval for 100 percent federal match when a Medicaid beneficiary, who is also an IHS beneficiary, is referred by a Tribal Health Provider to a non-tribal health provider. However, U.S. Secretary of Health and Human Services Burwell recently indicated in a letter to Governor Walker that DHHS is pursuing a policy change and 1115 waivers would not be necessary.³¹   Currently, the State is awaiting further policy clarification before implementing these initiatives.

Other Medicaid Initiatives

DHSS, in collaboration with multiple state agencies, released a request for proposals in July 2015 for assistance with developing a 1915(i) HCBS benefit and 1915(k) Community First Choice Medicaid State Plan option. The initiatives would serve eligible individuals with physical, cognitive, intellectual and behavioral health needs whose income qualifies them for Medicaid and who have functional needs, but who may or may not meet institutional level of care requirements. The state expects the design phase to be completed by July 2016 for implementation in July 2017.³² 

The state is also engaged in a feasibility study to examine various health care provider tax methodologies, and the fiscal and economic impact of such taxes in Alaska. The study is expected to result in recommendations for a specific health care provider tax for implementation, which will be the basis for health care provider tax legislation in the 2016 legislative session.³³ 

Economic and Budget Outlook

Economy

California, like many other states, has seen continually improving economic conditions since the Great Recession, during which California experienced record unemployment (peaking at 12.2 percent), major budget shortfalls, and declines across all major industries. California’s economy began its recovery from the last recession in June 2009, paralleling the economic recovery for the U.S. After six years of slow growth, the state’s economy is now on more solid ground.³⁴  The state has recovered all of the jobs lost during the recession,³⁵   and in recent months, job growth in California has outpaced the national average, with notable growth in professional and business services and construction sectors.³⁶  The state’s annual GDP has been growing faster than the national rate for the last few years. As of August 2015, California’s unemployment rate had fallen to 6.1 percent, remaining above the national average (5.1 percent) as nearly 1.2 million California residents remain unemployed.³⁷ 

State Budget

California’s budget situation has improved in recent years.  The state had faced several years of challenging budget conditions that were made more difficult by the Great Recession. At the height of the downturn, the state faced several years of multi-billion dollar budget shortfalls³⁸  that required a number of policy actions to curb spending and increase revenue, including a temporary increase in personal income tax rates for higher income earners (over $250,000) along with other tax increases approved by California voters through Proposition 30 in November 2012. In 2014, for the first time since 2007, California ended its fiscal year with a positive General Fund balance totaling $1.9 billion, due to much larger than anticipated growth in revenues from personal income taxes and corporate taxes.³⁹  In 2014 the state also implemented the Medicaid expansion, opened its state-based health insurance Marketplace, and invested in outreach and enrollment efforts.⁴⁰ 

California’s budget processes for FY 2015 and FY 2016 started off with budget surpluses, allowing the state to continue to pay down debt, restore some previous cuts, and make additional investments. The FY 2016 budget, signed by Governor Brown on June 25, 2015, totaled $168 billion. It holds total general fund spending relatively flat (increasing just 0.8 percent over last year) while increasing spending on education, health care, in-home supportive services (IHSS), workforce development, drought assistance, and the judiciary.⁴¹  In addition, the state is expanding full-scope coverage through existing Medi-Cal managed care for undocumented children; this coverage is financed with state-only dollars. The state is also focused on building reserves; the state estimates there will be $4.6 billion in state reserve accounts at fiscal year-end.⁴² 

Affordable Care Act Coverage Expansion

The 2010 Affordable Care Act (ACA) was designed to expand coverage to a majority of the non-elderly uninsured across the country through the Medicaid expansion and the creation of health insurance Marketplaces in states. These ACA coverage provisions took effect on January 1, 2014. California was one of a several states that opted to expand coverage to low-income adults before 2014.

Early Implementation Efforts: Low-Income Health Program (LIHP)

Since 2010, the state uninsured rate has dropped dramatically.  In 2010, out of a total population of 37 million, there were 6.8 million nonelderly uninsured in California.⁴³  In 2010, well before the major gains in coverage under the ACA, California expanded coverage to uninsured, low-income adults through the creation of the Low-Income Health Program (LIHP) under their “Bridge to Reform” Section 1115 Medicaid Demonstration Waiver.

California has a history of county-delivered health care services, as counties have traditionally had broad authority over the provision of health-related services. Building on an existing coverage initiative, LIHP was county-based coverage that was financed with county funds and federal funds at the state’s regular matching rate (no dollars from the state General Fund were used).⁴⁴  County participation was voluntary. LIHP benefits were more limited than those available to state Medicaid beneficiaries. Counties could use an open fee-for-service (FFS) system or a closed managed care system, or a combination of the two systems. Between July 2011 and December 2013, LIHP coverage was provided through 19 LIHP programs across 53 of the state’s 58 counties.⁴⁵  By the end of 2013, over 650,000 people were enrolled in the program.⁴⁶ 

Medicaid Expansion and Marketplace Coverage

In January 2014, California expanded its Medicaid program, known as Medi-Cal, statewide to cover low-income adults at or below 138 percent FPL. Individuals at or below 138 percent FPL who gained coverage under the early LIHP expansion were automatically enrolled in Medi-Cal coverage. As a result, approximately 630,000 LIHP beneficiaries were auto-enrolled in Medi-Cal.⁴⁷  Subsidized private coverage became available to adults with moderate incomes (between 139 – 400 percent FPL) through California’s state-based health insurance Marketplace, known as “Covered California.” An estimated 25,000 LIHP beneficiaries transitioned to Covered California.⁴⁸ 

In addition to automatically transitioning LIHP beneficiaries to ACA coverage options in 2014, California took several other steps to simplify and streamline enrollment under the ACA including creating a single online portal for Covered California and Medi-Cal applications and adopting the Express Lane Enrollment Project to target and enroll state Supplemental Nutrition Assistance Program (SNAP) beneficiaries in Medi-Cal coverage. The state also invested heavily in outreach and enrollment efforts for both Medi-Cal and Covered California. Covered California established an Assisters Program and worked with community organizations to provide direct assistance to consumers to help them enroll in coverage.

Medi-Cal coverage grew by 30 percent (or 2.8 million people) between the fall of 2013 and the end of 2014.⁴⁹  Approximately 1.7 million people applied for and were determined eligible for Covered California health plans between October 2013 and October 2014.⁵⁰  From 2013 to 2014, California’s uninsured rate declined from 19.1 percent to 13.4 percent.⁵¹ 

Despite much success in enrollment, California—like most other states—experienced enrollment and outreach challenges in 2014 including a shortage of in-person assisters, problems with cultural and linguistic resources, and technology/systems issues with the Covered California website.  These system issues led to a significant Medi-Cal application backlog.  In late 2014 and 2015, the state successfully addressed many of these challenges, largely resolving the backlog issue.⁵² 

Delivery System And Payment Reform

In addition to coverage expansions, DHCS has increasingly focused on delivery system and payment reform – to expand access for Medi-Cal beneficiaries, to improve care quality and health outcomes, and to reduce costs to create a more sustainable program.

Delivery System Reform Incentive Payment (DSRIP) Initiative

In 2010, California was the first state to secure a DSRIP waiver, effectively establishing the basic framework for future DSRIP waivers – the distribution of funds to safety net providers that agree to meet defined metrics and goals. California pursued a DSRIP initiative to provide financial support and stability to its 21 public hospital systems (referred to as “designated public hospitals”) and to “jump start” public hospital system preparation for broader health reform implementation. California’s $6.67 billion dollar DSRIP initiative was financed entirely by the state’s 21 public hospital systems and the federal government.⁵³ 

Participating public hospitals were required to implement projects in the following areas: infrastructure development (e.g., disease management registries, enhancing performance improvement and reporting capacity); innovation and redesign (e.g., medical homes); population-focused improvement (e.g., diabetes care management and outcomes); and urgent improvement in care (e.g., central line-associated infection prevention). In 2012, the state added the HIV Transition Incentive Program to DSRIP, a new optional project, to strengthen public hospital capacity to serve individuals diagnosed with HIV, particularly LIHP enrollees previously served under programs funded by the Ryan White HIV/AIDS Treatment Extension Act of 2009.⁵⁴  The state’s waiver gave individual hospital systems broad flexibility to determine the specific projects they would pursue and the benchmarks they would attempt to meet – acknowledging hospital systems were at different starting points along the spectrum of delivery system reform. To receive DSRIP funds, participating public hospitals were required to achieve project-specific milestones.

Since each public hospital system developed an individualized implementation plan, it is hard to tell a statewide story involving how much DSRIP has accomplished to date. It is also challenging for the state to assess the impact of DSRIP projects in advancing the state’s broader vision for delivery system reform.⁵⁵  To address these issues, California proposed a more standardized DSRIP approach in its waiver renewal application (described in more detail below) that includes the use of required core project components and standardized outcome and quality metrics.

In March 2015, California submitted a renewal application for its Bridge to Reform waiver, which was renamed “Medi-Cal 2020.” The renewal requests authority for a series of delivery system transformation and alignment programs, including the continuation of DSRIP funding for public hospital systems. The proposed waiver expands the scope of DSRIP-eligible institutions to 42 safety net institutions run by health care districts (referred to as “non-designated public hospitals”). These institutions are predominantly located in rural areas and are often the only hospitals serving their communities. The application requests a funded planning period of up to one year for these safety-net hospitals to build the infrastructure necessary to participate in the program. Proposed DSRIP project domains noted in the Medi-Cal 2020 renewal include:

• system redesign (e.g., improving care transitions, physical and behavioral health integration);
• care coordination for high-risk, high-utilization populations (e.g., health homes, complex care management);
• resource utilization efficiency (e.g., appropriate use of antibiotics, high cost imaging and pharmaceuticals);
• prevention (e.g., obesity, cancer); and
• patient safety in ambulatory care (e.g., medication reconciliation).

Managed Care

California’s Department of Health Care Services (DHCS) has a long history with managed care plans.⁵⁶  Over time, DHCS has expanded Medicaid managed care to all 58 counties, with each county choosing its own managed care model. As a result, several different managed care models operate across the state. All models include commercial plans and/or county-run plans. In most counties Medi-Cal beneficiaries choose between at least two managed care plans. However, in some less-populated counties beneficiaries have access to only one county-run plan.⁵⁷ 

At the start of the 2010 Bridge to Reform waiver, 55 percent of Medi-Cal beneficiaries were enrolled in managed care. Today, nearly 80 percent of Medi-Cal beneficiaries, or more than 9 million beneficiaries, are enrolled in managed care.⁵⁸ 

In addition to the expansion of managed care statewide, in recent years the state has expanded managed care to new Medi-Cal populations, including seniors and persons with disabilities (SPDs). Managed care expansions involving SPDs are described in the next two sections followed by a discussion of managed care systems transformation and improvement strategies outlined in the Medi-Cal 2020 proposal.

Mandatory Managed Care for Seniors and Persons with Disabilities (SPDs)

The Bridge to Reform waiver authorized the expansion of mandatory Medicaid managed care for seniors and persons with disabilities (SPDs) enrolled in fee-for-service (FFS) Medi-Cal.⁵⁹  By enrolling SPDs in managed care the state aimed to increase access, improve care coordination, and achieve cost efficiencies.⁶⁰  Because of the complex care needs of SPDs, managed care plans had to meet extensive readiness requirements. The state was required to conduct outreach and engagement activities to encourage active plan selection among beneficiaries and to educate beneficiaries about the new delivery system.⁶¹  The state took a phased approach to enrolling Medi-Cal SPDs into managed care over a 12 month period beginning June 2011. During this period, nearly 240,000 FFS SPDs were transitioned to Medicaid managed care plans across 16 counties.⁶²  Although the state engaged in significant planning efforts to try to ensure the smooth transition of SPDs to managed care, a multitude of challenges arose. Some challenges included beneficiary data sharing delays that hindered health plan and provider readiness; plan difficulty recruiting providers with expertise in complex care; lack of provider training in care coordination; and inadequate/confusing beneficiary outreach materials.^63 ,64  The state is using experience gained from this SPD transition to inform similar transitions in an additional 19 (rural) counties⁶⁵  and the transition of dually eligible beneficiaries into managed care; both of these latter transitions began in 2014.

Coordinated Care Initiative

California’s 2012-2013 state budget established the Coordinated Care Initiative. This initiative was authorized by CMS through an amendment to the Bridge to Reform waiver. Through this initiative, the state aims to transform the Medi-Cal delivery system to better serve seniors and persons with disabilities. The initiative involves two major components: Cal MediConnect and Managed Medi-Cal Long-Term Services and Supports (MLTSS).

Cal MediConnect is a three year demonstration program for Medicare and Medi-Cal dual eligible beneficiaries. Typically, across states, very little coordination has occurred between Medicare and Medicaid programs. Cal MediConnect seeks to integrate care and improve health outcomes for dual eligible beneficiaries through the alignment of Medicare and Medicaid financing. Under Cal MediConnect, a single health plan is responsible for coordinating medical, behavioral health, long-term institutional, and home- and community-based services for beneficiaries. Enrollment in Cal MediConnect began in April 2014. The demonstration is operating in 7 counties. The state is using a passive enrollment system, where eligible beneficiaries are enrolled into a MediConnect health plan unless they actively “opt-out.” Beneficiaries may opt-out or change plans at any time.  As of June 2015, enrollment in the demonstration had reached nearly 130,000 beneficiaries.⁶⁶  As of July 2015, the opt-out rate, excluding Los Angeles County, was 33 percent. Los Angeles County experienced a higher opt-out rate of 51 percent.⁶⁷ 

Under the Managed Medi-Cal MLTSS initiative, all Medi-Cal beneficiaries (in demonstration counties), including dual eligible beneficiaries, are required to join a Medi-Cal managed care plan to receive LTSS and other Medicaid-covered benefits. Most people with Medi-Cal only are already enrolled in a Medi-Cal managed care plan, however, now they will also obtain LTSS through their health plan.⁶⁸ 

Managed Care Systems Transformation & Improvement Programs

The Medi-Cal 2020 proposal outlines payment reform strategies the state believes will promote collaboration and shared accountability across managed care plans and providers. The state believes these strategies will lead to improved care quality and beneficiary health outcomes and reduced costs. Core strategies described in the Medi-Cal 2020 proposal include:

• Shared Savings Incentives with Managed Care Plans – A shared savings incentive for managed care plans based on total cost of care and performance on quality metrics. Managed care plans would be required to form partnerships with providers and behavioral health systems, what the state is referring to as “accountable care groups.”
• Standardization of Pay-for-Performance programs – The standardization of core elements of managed care plan pay-for-performance (P4P) programs to ease administrative burden on providers and drive quality improvement.
• Physical and Behavioral Health Integration – Incentives to improve coordination between managed care plans and county mental health plans and provider incentives to promote the integration of mental and physical health care services, through coordination or co-location approaches.

Fee-for-Service Transformation

Most services are provided under Medi-Cal managed care plans, although some services are still provided through Medi-Cal’s fee-for-service program, namely dental services and maternity care. The state has proposed, in the Medi-Cal 2020 renewal application, to introduce provider incentives to expand access to oral health services and to increase preventive service utilization. The state also proposed a Hospital Incentive Program to promote evidence-based obstetrical care to improve quality and reduce costs.

Increased Access to Housing and Supportive Services Programs

As part of the Medi-Cal 2020 renewal proposal, the state aims to improve care coordination for vulnerable populations including those experiencing homelessness. The state is proposing to include enhanced tenancy support and intensive medical case management services for individuals who are homeless and meet other high-risk criteria. The state also envisions the formation of regional housing partnerships that would be eligible to receive incentive funding to establish and support integrated care partnerships focused on housing. The state would require partnerships to include managed care plans, county health agencies, cities, hospitals, and housing and social service providers.

Additional Areas of Policy Change in FY 2016

Significant adjustments made to the 2015-2016 DHCS budget include: increased Medi-Cal spending due to expected caseload growth (including the expansion of state-funded coverage for children regardless of immigration status); restoration of the 10 percent dental provider rate reduction; increased managed care rates; funding for behavioral health treatment services for individuals with Autism; funding for ACA Section 2703 Health Homes; and funding to restore in-home supportive services (IHSS) hour cuts.

While signing the Budget Act, Governor Brown called for a special legislative session to address Medi-Cal financing issues related to the state’s managed care organization (MCO) tax and continued funding for the IHSS restoration. The special session, which began June 19, 2015, is considering the Governor’s proposal to restructure the managed care organization tax which is set to expire at the end of this fiscal year. A letter from CMS raised concerns about the current tax structure – noting the tax does not meet the federal requirement to be broad-based.⁶⁹  The current tax is estimated to generate $1.1 billion in FY 2016 that can then be used finance care and to draw down federal matching dollars. This special session will also consider how to fund the IHSS restoration in future years.

Economic and Budget Outlook

Economy

Tennessee’s economy has seen continual improvements in economic conditions since the Great Recession, during which Tennessee experienced record unemployment (peaking at 11.1 percent) as well as steep declines in state revenues. The state has recovered all of the jobs lost during the recession.⁷¹  Nonfarm and manufacturing sectors in the state have outgained national growth.⁷²  The unemployment rate has steadily declined to 5.7 percent in August 2015, though the state’s unemployment rate continues to be slightly above the national average (5.1 percent).⁷³  State tax revenue collections have also continued to improve since the recession. State revenue collections were up 4.6 percent in the third quarter of 2014, exceeding growth of 3.2 percent in the Southeast Region and 4.4 percent nationally.⁷⁴  By the end of FY 2015, the state had collected $605.7 million⁷⁵  more than the original budgeted estimate of $12.1 billion (which had assumed 3.17 percent growth⁷⁶ ).

State Budget

Governor Bill Haslam’s budget proposal for FY 2016, presented to the Tennessee General Assembly in February 2015, was based on a conservative revenue estimate of 2.53 percent and continued slow growth in the economy. The Governor proposed strategic investments in higher education and in primary and secondary education, including teacher pay, but also proposed cuts in other program areas to stay within projected revenue growth for the year.⁷⁷   Health care cuts included downsizing of a state-run facility for individuals with Intellectual and Developmental Disabilities and limiting new eligibility for certain in-home long-term services and supports⁷⁸  under the state’s Section 1115 Medicaid waiver to only individuals who meet the income and disability standards for SSI.⁷⁹  He also proposed and received an increase from 5.5 percent to 6 percent for 2016 in the state’s assessment on health maintenance organizations including those that manage benefits for Medicaid beneficiaries through its TennCare program. In addition, the General Assembly passed a bill to increase nursing home assessments FY 2016. The Tennessee General Assembly approved the FY 2016 budget on April 16, 2015 after rejecting attempts to add a provision to authorize an expansion of Medicaid (described further below).⁸⁰ 

Affordable Care Act Update

Governor Haslam, who was reelected by a wide margin in 2014, proposed an alternative to Medicaid expansion in early 2015 that enjoyed strong support from both business and health care organizations.⁸¹  “Insure Tennessee” would have relied on Section 1115 waiver authority.  The plan offered uninsured Tennesseans, ages 19-64, earning less than 138 percent FPL a choice between a defined contribution which could be used to purchase employer-sponsored insurance in the private market or enrollment in a managed care plan with a benefit package identical to Medicaid. The managed care option provided Health Savings Accounts, with incentives for healthy behaviors, and included premiums and copayments for individuals above 100 percent of the federal poverty level. The state’s share of expansion costs would have been covered by an increase to an existing hospital assessment on net patient revenue.⁸² 

The Governor convened a special session of the legislature in February to seek legislative approval to move forward with Insure Tennessee but the proposal was voted down in a Senate committee formed to hear the bill, bringing the special session to a close. Subsequently, the bill was reintroduced by members of the legislature in the regular session and passed out of the Senate General Welfare Committee only later to be voted down in the Senate Commerce Committee. It was not taken up in the House during regular session. Conservative lawmakers who opposed Insure Tennessee expressed concerns over the potential long-term costs to the state and the difficulty the state would face if it were to try to repeal Medicaid expansion in future years.⁸³ 

The state already covers parents to 101 percent of the FPL and pregnant women to 200 percent FPL under the existing TennCare program⁸⁴ , and reported significant increases in Medicaid enrollment in 2015 for non-elderly, non-disabled adults, pregnant women and children. These increases are thought to reflect more parents seeking required insurance coverage under the Affordable Care Act, including through applications made to the Federally-Facilitated Marketplace (FFM). The state is projecting enrollment growth to slow in 2016.

In 2012, Tennessee contracted with a vendor to redesign the program’s eligibility system to enable online applications for eligibility and to reflect other new requirements under the Affordable Care Act, expecting the new system to begin accepting applications by October 2013.⁸⁵  However, contractors were unable to meet this and subsequent deadlines. Due to the challenges and delays, individuals were unable to apply for Medicaid through an online portal at the state level. The state instead encouraged TennCare applicants to apply through the federally facilitated marketplace at www.healthcare.gov,⁸⁶  and makes computer kiosks available in all county Department of Human Services offices to support this process. Some Tennesseans experienced difficulties in 2014 obtaining timely eligibility decisions through the federally facilitated marketplace.  A class action lawsuit was filed against the state in July 2014 on behalf of individuals who claim to have been harmed by delays in enrollment into TennCare.⁸⁷  TennCare now offers a “delay hearing” process to individuals who have not received their eligibility determination within 45 days or 90 days, depending on application type.⁸⁸  After an independent review of the work completed on the Tennessee Eligibility Determination System (TEDS), the state announced in early 2015 it was bringing in a new vendor to complete the system redesign,⁸⁹   and the state now expects to have its new system fully operational in 2018.

Managed Care and Health System Reform in Tennessee

Tennessee initiated the use of capitated managed care arrangements in 1994 with the creation of TennCare under its Section 1115 demonstration waiver. The state has enrolled all Medicaid populations in managed care arrangements since 1994, though the state has continued to innovate in its delivery and financing arrangements to address specific state program goals. Today, most services are provided as part of a comprehensive contract with three statewide managed care organizations (MCOs).⁹⁰  In 2010, Tennessee incorporated TennCare CHOICES⁹¹  into the TennCare MCO contracts, thereby including long-term services and supports for older adults and people with physical disabilities in comprehensive managed care. Most outpatient pharmacy services, however, are “carved-out” and paid on a fee for service basis (managed by a pharmacy benefits manager).

The Health Care Finance Administration, within the Tennessee Department of Finance and Administration, administers the TennCare program, working with and through contracted private health plans to achieve Medicaid program improvement goals.  For example, the state’s commitment to improving the quality of care for beneficiaries is pursued through a variety of initiatives.  TennCare requires MCOs to be NCQA accredited, and plans are required to report a full set of HEDIS and CAHPS measures to the state. The state will pay a performance incentive for high performance in selected HEDIS measures and year-over-year improvement against standards established in annual contracts with the state. Current performance targets include timeliness of prenatal and post-partum care; measures of asthma and diabetes care; follow-up care for children prescribed with ADHD medication; adolescent well-care visits and immunizations; and antidepressant medication management, among others. The 2016 contract year will begin a new three-year cycle for quality improvement.  There is also a monthly withhold that must be earned back by plans through meeting state performance expectations.  TennCare officials point to achieving improvement in quality scores in the program, even while maintaining low PMPM cost trends.

In recent years, the state has required its health plans to undertake initiatives to reduce the rate of early elective deliveries; for example, since 2011, plans can pay no more for C-sections than for vaginal deliveries.⁹²  TennCare has also implemented Patient-Centered Medical Homes (PCMHs) through its MCOs and is working now to align these programs across plans. Further, under its State Innovations Models (SIM) grant from the Center for Medicare & Medicaid Innovation (CMMI), Tennessee is pursuing a multi-payer approach to PCMHs, beginning with 12 sites in 2016. The goal is to improve prevention and management of chronic disease, increased coordination and integration across multidisciplinary provider teams, and improved wellness and preventive care within the state. As part of this broader initiative, Tennessee plans to create a statewide TennCare Health Homes initiative in 2016 for individuals with Severe and Persistent Mental Illness, to further promote effective integration of physical health care, behavioral health care, and long-term services and supports within the state.

The state’s SIM grant is supporting a wide array of reform initiatives that the state anticipates will help providers build capacity in their practices to transition to value-based payment and delivery models.  The state established a goal to introduce 75 Episodes of Care (EOC) payments over five years; the first three EOCs for acute asthma exacerbation, perinatal and total joint replacement (hip and knee) are fully implemented, design has been completed for another five episodes and design is underway for 12 additional episodes.⁹³  The SIM grant will also be used to develop quality and acuity-based payments for long-term services and supports.

In addition, the state’s SIM grant is supporting the Department of Health in development of a statewide stakeholder process to develop a plan for improved population health. This will include the use of economic analysis and forecasting during the development of the State Health Plan to identify health disparities and “hot spot” populations accounting for a disproportionate share of health care costs. The Department of Health will also use grant awards to Tennessee academic public health programs to address five population health priority topics: obesity, diabetes, tobacco use, child health, and perinatal health.

Pharmacy

TennCare officials report that pharmacy costs are a significant upward pressure on expenditures in the program, fueled by the cost of new Hepatitis C treatments, generic drug price increases, and especially the cost of biosimilars and certain specialty agents (e.g., for cystic fibrosis and cholesterol lowering treatments).   The state, which has managed the pharmacy benefit closely through its single statewide pharmacy benefits manager (PBM) for many years, implemented policy changes in 2015 and plans additional changes in 2016 to counter this pressure.

After reporting growth in pharmacy expenditures of 23 percent in FY 2014 over FY 2013, TennCare implemented pharmacy ingredient cost reductions as it moved to AWP-15% for brand name drugs in 2015, and also implemented tighter management of specialty agents.  For example, oncology agents are limited to a 14 day supply on initial fill, the state has introduced edits to identify late refills for Hepatitis C treatment to better ensure medication compliance, and select specialty agents have been designated as “MCO-reimbursed only” when administration should only be performed in a healthcare facility. The state also introduced new prior authorization requirements for ADHD stimulant agents prescribed for adults and on the use of compounded prescription medications to ensure that all compounded prescriptions are medically necessary and FDA-approved or otherwise supported by CMS-recognized compendia.⁹⁴ 

Additional planned reductions for 2016 include a 2 year lifetime limit for individuals being treated for opioid addiction with Buprenorphine-containing medications.⁹⁵  TennCare implemented a “New Drug” Review Policy that will implement clinically relevant prior authorization criteria and point-of-sale rejections until new agents are appropriately review by the state’s Pharmacy and Technology committee. The state also plans to transition to Guaranteed Net Unit Price (GNUP) contracting with pharmaceutical manufacturers.

1. McDowell Group, Inc., The Role of the Oil and Gas Industry in Alaska’s Economy – Prepared for Alaska Oil and Gas Association (Juneau, Alaska: McDowell Group, Inc., May 2014), http://www.aoga.org/sites/default/files/news/aoga_final_report_5_28_14_0.pdf. ↩︎
2. Scott Goldsmith, Federal Spending in Alaska: Running Out of Steam? Web Note No. 11 (Anchorage, Alaska: Institution of Social and Economic Research, May 2012), http://www.iser.uaa.alaska.edu/Publications/webnote/2012_05_09-WebNote11FederalSpending.pdf. ↩︎
3. Alaska Oil and Gas Competitiveness Review Board, Alaska’s Oil and Gas Competitiveness Report 2015 (Alaska Oil and Gas Competitiveness Review Board, February 27, 2015), http://dor.alaska.gov/Oil-Gas-Competitiveness-Review-Board. ↩︎
4. Bureau of Economic Analysis, Regional Data – GDP & Personal Income, “Real GDP in chained dollars 2007-2014” accessed September 24, 2015. http://www.bea.gov/iTable/iTable.cfm?reqid=70&step=1&isuri=1&acrdn=1#reqid=70&step=1&isuri=1. ↩︎
5. Caroline Shultz, “Employment Forecast for 2015, Statewide,” Alaska Economic Trends 35, no. 1 (Jan 2015): 4-7, http://labor.state.ak.us/trends/jan15.pdf. ↩︎
6. Alaska Department of Revenue, Revenue Sources Book Spring 2015 (Alaska: Alaska Department of Revenue Tax Division, April 3, 2015), http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1143r. ↩︎
7. “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts, accessed June 11, 2015, http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind0. ↩︎
8. Gunnar Knapp, An Introduction to Alaska Fiscal Facts and Choices – Prepared for presentation at Building a Sustainable Future: Conversation with Alaskans (Anchorage, Alaska: University of Alaska Anchorage Institute of Social and Economic Research, June 5, 2015), http://gov.alaska.gov/Walker_media/documents/20150605_an-introduction-to-alaska-fiscal-facts-and-choices.pdf. ↩︎
9. Another unusual aspect of Alaska’s budget is revenue generated from investment activity, representing over 46 percent of total revenue in 2014. Alaska’s total reserves, approximately $64 billion, are comprised of three funds: Permanent Fund, Statutory Budget Reserve Fund ($1.65 billion), and the Constitutional Budget Reserve Fund ($10.13 billion). The Permanent Fund, which accounts for 90 percent of investment earnings, provides direct payouts in the form of dividends to Alaskan residents. In June 2015, Alaska’s Permanent Fund reserves totaled $52.8 billion after accounting for the dividend transfer. Only about 2.4 percent of investment income from the funds accrued to unrestricted General Fund in 2014 for state funded services. Alaska Permanent Fund Corporation, Fund News – Permanent Fund up 4.9 percent (Alaska: Alaska Permanent Fund Corporation, August 20, 2015), http://www.apfc.org/home/Content/pressroom/pressStory2009.cfm?story=Permanent%20Fund%20up%204%2E9%20percent&s=1&i=606. ↩︎
10. Alaska Office of the Governor, Governor Walker Signs Budget Bills into Law: FY16 $1.1 Billion Less than FY15; $200 Million Vetoed (Juneau, Alaska: Alaska Office of the Governor, July 1, 2015), https://www.omb.alaska.gov/ombfiles/16_budget/PDFs/PR_15-90_Governor_Walker_Signs_Budget_Bills_into_Law_07012015.pdf. ↩︎
11. This assumes the state does not utilize reserves from the Permanent Fund. The state’s constitution, which established the fund, prohibits utilizing the principal, but does not prohibit use of earnings for funding state operations. ↩︎
12. Alaska Office of the Governor, State of the Budget Speech (Juneau, Alaska: Alaska Office of the Governor, January 22, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7061. ↩︎
13. Alaska Office of the Governor, Medicaid Reform and Expansion Gains Support (Juneau, Alaska: Alaska Office of the Governor, April 9, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7120. ↩︎
14. Alaska Office of the Governor, Governor Releases Amended Endorsed Budget (Juneau, Alaska: Alaska Office of the Governor, February 5, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7072. ↩︎
15. Alaska Office of the Governor, Governor Walker Introduces Medicaid Bill (Juneau, Alaska: Alaska Office of the Governor, March 17, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7098. ↩︎
16. The Alaska House Majority, Finance Committee Tables Medicaid Expansion Bill (Juneau, Alaska: Alaska House Majority, May 14, 2015), Accessed at: http://www.housemajority.org/2015/05/14/finance-committee-tables-medicaid-expansion-bill/. ↩︎
17. Alaska Office of the Governor, Governor Walker Signs Budget Bills into Law (Juneau, Alaska: Alaska Office of the Governor, July 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7261. ↩︎
18. The Alaska House Majority, Alaska Legislature Takes Governor to Court Over Unconstitutional Action (Juneau, Alaska: Alaska House Majority, August 18, 2015), Accessed at: http://www.housemajority.org/2015/08/18/alaska-legislature-takes-governor-to-court-over-unconstitutional-action/. ↩︎
19. Associated Press, “Judge rejects call to block Alaska governor from expanding Medicaid,” Modern Healthcare (August 28, 2015,) http://www.modernhealthcare.com/article/20150828/NEWS/308289998?utm_source=modernhealthcare&utm_medium=email&utm_content=20150828-NEWS-308289998&utm_campaign=financedaily. ↩︎
20. Alaska Office of the Governor, Administration Implements Healthy Alaska Plan (Juneau, Alaska: Alaska Office of the Governor, September 1, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7259. ↩︎
21. It is one of two states (Hawaii is the other) for which the federal government adjusts its calculation of the federal poverty level to account for an elevated cost of living. In 2015, the federal poverty level for a family of three is $20,090 for 48 states and D.C. For Alaska that level is set at $25,120, about 25 percent higher. Office of the Assistant Secretary for Planning and Evaluation, 2015 Poverty Guidelines (Washington, DC: U.S. Department of Health and Human Services, September 2015), http://aspe.hhs.gov/2015-poverty-guidelines. ↩︎
22. Alaska Department of Health and Social Services, The Healthy Alaska Plan: A Catalyst for Reform (Alaska: Alaska Department of Health and Social Services, February 2015), http://dhss.alaska.gov/HealthyAlaska/Documents/Healthy_Alaska_Plan_FINAL.pdf. ↩︎
23. Ibid. ↩︎
24. Ibid. ↩︎
25. Alaska Health Care Commission, Findings on Health Care Cost, Pricing and Reimbursement in Alaska (Alaska: Alaska Health Care Commission), http://dhss.alaska.gov/ahcc/Documents/AHCCFindings-HealthCareCosts.pdf. ↩︎
26. Ibid. ↩︎
27. “Alaska Medicaid Coordinated Care Initiative (AMCCI),” Alaska Department of Health and Social Services Division of Health Care Services, accessed October 6, 2015, http://dhss.alaska.gov/dhcs/Pages/amcci/default.aspx. ↩︎
28. Deb Taylor, PK Wilson, Terri Gagne and Clarissa Moon, Alaska Medicaid Coordinated Care Initiative – PowerPoint Presentation for January – March 2015 Stakeholder Meetings (Alaska: Department of Health and Social Services Alaska Division of Health Care Services, March 17, 2015), http://www.alaskaccn.com/files/QuickSiteImages/Alaska_Medicaid_Coordinated_Care_Initiative__Overview__2015-03-17.pdf. ↩︎
29. Alaska Department of Health and Social Services, Agnew::Beck Consulting, Health Management Associates and Milliman Inc., Medicaid Redesign and Expansion in Alaska: Environmental Assessment, Partner Input and Next Steps PowerPoint Presentation (Alaska: Alaska Department of Health and Social Services, September 2, 2015), http://dhss.alaska.gov/HealthyAlaska/Documents/redesign/MCDRE%20Webinar%20Update%20on%20Round%201%20Session%209-2-15.pdf. ↩︎
30. Health Management Associates, Healthy Alaska Plan: Preliminary Draft Environmental Assessment Appendices (Health Management Associates, August 31, 2015). http://dhss.alaska.gov/HealthyAlaska/Documents/redesign/Preliminary%20Draft%20Environmental%20Assessment_APPENDICES_9-1-15_HMA_FINAL.pdf. ↩︎
31. Alaska Office of the Governor, Administration Implements Healthy Alaska Plan (Juneau, Alaska: Alaska Office of the Governor, September 1, 2015), http://gov.alaska.gov/Walker/press-room/full-press-release.html?pr=7259. ↩︎
32. Alaska Department of Health and Social Services, Request for Proposals: RFP 06 160000002 (Anchorage, Alaska: Department of Health and Social Services, July 14, 2015), https://aws.state.ak.us/OnlinePublicNotices/Notices/View.aspx?id=177572. ↩︎
33. Alaska Department of Health and Social Services, Request for Proposals: RFP 2015-0600-3125 (Anchorage, Alaska: Department of Health and Social Services, April 30, 2015; https://aws.state.ak.us/OnlinePublicNotices/Notices/View.aspx?id=176626. ↩︎
34. Mac Taylor, The 2015-16 Budget: California’s Fiscal Outlook. (Sacramento, California: California’s Legislative Analyst’s Office, November 2014), http://www.lao.ca.gov/reports/2014/budget/fiscal-outlook/fiscal-outlook-111914.pdf. ↩︎
35. Bureau of Labor Statistics, State and Area Employment, Hours, and Earnings from the Current Employment Statistics Survey, “Total Nonfarm Employment (Series ID: SMS06000000000000001) December 2007 through August 2015”accessed October 6, 2015, http://data.bls.gov/cgi-bin/dsrv. ↩︎
36. “Economy at a Glance,” Bureau of Labor Statistics, accessed October 6, 2015, http://www.bls.gov/eag/eag.ca.htm. Bureau of Labor Statistics, Employment, Hours, and Earnings from the Current Employment Statistics Survey, accessed October 6, 2015, http://data.bls.gov/cgi-bin/dsrv. ↩︎
37. “Economy at a Glance,” Bureau of Labor Statistics, accessed October 6, 2015, http://www.bls.gov/eag/eag.ca.htm. ↩︎
38. The Kaiser Family Foundation State Health Facts. Data Source: States Continue to Feel Recession’s Impact (Washington, DC: Center for Budget and Policy Priorities, June 27, 2012), accessed September 29, 2015, https://modern.kff.org/state-category/demographics-and-the-economy/state-fiscal-distress/. ↩︎
39. California State Controller’s Office, Bottom Line: What the Numbers Mean (California: California State Controller’s Office, July 10, 2014), http://www.sco.ca.gov/eo_2014_07_summary_analysis_numbers.html. ↩︎
40. California Department of Finance, California State Enacted Budget Summary 2013-2014 (California: California Department of Finance), http://www.ebudget.ca.gov/home.php?selectedYear=2013-14. ↩︎
41. California Department of Finance, California 2015-2016 State Enacted Budget (California: California Department of Finance), http://www.ebudget.ca.gov/home.php?selectedYear=2015-16. ↩︎
42. California Department of Finance, California State Budget Summary 2015-2016 (May Revision). (California: California Department of Finance), http://www.ebudget.ca.gov/home.php?selectedYear=2015-16. ↩︎
43. U.S. Census Bureau, 2010 American Community Survey 1-Year Estimates, “Health Insurance Coverage Status (S2701),” accessed October 6, 2015, http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_10_1YR_S2701&prodType=table. ↩︎
44. For LIHP beneficiaries with incomes at or below 133% FPL, federal funds were available to match county expenditures at the state’s regular federal medical assistance percentage (FMAP) rate. Matching funds were not capped for these beneficiaries because the state could have covered this optional group without a waiver. However, counties had the option to expand coverage up to 200% FPL; counties had the option to cap enrollment for these beneficiaries since federal funds were only available to match county expenditures up to a maximum $630 million for those over 133% FPL. ↩︎
45. California Department of Health Care Services, Medi-Cal 2020: Key Concepts for Renewal (California: California Department of Health Care Services, March 27, 2015), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/ca-bridge-to-health-reform-pa.pdf. ↩︎
46. California Department of Health Care Services, California’s Low-Income Health Program Transitions Hundreds of Thousands of New Members to Medi-Cal (DHCS) News Release (California: California Department of Health Care Services, December 31, 2013), http://www.dhcs.ca.gov/formsandpubs/publications/opa/Documents/2013/13-07%20LIHP%20Medi-Cal%20Expansion%2012-31-13%20Final%20Version.pdf. ↩︎
47. Ibid. ↩︎
48. Ibid. ↩︎
49. Rachel Garfield, Melissa Majerol and Katherine Young, Coverage Expansions and the Remaining Uninsured: A Look at California During Year One of ACA Implementation (Washington, DC: Kaiser Family Foundation, May 2015), https://modern.kff.org/health-reform/report/coverage-expansions-and-the-remaining-uninsured-a-look-at-california-during-year-one-of-aca-implementation/. ↩︎
50. Ibid. ↩︎
51. Centers for Disease Control and Prevention, “National Health Interview Survey Early Release Program,” State Tables 2013 and 2014. Available at: http://www.cdc.gov/nchs/data/nhis/earlyrelease/State_estimates_insurance_2013_2014.pdf. ↩︎
52. Rachel Garfield, Melissa Majerol and Katherine Young, Coverage Expansions and the Remaining Uninsured: A Look at California During Year One of ACA Implementation (Washington, DC: Kaiser Family Foundation, May 2015), https://modern.kff.org/health-reform/report/coverage-expansions-and-the-remaining-uninsured-a-look-at-california-during-year-one-of-aca-implementation/. ↩︎
53. 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), https://modern.kff.org/medicaid/issue-brief/key-themes-from-delivery-system-reform-incentive-payment-dsrip-waivers-in-4-states/. ↩︎
54. California Department of Health Care Services, Medi-Cal 2020: Key Concepts for Renewal (California: California Department of Health Care Services, March 27, 2015), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/ca-bridge-to-health-reform-pa.pdf. ↩︎
55. 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), https://modern.kff.org/medicaid/issue-brief/key-themes-from-delivery-system-reform-incentive-payment-dsrip-waivers-in-4-states/. ↩︎
56. Centers for Medicare & Medicaid Services, Managed Care in California (Washington, DC: Centers for Medicare & Medicaid Services, 2014), http://www.medicaid.gov/medicaid-chip-program-information/by-topics/delivery-systems/managed-care/downloads/california-mcp.pdf. ↩︎
57. California Department of Health Care Services, Medi-Cal Managed Care Program Fact Sheet – Managed Care Models (California: California Department of Health Care Services), http://www.dhcs.ca.gov/provgovpart/Documents/MMCDModelFactSheet.pdf. ↩︎
58. California Department of Health Care Services, Medi-Cal 2020: Key Concepts for Renewal (California: California Department of Health Care Services, March 27, 2015), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/ca-bridge-to-health-reform-pa.pdf. ↩︎
59. The expansion excluded dual eligible beneficiaries (i.e., those enrolled in Medi-Cal and Medicare) as well as beneficiaries receiving long-term care services. ↩︎
60. California Department of Health Care Services, Medi-Cal 2020: Key Concepts for Renewal (California: California Department of Health Care Services, March 27, 2015), http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ca/ca-bridge-to-health-reform-pa.pdf. ↩︎
61. Kaiser Commission on Medicaid and the Uninsured, California’s”Bridge to Reform” Medicaid Demonstration Waiver (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2011), https://modern.kff.org/health-reform/fact-sheet/californias-bridge-to-reform-medicaid-demonstration-waiver/. ↩︎
62. California Department of Health Care Services, Managed Care Implementation For Seniors And Persons With Disabilities Monitoring Dashboard (California: California Department of Health Care Services, January 2013), http://www.dhcs.ca.gov/individuals/Documents/MMCD_SPD/ChartsRptsData/SPD_Dashboard_Jan2013.pdf ↩︎
63. Carrie Graham, Elaine Kurtovich, Stephanie Taube, Lhasa Ray and Rachel Arguello, Transitioning Beneficiaries with Complex Care Needs to Medicaid Managed Care: Insights from California. (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, July 2013), https://modern.kff.org/medicaid/issue-brief/transitioning-beneficiaries-with-complex-care-needs-to-medicaid-managed-care-insights-from-california/. ↩︎
64. Carrie Graham, Diana McDonnel, Kira Foster and Susan Ivey, The Transition of Senior and People with Disabilities to Medi-Cal Managed Care: The beneficiary perspective – Prepared for the California HealthCare Foundation and the California Department of Health Care Services (California: Health Research for Action at the University of California – Berkley, March 2014),  http://www.healthresearchforaction.org/sites/default/files/SPDTransitions_FNL_Rpt_Web%20Mar%2014.pdf. ↩︎
65. “Seniors & Persons with Disabilities (SPD) Regional and Imperial Model Implementation,” California Department of Health Care Services, accessed September 3, 2015, http://www.dhcs.ca.gov/individuals/Pages/SPDRegional_Imperial_Imp.aspx. ↩︎
66. Kaiser Commission on Medicaid and the Uninsured, Health Plan Enrollment in the Capitated Financial Alignment Demonstrations for Dual Eligible Beneficiaries. (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, August 2015), https://modern.kff.org/medicaid/fact-sheet/health-plan-enrollment-in-the-capitated-financial-alignment-demonstrations-for-dual-eligible-beneficiaries/. ↩︎
67. California Department of Health Care Services, Cal Medi-Connect Monthly Enrollment Dashboard (California: California Department of Health Care Services, July 2015), http://www.calduals.org/wp-content/uploads/2015/07/CMC-Enrollment-Dashboard-July-2015-Final.pdf. ↩︎
68. California Department of Health Care Services. Coordinated Care Initiative Executive Summary (California: California Department of Health Care Services, August 2013), http://www.calduals.org/wp-content/uploads/2014/04/1-CCI-Overview_April2014.pdf. ↩︎
69. One of the federal requirements related to the use of provider taxes in Medicaid requires that the tax be broad-based. Currently the state taxes MCOs on the revenue received from their Medi-Cal managed care plans only. For more information on the tax, see the following LAO brief: California Legislative Analyst’s Office, Overview of MCO Tax, Selected Other Tax Increase Options, and IHSS Issues (California: California Legislative Analyst’s Office, July 2015), http://www.lao.ca.gov/handouts/health/2015/Overview-of-MCO-Tax-070215.pdf. For further information on the requirements see the following brief: Kaiser Commission on Medicaid and the Uninsured, Medicaid Financing Issues: Provider Taxes (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, May 2011), https://modern.kff.org/medicaid/fact-sheet/medicaid-financing-issues-provider-taxes/. ↩︎
70. This change, Substance Abuse Services moving to an Organized Delivery System operated by counties, is described  in the main Budget Survey Report as movement to a PHP arrangement in FY 2016, because in federal terms the program falls under a PIHP. However, the state notes this arrangement isn’t a PIHP in a traditional sense. ↩︎
71. Bureau of Labor Statistics, State and Area Employment, Hours, and Earnings from the Current Employment Statistics Survey, “Total Nonfarm Employment (Series ID: SMS47000000000000001) December 2007 through August 2015”accessed October 6, 2015, http://data.bls.gov/cgi-bin/dsrv. ↩︎
72. Tennessee Department of Labor & Workforce Development, Tennessee’s Unemployment Rate for July 5.7% (Tennessee: Tennessee Department of Labor & Workforce Development, August 20, 2015), https://www.tn.gov/workforce/news/17178. ↩︎
73. “Economy at a Glance,” Bureau of Labor Statistics, accessed October 6, 2015, http://www.bls.gov/regions/southeast/tennessee.htm#eag. ↩︎
74.   Center for Business and Economic Research, Tennessee Business and Economic Outlook: Spring 2015 (Knoxville, Tennessee: Center for Business and Economic Research, 2015), http://cber.bus.utk.edu/tefs/spr15.pdf. ↩︎
75. Tennessee Department of Finance and Administration, July Revenues (Tennessee: Tennessee State Government, August 13, 2014), https://www.tn.gov/news/16951. ↩︎
76. Governor Bill Haslam, The Budget: Fiscal Year 2015-2016 (Tennessee: Office of the Governor, February 2014), http://tn.gov/assets/entities/finance/budget/attachments/2016BudgetDocumentVol1.pdf. ↩︎
77. Ibid. ↩︎
78. The new eligibility limits apply to CHOICES Group 3, which covers adults who don’t qualify for a nursing facility level of care, but need in home supports to delay or prevent the need for nursing facility care; individuals determined eligible using institutional eligibility standards are to be grandfathered. “To Qualify for CHOICES,” TennCare Division of Health Care Finance & Administration, accessed October 6, 2015, https://www.tn.gov/tenncare/article/to-qualify-for-choices. ↩︎
79. Staff Report, “7 things that Gov. Haslam’s budget would do in Tennessee,” The Tennessean (February 10, 2015,) http://www.tennessean.com/story/news/politics/2015/02/09/budget-highlights-tennessee-haslam-2015-2016/23148499/. ↩︎
80. Erik Schelzig, “Legislature approves Haslam’s $33.8B budget,” knoxblogs.com,  http://wapp.capitol.tn.gov/apps/BillInfo/default.aspx?BillNumber=HB1374&GA=109 /. ↩︎
81. Chris Kardish, “Why Medicaid Expansion Has Reached a Standstill,” Governing (April 2015,) http://www.governing.com/topics/health-human-services/gov-medicaid-expansion-standstill.html. ↩︎
82. Tennessee Division of Health Care Financing and Administration, Insure Tennessee (Tennessee: Tennessee Division of Health Care Financing and Administration), https://www.tn.gov/tenncare/article/insure-tennessee. Kaiser Commission on Medicaid and the Uninsured, Proposed Medicaid Expansion in Tennessee (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, January 2015), https://modern.kff.org/medicaid/fact-sheet/proposed-medicaid-expansion-in-tennessee/. ↩︎
83. Andy Sher, “Gov. Haslam’s Insure TN plan hits fierce opposition from Republicans in House, Senate committees,” Times Free Press (February 4, 2015,) http://www.timesfreepress.com/news/local/story/2015/feb/04/gov-haslams-insure-tn-plan-hits-fierce-opposition-republicans-house-senate-committees/286385/. ↩︎
84. The Kaiser Family Foundation State Health Facts. Data Source: Tricia Brooks, Joe Touschner, Samantha Artiga, Jessica Stephens and Alexandra Gates, Modern Era Medicaid: Findings from a 50-State Survey of Eligibility, Enrollment, Renewal, and Cost-Sharing Policies in Medicaid and CHIP as of January 2015 (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, January 20, 2015), accessed September 29, 2015, https://modern.kff.org/health-reform/state-indicator/medicaid-income-eligibility-limits-for-adults-as-a-percent-of-the-federal-poverty-level/. ↩︎
85. Northrop Grumman, Northrop Grumman Selected to Set Up, Sustain Tennessee’s Medicaid and Children’s Health Insurance Eligibility System (McLean, Virginia: Northrop Grumman, July 9, 2013), http://phx.corporate-ir.net/phoenix.zhtml?c=112386&p=irol-newsArticle&ID=1836280. ↩︎
86. “How Do I Apply for TennCare?” Tennessee Division of Health Care Finance & Administration, accessed October 6, 2015, https://www.tn.gov/tenncare/topic/how-to-apply. ↩︎
87. Southern Poverty Law Center, SPLC Lawsuit: Tennessee Deprives Residents of Medicaid Coverage (Montgomery, Alabama: Southern Poverty Law Center, July 22, 2014), https://www.splcenter.org/news/2014/07/23/splc-lawsuit-tennessee-deprives-residents-medicaid-coverage. ↩︎
88. “How to file an eligibility appeal?” Tennessee Division of Health Care Finance & Administration, accessed October 6, 2015, https://www.tn.gov/tenncare/topic/how-to-file-an-eligibility-appeal. ↩︎
89. Tennessee State Government, Tennessee to Go in New Direction for Medicaid Eligibility Determination System (Tennessee: Tennessee State Government, January 12, 2015), https://news.tn.gov/node/13420. ↩︎
90. In 2015, TennCare MCOs include BlueCare Tennessee, UnitedHealthcare and Wellpoint; BlueCare also operates TennCare Select. ↩︎
91. CMS approved an amendment to Tennessee’s Section 1115 waiver July 23, 2009, to incorporate long term services and supports into comprehensive managed care, implementing Tennessee’s Long Term Care Community Choices Act of 2008. Tennessee State Government, TennCare Receives Federal Approval for Long-Term Care Community Choices Act (Tennessee: Tennessee State Government, July 23, 2009), https://news.tn.gov/node/2273. ↩︎
92. Bureau of TennCare, Budget Reductions/Impact for July 1, 2015 – Memorandum to TennCare Managed Care Organizations (Nashville, Tennessee: Department of Finance and Administration, June 4, 2014), https://www.uhccommunityplan.com/content/dam/communityplan/healthcareprofessionals/providerinformation/TN-Provder-Information/TN_MCO_Budget_Reduction_Notice.pdf. ↩︎
93. “Episodes of Care,” Tennessee Division of Health Care Finance & Administration, accessed October 6, 2015, http://www.tn.gov/hcfa/topic/episodes-of-care. ↩︎
94. Bureau of TennCare, Budget Reductions/Impact for July 1, 2015 – Memorandum to TennCare Managed Care Organizations (Nashville, Tennessee: Department of Finance and Administration, June 4, 2014), https://www.uhccommunityplan.com/content/dam/communityplan/healthcareprofessionals/providerinformation/TN-Provder-Information/TN_MCO_Budget_Reduction_Notice.pdf. ↩︎
95. Ibid. ↩︎
96. Incarcerated individuals in a suspended status are eligible for inpatient hospitalizations to be reimbursed by TennCare and not billed to the correctional facility. ↩︎

Beginning in FY 2014, policy changes introduced by the Affordable Care Act (ACA) have been driving Medicaid enrollment and spending growth. This report provides an overview of Medicaid enrollment and spending growth with a focus on state Fiscal Year (FY) 2015 and state Fiscal Year 2016. Findings are based on interviews and data provided by state Medicaid directors as part of the 15^th annual survey of Medicaid directors 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). Information collected in the survey on policy actions taken during FY 2015 and FY 2016 can be found in the companion report. Key findings related to Medicaid enrollment and spending growth are described below.

Medicaid enrollment and spending increased substantially in FY 2015, the first full year of implementation of the major ACA coverage expansions. Across all 50 states and DC, Medicaid enrollment increased on average by 13.8 percent in FY 2015, largely due to the ACA coverage expansions. Driven by growth in enrollment, total Medicaid spending increased by 13.9 percent on average in FY 2015. (ES – 1)  Beyond enrollment, states reported that the other drivers of increases in spending were provider rate increases and the higher cost of health care, including prescription drugs. Improvements in the economy were a downward pressure on enrollment which affected spending, but downward pressure in enrollment and spending as a result of the improving economy were outweighed by the ACA coverage policy changes.

In FY 2015, Medicaid enrollment and total Medicaid spending growth in expansion states far exceeded growth in non-expansion states. Expansion states reported Medicaid enrollment and total spending growth nearly three times the rate of non-expansion states. (Figure 2) A total of 29 states were implementing the ACA Medicaid expansion in FY 2015, up from 26 states in the previous year (FY 2015 additions include: New Hampshire, Pennsylvania and Indiana).

Across the 29 expansion states in FY 2015, enrollment increased on average by 18.0 percent and total spending increased by 17.7 percent; both enrollment and spending growth were driven by increases in enrollment among adults qualifying under the new expansion group. Of the 29 states expanding Medicaid in FY 2015, more than half (17 states) noted that enrollment initially increased faster than expected.  Over two-thirds of expansion states reported that per member per month costs for the expansion population were at or below projections.¹  Across the 22 states not implementing the Medicaid expansion in FY 2015,²  enrollment and total spending growth was 5.1 percent and 6.1 percent (respectively), much slower growth compared to the expansion states. Increased enrollment among previously eligible parents and children was the primary reason cited for enrollment growth in non-expansion states. (ES – 2)

State general fund Medicaid spending³  across all states grew at more modest levels in FY 2015 than total Medicaid spending and Medicaid enrollment growth but there was variation across expansion and non-expansion states. Across expansion states, state general fund Medicaid spending grew at more modest levels compared to total Medicaid spending – primarily due to the enhanced federal match rate for those newly eligible for coverage. For non-expansion states, state Medicaid spending growth in FY 2015 slightly outpaced total Medicaid spending growth. Some non-expansion states attributed growth in state Medicaid spending to annual changes in the formula-driven federal Medicaid match rate that resulted in reductions in the federal Medicaid share for some large non-expansion states, including Texas. Across all states, state general fund Medicaid spending for FY 2015 grew at a similar rate as overall general fund growth (4.5 percent for Medicaid compared to 4.6 percent for state general fund growth).⁴ 

Total Medicaid enrollment and spending growth is projected to slow in FY 2016; looking ahead, states will monitor the effects of the ACA and other payment and delivery system reforms on spending. The major effects of the ACA were experienced by states in FY 2015; FY 2016 projections for Medicaid enrollment (4.0 percent) and total spending (6.9 percent) across all states indicate much slower growth on average than in FY 2015. Subsequently, the difference in enrollment and total spending growth rates across expansion and non-expansion states are projected to narrow in FY 2016. Expansion states are continuing to monitor and assess the effects of the Medicaid expansion on the state budget (within and beyond Medicaid). For FY 2015 and FY 2016, a number of Medicaid directors reported savings in areas including behavioral health, uncompensated care and criminal justice as well as increased revenue as a result of implementing the Medicaid expansion. Understanding these effects is important as states look ahead to 2017 when the enhanced match rate for newly eligible Medicaid expansion adults begins to decline; starting January 1, 2017 (halfway through FY 2017 for most states) the match rate will drop from 100 percent to 95 percent, resulting in a state fund share of 5 percent. Many states are also engaged in major payment and delivery system reforms that have implications for care delivery as well as program spending going forward.

Introduction

Medicaid enrollment and spending are primarily affected by economic conditions and policy changes. Over the past 15 years, Medicaid enrollment increased substantially during two major recessions, reflecting the countercyclical nature of the program. During economic downturns, when individuals lose their jobs and incomes decline, more people qualify and enroll in Medicaid, which in turn drives increases in total Medicaid spending. During the most recent economic downturns, Medicaid enrollment peaked in 2002, leveled in 2006 and 2007, and then peaked again in 2009. Following economic downturns, Medicaid enrollment and spending growth may slow in the absence of other policy changes. (For additional information about Medicaid financing, the role of Medicaid in state budgets and Medicaid and the economy, see Appendix).

In each of the past five years, the economy has gradually improved and policy changes at the state and federal levels, including those in the Affordable Care Act (ACA), have been driving enrollment and spending growth. The enactment of the ACA had major implications for Medicaid eligibility, enrollment and spending across states. As enacted, all states were to expand coverage to nearly all adults with incomes up to 138 percent of the poverty level (FPL) ($16,242 per year for an individual in 2015). However, the 2012 Supreme Court ruling on the ACA effectively made the decision to implement the Medicaid coverage expansion an option for states. The ACA also required all states to implement new streamlined and coordinated application, enrollment, and renewal processes, including transitioning to a new income standard (Modified Adjusted Gross Income or MAGI) to determine Medicaid financial eligibility for non-elderly, non-disabled populations.

This report provides an overview of Medicaid enrollment and spending growth with a focus on state Fiscal Year (FY) 2015 and state Fiscal Year (FY) 2016. Findings are based on interviews and data provided by state Medicaid directors as part of the 15^th annual survey of Medicaid directors 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). For a more detailed description of the Methodology used to calculate enrollment and spending growth, please see the “Methods Box” at the end of this brief.

Medicaid Enrollment and Spending FY 2015 and FY 2016

Medicaid enrollment and spending increased substantially in FY 2015, the first full year of implementation of the major ACA coverage expansions. Across all 50 states and DC, Medicaid enrollment increased on average by 13.8 percent in FY 2015, following growth of 8.3 percent the previous year. The sharp increases in these two years were driven by enrollment growth in states implementing the Medicaid expansion. Driven by growth in enrollment, total Medicaid spending increased by 13.9 percent in FY 2015. Growth in total Medicaid spending is expected to drop to 6.9 percent in FY 2016, as the initial effects of the major ACA coverage expansions are largely completed. (Figure 1)  Beyond enrollment, states reported that other drivers of increases in spending are provider rate increases and the higher cost of health care, including prescription drugs. Improvements in the economy were a downward pressure on enrollment which affected spending, but downward pressure in enrollment and spending as a result of the improving economy were outweighed by the ACA coverage policy changes.

Compared to enrollment and total spending growth, state general fund spending for Medicaid across all states grew at more modest levels in FY 2015.⁵  Historically, state Medicaid spending and total Medicaid spending have increased at similar rates except when there have been statutory changes in the federal Medicaid match rate (officially known as the FMAP, or Federal Medical Assistance Percentage). For example, Congress enacted temporary increases in the federal share of Medicaid during the last two economic downturns that resulted in lower growth in state Medicaid spending compared to total Medicaid spending growth. The magnitude of the federal fiscal relief included in the American Recovery and Reinvestment Act (ARRA) – over $100 billion in additional federal funds over 11 quarters through June 2011 – resulted in declines in state spending for Medicaid in 2009 and 2010. However, the expiration of this relief resulted in higher state Medicaid spending growth in FY 2012 compared to growth in federal Medicaid spending.

More recently, the change in the Medicaid match rate tied to the ACA Medicaid expansion has resulted in a divergence in growth rates for total and state Medicaid spending. For states that expand Medicaid, the federal government pays 100 percent of Medicaid costs of those newly eligible under the Medicaid expansion for calendar years 2014-2016. The federal share phases down to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020 and thereafter, well above traditional FMAP rates in every state.

As a result of the 100 percent FMAP for newly eligible enrollees in expansion states, state spending for Medicaid across all states increased on average by 4.5 percent in FY 2015, compared to total Medicaid spending growth across all states of 13.9 percent. (Figure 2)  State general fund Medicaid spending for FY 2015 grew at a similar rate as overall general fund growth (4.5 percent for Medicaid compared to 4.6 percent for all state general fund growth).⁶ 

State Medicaid directors were remarkably accurate in projecting enrollment and spending for FY 2015. Compared to projections included in this report last year, actual enrollment, total spending and state spending averages were on target with state projections. In each of these areas, states expect to see sharp declines in growth for FY 2016 as the full effects of the implementation of the ACA were experienced primarily in FY 2015. (Figure 3)

Looking ahead to FY 2016, total enrollment and spending growth are projected to slow. Enrollment growth is projected to average just 4.0 percent across all 50 states and DC. This would be a substantial decline from the previous two years. Some uncertainty remains for FY 2016 since, at the time of the survey, legislatures had not yet enacted a final state budget for FY 2016 in Illinois and Pennsylvania.

FY 2015: Expansion and Non-Expansion States

In FY 2015, Medicaid enrollment and total spending growth in expansion states far exceeded growth in non-expansion states.  Expansion states reported enrollment and spending growth nearly three times the rate of non-expansion states. (Figure 4) A total of 29 states were implementing the ACA Medicaid expansion in FY 2015, up from the 26 states in the previous year. The three additional states that implemented the Medicaid expansion in FY 2015 were New Hampshire in August 2014, Pennsylvania in January 2015 and Indiana in February 2015.

Across the 29 states expanding Medicaid in FY 2015, enrollment increased on average by 18.0 percent and total spending by 17.7 percent. Enrollment in expansion states was driven by growth among adults qualifying under the new expansion group, although nearly all expansion states also saw increased enrollment among the elderly and two-thirds saw increased enrollment among children. Some expansion states reported declines in enrollment in the eligibility categories for pregnant women, individuals with disabilities and other non-elderly adults as individuals gained coverage under the Medicaid expansion group instead of qualifying based on categorical requirements or through more limited pathways.

Of the 29 states expanding Medicaid in FY 2015, slightly more than half (17 states) noted that enrollment initially increased faster than expected.  For most states, the cost of the new enrollees was less than expected; nearly two-thirds of expansion states reported that per member per month costs for the expansion population were at or below projections.⁷  Across the 29 states that had implemented the ACA Medicaid expansion as of FY 2015, the rate of growth in total Medicaid spending averaged 17.7 percent, very similar to the 18.0 percent enrollment growth rate. (Figure 4)

Across the 22 non-expansion states in FY 2015, enrollment and total Medicaid spending grew 5.1 percent and 6.1 percent (respectively), much slower growth than experienced by expansion states. Increased Medicaid enrollment among “previously eligible but not enrolled” parents and children was the primary reason cited for Medicaid enrollment growth in non-expansion states in FY 2015. Additionally, total Medicaid spending increased on average by 6.1 percent across non-expansion states in FY 2015, also primarily due to growth in Medicaid enrollment. (Figure 4)

Growth in state general fund spending for Medicaid in expansion states was much slower than total Medicaid spending in FY 2015, due to the ACA enhanced FMAP. In the 29 states that had implemented the Medicaid expansion in FY 2015, state general fund spending on Medicaid increased on average by 3.4 percent (compared to total Medicaid spending growth of 17.7 percent). States that implement the Medicaid expansion receive 100 percent federal match for those made eligible by the expansion; therefore, the increase in total Medicaid spending in these states was supported primarily by the increase in federal matching funds to these states.

In FY 2015, across the 22 non-expansion states, state general fund spending on Medicaid increased by 6.9 percent on average, slightly higher than total Medicaid spending growth of 6.1 percent. (Figure 4) Differences between total and state Medicaid spending growth in non-expansion states were driven by annual formula-driven changes in the FMAP, particularly for some large non-expansion states. For example, in Texas the FMAP dropped from 58.69 percent to 58.05 percent, necessitating additional state Medicaid spending to maintain current programs.

Enacted Budgets for FY 2016:  Expansion and Non-Expansion States

In FY 2016, the Medicaid enrollment growth rate is expected to slow across all states, and the variation in enrollment growth between expansion and non-expansion states is expected to narrow. (Figure 5) Slower overall growth in Medicaid enrollment in FY 2016 is anticipated because of three main factors. First, enrollment growth among those newly eligible under the ACA Medicaid expansion is moderating, after the initial surge in growth in 2014 or 2015. Second, an improving economy has contributed to less demand for Medicaid. Third, in some states, slowing enrollment is tied to the timing of annual renewals. In response to challenges states faced implementing new eligibility and enrollment systems in 2014, CMS granted waivers to a number of states (expansion and non-expansion alike) to postpone eligibility redeterminations and renewals for several months. Many states that postponed redeterminations reported that enrollment growth moderated or declined when renewal backlogs were addressed and regular renewal procedures were resumed.

In FY 2016, most expansion states expect Medicaid enrollment and Medicaid spending growth to slow, compared to FY 2015. In FY 2016, two additional states plan to implement the Medicaid expansion. Alaska began implementation in September 2015 and Montana plans to implement in January 2016.⁸  Across the 31 Medicaid expansion states, enrollment is expected to increase on average by 4.5 percent in FY 2016. New enrollment among expansion adults is projected to drive enrollment  growth across all expansion states, but particularly in Alaska and Montana  (newly adopting states in FY 2016) and in Indiana and Pennsylvania (states that adopted in late FY 2015). Although the other expansion states expect overall enrollment growth driven by the expansion group to continue in FY 2016, these states expect growth rates to moderate substantially compared to FY 2015.

Three states (Minnesota, Massachusetts and Oregon) project that FY 2016 enrollment will be less than FY 2015 enrollment. Minnesota reported that enrollment in Medicaid is expected to decline primarily because of the implementation of the Basic Health Plan (BHP). Under the state’s Basic Health Plan, individuals with incomes between 138% and 200% FPL previously covered under Medicaid were shifted to BHP coverage. Massachusetts projects enrollment to decline among non-elderly, non-disabled adults. Non-elderly, non-disabled adults were temporarily enrolled in Medicaid while the state resolved issues with its eligibility and enrollment system that prevented the completion of Medicaid and Marketplace eligibility determinations. Oregon also projects enrollment to decline across MAGI adults, due in part to the resumption of redeterminations. As enrollment growth is projected to slow in FY 2016, so is total Medicaid spending growth. Across the 31 expansion states, growth in total Medicaid spending in FY 2016 is projected to be 8.6 percent on average. State Medicaid spending growth in expansion states is projected to increase by less than half that rate, on average by 3.7 percent, due to the enhanced ACA match rate for newly eligible adults. (Figure 5)

Across the 20 non-expansion states in FY 2016, Medicaid enrollment is projected to increase on average by 2.8 percent and total Medicaid spending is expected to increase on average by 3.6 percent. Non-expansion states reported that they expect to continue to see some increased participation among those previously eligible but not enrolled, but the resumption of regular renewals and the improving economy are factors working to slow enrollment growth. Slowing enrollment growth is expected to result in slower total Medicaid spending growth.

Formula-driven changes to the traditional federal Medicaid match rate as well as specific issues in some large states are driving changes in state Medicaid spending projections in non-expansion states in FY 2016. Enacted budgets across the 20 non-expansion states authorized state general fund Medicaid spending increases of 5.2 percent on average, compared to average growth in total Medicaid spending of 3.6 percent. This higher growth for state spending is largely attributed to continued declines in the formula driven FMAP for Texas (a significant drop from 58.05 percent to 57.13 percent) and in other states, as well as other state-specific changes in sources of funding. For example, in Florida, another state where changes have a large effect on the weighted average, state general fund spending for Medicaid is expected to increase at a higher rate than for total spending for Medicaid due to changes in funding for its Low-Income Pool (LIP) program. Under the renewal of the Florida LIP waiver, the federal contribution declined substantially resulting in a need for a larger increase state Medicaid spending.

The Effect of the Medicaid Expansion on State Budgets

In addition to increases in health coverage and reductions in the number of uninsured, state decisions about whether to expand Medicaid have broader economic and fiscal implications.⁹   This year, Medicaid directors in states that implemented the expansion were asked to report if state budget savings were occurring in specific areas outside of the Medicaid program.  Early evidence from some expansion states shows that additional federal Medicaid dollars can result in savings in state general fund spending both within the Medicaid budget as well as for other state programs or agencies. Although states reported that isolating the fiscal impact of expanded Medicaid eligibility from other ACA effects and/or other factors affecting health care costs can be a challenge.¹⁰  Some Medicaid directors noted that state “savings” were realized by other programs and were reinvested in those programs. Other states noted that savings were generated but did not accrue at the state-level, but did accrue at the county-level.Other Medicaid directors were not able to report whether savings accrued or not, since they were not familiar with other program budgets. However, a number of Medicaid directors did report seeing savings, suggesting these are areas to continue to watch going forward.

• Behavioral Health: Thirteen (13) states reported savings in either FY 2015 or FY 2016 as individuals who previously received state-funded behavioral health services were now receiving those services under Medicaid.
• Uncompensated Care: Six states reported savings for the state budget related to state funding for uncompensated care costs in either FY 2015 or FY 2016.
• Criminal Justice / Corrections: Fifteen (15) states reported savings related to state funding for criminal justice due to the expansion in either FY 2015 of FY 2016. Under federal law, Medicaid reimbursement is available for care provided to eligible individuals who are admitted to an inpatient facility (not on jail or prison grounds), such as a hospital, for at least 24 hours. Prior to the ACA, few states had pursued Medicaid reimbursement for these services given the limited share of the incarcerated population that could qualify for Medicaid.¹¹  With the expansion, a larger share of the incarcerated population may qualify for Medicaid.¹² 
• Revenue: Twelve (12) states reported either provider tax revenues or general revenues had increased in either FY 2015 or FY 2016 due to the expansion.

Conclusion and Looking Ahead

Historically, Medicaid enrollment and spending have been driven largely by economic conditions as well as state and federal policy decisions. Over the past two decades, two major recessions resulted in periods of significant growth in Medicaid program enrollment and spending, with the rate of growth slowing as the economy improved. Since 2014, the implementation of the ACA has been the primary driver of Medicaid enrollment and spending growth, particularly in states implementing the Medicaid expansion. Looking ahead to FY 2016 and beyond, enrollment and spending growth are expected to slow as the effects of the ACA eligibility changes play out both in states implementing and not implementing the ACA Medicaid expansion. Expansion states are also looking ahead to FY 2017 when new state fund dollars will be needed when the enhanced match rate for newly eligible enrollees starts to decline, dropping from 100 percent to 95 percent starting January 1, 2017 (halfway through FY 2017 for most states.)  States will also continue to monitor how the ACA provisions are affecting Medicaid enrollment and spending, other areas of the state budget, overall health insurance coverage, and the health care systems in their state. Many states are also engaged in major payment and delivery system reform efforts that have implications for program performance and spending as well as the health and health care for the millions of beneficiaries served by Medicaid.

Appendix: Background on Medicaid Financing

Medicaid Financing Structure

The Medicaid program is jointly funded by states and the federal government. The federal government guarantees match funds to states for qualifying Medicaid expenditures (payments states make for covered Medicaid services provided by qualified providers to eligible Medicaid enrollees.) The federal match rate (Federal Medical Assistance Percentage or FMAP) is calculated annually for each state using a formula set in the Social Security Act which is based on a state’s average personal income relative to the national average; poorer states have higher FMAPs. Personal income data are lagged, so data used for FFY 2016 FMAPs are from the three years of 2011 to 2013. According to the formula, the FMAP in FFY 2015 varies across states from a floor of 50 percent to a high of 74.2 percent. (Figure 6)  This means every $1 of state spending on Medicaid is matched with at least $1 of federal funds.¹⁶ 

Medicaid’s Role in State Budgets

Medicaid has a unique role in state budgets because it is both an expenditure item and a source of federal revenue for states. In FY 2013, Medicaid accounted for 24.5 percent of total spending, but only 17.8 percent of all state general fund spending, a far second to spending on K-12 education (35.4 percent of state general fund spending.)¹⁷  Due to the federal match structure for Medicaid, the program is the largest source of federal funds for states, accounting 47.6 percent of all federal funds for states in FY 2013. Over the last decade, shares of general fund spending for Medicaid and K-12 education have remained fairly constant with an uptick in the share of general fund spending on Medicaid since 2010 in part due to the June 2011 expiration of the enhanced FMAP provided by under the American Recovery and Reinvestment Act (ARRA). (Figures 7 and 8)

Medicaid and the Economy

Medicaid is a countercyclical program. During economic downturns individuals lose jobs, incomes decline and more people qualify and enroll in Medicaid which increases program spending. At the same time, economic downturns negatively affect state tax revenues. This places additional pressure on state budgets as demand for other forms of assistance (i.e. food stamps and unemployment benefits) also increases. During economic downturns, states face difficulty balancing these pressures. In response, Congress has twice passed temporary increases to the FMAP rates to help support states during economic downturns, most recently in 2009 as part of the American Recovery and Reinvestment Act (ARRA.)  The ARRA-enhanced match rates provided states with the largest source of federal fiscal relief, over $100 billion in additional federal funds over 11 quarters, ending in June 2011.¹⁸ 

As economic conditions improve, demand for Medicaid coverage moderates. State economies have seen sustained improvement following the worst recession since the Great Depression. The national unemployment rate has continued to decline, falling to 5.1 percent in September 2015, the lowest rate since April 2008.¹⁹  Over two-thirds of states had unemployment rates at or below six percent in July 2015. (Figure 9)  After 67 months of private-sector job growth, there were over 4.3 million more private sector jobs in September 2015 than before the recession.²⁰  However, an estimated 7.9 million people remain unemployed, nearly 27 percent of whom are long-term unemployed (those actively looking for work for 27+ weeks.²¹ )

Real gross state product (GSP), a measure of state economic activity, grew by 2.2 percent from 2013 to 2014 at the national level, the fifth year of consecutive growth at the national level. All but two states (Alaska and Mississippi) experienced positive GSP growth from 2013 to 2014, ranging up to 6.3 percent.²²  State revenue collections have also improved. After experiencing the sharpest decline in state tax revenues on record during the Great Recession, states had seen tax revenue growth 21 of the last 22 quarters.²³  (Figure 10)  The improving economic conditions have acted as a downward pressure on Medicaid enrollment growth in recent years. However, the moderating effect of the improving economic conditions has been outweighed by policy changes to expand coverage under the ACA.

1. Two expansion states (Arkansas and Pennsylvania) did not respond to this question. Of the remaining 27 states that had implemented the Medicaid expansion at the time of the survey, 20 reported the average per-member per-month costs had come in either below or on target with initial projections. ↩︎
2. Alaska and Montana plan to implement the Medicaid expansion in FY 2016; they are therefore counted as not implementing the Medicaid expansion in FY 2015. ↩︎
3. Historical state Medicaid spending refers to all non-federal spending, which may include local funds and provider taxes and fees as well as state general fund dollars. State spending for FYs 2014-2016 collected as part of this survey reflect state spending, largely state general fund dollars. ↩︎
4. National Association of State Budget Officers, Fiscal Survey of States (Washington, DC: National Association of State Budget Officers, Spring 2015), http://www.nasbo.org/publications-data/fiscal-survey-of-the-states. ↩︎
5. Historical state Medicaid spending refers to all non-federal spending, which may include local funds and provider taxes and fees as well as state general fund dollars. State spending for FYs 2014-2016 collected as part of this survey reflect state spending, largely state general fund dollars. ↩︎
6. National Association of State Budget Officers, Fiscal Survey of States (Washington, DC: National Association of State Budget Officers, Spring 2015), http://www.nasbo.org/publications-data/fiscal-survey-of-the-states. ↩︎
7. Two expansion states (Arkansas and Pennsylvania) did not respond to this question. Of the remaining expansion states, responses were less clear. Some noted higher than expected costs in reference to an earlier period not covered in this survey. Others indicated that they could not disaggregate expansion increases from other MCO increases. Only a few indicated that costs on a pmpm basis were higher than they had originally projected. ↩︎
8. The state adopted the Medicaid expansion through legislation that requires federal waiver approval. ↩︎
9. Stan Dorn, Norton Francis, Laura Snyder and Robin Rudowitz, The Effects of the Medicaid Expansion on State Budgets: An Early Look in Select States (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, March 2015), https://modern.kff.org/medicaid/issue-brief/the-effects-of-the-medicaid-expansion-on-state-budgets-an-early-look-in-select-states/. Sherry Glied and Stephanie Ma, How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion (New York City, NY: The Commonwealth Fund, December 2013), http://www.commonwealthfund.org/Publications/Issue-Briefs/2013/Dec/Federal-Funds-Medicaid-Expansion.aspx. ↩︎
10. Stan Dorn, Norton Francis, Laura Snyder and Robin Rudowitz, The Effects of the Medicaid Expansion on State Budgets: An Early Look in Select States (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, March 2015), https://modern.kff.org/medicaid/issue-brief/the-effects-of-the-medicaid-expansion-on-state-budgets-an-early-look-in-select-states/. ↩︎
11. State Health Care Spending Project, Managing Prison Health Care Spending (Washington DC: Pew Charitable Trusts and John D. and Catherine T. MacArthur Foundation, October 2013), http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2014/PCTCorrectionsHealthcareBrief050814pdf.pdf. ↩︎
12. Ibid. ↩︎
13. National Association of State Budget Officers, Fiscal Survey of States (Washington, DC: National Association of State Budget Officers, Spring 2015), http://www.nasbo.org/publications-data/fiscal-survey-of-the-states. ↩︎
14. The Kaiser Family Foundation State Health Facts. Data Source: Centers for Medicare and Medicaid Services, Medicaid & CHIP Monthly Application, Eligibility Determinations, and Enrollment Reports. (Washington, DC: Centers for Medicare and Medicaid Services, August 2014), http://www.medicaid.gov/medicaid-chip-program-information/program-information/medicaid-and-chip-enrollment-data/medicaid-and-chip-application-eligibility-determination-and-enrollment-data.html. ↩︎
15. Laura Snyder, Robin Rudowitz, Eileen Ellis and Dennis Roberts, Medicaid Enrollment: June 2013 Data Snapshot (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, January 29, 2014), https://modern.kff.org/medicaid/issue-brief/medicaid-enrollment-june-2013-data-snapshot/. ↩︎
16. The Kaiser Family Foundation State Health Facts. Data Source: 79 Fed. Reg. 71426 – 71428 (Dec. 2, 2014) accessed September 29, 2015, https://modern.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/. ↩︎
17. Kaiser Commission on Medicaid and the Uninsured estimates based on the data reported in: National Association of State Budget Officers, State Expenditure Report – Examining Fiscal 2012-2014 State Spending (Washington, DC: National Association of State Budget Officers, November 2014), http://www.nasbo.org/publications-data/state-expenditure-report/state-expenditure-report-fiscal-2012-2014-data. ↩︎
18. To be eligible for ARRA funds, states could not restrict eligibility or tighten enrollment procedures in Medicaid or CHIP. Vic Miller, Impact of the Medicaid Fiscal Relief Provisions in the American Recovery and Reinvestment Act (ARRA) (Washington, DC: Kaiser Commission on Medicaid and the Uninsured, October 2011), https://modern.kff.org/medicaid/issue-brief/impact-of-the-medicaid-fiscal-relief-provisions/. ↩︎
19. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, “(Seas) Unemployment Rate (Series ID: LNS14000000)” accessed October 2, 2015, http://data.bls.gov/timeseries/LNS14000000. ↩︎
20. Bureau of Labor Statistics, Employment, Hours, and Earnings from the Current Employment Statistics Survey, “Total Private Employment (Series ID: CES0500000001) December 2007 through September 2015”accessed October 2, 2015, http://data.bls.gov/cgi-bin/dsrv. ↩︎
21. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, “A-12. Unemployed persons by duration of unemployment, seasonally adjusted” accessed October 2, 2015, http://www.bls.gov/web/empsit/cpseea12.htm. ↩︎
22. Bureau of Economic Analysis, “Broad Growth Across States in 2014 – Advance 2014 and Revised 1997-2013 Statistics of GDP by State” (Washington, D.C.: US Department of Commerce, June 10, 2015), http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm. ↩︎
23. US Census Bureau, Quarterly Summary of State & Local Tax Revenue, “Table 3: Latest State Tax Collections by State” accessed September 29, 2015, http://www.census.gov/govs/qtax/. ↩︎

Medicaid plays a significant role in the U.S. health care system, now providing health insurance coverage to more than one in five Americans. The Medicaid program continues to evolve, 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).

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 15^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 2015 and those planned for implementation in FY 2016 based on information provided by the nation’s state Medicaid directors.

Policy changes and initiatives described in this report include those in eligibility and enrollment, managed care, delivery and payment system reforms, provider payment rates, and covered benefits (including prescription drug policies). The report also looks at the key issues and challenges now facing Medicaid programs.

Eligibility and enrollment changes in the ACA are continuing to have major policy implications for states in FY 2015 and FY 2016. As of October 2015, 31 states (including DC) had adopted the ACA Medicaid expansion. This includes 26 states that implemented the expansion in FY 2014, three additional states in FY 2015 (New Hampshire, Pennsylvania and Indiana) and two additional states in FY 2016 (Alaska and Montana). Other eligibility changes adopted or planned for states in FY 2015 and FY 2016 were small and targeted to a limited number of beneficiaries. As a result of new coverage pathways, a number of states are eliminating coverage for beneficiaries with incomes above 138 percent of poverty, many of whom qualify for Marketplace subsidies, as well as eligibility pathways to more limited Medicaid coverage. A few states had received or were seeking waivers to implement changes to premiums that were primarily related to the ACA coverage expansions (Arkansas, Indiana, Iowa, Michigan and Montana).

Under the ACA, all states were required to implement enrollment changes including new streamlined application, enrollment, and renewal processes for individuals. Many states adopted new eligibility and enrollment systems. A number of states were still working through challenges in processing renewals at the start of FY 2016.

States remain focused on strategies and initiatives to improve the effectiveness and outcomes of care, and to slow the growth in the cost of care. As of July 2015, a total of 48 states used some form of managed care to serve the Medicaid population, including 39 states (including DC) that contracted with risk-based managed care organizations (MCOs) to serve their Medicaid enrollees. In 21 of these states, at least 75 percent of all Medicaid beneficiaries were enrolled in MCOs. In FYs 2015 and 2016, the trend toward increased use of MCOs continues, as five states (Florida, Indiana, Iowa, Louisiana and Rhode Island) end their primary care case management (PCCM) programs and transition populations to MCOs. Other states are moving more eligibility groups, geographic areas and benefits into MCOs. As more states rely on MCOs for acute physical health care, a growing number of states are focusing on integration of physical health, behavioral health and long-term services and supports (LTSS) under the umbrella of managed care as a priority policy direction.

With greater utilization of MCOs has come greater focus on quality performance. For FY 2015, a total of 21 states implemented new or expanded quality initiatives and 19 states planned to do so in FY 2016. (ES 1) These include MCO report cards and greater reporting of quality metrics, pay for performance, capitation withholds, performance bonuses or penalties, and special quality initiatives and performance improvement projects.

States are implementing and expanding alternative delivery system and payment models. Thirty-seven (37) states in either FY 2015 or FY 2016, including 27 states in FY 2015 and 28 states in FY 2016, reported adopting or expanding one or more initiatives that seek to control costs, reward quality and encourage integrated care. (ES 1) Initiatives include patient-centered medical homes (PCMHs), Health Homes, Accountable Care Organizations (ACOs) as well as other initiatives to coordinate physical and behavioral health care and better manage the care of persons with multiple chronic conditions. Nearly a quarter of states are implementing initiatives in FY 2015 or FY 2016 to coordinate care and financing for dually-eligible Medicare-Medicaid beneficiaries. A limited number of states are implementing episode of care and DSRIP initiatives.

States are implementing policies designed to “re-balance” care to allow more individuals to live in their homes and in the community. Nearly every state (46 states in both FY 2015 and FY 2016) took steps to expand care in the home and community. The ACA included some LTSS-related options intended to promote LTSS rebalancing including the Community First Choice Option and the 1915(i) HCBS State Plan Option. Thirteen (13) states reported having one or both of these options in place in FY 2014; an additional six states implemented at least one of these options in FY 2015 and eight states planned to do so in FY 2016.

Given the size of Medicaid in state budgets, there is always pressure to control costs; however, improvements in the economy have allowed states to adopt more increases in reimbursement rates and benefits compared to restrictions. Medicaid provider payment rates and benefits are often adjusted in response to changes in the economy, with restrictions in times of economic downturns and state budget shortfalls, and restorations or enhancements when the economy and state revenues improve. In FY 2015 and FY 2016, more states implemented or planned for rate increases compared to restrictions (47 and 45 states increasing compared to 35 and 38 states restricting rates in those years). In this survey, a number of states reported that they have or are adopting reimbursement policies to reduce potentially preventable hospital readmissions and early elective deliveries.

All states (except Alaska) use at least one provider tax or fee to help finance Medicaid. Eighteen (18) states increased or planned to increase one or more provider taxes or fees in FYs 2015 and 2016. Seven (7) of the Medicaid expansion states (Arizona, California, Colorado, Indiana, Kentucky, Nevada and Ohio) reported plans to use increased 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 a small share of the costs of the expansion.

A total of 24 states expanded or enhanced covered benefits in FY 2015, and 18 states planned expansions in FY 2016. The most common benefit enhancements reported were for behavioral health and substance abuse services, HCBS and dental services for adults. Far fewer states reported benefit restrictions.

States have a renewed focus on controlling rising prescription drug costs. Since 2014, rising drug prices and increasing program costs have refocused state attention on pharmacy reimbursement and coverage policies. The majority of states identified high-cost and specialty drugs (e.g., hepatitis C antivirals among others) as a significant cost driver for state Medicaid programs as well as increased costs for generics among other factors. Over two-thirds of the states in FY 2015 and half in FY 2016 reported actions to refine and enhance their pharmacy programs in response to new and emerging specialty and high-cost drug therapies.

Medicaid directors reported a number of key priorities in FY 2016 and beyond. Medicaid is a large and complex program that provides health coverage for an increasing share of the population in each state. As the program continues to evolve, the key priorities for most directors are around implementing the ACA coverage provisions, controlling costs, implementing an array of complex delivery system reforms, and standing up new systems to support program operations related to enrollment, claims processing and delivery system reforms. Tackling this magnitude of change is a significant challenge, particularly given that most state Medicaid programs are operating within constrained resources, both in terms of staff and funding. Emerging priorities mentioned by Medicaid directors include population health and social determinants of health. (ES 2) State Medicaid programs are looking for opportunities to leverage other resources and stakeholders (such as state public health agencies and other payers) to improve the quality of care provided and ultimately affect health outcomes for the populations they serve. Pursuing these significant goals has caused Medicaid to evolve into a major player in transforming the overall health care system.

This report provides an in-depth examination of the reforms, policy changes and initiatives taking place in state Medicaid programs across the country. The findings in this report are drawn from the 15^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), in collaboration with the National Association of Medicaid Directors. This was the fifteenth annual survey, which has been conducted at the beginning of each state fiscal year from FY 2002 through FY 2016.¹  (Copies of previous reports are archived here.)

The KCMU/HMA Medicaid survey on which this report is based was conducted from June through August 2015. Medicaid directors and staff provided data for this report in response to a written survey and a follow-up telephone interview. All 50 states and DC completed surveys and participated in telephone interview discussions between June and August 2015. The survey asked state officials to describe policy initiatives and changes that occurred in FY 2015 and those adopted for implementation for FY 2016 (which began for most states on July 1, 2015² ). The survey does not attempt to catalog all Medicaid policies. Experience has shown that adopted policies 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. Not included in the survey are policy changes under consideration where a definite decision on implementation has not yet been made. A copy of the survey instrument is located in the appendix of this report.

Key findings of this survey, along with 50-state tables providing more detailed information, are described in the following sections of this report:

• Eligibility, Enrollment, Premiums and Cost-Sharing
• Managed Care Reforms
• Emerging Delivery System and Payment Reforms
• Long-Term Services and Supports
• Provider Rates, Taxes and Benefits
• Priorities for FY 2016 and Beyond Reported by Medicaid Directors

Changes to Eligibility Standards

The ACA included a number of significant changes to Medicaid eligibility and enrollment policies. One of the most significant changes was to extend Medicaid coverage to nearly all non-elderly adults with incomes up to 138 percent of the federal poverty level (FPL) ($16,242 per year for an individual in 2015), ending the historic exclusion of adults without dependent children, or childless adults, from the program. However, the June 2012 Supreme Court ruling on the constitutionality of the ACA effectively made the Medicaid expansion optional for states. Regardless of whether states implement the Medicaid expansion, all states were required to implement a range of other changes to eligibility and enrollment under the ACA. These changes included transitioning to use of Modified Adjusted Gross Income (MAGI) to determine financial eligibility for children, pregnant women, parents and low-income adults; eliminating asset limits for these same groups; establishing a new minimum eligibility limit of 138 percent FPL for children in Medicaid, which resulted in the transition of older children from the Children’s Health Insurance Program (CHIP) to Medicaid in some states; and providing new streamlined application, enrollment, and renewal processes for individuals. In addition, Medicaid agencies must coordinate eligibility determination and enrollment processes with the new Marketplaces. Altogether, the eligibility changes in 2014 represent historic program changes. Most of these changes occurred in FY 2014. As a result, very few changes in eligibility standards occurred for FY 2015 and FY 2016.

As of October 2015, 31 states (including DC) had adopted the Medicaid expansion. (Figure 1) In Utah, discussions continue about implementing the Medicaid expansion, and other states may re-visit the decision in the next legislative session. Most states that have adopted the ACA Medicaid expansion did so in FY 2014 (26 states). In FY 2015, three additional states adopted the ACA Medicaid expansion (Indiana, New Hampshire and Pennsylvania.) In FY 2016, two states to date have adopted the ACA Medicaid expansion; Alaska implemented in September 2015, and Montana plans to implement in January 2016 pending federal waiver approval.

Other eligibility changes in FY 2015 and FY 2016 were limited and targeted to small numbers of beneficiaries. For FY 2015, a total of eleven states made changes that expanded Medicaid eligibility and for FY 2016, five states plan to implement Medicaid eligibility expansions. (Figure 2) Only one state in FY 2015 and three states in FY 2016 made or are planning eligibility restrictions that were likely to leave individuals without other coverage options. A number of states are making changes to existing Medicaid eligibility pathways due to the availability of new coverage options; these changes are not counted as restrictions or expansions in this report.

Coverage Transitions

As reported last year, with more coverage options available across the income spectrum, some states made changes to existing Medicaid pathways. These changes are discussed below and are noted in Tables 2 and 3 as “(#)” meaning they are not counted as a positive or negative eligibility change.

Medicaid expansion states reducing eligibility for adults over 138 percent FPL. Both Minnesota and New York previously covered adults with incomes above traditional Medicaid eligibility levels through Medicaid waiver programs but have transferred those groups to their Basic Health Plans, discussed below. In addition, Connecticut reported plans to reduce Medicaid parent eligibility levels to 150 percent FPL in FY 2016; many parents previously eligible at the higher levels should be eligible for Marketplace subsidies.

States reducing or eliminating optional and limited Medicaid eligibility pathways. With new coverage options available either through the Medicaid expansion or the Marketplace, states have new options about how they treat some existing eligibility pathways for more limited Medicaid coverage, such as pregnancy related coverage, family planning-only programs, some spend-down programs, and the Breast and Cervical Cancer Treatment (BCCT) program.⁴  Prior to the implementation of the major ACA coverage changes, it was not clear if states would eliminate or scale back some of these programs in response to the new coverage options. While most states reported no current plans to change such pathways, many states indicated that enrollment in these groups has declined as more individuals are eligible under the adult Medicaid expansion group. However, a few states did note eligibility changes. (Table 1) In these cases, states generally plan to not allow new enrollment through these pathways but will continue coverage for those already enrolled.

Other Eligibility Changes

Other eligibility changes were more targeted or limited. These changes are noted in Table 2, but a few include:

• In FY 2016, Colorado is implementing the option to eliminate the five-year bar on Medicaid eligibility for lawfully-residing immigrant children.
• In FY 2015, Montana increased the cap on enrollment in its Mental Health Services Plan (MHSP) waiver from 2,000 to 6,000 adults with serious mental illness (before the state adopted the Medicaid expansion).
• Virginia implemented a Section 1115 waiver to provide limited benefits to some uninsured adults with serious mental illness as part of the Governor’s Action Plan in FY 2015. (State legislation later reduced eligibility for this waiver from 100 percent FPL to 60 percent FPL, effective July 1, 2015.)
• A number of states made changes to increase eligibility for the aged, blind and individuals with disabilities including eliminating the asset test (Vermont in FY 2015)and increasing income and asset limits for working individuals with disabilities (Virginia, New Jersey, Florida and Michigan).

Only one state in FY 2015 (Wisconsin) and three states in FY 2016 (Ohio, Tennessee and Virginia) made or plan to make eligibility restrictions that are likely to leave individuals without other coverage options. These are targeted restrictions that would affect small groups of beneficiaries.

In addition, California mentioned plans in FY 2016 to extend coverage to all undocumented children. This is a state-funded initiative and not funded through Medicaid; therefore, it is not counted as a Medicaid policy change in this report.

Enrollment Policies and Changes

Renewals

As of January 1, 2014, new streamlined renewal policies for Medicaid also went into effect under the ACA. However, many states were delayed in implementing new renewal procedures. Recognizing this delay, during 2014, CMS allowed states to suspend renewals for existing enrollees for specified periods of time in order to free up staff resources to process new applicants and continue to update eligibility systems to implement new streamlined renewal procedures based on MAGI rules. States were asked if, at the time of the survey, they were experiencing challenges processing MAGI-based renewals and to describe those challenges.

A number of states reported that they were experiencing challenges processing MAGI-based renewals at the time of the survey. Most of the issues reported were related to new eligibility systems, high volume of renewals, challenges matching data, and issues with pre-populated renewal forms. Most of these challenges were seen as temporary issues, but were not yet fully resolved in some states at the start of FY 2016.

Hospital Presumptive Eligibility (HPE)

Starting in January 2014, the ACA allowed qualified hospitals to make Medicaid presumptive eligibility determinations. States were asked to describe the level of participation among hospitals in their states. Thirty-three (33) states reported that they have implemented HPE and have at least one hospital participating in the initiative; the remaining states noted that either they were still working to implement HPE or that no hospitals had signed up to participate at the time of the survey.

Premiums and Cost-Sharing

In July 2013, CMS released final rules designed to streamline and simplify regulations around Medicaid premiums and cost-sharing, consolidate existing law and provide for individual market premium assistance. Under the new rules, CMS clarified that total Medicaid premiums and cost-sharing incurred by all individuals in a Medicaid household may not exceed an aggregate limit of five percent of the family’s income, applied on either a quarterly or monthly basis. To enforce this, the new rules also extended the requirement that states track aggregate premiums and cost-sharing and suspend such payments if the household reached the five percent cap.⁵  In this year’s survey, several states commented on the difficulty of implementing a process to track these limits. In some cases, this has resulted in delays or reversals of plans to increase beneficiary cost-sharing.

Premiums

With certain exceptions, 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 may be charged premiums (sometimes referred to as “buy-in” programs) including: working individuals with disabilities eligible under the Ticket to Work and Work Incentives Improvement Act (TWWIIA) and children with disabilities in families with incomes that otherwise exceed Medicaid limits eligible under the Family Opportunity Act (FOA). States are also permitted under certain circumstances to impose premiums on parents receiving Transitional Medical Assistance (TMA) coverage. Prior to the ACA Medicaid expansion, a number of states also received Section 1115 waiver authority to expand coverage to higher income groups who were not otherwise eligible for Medicaid and to subject them to a premium requirement. Under the ACA, a few states have received federal waivers to impose premiums on their Medicaid expansion populations.

In this year’s survey, states identified very few changes to premiums. Six states reported premium changes, including some with multiple changes. Five states made or proposed changes related to ACA coverage expansions (Arkansas, Indiana, Iowa, Michigan and Montana) and are described following the next section. Two states (Michigan and Minnesota) increased premiums for working individuals with disabilities.⁶ 

Copayment Requirements

Most state Medicaid programs require beneficiary copayments, but to varying degrees. Six states reported new copayment requirements in either FY 2015 or FY 2016; each of these states reported new copayment requirements for their Medicaid expansion populations. Indiana reported new copayments in FY 2015 and FY 2016 aside from the new Medicaid expansion group. Only three states reported any other actual or planned copayment increases for either FY 2015 (one state) or FY 2016 (two states). Two states reported elimination of copayments in FY 2015 and three states reported reductions in copayments in either FY 2015 (two states) or FY 2016 (one state).

Increases for the ACA Expansion Population. Two states in FY 2015 (Indiana and Iowa) and four states in FY 2016 (Arizona, Montana, New Hampshire and New Mexico) adopted new copayments for their expansion populations. Four of these states (Arizona, Indiana, Iowa and New Mexico) noted changes in copayments related to non-emergent use of the Emergency Department (ED) for the expansion group; all but one (Indiana) planned to increase such copayments under existing state plan authority (up to $8). Indiana received a waiver under Section 1916(f) to test the effects of higher copayments ($8 for the first use of the ED and then $25 for subsequent use) than otherwise allowed under federal law (Section 1115 waiver authority does not extend to Medicaid cost-sharing requirements).⁷  Additionally, two states (New Hampshire and Michigan) reported plans to increase copayments for some expansion adults in FY 2016.

Pharmacy. A few states reported changes to pharmacy copayments in either FY 2015 or FY 2016. The nature and direction of these changes varied based on policy goals. New Mexico added pharmacy copayments for its expansion population. New Hampshire increased pharmacy copayments for its Medicaid expansion population, but eliminated pharmacy copayments for adults with incomes below 100 percent FPL. Two states reported decreased pharmacy copayments – an across the board reduction for working individuals with disabilities in New Mexico and a reduction in copayments for high value drugs (such as those for diabetes or mental illness) in South Carolina.

Table 2: Changes to Eligibility Standards in all 50 States and DC, FY 2015 and 2016

Table 3: Eligibility Changes in all 50 States and DC, FY 2015 and FY 2016*

Table 4: Premium and Copayment Actions Taken in all 50 States and DC, FY 2015 and 2016*

Managed care is now the predominant delivery system for Medicaid in most states, as Medicaid programs increasingly have turned to managed care as a means to help ensure access, improve quality and achieve budget certainty. As of July 2015, all states (including DC) except three – Alaska, Connecticut and Wyoming– had in place some form of managed care. Across the 48 states with some form of managed care, a total of 39 states (including DC) had contracts with comprehensive risk-based managed care organizations (MCOs); 19 states administered a Primary Care Case Management (PCCM) program, a managed fee-for-service based system in which beneficiaries are enrolled with a primary care provider who are paid a small fee to provide case management services in addition to primary care. Of the 48 states that operate some form of managed care, a total of 10 states operate both MCOs and a PCCM program while 29 states (including DC) operate MCOs only and nine states operate PCCM programs only.¹¹  (Figure 3) Wyoming, one of the three states without managed care (i.e., without an MCO or PCCM model), does operate a limited-benefit risk-based prepaid health plan (PHP). In total, 18 states (including Wyoming) contracted with one or more PHPs to provide behavioral health, dental care, maternity care, non-emergency medical transportation, or other benefits.

Populations Covered by Managed Care

The share of Medicaid beneficiaries enrolled in MCOs, PCCM programs or remaining in fee-for-service 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. In this year’s survey, states were asked to indicate the approximate share of specific Medicaid populations that were served by MCOs, PCCM programs and fee-for-service (FFS) for their acute care services. As shown in Table 5, among the 39 states (including DC) with MCOs, 21 states reported that 75 percent or more of their Medicaid beneficiaries were enrolled in MCOs as of July 1, 2015, including four of the five states with the largest total Medicaid enrollment, accounting for 4 out of every 10 Medicaid beneficiaries across the country (California, New York, Texas and Florida). (Figure 4 and Table 5)

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-two (32) of the 39 MCO states covered 75 percent or more of children through MCOs. Twenty-one (21) of the 39 MCO states covered 75 percent or more of low-income adults (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 15 of the 39 MCO states covering 75 percent or more such enrollees through MCOs. (Figure 4) With the exception of some states participating in the CMS Financial Alignment Demonstrations, most states were even less likely to include those dually eligible for Medicare and Medicaid through managed care contracts.

Of the 29 states that were implementing the ACA Medicaid expansion on July 1, 2015, 26 were using MCOs to cover newly eligible adults. (The three expansion states without risk-based managed care were Arkansas, Connecticut and Vermont.) The large majority (23) of these 26 states covered more the 75 percent of beneficiaries in this group through managed care. The three states with less than 75 percent MCO penetration for this group were Colorado, Illinois and Iowa (which each operate PCCM programs as well as MCOs.)

Ten (10) of the 19 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, Iowa and North Dakota are exceptions: a majority of Colorado’s enrollees were in the PCCM program, which is the foundation of the state’s Accountable Care Collaboratives, and approximately four in ten enrollees in both Iowa and North Dakota were enrolled in those states’ PCCM programs as of July 1, 2015.

Managed Care Population Changes

In both FY 2015 and in FY 2016, states continued to take actions to increase enrollment in managed care, although fewer states reported doing so than in last year’s survey – likely reflecting full or nearly full MCO saturation in a growing number of states. Of the 39 states (including DC) with MCOs, a total of 20 states indicated that they made specific policy changes in either FY 2015 (13 states) or FY 2016 (13 states) to increase the number of enrollees in MCOs, compared to 34 in last year’s survey; no states with MCOs took any action to restrict MCO enrollment.

The most common strategy was to expand voluntary or mandatory enrollment to additional eligibility groups (9 states in FY 2015 and 8 states in FY 2016). The eligibility group most commonly added to MCOs was persons eligible for LTSS (New Jersey, New Mexico, New York, Texas, Virginia and Washington), followed by the newly eligible adult group in states adopting the ACA Medicaid expansion (Illinois, Indiana, Pennsylvania and West Virginia). In addition, five states (Florida, Indiana, Iowa, Louisiana and Rhode Island) are terminating their PCCM programs in either FY 2015 or FY 2016 and shifting those populations into risk-based managed care (discussed below). Four states (Florida, Illinois, Louisiana and New York) made enrollment mandatory for specific eligibility groups in FY 2015, and nine states (Illinois, Iowa, Louisiana, New Hampshire, New York, Rhode Island, Utah, Virginia and Washington) are doing so in FY 2016. Expansions of MCO geographic service areas were reported in five states in FY 2015, and in four states for FY 2016. (Figure 5) In addition, California reported plans to enroll undocumented children into MCOs in FY 2015. This is predominantly a state-funded program and is therefore not counted as a Medicaid policy change in this report.

Primary Care Case Management (PCCM) Programs Changes

Of the 19 states with PCCM programs, six indicated they enacted policies to increase PCCM enrollment in FY 2015 or FY 2016. Four (Iowa, Massachusetts, Montana and Nevada) indicated that they would enroll new Medicaid expansion adults in their PCCM programs; Alabama expanded its Health Home program statewide in FY 2015; and Colorado reported increased PCCM enrollment of persons dually eligible for Medicare and Medicaid as part of its Financial Alignment Demonstration.

In contrast, seven states (Florida, Illinois, Indiana, Iowa, Louisiana, Oklahoma, and Rhode Island) have taken actions to decrease enrollment in their PCCM programs. Five of these states (Florida, Indiana, Iowa, Louisiana and Rhode Island) have ended or plan to end their PCCM programs and will transition PCCM enrollees to risk-based managed care. In June 2014, Illinois began transitioning 1.5 million PCCM enrollees to new care coordination models (including both risk-based managed care and PCCM models) in five mandatory enrollment regions. In Oklahoma, effective July 2014, individuals with creditable primary coverage are no longer eligible for the SoonerCare Choice PCCM program.

Limited-Benefit Prepaid Health Plans (PHP) Changes

Of the 18 states with one or more limited-benefit prepaid health plans (PHPs), six indicated they enacted policies to increase PHP enrollment in FY 2015 or FY 2016. California is planning to move coverage of substance abuse services from FFS to a PHP arrangement in FY 2016.¹²  Iowa reported that the benefit for its Medicaid expansion population includes a dental PHP program, and Pennsylvania reported that the Medicaid expansion would increase enrollment in its behavioral health PHP program. Michigan indicated that its dental PHP program was expanding to additional counties; Wisconsin noted that its LTSS PHP was expanding to additional counties; and Wyoming expanded a behavioral health PHP program for children statewide.

Four states reported actions that decreased enrollment in their PHP programs. Iowa and Florida folded, or will fold, PHP arrangements into their MCO programs (dental and behavioral health PHPs in Florida and a behavioral health PHP program in Iowa). Colorado ended a physical health PHP and replaced it with an MCO arrangement, and Washington is allowing “Early Adopter” counties to convert behavioral health PHPs to fully integrated MCO contracts.

Benefits Covered Under Managed Care Contracts

Although MCOs are at-risk financially for providing a comprehensive set of acute-care services, nearly all states elect to exclude or “carve-out” certain services from MCO contracts. These services may be delivered and financed through another contractual arrangement (e.g., through a limited benefit risk-based PHP) or in the FFS delivery system. In this year’s survey, states were asked to indicate the delivery system(s) used to provide the following benefits: prescription drugs, children’s dental services, adult dental services, outpatient and inpatient mental health services and substance abuse services.

The data presented shows this information only for populations enrolled under an MCO contract. Nearly all states exclude some populations from MCOs. For example, North Dakota does not cover children through its managed care contracts so North Dakota is not included in the “Dental (Children)” data. Ten states that operate MCOs do not cover dental services for adults (or only cover emergency dental), so these states are excluded from the “Dental (Adults)” counts.

“Carved-in” refers to the inclusion in MCO contracts of virtually all services in a given category (exceptions may exist, such as limited carve-outs for selected drugs). “Varies” refers to cases where the inclusion of benefits in MCO contracts may vary by population or region or the contract may cover some but not all services (e.g., states that carve-in some behavioral health services but carve-out specialized services for persons with serious mental illness). “Carved-out” means that the services are largely excluded from MCO contracts and are instead covered under either a FFS or PHP model. (Figure 6) States were also asked to describe any carve-in or carve-out changes for specific benefits in FY 2015 or planned for FY 2016. The most commonly reported benefit change was to carve-in behavioral health services and LTSS.

Pharmacy

Most MCO states (33 of 39 states) carve-in their pharmacy services for the populations covered by their MCO contracts. Some of these states have small carve-outs for certain drugs or drug classes (e.g., HIV/AIDS drugs, medications for hepatitis C, mental health drugs, etc.). Three states (Iowa, Missouri and Nebraska) carve-out pharmacy benefits entirely, delivering these benefits on a FFS basis. Additionally, Tennessee reported that all drugs – except for certain physician-administered drugs – are carved-out and delivered FFS through a contracted pharmacy benefit manager. Two states (Indiana and Wisconsin) reported that pharmacy benefits are carved-in under certain MCO programs but carved-out of others.

A number of states have carved pharmacy benefits into their managed care contracts in recent years. In this year’s survey, four states added or reported plans to add pharmacy benefits to their managed care contracts (Delaware, Iowa, Indiana and New York). Delaware reported carving pharmacy benefits into their MCO contracts in FY 2015. Iowa plans to carve the pharmacy benefit into its MCO contracts as it terminates its PCCM program and shifts this population to MCOs in FY 2016. Indiana implemented a new MCO program for the aged, blind and disabled population in FY 2015 that included pharmacy benefits; it also carved-in pharmacy benefits for the Healthy Indiana Plan (the state’s expansion group). New York, which had already carved most pharmacy benefits into managed care contracts, plans to carve-in hemophilia factor products and injectable antipsychotic drugs in FY 2016. In contrast, only one state (Maryland) reported carving some pharmacy benefits out of managed care contracts in FY 2016 (substance use disorder drugs).

Dental

Children’s Dental. More than half of MCO states that cover children under their managed care contracts¹³  generally carve-in children’s dental services (21 of 38 states). Fifteen (15) MCO states carve-out children’s dental services. The majority of these states cover children’s dental on a FFS basis, but two states (Louisiana and Rhode Island) carve-out these services to a PHP and two states (Michigan and Utah) use both PHP and FFS models, depending on geographic area. Two states (Indiana and Wisconsin) reported that children’s dental services are sometimes carved-in: Indiana’s coverage varies by MCO program and Wisconsin’s coverage varies by geographic region.

Adult Dental. Twenty-nine (29) of the 39 MCO states reported that they cover adult dental benefits; the other ten do not cover adult dental or only provide coverage for emergency dental services.¹⁴  Just over half of the MCO states that cover adult dental generally carve-in this benefit (15 of 29 states). Another four (Indiana, Massachusetts, Michigan and Wisconsin) sometimes carve-in adult dental services; in Indiana, Massachusetts and Michigan, the dental carve-in varies by MCO program while the dental carve-in in Wisconsin varies by geographic region. Eight of the remaining ten MCO states with adult dental benefits carve these services out¹⁵  to FFS, while two states (Iowa for expansion adults and Louisiana) carve-out adult dental services to PHPs.

Indiana reported carving dental services into managed care contracts for selected populations (children and adults) in FY 2015.

Behavioral Health

States cover behavioral health services (mental health and substance abuse services) through a wide array of delivery arrangements. Sixteen (16) MCO states generally cover outpatient mental health services through their MCO contracts; a similar number cover inpatient mental health services (15 states) and substance abuse services (16 states) through their MCO contracts. Of the remaining states, a number contract with PHPs to provide carved-out specialty behavioral health services.

Eight states reported planned changes for FY 2016: six states (Arizona, Iowa, Louisiana, New York, Washington and West Virginia) plan to carve inpatient and outpatient mental health services as well as substance abuse services into at least some of their MCO contracts. Arizona plans to carve-in these services for their dual-eligible beneficiaries under their acute care contracts; New York continues to phase in coverage of these services under managed care plans. Iowa and Louisiana plan to transition coverage from PHPs to their managed care contracts. Washington also reported plans to carve these services into managed care contracts in regions that elect to be “Early Adopters” as part of their effort to establish common purchasing regions for managed behavioral health and physical health. (Those that do not will contract separately for physical and behavioral health.) In addition, Mississippi plans to carve inpatient mental health services into its managed care contracts as part of its larger effort to carve-in inpatient services generally. Maryland reported carving substance abuse services out of managed care contracts in FY 2015.

Long-Term Care Services and Supports (LTSS)

In this survey, about half of the MCO states reported that institutional LTSS (17 states) and home and community-based services (HCBS) (18 states) were provided only under the FFS delivery system. However, the survey did not capture whether LTSS was carved out of the states’ MCO arrangements or whether, instead, persons receiving LTSS were entirely excluded from MCO arrangements for all of their care (primary, acute, and behavioral health services). Only a small number of states reported that most LTSS is provided by MCOs – five states for institutional LTSS (Arizona, Hawaii, Kansas, New Mexico and Tennessee) and four states for HCBS (Arizona, Kansas, New Jersey and Tennessee). In some of these states,  however, persons with intellectual and developmental disabilities (IDD) are excluded from enrollment or IDD waiver services are carved-out. In addition, 17 other MCO states reported providing some HCBS and institutional LTSS through MCOs, often based on specific population characteristics and/or geographic region (for example, under a Financial Alignment Demonstration for dual eligible beneficiaries). A number of states also mentioned PACE programs,¹⁶  but this site-based form of managed care was not counted for purposes of this analysis.

Ten states reported changes for FY 2015 or planned for FY 2016. In FY 2015, six states (California, Michigan, New Jersey, New York, South Carolina and Texas) implemented MCO arrangements for institutional LTSS and HCBS for at least some populations; many of these states noted this change was in reference to the launch of dual eligible demonstrations (Michigan, New York, South Carolina and Texas). California implemented MCO contracts including both HCBS and institutional care services in some counties in FY 2015. New Jersey carved HCBS (services and beneficiaries) into managed care contracts as well as institutional services for new nursing facility entrants (those already in nursing facilities will remain in FFS). Texas also carved institutional LTSS into its non-dual managed LTSS program. Additionally, Idaho added institutional as well as HCBS to its Medicare-Medicaid Coordinated Plan (MMCP) in FY 2015.¹⁷ 

In FY 2016, five states will implement new LTSS MCO arrangements. Rhode Island will implement its dual eligible demonstration; Iowa will include both HCBS and institutional LTSS into new MCO contracts (pending federal waiver approval), and New Hampshire will add HCBS to its MCO contracts. New York and New Mexico will add additional LTSS (services and beneficiaries) to their MCO contracts (assisted living services in New York, waiver services for the medically frail in New Mexico).

Managed Care Quality Initiatives

All states with MCO programs track one or more quality measures and require other health plan quality activities to improve health care outcomes and plan performance. In this year’s survey, states were asked whether certain quality strategies were in place in FY 2014, or newly added or expanded in FY 2015 or FY 2016. Thirty-three (33) of the 39 MCO states (including DC) had one or more of these quality strategies in place in FY 2014. A majority (23 states) publicly reported or required MCOs to publicly report quality metrics (e.g., a “report card”), and over one-third had pay-for-performance provisions, capitation withholds, and performance bonuses or penalties in place in FY 2014 as well. (Figure 7) Four states mentioned other types of quality initiatives in place in 2014 including a requirement for some or all plans to be NCQA-accredited (Massachusetts and Tennessee), a requirement for MCOs to implement provider and member incentive plans (Missouri) and other reviews of performance, quality and network adequacy (Nevada).

In FY 2015, a total of 21 states implemented new or expanded quality initiatives and 19 states planned to do so in FY 2016. The most common initiative that was new or expanded in FY 2015 and 2016 was managed care payment withholds tied to quality performance. (Figure 7) Three of these states in FY 2015 (California, Texas and West Virginia) and two of these states in FY 2016 (DC and Iowa) added new withhold requirements. Withhold amounts ranged from 0.15 percent (Virginia) to five percent (West Virginia and Minnesota). Several states also reported expanding or adding new pay-for- performance requirements as well as performance bonus or penalties and initiatives to publicly report quality metrics.

A few states mentioned additional types of quality initiatives. Minnesota will require MCOs to participate in its ACO and value-based contracting initiatives in FY 2016, and Pennsylvania will require MCOs to participate in community-based care management programs in FY 2015 and plans to require MCOs to participate in physical health/behavioral health integration efforts in FY 2016.

Medicaid Managed Care Administrative Policies

Minimum Medical Loss Ratios

For an MCO, the proportion of total per member per month capitation payments that is spent on clinical services and for quality improvement is known as the Medical Loss Ratio (MLR). Thus, the MLR represents the share of dollars that MCOs spend on providing and improving patient care, rather than on administrative costs, which include executive salaries, overhead, and marketing and profits. State insurance regulators commonly set a minimum MLR for commercial health plans, and the ACA mandates a minimum MLR for Medicare Advantage plans and for qualified health plans (QHPs) participating in the health insurance Marketplaces. There is currently no federal minimum MLR for Medicaid MCOs, nor are state Medicaid programs currently required to set minimum MLRs, but states are allowed to establish minimum MLR requirements for Medicaid health plans.

As of July 1, 2015, 19 of the 39 states that contracted with comprehensive risk-based MCOs specified a minimum MLR for all or some plans, and 20 states did not have an MLR requirement. Seventeen (17) of the 19 states with a MLR requirement always applied it and two states applied it on a limited basis (e.g., for the new ACA Medicaid expansion population). State Medicaid MLRs vary, but are most commonly set at 85 percent. A few states noted that their minimum MLRs varied by type of plan or population.

Other states that do not require a minimum MLR did note other mechanisms to monitor administrative costs and profits among Medicaid MCOs. Four states without minimum MLRs (Massachusetts, New York, Pennsylvania and Virginia) reported having a cap on profits and/or administrative costs. Two states (California and Utah) reported using a target MLR in their rate-setting process. One state (Texas) reported requiring “experience rebates” from plans with profits above a specified level, and one state (Kansas) reported not requiring a minimum MLR but does track MLRs of its plans.

Auto-enrollment

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. Of the 39 states with comprehensive risk-based MCOs, all except one required some or all beneficiaries to enroll in an MCO. (The exception is North Dakota, which has only one health plan.) The proportion of beneficiaries who are auto-enrolled varies widely across states. Two states had auto-enrollment rates of 10 percent or less, while six states auto-enrolled over 75 percent of new MCO enrollees.¹⁸  States’ auto-enrollment algorithms also vary, but 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; 15 states considered plan capacity, and eight states took plan quality rankings into consideration. Other states noted plans to move toward including quality rankings in their auto-assignment algorithms in the future.

Using HEDIS measures for Plan Selection. In this year’s survey, states were asked if they used, or planned to use, HEDIS scores as criteria for selecting MCOs to contract with. Of the 39 states with MCOs, 14 answered “yes,” 22 answered “no,” and three states did not respond.

Table 5: Share of the Medicaid Population Covered Under Different Delivery Systems, as of July 2015

Table 6: Medicaid Managed Care Expansions to New Groups in all 50 States and DC, FY 2015 and 2016 

Table 7: Coverage of Select Benefits Under Medicaid Managed Care Contracts, as of July 2015

TABLE 8: MEDICAID MANAGED CARE QUALITY INITIATIES IN ALL 50 STATES AND DC, FY 2014 – 2016

Table 9: Minimum Medical Loss Ratio Policies for Medicaid MCOs in all 50 States and DC, as of July 2015

Table 10: Auto-Enrollment Policies for Medicaid MCOs in all 50 States and DC, as of July 2015

Interest in delivery system and payment reforms that hold the promise of improving health outcomes and constraining costs remains high among state Medicaid programs across the country. Twenty-seven (27) states in FY 2015 and 28 states in FY 2016 reported adopting or expanding one or more initiatives that seek to reward quality and encourage integrated care. Key initiatives include patient-centered medical homes (PCMHs), Health Homes, and Accountable Care Organizations (ACOs). States are also implementing initiatives to coordinate care and financing for dual eligible beneficiaries. Episode of care and DSRIP initiatives are emerging delivery system reforms. This year’s survey asked states to identify which delivery system and payment reform models were in place in FY 2014, and whether they had adopted or were enhancing such models in FY 2015 or FY 2016. (Figure 8)

Patient-Centered Medicaid Homes (PCMHs)

Patient-centered medical home initiatives operated in half (26) of Medicaid programs in FY 2014. Under a PCMH model, a physician-led, multi-disciplinary care team holistically manages the patient’s ongoing care, including recommended preventive services, care for chronic conditions and access to social services and supports. Generally, providers or provider organizations that operate as a PCMH seek recognition from organizations like the National Committee for Quality Assurance (NCQA).²³  PCMHs are often paid (by state Medicaid agencies directly or through MCO contracts) a PMPM fee in addition to regular FFS payments for their Medicaid patients.²⁴ 

In this year’s survey, nine states reported having adopted or expanded PCMHs in FY 2015 and six states indicated plans to do so in FY 2016. Several of these states reported significant expansions. For example, Connecticut has made significant investments in recent years to help primary care practices obtain NCQA PCMH recognition. Over one-third of Connecticut’s Medicaid beneficiaries are served by PCMHs and the state is considering expanding the model beyond primary care. Wyoming, a state without MCO or PCCM programs, implemented PCMHs in FY 2015; the state is expanding the number of large practices participating. Idaho also reported expanding the number of practices participating in the state’s PCMH program, with the goal of covering 80 percent of the state’s population over the next four years. Other states with well-established managed care programs reported harmonizing PCMH requirements across their MCOs (Tennessee) and requiring MCOs to establish pilot medical homes for behavioral health, targeting adults with serious mental illness (Virginia).

In contrast, Massachusetts reported that its PCMH demonstration ended in March 2014, but was followed by the launch of the state’s three-year Primary Care Payment Reform Demonstration covering nearly 90,000 lives. Also, Pennsylvania reported that one of its MCOs participated in the CMMI Multi-Payer Advanced Primary Care Practice demonstration (that included Medicaid) that ended in 2014, but is considering expanding PCMH payments under future managed care contracts.

ACA Health Homes

Nearly one-third of states (16) had at least one Health Home initiative in place in FY 2014. This option, created under Section 2703 of the ACA, builds on the PCMH concept. It requires states to target beneficiaries who have at least two chronic conditions (or one and risk of a second, or a serious and persistent mental health condition), and provide a person-centered system of care that facilitates access to and coordination of the full array of primary and acute physical health services, behavioral health care, and long-term services and supports. This includes services such as comprehensive care management, referrals to community and social support services and the use of Health Information Technology (HIT) to link services, among others. States receive a 90 percent federal match rate for qualified Health Home service expenditures for eight quarters under each Health Home state plan amendment; states can (and have) created more than one Health Home program to target different populations.

In this survey, eight states reported having adopted or expanded Health Homes in FY 2015 and 13 states reported plans to do so in FY 2016. Nearly all states noted that they were focusing their Health Home programs on populations with behavioral health conditions. States are also incorporating Health Homes into larger reform efforts related to integrating physical and behavioral health. For example, Tennessee is planning to implement Health Homes statewide for individuals with severe and persistent mental illness in 2016; this is part of a larger effort to develop a multi-payer PCMH program that the state plans to expand statewide by 2018.

Two states reported that they ended their Health Homes during this period. Oregon ended its Health Home initiative on September 30, 2013, when the enhanced federal payments ended, but the state continues to expand the use of PCMHs. Washington’s Health Home program, which provided additional coordination and other Health Home services for those dually-eligible for Medicare and Medicaid as well as other Medicaid beneficiaries with at least one chronic condition and at risk of developing another, is ending December 31, 2015. The state is working with beneficiaries to transition them to other care management services.

Accountable Care Organizations (ACOs)

States continue to experiment with accountable care organizations as the concept evolves. Six states reported having ACO models in place for at least some of their Medicaid beneficiaries in FY 2014. While there is currently no uniform, commonly accepted federal definition of an ACO, an ACO generally refers to a group of health care providers or, in some cases, a regional entity that contracts with providers and/or health plans, that agrees to share responsibility for the health care delivery and outcomes for a defined population.²⁵  An ACO that meets quality performance standards that have been set by the payer and achieves savings relative to a benchmark can share in the savings. The organizational structure of ACOs varies, but ACOs generally include primary and specialty care physicians and at least one hospital. Virtually all states with ACO initiatives built on existing care delivery programs (e.g., PCCM, medical homes, MCOs) that already involved some degree of coordination among providers and likely had key infrastructure to facilitate coordination among ACO providers (e.g., electronic medical records). States use different terminology in referring to their Medicaid ACO initiatives, such as Coordinated Care Organizations (CCOs) in Oregon and Regional Care Collaborative Organizations (RCCOs) in Colorado.²⁶ 

In this survey, three states reported adopting or expanding ACOs in FY 2015 and six states reported such activity in FY 2016. This includes states like Maine, Massachusetts, and New Jersey that have implemented or are planning to implement new ACO models. Utah reported plans to expand their ACO model to new counties. Other states reported ACO activity spurred by MCO contract requirements (Iowa, New Mexico and Minnesota) or as part of larger Section 1115 waiver proposals (California).

Care Coordination and Integration of Care for Dual Eligible Beneficiaries

Coordinating care for those dually eligible for Medicare and Medicaid (dual eligible beneficiaries) is a significant issue for Medicaid programs. These individuals tend to have significant health needs, a high prevalence of chronic conditions and substantial need for long-term services and supports. Prior to the ACA, coordination of care for individuals with dual enrollment in Medicaid and Medicare had been difficult to pursue for states in part because of misalignment between Medicare and Medicaid laws. In addition, when states did develop approaches to better coordinate care, any resulting savings from improvements in acute care (such as reduced inpatient admissions, readmissions and emergency room visits) accrued to Medicare and were not shared with state Medicaid programs. Under Section 2602 of the ACA, CMS established the Medicare-Medicaid Coordination Office (MMCO) and initiated Financial Alignment Demonstrations (FADs) with interested states seeking to coordinate and improve care and control costs for those dually eligible for Medicare and Medicaid.

In this survey, 13 states indicated that initiatives to coordinate care for dual eligible beneficiaries were in place in FY 2014, including seven with CMS FADs and seven with initiatives outside the CMS FAD that centered on enrolling this population in comprehensive MCOs or managed long-term care plans (one state had both a FAD and a non-FAD initiative). Ten states reported implementing or expanding an initiative to coordinate care for dual eligible beneficiaries in FY 2015, including six states with FADs, two of which (California and Texas) implemented or expanded other initiatives such as MLTSS outside of the FAD initiative. For FY 2016, five states are planning to implement or expand an initiative including one state planning a FAD. Initiatives outside of the FADs included alignment of Medicare Advantage Special Needs Plans for dual eligible beneficiaries (D-SNPs) with Medicaid MCOs and enrollment of dual eligible beneficiaries in comprehensive Medicaid MCOs (for acute care services) or managed long-term care.

Episode-of-Care Initiatives

Unlike fee-for-service (FFS) reimbursement where providers are paid separately for each service, or capitation where a health plan receives a per member per month (PMPM) payment intended to cover the costs for all covered services, an episode-of-care payment is linked to the care that a patient receives for a defined condition or health event (e.g., pregnancy and delivery, heart attack, or knee replacement). Episode-based payments usually involve payment for multiple services and providers and therefore create a financial incentive for physicians, hospitals and other providers to work together to improve patient care and manage costs. In this survey, two states (Arkansas and Tennessee) noted that an episode-of-care initiative was in place in FY 2014. Both states indicated that they continued to expand these initiatives in FY 2015 and FY 2016. New Mexico reported that a small pilot is being operated by some of the state’s MCOs in FY 2015 and Louisiana reported that one MCO planned a demonstration in partnership with a birthing hospital in FY 2016. Additionally, Ohio is currently in an episode-of-care reporting year; gain-sharing payments will begin in calendar year 2017.

Hospital Delivery System Reform Incentive Payment (DSRIP) Program

Delivery System Reform Incentive Payment (DSRIP) programs are another piece of the dynamic and evolving Medicaid delivery system reform landscape. DSRIP initiatives, which are part of broader Section 1115 demonstration waiver programs, provide states with significant funding to support hospitals and other providers in changing how they provide care to Medicaid beneficiaries. DSRIP waivers are not grant programs – they are performance-based incentive programs. Originally, DSRIP initiatives were more narrowly focused on funding for safety-net hospitals and often grew out of negotiations between states and HHS over the appropriate way to finance hospital care. Now, however, they are used to promote far more sweeping payment and delivery system reforms.

The first DSRIP initiatives were approved and implemented in California and Texas in 2010 and 2011, followed by New Jersey, Kansas and Massachusetts in 2012 and 2013. In this year’s survey, Massachusetts reported expanding its DSRIP program and New Mexico and New York reported implementing DSRIP programs in FY 2015. For FY 2016, California and New Mexico reported DSRIP enhancements while New Hampshire and Washington reported plans to seek approval for new DSRIP initiatives.

Other Initiatives

In addition to the initiatives discussed already, states reported other delivery system and payment reform initiatives. For example, some states reported including value-based purchasing requirements in their managed care contracts (Arizona, Iowa, Michigan, and Texas). Pennsylvania reported plans to include a “health-home like” program in its 2016 MCO contracts. Other states reported expanding telehealth services and use of community health workers (New Mexico), creating a coordinated point of entry for substance abuse disorder treatment services (New Jersey) and offering subsidies to enable ambulatory practices to access health information exchange services and achieve Meaningful Use (North Carolina).

Table 11: Delivery System and Payment Reform Initiatives in Place in all 50 States and DC in FY 2014

Table 12: Delivery System and Payment Reform Actions Taken in all 50 States and DC, FY 2015 and 2016