Fiscal Fitness: How States Cope

Ohio Medicaid faces steep growth; strives to protect access

Over the past 12 months, Ohio Medicaid has seen a 9% increase in enrollment, totaling 168,000 additional individuals on the program. Interestingly, though, 80% of that growth has been in the Healthy Families program, which covers parents, pregnant women, and children at low income levels. "So, the growth isn't coming from our expansion population. It's not our CHIP kids. We are seeing people who [have] never been on our program before, coming on not at the marginal end, but in our lowest growth categories," says Heather Burdette, MBA, assistant deputy director of Ohio Health Plans. "When I look at our base program, it's grown by 76,000 over the last 12 months. So, we have seen significant growth there."

Average monthly enrollment in Medicaid for FY 2008 was 1.88 million, and this is expected to grow to 2.05 million by FY 2010. "So, in over two years, we'll have added 270,000 individuals on an average monthly basis," says Ms. Burdette. "September 2009 was our 21st consecutive month of caseload growth. That is the longest sustained enrollment growth we have seen in more than eight years. September 2009 also marked the first time enrollment exceeded 2 million consumers."

Growth has been fairly steady over the past two years, including the holiday season, which is unusual for that time frame. "We are hoping that in about a year that the growth will begin to flatten. That's our hope, but I just don't know," says Ms. Burdette. "Actually, when we did our final budget estimate in April, we really ramped up what we expected the growth to be. And we added 17,000 consumers from May to June, and 22,000 from August to September."

Ms. Burdette says she expects the steep growth to moderate, but not level off completely for some time. "Since we are seeing most of the growth in our lowest income categories, we don't expect that the people coming on today, or at least their kids, will be coming off our program anytime soon. Because even if that family's income doubles, their kids will still be eligible for the program," says Ms. Burdette.

Normally, the state's budget would have been passed and signed into law by June 30, 2009, as the state's fiscal year starts in July. "But because of the challenges with increased spending and decreasing revenues, we didn't have a signed budget until mid-July. So, one of the things we are dealing with right now, only three months into the year, is having a short time frame to implement the changes we need to, in order to maintain a balanced budget," says Ms. Burdette.

Ohio Medicaid began seeing significant growth in July 2007, which necessitated some adjustments to plans. An expansion of the Children's Health Insurance (CHIP) program from 200% to 300% of FPL has been delayed while alternate funding sources are being identified. "Ohio has had a very interesting route with our CHIP expansion. It was originally approved for FY 2008 and 2009, and we planned to bring it up on January 2008. Then, CMS [the Centers for Medicare & Medicaid] came out with their Aug. 17 directive," says Ms. Burdette. "As Ohio is a Medicaid expansion state, our stance was the letter shouldn't even apply to us. But CMS decided to interpret their letter differently and apply it to us."

About a year later, approval was obtained for the expansion, now planned for March 2009. By that time, however, declining state revenues forced the expansion to again be put on hold; instead, it was built into the FY 2010 and FY 2011 budgets. Ultimately, the expansion was funded using tobacco funds. "We will also be shifting the funding for many our optional services for adults to tobacco funding, come February 2010," says Ms. Burdette. "Our hope is this way we won't have to reduce them. It was very important to the administration to be able to protect eligibility and protect services. We really are doing a lot of different things to find different ways to fund the program."

Protecting access

Ohio Medicaid was planning two community provider rate increases for 2009, but these never came to pass. Instead, provider rates are being reduced, along with pharmacy dispensing fees. In addition, a state-funded program for very low-income, childless adults was eliminated, a franchise fee for hospitals was added, and franchise fees were increased for nursing facilities and Intermediate Care Facilities for the Mentally Retarded (ICFs-MR.)

"We are carving pharmacy out of managed care, so we can take advantage of rebates, as well as simplify things for consumers and providers. They will have one prior authorization and one Preferred Drug List plan to deal with, so we can reduce some confusion there," says Ms. Burdette.

A targeted provider rate increase of 3% on average became effective July 1, 2008. Now, as of Jan. 1, 2010, community providers will be given a 3% decrease. "We are not just undoing what we did. It will be a targeted increase," says Ms. Burdette. "But the point is, we put X dollars into the system, and now we are pulling that same amount out, a year and a half later."

Before the July 2008 increase, some providers had gone a decade without a rate increase. "So, while it was a small increase, relatively speaking, I think the provider groups would say it was long overdue," says Ms. Burdette. "Particularly with our community providers, when they see increases that our hospitals and nursing homes and ICFs-MR have had, it's been a bit of a bitter pill for them to swallow. That was why it was so important to bring them in, when we could, and talk to them about the best way of doing this."

One goal was to protect access to primary care or preventive services. "To do this, we looked less at provider type and more at codes," says Ms. Burdette. "We looked at codes that were at or near 100% of Medicare, and brought them back a little bit, to preserve savings for some of the other codes."

For dental services, provider groups were asked whether they preferred a rate reduction or decreased payments for services. "We really tried to look at the codes and prioritize them for what we thought was most important, with an incentive in the system for services that we thought needed to be provided," says Ms. Burdette. "For other areas, we thought about the uniqueness of how they do their business and what could we do to reduce the amount of money going into the system, but do it in a way that made sense. We are watching closely, but so far, we don't have any reason to believe there will be access issues."

"The big thing that we've really been focused on over the last few years is cost avoidance," says Ms. Burdette. In FY 2009, $704 million in commercial and Medicare insurance claims were cost-avoided, an increase of $83 million compared with 2008.

"We right now have over 85% of all the covered lives in Ohio in our system to be cost-avoided against. So, we have been very aggressive in using the ability that was granted in the DRA [Deficit Reduction Act], to bring that information in-house to allow us to cost-avoid," says Ms. Burdette. "That has been one of our biggest victories."

Significant cost savings also are expected from a new claims system being implemented. "Our biggest focus right now—from a budgetary perspective—in addition to just keeping our heads above water, is to bring up our new claims system," says Ms. Burdette. "We are very much in the midst of doing that. Our plan is to have it up by December of 2010. That will allow us to make some changes to be more efficient."

Better clinical claims editing will be possible. "While we have some claims edits in our system right now, this will allow us to do more complex edits," says Ms. Burdette. "We will be able to look at claims as they come in, the way they are bundled, and whether they make sense, and reject claims that should not go with each other. It's hard to get money back. It's always better to cost-avoid up front."

The new system also will make it easier to assess budgetary changes on benefit packages. "Right now, this is a huge undertaking. To select what's best for this population or that population is very complex to do," says Ms. Burdette. "This will allow us to make good changes more efficiently and really allow us to operate a better program."

Paper claim submissions will be eliminated, with all prior authorization requests received and responded to electronically. "So, we should really see a lot of efficiency there. We also plan to automate more of our phone system work and a lot of other calls that we do, which should be a great help," says Ms. Burdette.

Ms. Burdette says the end of federal stimulus funding is a definite concern. "But right now, we are doing what we need to do to get through FY 2010 and 2011. Some of that work is going to lower our costs, such as the pharmacy carve-out," she says. "That should put us in a better position going forward. What we are doing is laying the groundwork that will help us into 2011 and 2012, when the stimulus funding goes away."

Contact Ms. Burdette at (614) 466-4443 or hburdett@ohio.gov.