Ohio Medicaid prepares for reform; optional services taken off table

Ohio Medicaid managed to keep optional services off the table throughout the recession, despite having a "fundamentally changed" economy in the state, according to Medicaid director John McCarthy.

"We are only second to Michigan in job loss," he says. "The legislature and the governor are trying to bring jobs back to Ohio, and then the Medicaid rolls will slowly go down. But it's going to take time to get that manufacturing base back up."

In May 2011, Ohio's unemployment rate was 8.6%, notes Mr. McCarthy, and the state lost approximately 400,000 jobs between 2007 and 2010.

Medicaid's optional services remained intact mainly because Ohio didn't include the extension of enhanced Federal Medical Assistance Percentages (FMAP) in its FY 2010-2011 budget, according to Mr. McCarthy. The extension of FMAP brought about $500 million in additional Medicaid funding to Ohio, he says.

It wasn't known whether FMAP would be extended when Ohio's last budget was passed two years ago, he explains, so it wasn't included. "When the FMAP was extended, that freed up more money in the Medicaid program," says Mr. McCarthy. "Hospitals were supposed to take a rate cut, but ended up not having to because of those extra dollars."

When FMAP was extended, hospitals were given $150 million in the form of a provider fee decrease, adds Mr. McCarthy.

Cuts to optional services are still not on the table, according to Mr. McCarthy, mainly because they result only in short-term savings. For example, cutting dental care increases the number of people who visit the emergency department with untreated dental problems, he says.

"In the first year, there is no way that those costs would get all the way up to the cost of the optional services that were cut," he says. "But when you get to the second or third year, you start seeing increases in costs."

Back to beginning

Due to the transition with a new administration, the planning process for the Medicaid expansion in 2014 "went all the way back to the beginning," says Mr. McCarthy. "We have reviewed all items, to be sure that any decisions that had been made go along with this administration's priorities."

For instance, he says, the state had to take a new look at the question of whether it would run the exchange or allow the federal government to run it. "The decision was made to move forward with planning the exchange," says Mr. McCarthy.

Some requests for proposals were recently released, says Mr. McCarthy, and the agency is moving forward with the assumption that health care reform legislation will not be overturned.

"It is difficult at times. We need to stop and make sure we are not doing anything that is going in a completely wrong direction from where the state is moving overall," he says. "At the same time, we want to be sure that no matter what happens, we're not behind."

Very tight budget

The biggest challenge for Medicaid at this juncture is an extremely tight state budget, says Mr. McCarthy. "Trying to navigate through that is quite difficult. You are limited in what you can do in the Medicaid program," he says. "There have been a lot of ideas floated our way. Some of them you can do, and some of them you can't do."

One suggestion that fell into the latter category was to increase revenues with higher copays and deductibles, says Mr. McCarthy. "We do not have that expansive of a program here. Once you take moms, kids and pregnant women off the table, that's over half of our program. When you take out the ABD [Aged/Blind/Disabled] population, it's another quarter or so," he says. "There's not enough people left for a dollar impact."

Increases in copays and deductibles would end up having more of a negative impact on Medicaid providers, he says.

The loss of enhanced FMAP will mean an $800 million loss for the state's two-year fiscal year 2012-2013 budget. "We tried to fill that hole with policy changes first. After that, we did have to look at provider rate reductions," says Mr. McCarthy. "We did not touch optional services."

Nursing homes will take a 5.8% reduction, and hospitals about 2%, says Mr. McCarthy, and managed care organizations will take a 1% reduction in administrative fees. "The total Medicaid budget achieves an unprecedented level of Medicaid savings — $1.4 billion over the biennium," he reports.

The two-year budget poses an additional challenge, says Mr. McCarthy, since it's difficult to project what revenues and enrollment will look like in 2013. "We are seeing increases in enrollment, but not at the 4% rate of growth that we were seeing a little while ago," he says. The budget assumes enrollment growth will slow to about 2.6% in 2012, and down to 2% the following year, he says.

"After past recessions, we have seen a decline in the number of people in the program. This time, we are not seeing that," adds Mr. McCarthy. "We are just seeing a leveling out in the level of growth. We continue to see utilization go up."

New eligibility system

Ohio is moving forward in trying to obtain 90/10 funding for a new Medicaid eligibility system, reports Mr. McCarthy. "We have a very old eligibility system here, created before the de-linking of Medicaid from TANF [Temporary Assistance for Needy Families], that lacks online capability," he says.

One goal is to simplify the eligibility process, says Mr. McCarthy, as the current 30-year-old system requires a number of determinations to be made manually. "To fix these things would take millions of dollars," he says. "Instead of investing in that, we're investing in a new eligibility system."

There are still some pieces of the eligibility system that link Medicaid and TANF, says Mr. McCarthy, which require manual processes to get around. "The system was fixed partway with a workaround. But as time goes by, we need something that is more simplistic," he says.

Mr. McCarthy says he's waiting for guidance from the Centers for Medicare & Medicaid Services regarding the performance measurement that is required around eligibility determinations. "That's a concern to us. How do you design a system when you don't know what the performance standard is going to be?" he asks. "That's a bit frustrating. Obviously if I had that now, it would make my planning a lot easier."

Meanwhile, says Mr. McCarthy, the agency is trying to answer such questions as what constitutes a family unit, how often taxable income needs to be checked, and whether wage changes have to be changed instantaneously for Medicaid.

"There are a lot of outstanding pieces there on the Medicaid side, which rolls over onto the exchange side, such as the ability to determine what the tax credit should be for people," Mr. McCarthy says. "That is another issue we are going to have to deal with."

Contact Mr. McCarthy at (614) 752-3739.