Putting Medicaid in the Larger Budget Context: An In-Depth Look at Three States in FY 2017 and FY 2018

West Virginia

Economic and Budget Outlook

Economy and State Revenues

In 2015, West Virginia fell into an economic recession primarily driven by continued job losses in the coal industry and a slowdown in the natural gas industry.1 The state continued to struggle economically in 2016 as its real Gross Domestic Product (GDP) shrank by 0.9 percent. West Virginia was one of only seven states with negative GDP growth in 2016, driven, again, by negative growth in the mining sector but also by losses in the construction sector.2 More recently, however, growth in the mining sector nationwide resulted in economic growth in the state. In the first quarter of 2017, West Virginia had the second-highest GDP growth rate in the nation (3.0 percent), second only to Texas (3.9 percent) and just ahead of New Mexico (2.8 percent) whose economies are also heavily reliant on mining.3

Looking ahead, University of West Virginia economists forecast continued moderate growth for the remainder of CY 2017, but warned that economic outcomes vary across the state and that “it will take years to recover all of the jobs that have been lost since early 2012.”4 The state’s labor force has shrunk by nearly 5 percent since its high in June of 2009, which has contributed to decreasing rates of unemployment.5 The state’s unemployment rate dropped from 6.0 percent in August 2016 to 5.0 percent in August 2017, the labor force also shrank by 0.5 percent) during that same time period.6 West Virginia had the lowest work force participation rate among all states at 53.2 percent, presenting “a significant hurdle for long-run economic prosperity.” 7,8

Except for a one-year state revenue rebound of 8.1 percent in FY 2011, West Virginia state revenue growth has remained low or negative since the onset of the Great Recession with an average annual growth rate of -0.2 percent between FY 2008 and FY 2016.9 In addition to weak economic growth, a variety of tax cuts since 2007 have also reduced  annual state revenues by at least $415 million.10 For FY 2017, general revenues were originally projected to grow by 2 percent, but came in $21 million below target as of June 30, 2017.11 Improving severance tax collections beginning in March 2017, resulting from natural gas price increases and an increase in coal production, helped the state avoid a larger shortfall predicted to be as high as $192 million earlier in 2017.12 Looking ahead, state general revenue collections are projected to grow by a modest 1.4 percent in FY 2018.13

State Budget

At the start of CY 2017, newly-elected Democratic Governor Jim Justice faced both a current year budget shortfall for FY 2017 of $123 million and a projected budget gap for FY 2018 of $497 million.14  To close the FY 2017 shortfall, the Governor used a combination of midyear spending cuts totaling nearly $60 million and one-time special revenues, including $40 million from the state’s Rainy Day reserve.15,16 In February, he also offered an Executive Budget proposal that included over $450 million in revenue enhancements to close the projected budget gap for FY 2018 and fund base budget increases for Medicaid, public retirement systems, and classroom teacher raises.17

In April 2017, Governor Justice vetoed a state budget passed by the Republican-controlled legislature that did not include the revenue enhancements proposed by the Governor, but did include $110 million in spending cuts and a $90 million transfer from the Rainy Day reserve that the Governor feared would put the state’s bond rating at risk.18 On June 21, 2017, however, the Governor announced that he would allow a subsequent budget passed by the legislature to become law without his signature – despite his objections to its cuts – to avoid a state government shut-down that might otherwise have occurred on July 1, 2017.19 Compared to FY 2017 appropriation levels, nearly every area of the FY 2018 budget, including Medicaid, was cut with the only significant funding increases for payments to the Teacher’s Retirement System Unfunded Liability and the State Police.20 FY 2018 General Revenue Fund appropriations are slightly below actual FY 2013 spending and, after adjusting for inflation, also less than FY 2008 spending.21

Less than seven months into his first term, Governor Justice announced on August 3, 2017, that he was switching parties to become a Republican later saying that his decision was driven by the refusal of legislative Democrats to support his push for tax reform during the budget special session. He also said he made the change because it had given him the ear of President Trump and his Administration to listen and seriously consider plans to bring back coal jobs and allocate federal funds to the state.22

Demographic Characteristics and Medicaid’s Role

West Virginia has the third highest percentage of people living in poverty among all states (along with New Mexico, 18 percent in 2016),23 the second lowest personal income per capita among states ($36,132 in 2014),24 and the second highest share of its total population enrolled in Medicaid (26 percent in 2016).25 Due to the state’s low per capita income, it has one of the highest federal medical assistance percentages (FMAPs) at 73 percent in fiscal year 2018,26 and over three-quarters (79 percent) of all federal funds that West Virginia receives are for Medicaid.27 Nearly half (46 percent) of West Virginia’s population resided in rural areas in 2015.28

West Virginia’s population faces multiple high health needs and limited access to care. The state ranked 43rd among states in overall health status in 201629 and had the highest percentage among states of people reporting fair or poor health status in 2015 (25.9 percent).30 In addition to being hit harder than any other state by the opioid epidemic (as described in detail below), West Virginia has the highest obesity rate in the country (71.1 percent in 2015)31 and the highest percent among states of the non-institutionalized population reporting a disability (19.5 percent in 2015).32 Access limitations in the state make addressing these serious health needs even more difficult: 30 percent of people in West Virginia lived in a health professional shortage area for primary care and had limited access to the services they need as of December 2016 (the 8th highest percentage among states),33 while 13.8 percent of adults reported not seeing a doctor due to cost in 2015.34 This range of serious health needs and access challenges coupled with Medicaid’s important role in providing necessary services to high-need populations suggest that West Virginia is a state that would be at particularly high risk under potential caps on Medicaid funding.35

Update on the Affordable Care Act

Medicaid Expansion

West Virginia elected to expand Medicaid coverage to newly eligible groups under the Affordable Care Act (ACA) in January 2014, extending coverage to non-disabled childless adults for the first time. While the state’s actuaries had predicted new enrollments in the first year of about 63,000, actual enrollment through the end of June 2014 increased by over 130,000 – more than twice the projected first year increase.36  As of FY 2016, statewide Medicaid expansion enrollment had grown to over 180,000 and accounted for nearly one-third of total Medicaid enrollment.37 West Virginia’s expansion enrollment success was partially related to their implementation of facilitated enrollment (or “fast track enrollment”) options, including enrolling eligible individuals into coverage using data already available from the state’s Supplemental Nutrition Assistance Program (SNAP) as well as Medicaid enrollment data for children (used to reach eligible parents).38 According to the Centers for Medicare & Medicaid Services (CMS), total West Virginia Medicaid and Children’s Health Insurance Program (CHIP) enrollments grew by over 57 percent between the third quarter of CY 2013 (prior to the implementation of the ACA and Medicaid coverage expansions) through June 2017.39

Marketplace Coverage

The ACA provided states the option of establishing their own Marketplaces or relying on the federally-facilitated Marketplace (FFM), www.healthcare.gov. West Virginia was one of seven states that chose a “State Partnership Marketplace” model allowing the state to rely on the FFM but retain control over plan management and some consumer assistance activities.40 In April 2017, however, Governor Justice signed into law HB 2119 that repeals the state law establishing the West Virginia Health Benefit Exchange effective July 4, 2017,41 likely resulting in the state reverting to the FFM model. The West Virginia Marketplace had just one carrier in 2014 and 2015, but grew to two carriers in 2016 and 2017 and will continue to have two carriers in 2018.42 During open enrollment for the 2017 plan year, 34,045 West Virginians selected a West Virginia Marketplace plan.43

Delivery System Reforms

Managed Care

West Virginia has operated a risk-based Medicaid managed care program – Mountain Health Trust – since September 1996.  Under this program, the state currently contracts with four managed care organizations (MCOs) to provide medically necessary Medicaid services to most Medicaid enrollees statewide, although, school-based services, transplant services, long-term care, personal care and non-emergency medical transportation services are “carved out” of the MCO contracts. As of July 1, 2017, pharmacy services were also carved out of the MCO benefit package.44 As of September 2017, there were approximately 420,000 members enrolled in Mountain Health Trust.45

Addressing The Substance Use Disorder Crisis

The misuse of and addiction to opioids, including prescribed pain relievers, heroin, and synthetic opioids such as fentanyl, is a serious and growing national public health crisis that has hit West Virginia harder than most other states. In 2015, West Virginia had the highest age-adjusted drug overdose death rate (41.5 per 100,000), more than twice the national rate (16.3 per 100,000). 46 Between 2012 and 2015, the drug overdose death count increased by nearly 30 percent, from 558 to 725,47 and between 2014 and 2016, 37 of every 1,000 births in the state involved a baby born with Neonatal Abstinence Syndrome (NAS) resulting from substance abuse among pregnant women.48 The state has the second highest rate of prescription drugs filled: 21.8 drugs per capita, compared to 12.7 nationwide.49 Out of home foster care placements have grown by more than 30 percent over the past three years from 4,366 in April 2014 to 5,772 in April 2017, driven in part by substance abuse by the parents.50

Recognizing the substantial public and private harms generated by this crisis, the state has taken numerous steps in recent years to curb the epidemic:51

  • In 2015:
    • The legislature passed legislation making naloxone (an opioid overdose antidote) available to first responders and to relatives, friends, caregivers or persons in a position to assist someone at risk of experiencing an opiate-related overdose.
    • The state launched its first ever Behavioral Health Referral and Outreach Call Center to provide resources and referral support 24-hours a day (this took place in September 2015).
    • The West Virginia Department of Health and Human Resources (DHHR), Bureau for Children and Families (BCF) launched Safe at Home West Virginia (this took place in October 2015). This program provides wraparound behavioral health and social services to youth ages 12 – 17 years with certain behavioral health needs who are currently in congregate care or at risk of entering congregate care.
  • In 2016, the legislature:
    • Authorized pharmacists and pharmacy interns to dispense naloxone without a prescription in accordance with a Board of Pharmacy protocol.
    • Passed the Medication-Assisted Treatment (MAT) bill. MAT combines behavioral therapy and medications to treat substance use disorders (SUDs). Clinics that use MAT must be licensed or registered by the state, provide counseling in conjunction with treatment and test their patients to ensure they are using the medication as intended.
  • The Substance Abuse and Mental Health Services Administration (SAMHSA) awarded the state a Cooperative Agreement to Benefit Homeless Individuals in partnership with four Continuum of Care Organizations. This agreement will be used to enhance the state’s infrastructure to provide effective, accessible treatment and recovery support services to veterans, nonveterans, families, and youth experiencing homelessness who have mental health and SUDs.

Some cities and towns have also initiated syringe exchange programs to reduce the risk of spreading diseases associated with intravenous drug use, such as hepatitis B, hepatitis C and HIV/AIDS, and in Huntington, a non-profit residential infant recovery center, Lily’s Place, has opened to provide short-term medical care to infants suffering from prenatal drug exposure.

Adoption of CDC Opioid Prescribing Guidelines

Building on the Centers for Disease Control (CDC) Opioid Prescribing Guidelines, West Virginia Medicaid initiated a new program on January 17, 2017, to encourage the safe prescribing of opioid medications. This program is designed to help prescribers be aware of the total morphine milligram equivalency (MME) of their patient’s opioid prescriptions, especially patients seeing more than one provider for pain management. The Public Employees Insurance Agency (PEIA) implemented the same program in January 2017, and a common prior authorization form was developed for use in both the PEIA and Medicaid Programs.52 Beginning in July 2017 (the effective date of the carve-out of pharmacy benefits from managed care contracts), these opioid prescribing guidelines are also being phased in for MCO members.53

Section 1115 SUD Waiver

On October 6, 2017, CMS approved West Virginia’s Section 1115 demonstration waiver application to address the state’s SUD crisis with an effective date of January 1, 2018.54 The purpose of the Creating a Continuum of Care for Medicaid Enrollees with Substance Use Disorders waiver is to promote access to SUD treatment and prevention services and build a comprehensive continuum of care across the state to more effectively prevent and treat SUDs in West Virginia. Features of the waiver include expanded coverage for methadone, naloxone, peer recovery support, withdrawal management and short-term residential services for all Medicaid enrollees.

Health Homes

In July 2014, the West Virginia Department of Health and Human Resources, Bureau for Medical Services implemented a Health Homes initiative (authorized under ACA Section 2703) focused on members in a six-county region who suffer from bipolar disorder and who may have hepatitis B or C (Health Home I). In April 2017, this initiative was expanded statewide (Health Home II), and a second Health Home pilot (Health Home III), targeting diabetes and obesity, was launched in 14 counties.55

The state’s Health Home model focuses on the member’s entire condition, behavioral health, physical health, and social needs. By addressing all member needs, the Health Home model is designed to reduce emergency room (ER) visits and inpatient admissions for both physical and behavioral health issues, and improve the member’s overall quality of life. Results from the Health Home I implementation demonstrated success in reducing ER utilization, inpatient admissions, and overall costs, which led the state to initiate the Health Homes II statewide expansion and the new Health Homes III pilot.

Additional policy actions the state either implemented in FY 2017 or planned to implement in FY 2018 are described in the table below.

West Virginia Medicaid Policy Changes FY 2017 and FY 201856
Provider Rates
FY 2017:

  • Increased MCO rates and nursing facility rates.
  • All other rates were flat.
FY 2018:
  • Plan to increase MCO rates and nursing facility rates.
  • Plan to hold all other rates flat.
Benefit Changes
FY 2017:

  • Liberalized medical necessity criteria for hepatitis C antiviral agents.

FY 2018:

  • Through Section 1115 waiver authority, the state will expand substance use disorder (SUD) treatment coverage to create a continuum of care for Medicaid enrollees with SUD issues. New SUD treatment services and supports will include:
    • Statewide adoption of the Screening, Brief Intervention, and Referral to Treatment (SBIRT) method to ensure a consistent and effective enrollment process for the waiver
    • Expanded coverage of withdrawal management in regionally identified settings
    • Short term, residential SUD treatment
    • Enhanced access to outpatient SUD treatment as appropriate when residential treatment is not required
    • Coverage of methadone and methadone administration
    • Comprehensive initiative for distributing naloxone and cross-training staff on administration of naloxone
    • Coverage of clinical and peer recovery support services and recovery housing supports.
Copayment Changes
FY 2018:

  • Changing the pharmacy copayment requirements from a tiered approach ($0.50 – $3) based on drug price to a flat rate of $1 for generics and $3 for brands. The change is expected to be cost-neutral to the state.
Pharmacy Changes
FY 2017:

  • Hepatitis C antivirals carved out of managed care contracts effective April 1, 2017.
  • New pharmacy utilization controls applied.
  • New provider education/profiling initiative implemented.
  • CDC Opioid Prescribing Guidelines adopted for fee-for-service enrollees.

FY 2018:

  • Pharmacy benefit carved out of managed care contracts effective July 1, 2017.
  • Following pharmacy managed care carve-out, plan to enhance rebate collection efforts and further reduce ingredient cost reimbursement.
  • Will expand pharmacy utilization controls.
  • Will expand provider education/profiling initiative.
  • CDC Opioid Prescribing Guidelines will be implemented, on a phased-in basis, for MCO members beginning July 1, 2017.
Managed Care and Delivery System and Payment Reforms
FY 2017:

  • Non-dual, non-LTSS SSI members enrolled into managed care on a mandatory basis.
  • ·Health Homes for persons with bipolar disorder and who have or are at risk of having hepatitis B or C expanded statewide (April 2017).
  • New Health Home pilot targeting diabetes and obesity implemented (April 2017).
FY 2018:
  • Quality withhold eliminated from managed care contracts.
  • Requirement added to MCO contract requiring 10 percent of the plan’s enrollees to be part of an Alternative Provider Payment Model. Plans allowed to determine model(s) used.
Long Term Services and Supports Rebalancing
FY 2018:

  • Planning to expand the number of persons served in the Individuals with Developmental Disabilities Waiver.
North Carolina

KFF Headquarters: 185 Berry St., Suite 2000, San Francisco, CA 94107 | Phone 650-854-9400
Washington Offices and Barbara Jordan Conference Center: 1330 G Street, NW, Washington, DC 20005 | Phone 202-347-5270

www.kff.org | Email Alerts: kff.org/email | facebook.com/KFF | twitter.com/kff

The independent source for health policy research, polling, and news, KFF is a nonprofit organization based in San Francisco, California.