Blog

HMA perspectives on the 2022 federal policy landscape

This week, our In Focus section looks at the current federal policy landscape and trends and the legislative outlook for the remainder of 2022 and beyond. Experts from HMA continue to monitor developments in this area and provide additional updates as more information becomes available.

Legislative Branch

To date in 2022, Congress passed multiple comprehensive bills, including the Inflation Reduction Act (IRA), which was signed by President Biden on August 16, 2022. The IRA extends Exchange plan premium tax subsidies through 2025, institutes an out-of-pocket drug spending cap for Medicare beneficiaries, expands Medicare, Medicaid, and CHIP coverage protections for certain vaccines, allows Medicare to negotiate drug prices, and implements a penalty payment in the Medicare program for prescription drug prices that rise faster than the rate of inflation.

Going forward, stakeholders have an extensive list of immediate Medicare payment issues for Congress to tackle while lawmakers continue to consider fundamental reforms to the program. Priorities include mitigating Medicare payment reductions scheduled for 2023; providing relief to address inflationary cost pressures; extending the 5 percent bonus for physicians participating in Advanced Alternative Payment Models (APMs), which expires at the end of 2022 for Accountable Care Organizations (ACOs); and permanently expanding telehealth access and payment policies after the federal COVID-19 public health emergency (PHE) declaration expires. Many stakeholder groups are also urging the Senate to act on the House-approved legislation, Improving Seniors Timely Access to Care Act (H.R. 3173), to reform Medicare Advantage prior authorization policies.

Congress did not include major Medicaid proposals in the Inflation Reduction Act. Medicaid stakeholders want Congress to revisit certain Medicaid policies in one of the remaining legislative vehicles this year. Significant proposals of interest include closing the Medicaid coverage gap in non-expansion states, enhanced coverage for justice involved populations, and expanding support for home and community-based services (HCBS). States and some stakeholders have also sought more certainty in the timing and guardrails for ending the COVID-19 Public Health Emergency (PHE) policy that links enhanced federal Medicaid funding with the requirement for continuous Medicaid coverage.

Congressional leaders and key influencers are laying the groundwork for 2023 legislative efforts. Congress is likely to defer action on most major legislative issues until after the November mid-terms, including finalizing federal fiscal year 2023 funding for most departments. A change in control of either or both chambers of Congress will likely lead to greater scrutiny of the Biden Administration’s health care policies and actions, which have largely gone untested by this Congress.

Executive Branch

Executive orders have been a major source in driving federal workstreams in 2022. Following enactment of several major bills, implementation responsibilities have shifted to the Executive Branch and stakeholders will have multiple opportunities to further shape and support new programs, regulatory and policy updates, and funding opportunities. Executive orders passed include:

  • Advancing Racial Equity and Support for Underserved Communities, January 21, 2021
  • Promoting Competition in the American Economy, July 9, 2021
  • Improving the Customer Experience, December 13, 2021
  • Access to Affordable, Quality Health Coverage, April 5, 2022
  • Equality for LGBTQI Individuals, June 15, 2022
  • Protecting Access to Reproductive Healthcare Services, July 8, 2022

The Administration will continue to address COVID-19 emergency needs while stepping up efforts to support states, health plans, providers and other stakeholders as they prepare for the post-COVID environment. The current PHE declaration expires October 13, 2022, but since HHS has not signaled that it plans to end the PHE in October, another extension is likely until January 11, 2023. The next advance notification about the end of the PHE would be Nov. 12, 2022. Once the PHE declaration expires, numerous Medicare and Medicaid, TANF, and SNAP flexibilities will end, including Medicaid’s continuous coverage requirement and certain telehealth flexibilities, among others. Additional federal agency guidance is expected to support post-PHE transitions.

The Centers for Medicare & Medicaid Services (CMS) plans to advance new policy direction across several service and delivery areas, including strengthening long-term services and support and innovations via Section 1115 demonstration programs. CMS is expected to approve transformational 1115 proposals in additional states. Several state proposals focus, in part, on building capacity among local and regional entities and community-based organizations to address social drivers of health. Many state proposals are also strengthening behavioral health delivery systems and seek to meet enrollees’ urgent behavioral health needs. Additionally will want to monitor CMS’ regulatory efforts to align and strengthen managed care and fee-for-service (FFS) access and network adequacy policies as well as updates to the agency’s in lieu of services policy in managed care programs.

The Administration is also expected to accelerate work on its top policy priorities and regulatory agenda in advance of the next Presidential election, and this will require ongoing engagement among health care stakeholders.

For additional information on these and other policies, please contact Andrea MarescaAmy BassanoZach GaumerJon Kromm, or Kevin Kirby.

The basics of evaluating PBM contracts

This week, our In Focus section highlights an issue brief from Wakely, an HMA Company, The Basics of Evaluating PBM Contracts, published September 2022. The brief provides an overview of the basic financial elements of a pharmacy benefit manager (PBM) contract. Evaluation of a traditional request for proposals (RFP) or PBM contract should begin with financial analysis of the following four key elements: discount guarantees (typically understood as point-of-sale ingredient costs), dispensing fees, rebate guarantees, and PBM administrative fees. This paper addresses various points of consideration when attempting a financial analysis of these contract elements.

Payors today face unprecedented degrees of complexity when conducting a PBM RFP or evaluating PBM contracts. To stay competitive, payors must navigate an ambiguous and changing pricing environment. That requires a solid understanding of PBM contracting. In a proposal, some PBMs may offer better AWP discounts while other PBMs offer better rebate guarantees. Alternatively, a payor may find a PBM that offers the best discounts and rebates but charges significantly higher administrative fees. Such analysis will consider the impacts of these key components together with historical and projected drug mix. While any PBM analysis must start with the elements discussed in this paper, a complete analysis must dive below the surface and into the fine print underlying these items.

Link to Issue Brief

Delaware substance use disorder treatment system needs assessment

This week, our In Focus highlights a Health Management Associates Institute on Addiction (HMA IOA) report, Delaware Substance Use Disorder Treatment System Needs Assessment, published in June 2022. HMA IOA conducted a statewide three-county substance use disorder (SUD) treatment system needs assessment in Delaware. This project began in November 2021 and was primarily funded by New Castle County with contributions from Kent and Sussex counties. The goal was to review the current state of the SUD treatment ecosystem, identify strengths and gaps collecting input from as many Delawareans across multiple sectors as possible, and make actionable recommendations to build a more robust and sustainable future state system.

The final analysis included interviews with key stakeholders, focus groups, a survey of all licensed SUD providers, claims data analysis, and a comparison of Delaware’s public (e.g., Medicaid) outpatient and residential SUD reimbursement rates with selected regional states. This approach provided a unique cross-sector view of where the most significant opportunities for improvement and investment may rest.

The areas of greatest experienced need in the system were reported as: inadequate treatment beds, especially for some populations, like children and youth; lack of residential services for adults, especially those on Medicare and without insurance; needed supports for those experiencing negative impacts from social determinants of health (SDOH), like transportation and housing needs; lack of consistent access and care coordination; lack of adequate reimbursement to sustain the system or expand the treatment system; the need for trauma-informed care (TIC); and the need for more harm reduction and prevention strategies, including greater access specifically to Narcan 4mg Nasal Spray or its generic equivalent.

The study found that Delaware is meeting only 15 percent of SUD treatment needs and only meeting five percent of the need for the highest-intensity services, including inpatient treatment.

The results also showed an apparent discrepancy between what the state is working hard to implement to address the SUD and overdose crisis in Delaware and the community’s perception of, or lived experience with, those SUD treatment services and supports. Additionally, HMA IOA heard about many treatment system strengths from interviewees, town hall participants, and focus groups and included recommendations that are meant to leverage those existing strengths in the future treatment system.

Click here to read the report.

How can Medicare and Medicaid providers utilize CMS’ COVID-19 roadmap?

On August 18, 2022, the Centers for Medicare and Medicaid Services (CMS) released a roadmap to support healthcare providers with preparing for the eventual end of the COVID-19 public health emergency (PHE) declaration. CMS also published a series of fact sheets summarizing the status of Medicare Blanket waivers and flexibilities by provider type as well as flexibilities applicable to the Medicaid providers and stakeholders.

In its announcement, CMS expressed concern that the continued PHE flexibilities could contribute to further decline in patient, resident, and client safety beyond what has already been observed. As a result, the agency is cautiously working to balance ongoing PHE needs while conveying more urgency for providers to prepare for the eventual end of the PHE flexibilities and waivers.

CMS has already ended certain flexibilities and waivers. The agency could phase out other flexibilities as it prepares to let the PHE declaration lapse. This means that providers and health plans should act now to assess flexibilities and waivers in use and develop a plan to transition to post-PHE environment.

Phase-out of COVID-19 Flexibilities

During the COVID-19 PHE, CMS has utilized Medicare and Medicaid waivers and flexibilities extensively. For example, Medicare has not enforced certain federal requirements during this time to allow hospitals to utilize off-site locations to screen and treat patients when needed as well as to minimize certain reporting requirements. The agency’s flexibilities also have accelerated adoption of telehealth and audio only services, particularly for behavioral health services.

Medicare and Medicaid providers across the states utilized PHE flexibilities to varying degrees, in part depending on experiences in individual communities, capacity, and other provider specific factors. Additionally, over the course of the PHE health plan and provider staffing and workflows have changed dramatically. This means health plans and providers will need a tailored plan to support the transition to the post PHE environment.

HMA’s experts are working with hospitals, health systems, clinics, and other providers as well as health plans on the steps they need to take now to prepare for multiple transitions. Our experts identified six immediate steps that Medicare and Medicaid plans and providers can be undertaking now to ensure they can effectively return to normal operations, including:  

  • Review performance on the patient and clinician safety metrics cited in the new CMS resources. In instances where providers have gaps and suboptimal safety and quality outcomes they will need assistance developing and implementing mitigation and quality improvement plans.
  • Utilize CMS’ tailored fact sheets to identify specific flexibilities and waivers in use now and the “normal” federal regulations that will be in effect once the PHE lapses. This assessment should include the blanket waivers and provider specific flexibilities, including:
    • Flexibilities around the requirements and timing for practitioner training
    • Expansion of allowable sites of service that permitted more expansive use of telehealth and virtual services as well as screening and treatment provided at alternative sites
    • Relaxation of federal requirements pertaining to surge capacity protocols
    • Flexibilities for staffing requirements, including medical records departments, nursing facilities, among others
    • Waiver of requirement for hospitals to submit occupational mix surveys and to have a utilization review plan with a UR committee focused on services furnished to Medicare and Medicaid enrollees
    • Applicable of the Extreme and Uncontrollable Circumstances Policy in Medicare’s Shared Savings Program and use of other flexibilities for MSSP Accountable Care Organizations (ACOs)
    • Non enforcement of certain physician self-referral laws
    • Waiver of numerous reporting requirements including those pertaining to verbal orders, discharge planning, HEDIS and STARs measure reporting, among others
  • Project impact of ending Medicaid’s continuous coverage policy and support individuals with actions they may need to take at the end of the PHE. Once the PHE ends, Medicaid’s enhanced federal funding for states and continuous coverage policy will end. HMA is working with health plans, providers and other stakeholders to project how this change will impact the enrollment and payer mix on state and local levels. Additionally, patients and their caregivers will need support from plans, providers, and consumer groups to ensure they renew their coverage or transition to other coverage programs when needed.HMA’s experts have written extensively about our work to support the Medicaid unwinding activities here and here.
  • Develop a plan to transition from “PHE” to “post-PHE” expectations that is informed by the assessment of flexibilities in use. Key components of the plan include:
    • Anticipated resource needs to reflect changes in staffing and workflows during the PHE
    • Articulation of specific compliance procedures and regular reporting requirements that will resume and the process for this transition
    • Develop training and education opportunities for staff that may be new or need refresher on normal policies and procedures as well as timeframes for making these changes
  • Update budgets projections to account for changes in reimbursement rates for certain services post-PHE. Certain reimbursement amounts and payment methodologies will change post-PHE, such as payment for administering the COVID-19 vaccine in a Medicare patient’s home among other changes. Providers will need to project the financial impact of these payment changes and update coding and billing manuals and procedures where applicable.
  • Build strategies to sustain changes to care models implemented during the COVID-19 PHE while also addressing health disparities. Some providers and facilities adopted care models and modified existing ones during the PHE that may have improved patient outcomes and experiences, maximized expertise of practitioners, and improved value-based care. For example, some providers have embraced the Medicare Hospital Without Walls Initiative and will need to assess their options as some of those flexibilities are phased out. Other federal opportunities have newly emerged during the pandemic, such as the Rural Emergency Hospital designation and pending changes to the Medicare Shared Savings Program (MSSP).

What’s Next

The COVID-19 PHE declaration next expires on October 12, 2022. While a renewal of the PHE declaration is possible into early 2023, providers should be using this time to prepare for resumption of normal policies and procedures.

The expiration of PHE flexibilities and waivers are not, however, happening in a vacuum. Providers need to make this transition amidst a dynamic healthcare sector with high expectations for continuous improvement in quality, patient experiences, and value. During this transitional period HMA’s experts are working with health plans and providers to develop or revisit strategic plans and investments to refocus attention on improving models of care and value-based payment approaches, including strategies that will help mitigate health disparities.

For questions, please contact Melinda Estep, Mary Walter, and Andrea Maresca.

Medicaid managed care spending tops $420 billion in 2021

This week, our In Focus section reviews preliminary 2021 Medicaid spending data collected in the annual CMS-64 Medicaid expenditure report. After submitting a Freedom of Information Act request to the Centers for Medicare & Medicaid Services (CMS), HMA received a draft version of the CMS-64 report that is based on preliminary estimates of Medicaid spending by state for federal fiscal year (FFY) 2021. Based on the preliminary estimates, Medicaid expenditures on medical services across all 50 states and six territories in FFY 2021 was nearly $710.2 billion, with over 59 percent of the total now flowing through Medicaid managed care programs. In addition, total Medicaid spending on administrative services was $30.8 billion, bringing total program expenditures to $741 billion.

Total Medicaid Managed Care Spending

Total Medicaid managed care spending (including the federal and state share) in FFY 2021 across all 50 states and six territories was $420.5 billion, up from $359.6 billion in FFY 2020. This figure includes spending on comprehensive risk-based managed care programs as well as prepaid inpatient health plans (PIHPs) and prepaid ambulatory health plans (PAHPs). PIHPs and PAHPs refer to prepaid health plans that provide only certain services, such as dental services or behavioral health care. Fee-based programs such as primary care case management (PCCM) models are not counted in this total. Below we highlight some key observations:

  • Total Medicaid managed care spending grew 16.9 percent in FFY 2021. The rate of growth has been increasing since the COVID-19 pandemic. Prior to 2020, the rate had decelerated since FFY 2016.
  • Managed care spending growth was due in large part to the COVID-19 pandemic and the resulting higher Medicaid enrollment.
  • In terms of dollars, the increase in Medicaid managed care spending from FFY 2020 to FFY 2021 was $60.9 billion, compared to $46.1 billion from FFY 2019 to FFY 2020.
  • Medicaid managed care spending has increased at a compounded annual growth rate (CAGR) of 16.1 percent since FFY 2007, compared to a 6.6 percent growth in total Medicaid spending.
  • Compared to FFY 2020, Medicaid managed care spending as a percent of total Medicaid spending in FFY 2021 increased by 3.8 percentage points to 59.2 percent.

Figure 1: Medicaid MCO Expenditures as a Percentage of Total Medicaid Expenditures FFY 2007-2021 ($M)

As the table below indicates, 69.4 percent of FFY 2021 spending came from federal sources, which is 12 percentage points higher than the pre-Medicaid expansion share in FFY 2013, and 1.8 percentage points higher than FFY 2020.

Figure 2: Federal vs. States Share of Medicaid Expenditures, FFY 2013-2021 ($M)

State-specific Growth Trends

Forty-five states and territories report managed care organization (MCO) spending on the CMS-64 report, including Alaska, which utilizes a PIHP/PAHP model exclusively. Oklahoma is expected to implement a Medicaid managed care program in 2023. Of the remaining 44 states and territories that contract with risk-based MCOs, average MCO spending in FFY 2021 increased 17.6 percent. On a percentage basis, North Carolina experienced the highest year-over-year growth in Medicaid managed care spending at 63.3 percent due to the implementation of its risk-based Medicaid managed care program. Among states with more mature programs, Colorado experienced the fastest growth in FFY 2021 at 59 percent, followed by Nebraska at 55.6 percent.

The chart below provides additional detail on Medicaid managed care spending growth in states with risk-based managed care programs in FFY 2021.

Figure 3: Medicaid Managed Care Spending Growth on a Percentage Basis by State FFY 2020-21

Source: CMS-64; *Note: Not all states are included in the table.

Looking at year-over-year spending growth in dollar terms, Illinois experienced the largest increase in Medicaid managed care spending at $5.5 billion. Other states with significant year-over-year spending increases in dollar terms included Texas ($5.2 billion), California ($5.2 billion), and New York ($5.1 billion). The chart below illustrates the year over year change in spending across the states.

Figure 4: Medicaid Managed Care Spending Growth on a Dollar Basis by State FFY 2020-21 ($M)

Source: CMS-64; *Note: Not all states are included in the table.

The percentage of Medicaid expenditures directed through risk-based Medicaid MCOs increased by more than  five percentage points in 14 states from FFY 2020 to FFY 2021. The managed care spending penetration rate rose 13.4 percentage points in the District of Columbia, 9.7 percentage points in Indiana, 9.5 percentage points in Nebraska, 9.2 percentage points in North Carolina, and 9.1 percentage points in Illinois.

Figure 5: Medicaid MCO Expenditures as a Percentage of Total Medicaid Expenditures in States with a 5 percent or Greater Increase from FFY 2020 to FFY 2021 ($M)

Source: CMS-64

The table below ranks the states and territories by the percentage of total Medicaid spending through Medicaid MCOs. Iowa reported the highest percentage at 97.2 percent, followed by Puerto Rico at 95 percent, and Hawaii at 94.4 percent.

We note that in many states, there are certain payment mechanisms which may never be directed through managed care, such as supplemental funding sources for institutional providers and spending on retroactively eligible beneficiaries. As a result, the maximum achievable penetration rate in each state will vary and may be below that achieved in other states. The Medicaid managed care spending penetration rate is greatly influenced by the degree to which states have implemented managed long-term services and supports (MLTSS) programs.

Figure 6: Medicaid MCO Expenditures as a Percent of Total Medicaid Expenditures, FFY 2016-2021

Non-MCO Expenditures

Despite the rapid growth in Medicaid managed care over the last 10 years, program spending still represented approximately 59 percent of total Medicaid expenditures in FFY 2021. So where is the remaining fee-for-service (FFS) spending (approximately $291 billion) going? First, as noted above, there are many states/territories with Medicaid managed care programs in which certain beneficiaries or services are carved-out of the program, and these are typically associated with high-cost populations. The total amount of non-MCO spending in the 44 states with risk-based managed care in FFY 2021 was $260.4 billion. Assuming an average “full penetration” of 85 percent of total Medicaid spending, then HMA estimates that an additional $221 billion in current FFS spending could shift to a managed care model just in the states that already employ managed care for a subset of services and/or beneficiaries.

Thirteen states/territories did not utilize a comprehensive risk-based managed care model in FFY 2020. In general, the 13 states/territories that do not utilize managed care today are smaller states. Oklahoma, with $5.3 billion in Medicaid spending is expected to shift to risk-based Medicaid managed care in 2023. Total Medicaid spending across all 13 non-managed care states/territories was $29.8 billion. The 13 states/territories that did not employ a risk-based comprehensive Medicaid managed care model in FFY 2021 were Alabama, Alaska, American Samoa, Connecticut, Guam, Maine, Montana, Northern Mariana Islands, Oklahoma, South Dakota, Vermont, Virgin Islands, and Wyoming.

In terms of spending by service line, the largest remaining FFS category is home and community-based services at $69.5 billion, which accounts for 24 percent of FFS spending. Inpatient hospital services represent 21 percent of FFS spending at $60.8 billion.

Figure 7: Fee-for-Service Medicaid Expenditures by Service Line, FFY 2021

While the CMS-64 report provides valuable detail by service line for all FFS expenditures, it does not capture how spending directed to Medicaid MCOs is allocated by category of service. Therefore, it is not possible to calculate total MCO spending by service line, a challenge that will only intensify as more spending runs through MCOs.

Bolstering the youth behavioral health system: innovative state policies to address access & parity

This week, our In Focus section highlights an HMA Issue Brief, Bolstering the Youth Behavioral Health System: Innovative State Policies to Address Access & Parity, published in August 2022. The brief examines policies aiming to advance access and availability of behavioral health services (encompassing mental health and substance use disorders) for youth. Below we explore opportunities for states to adopt levers to ensure access to the full continuum of children’s behavioral health services. States should consider developing a multi-faceted strategy to address accessibility issues including:

  • A policy mechanism for insurance coverage and funding for infrastructure, support and services across behavioral health, child welfare and Medicaid
  • A robust delivery system for provision of services
  • Comprehensive benefit design
  • A mechanism to monitor network adequacy, access, and parity

The COVID-19 pandemic has exacerbated rates of depression, anxiety, and other behavioral health issues among youth – with suicide now the second leading cause of death among ages 10-12. Pre-pandemic, 1 in 5 children experienced a mental health condition every year and only 54 percent of non-institutionalized youth enrolled in Medicaid or CHIP received mental health treatment. Between March 2020 to October 2020, mental health–related emergency department visits increased 24 percent among youth ages 5 to 11 and 31 percent among ages 12 to 17, compared with 2019 emergency department visits.

Youth covered by Medicaid and the State Children’s Health Insurance Program (CHIP), and the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) of the Medicaid Act require state Medicaid agencies to provide enrollees under age 21 with access to periodic and preventive screenings, and services that are necessary to “correct or ameliorate” medical conditions, including other additional health care services such as behavioral health conditions. It remains the responsibility of states to determine medical necessity on a case by-case basis. As of 2020, states are mandated to submit a CHIP state plan amendment to demonstrate compliance with the new behavioral health coverage provisions. However, behavioral health services are not a specifically defined category of benefits in federal Medicaid law and coverage of many services is at state discretion. The 2008 Mental Health Parity and Equity Act (MHPAEA) requires that Medicaid managed care and private health insurers who do reimburse for behavioral health services provide behavioral health benefits to cover mental health and substance use services that is no more restrictive than the coverage generally available for medical and surgical benefits. While MHPAEA was designed to reduce inequities in coverage between behavioral and physical health services, it does not reduce inequities in reimbursement as payers are not required to cover behavioral health services.

Ambitious efforts are underway to prioritize behavioral health services for youth. The Department of Health and Human Services (HHS) recently called for states to prioritize and maximize efforts to strengthen youth mental health. The American Academy of Pediatrics (AAP), American Academy of Child and Adolescent Psychiatry (AACAP) and Children’s Hospital Association declared a national emergency in children’s mental health. In addition, passage of the Bipartisan Safer Communities legislation includes significant funding for mental health screening, expansion of community behavioral health center (CCBHC) model; improving access to mental health services for children, youth, and families through the  Medicaid program and CHIP; increasing access to mental health services for youth and families in crisis via telehealth; and investments to expand provider training in mental health, supporting suicide prevention, crisis and trauma intervention, and recovery.

Click here to read the Issue Brief.

For questions, please contact:

Caitlin Thomas-Henkel
Uma Ahluwalia
Devon Schechinger
Debbi Witham

Innovative state policy solutions to enhance the youth behavioral health system

With suicide now the second leading cause of death among children, adolescents, and young adults (aged 15-24 years old) in the United States, it is apparent that the COVID-19 pandemic has not only exacerbated rates of depression and anxiety, but also illuminated the fractures in our youth behavioral health system. In response, states are focusing on ways to advance policies that aim to expand coverage for youth mental health services.

Individuals suffering from mental health conditions or substance use disorders (SUDs) face many challenges accessing care and often do not seek treatment. Even before the COVID-19 pandemic, Centers for Disease Control and Prevention (CDC) data found 1 in 5 children were diagnosed with a mental health disorder, yet only 20% of those children received appropriate care.

In the past two years, over 100 laws in at least 38 states have been enacted with a focus on supporting schools to act as a primary access point for youth behavioral health care. At least half of all states are applying the co-location approach, where both types of care are delivered at the same site, to better integrate physical and behavioral health care. According to the Kaiser Family Foundation report, more than four-fifths of states launched initiatives related to screening for behavioral health needs, an effective strategy for Medicaid to connect those with behavioral health needs to the appropriate services.

Medicaid plays a pivotal role as the largest payer of behavioral health services, including both mental health and SUD services.  Efforts to address these issues have been a focus in Medicaid at the federal level, including in the 2018 SUPPORT Act and more recently in the 2021 American Rescue Plan Act (ARPA), which provided enhanced Medicaid funding for certain behavioral health providers and mobile crisis services. The Center for Medicare & Medicaid Services (CMS) under the Biden Administration has highlighted behavioral health policy and investments as a federal Medicaid priority.

During National Mental Health Awareness Month, the Department of Health and Human Services (HHS) called for states to prioritize and maximize efforts to strengthen youth mental health and detailed HHS’ plans to support state-wide coordination across federal funding streams to expand youth mental health services. This blog highlights California’s approach and spotlights other states’ efforts to bolster the children’s behavioral health system.

State Strategies to Strengthen the Youth Behavioral Health System

There has been significant work underway in California for years to address youth behavioral health services, but up until recently it did not include substantial investments to redesign the mental health system for youth, and families. California exemplifies ways to leverage policy levers and make significant state investments to cultivate and strengthen the youth behavioral health system. 

In 2021, Californiaenacted groundbreaking legislation by making significant investments to reimagine its youth behavioral health system. The Children and Youth Behavioral Health Initiative is a $4.4B investment intended to enhance, expand, and redesign the systems that support behavioral health for youth, children and families. This initiative, administered by the California Health and Human Services Agency and its departments, aims to evolve California’s behavioral health system in which all children (25 years of age and younger) regardless of payer, are served for new and existing behavioral health needs.

This multi-year strategy seeks to enhance and redesign the current behavioral health system by integrating behavioral health into physical health, education, and other areas that support children and families. With a stronger focus on prevention and early intervention, the Initiative will distribute school-linked partnership, capacity, and infrastructure grants to support implementation of the initiative for behavioral health services in schools and school-linked settings.

The Initiative will also provide incentive payments to qualifying Medi-Cal (Medicaid) managed care plans to establish interventions that expand access to preventive, early intervention, and behavioral health services for children in publicly funded childcare and preschool, as well as pre-K-12 children in public schools. Also included are efforts to submit a State Plan Amendment to incorporate the dyadic services benefit under Medi-Cal, whereby screening for behavioral health problems, interpersonal safety, tobacco and substance misuse and social determinants of health are provided for the child and caregiver or parent during medical visits. A key piece of the Initiative stipulates that every component outlined in the Children and Youth Behavioral Health Initiative Act may only be implemented if the Department of Health Care Services confirms that federal financial participation under the Medi-Cal program will not be jeopardized. Indeed, the intricate design and implementation of the Initiative would not be possible without partnerships from other State agencies, education stakeholders, subject matter experts, and community partners to deliveressential services from prevention to treatment and recovery.

California’s commitment to address youth behavioral health services at a statewide level illustrates the various efforts emerging across the country.  California is one state that is advancing multi-faceted strategies through legislation and Medicaid, but other states have used various Medicaid authorities including 1115 demonstrations, State Plan Amendments (SPAs), and 1915(c) Waivers to remove accessibility roadblocks and enhance youth behavioral health services. States have taken a variety of approaches in their commitments to bolster the system of care around the country that include:

  • New York amended its state plan amendment to expand the EPSDT benefit to enable a greater focus on prevention, early intervention, and expansion of behavioral health services. 
  • New Jersey amended its state plan to make Mobile Response and Stabilization Services (MRSS) for youth up to age 21 reimbursable under Medicaid’s EPSDT benefit.
  • Ohio RISE (Resilience through Integrated Systems and Excellence) for youth with complex behavioral health needs was enacted through a Medicaid 1915c waiver. Through this program, a single managed care organization provides new, targeted behavioral health services and intensive care coordination
  • Washington State passed the Behavioral Health Emergency Services legislation E2SHB 1688 (Chap. 263, Laws of 2022) to ensure coverage for all emergency behavioral health services (adult and children) to protect consumers from charges for out-of-network health care services by addressing coverage of emergency BH services.

Moving Ahead

States can combine the power of their policy levers along with the cascade of forthcoming federal dollars to strengthen the youth mental health system of care. The Bipartisan Safer Communities legislation includes significant funding for mental health screening, among other critical services. The Bipartisan legislation seeks to foster the tremendous opportunity for states and schools to increase behavioral health capacity for students and mental health professionals, evidenced by the School Based Mental Health Services (SBMHS) Grant Program, the School Based Mental Health Service Professionals Demonstration Grant, and several other investments for supportive services in schools.

Ensuring equitable access to a plethora of high-quality behavioral health services for youth requires the individual and collective commitment of states. The children’s mental health crisis has reached unprecedented levels and the opportunity for states to lead by example has arrived. Fortunately, states have significant tools to address the youth mental health crisis through the design and deployment of innovative policies and mission-aligned collaborations. Federal funds and state policy levers will help advance a robust and accessible children’s behavioral health system. As our communities work to rebuild in a post-pandemic world, states have the unique opportunity to provide today’s youth with compassion, essential behavioral health resources, and integrated systems to meet them where they are.

For additional information, please read our Bolstering the Youth Behavioral Health System: Innovative State Policies to Address Access & Parity brief, which explores state policy levers to advance access and availability of behavioral health services (encompassing mental health and substance use disorders) for youth.

Congress approves major health care proposals but the work is just beginning for CMS and stakeholders

On August 7, 2022, the Senate passed the Inflation Reduction Act of 2022 (the IRA). The House approved the bill on August 12, and President Biden is expected to sign the IRA into law in the coming weeks.

The IRA addresses a range of policy topics across health care climate, energy, and taxation. Regarding health care, the IRA makes structural changes to the Medicare Part D prescription drug benefit and provides new authority for the Medicare program to address the pricing of prescription drugs in the Part B and Part D programs. The measure also extends the temporary enhanced assistance for health coverage purchased from Marketplaces, which was first approved in the American Rescue Plan Act (ARPA). In addition, the IRA updates vaccine coverage policies in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). 

While the IRA provides a critical framework for the structural changes to the nation’s largest public health insurance programs, the U.S. Department of Health and Human Services will be responsible for building out the policy and operational components necessary to support implementation.  

Notably, the Centers for Medicare and Medicaid Services (CMS) will lead implementation of the IRA’s Medicare and Marketplace provisions. The changes to the Part D benefit and the development of entirely new processes and policies to support the IRA’s drug pricing provisions require significant resources and consideration of direct as well as indirect impacts for the health care market. The agency can use a variety of regulatory tools to support implementation, including issuing standalone Requests for Information (RFIs), convening stakeholder engagement sessions, updating policy manuals, and undertaking notice and comment via the formal rulemaking process, among others.

CMS’ strategic plan emphasizes the value of stakeholder engagement, and this is likely to lead to multiple opportunities for public input, particularly as CMS implements the new Medicare provisions of the IRA. For example, the agency must develop the policy parameters for reforming the Part D benefit design and is likely to seek input from Medicare Advantage (MA) and MA Prescription Drug Plans (MA-PDPs), providers, vendors, and consumer advocacy groups among others to inform its approach. CMS will also need input from the stakeholder community as it establishes the timelines, reporting, and negotiating mechanisms impacting Part B and D prescription drugs pricing and how it will implement the inflation penalty policies outlined in the IRA.

The IRA’s extension of the American Rescue Plan Act’s (ARPA) enhanced eligibility for premium assistance through 2025 provides more near certainty around eligibility and enrollment for this market. This may led to renewed momentum for CMS to engage with states and stakeholders on Marketplace policies and structures.

Many of the details around how the IRA’s health care policies will be implemented are unknown at this time. Stakeholders will want to monitor CMS’ progress and provide feedback with data-informed analysis and concrete and practical recommendations as these opportunities are announced. 

An overview of many of the IRA’s health care provisions follows. Our team of experts can provide tailored analysis and support to clients as they begin to unpack the full breadth of the IRA’s policy changes and implications for Medicare Advantage and Part D plans, providers, vendors, consumer advocacy groups and other stakeholders.

  • Part B and Part D Drug Pricing. Requires the Secretary of HHS to select a list of drugs eligible for negotiation, and enter into agreements with select manufacturers, negotiating a “maximum fair price” (MFP) for each selected drug in the Medicare program. The Secretary is required to negotiate on a certain number of drugs per year, 10 drugs in 2026; 15 drugs in 2027 and 2028, and 20 drugs in 2029 and subsequent years.  The number of drugs negotiated will accumulate over the years, such that up to 60 drugs could be negotiated by 2029.  Manufacturers who are not in compliance will face an excise tax that could far exceed the cost of drugs sold over time and civil monetary penalties.
  • Prescription Drug Inflation Rebates. Requires manufacturers to pay rebates for Medicare Part B and D drugs with prices rising faster than inflation. The rebate calculation would be based on units and pricing in Medicare and would determine an inflation-adjusted payment amount based on the percentage by which the price exceeds the inflation benchmark, as determined by the Consumer Price Index for All Urban Consumers (CPI-U). If a manufacturer fails to pay the rebate, then they would be subject to a civil monetary penalty either equal to or at least 125 percent of the rebate amount for the quarter.
    • The Part D inflation rebate takes effect October 2022 for Part D drugs and biologics.
    • The Part B inflation rebate begins January 2023 for single-source drugs or biologics and certain biosimilar products. The IRA also includes an inflation growth cap on beneficiary coinsurance in Part B, beginning April 2023.
  • Part B Payment for Biosimilar Biological Products. Amends Medicare’s Average Sales Price (ASP) payment methodology in cases where the ASP during the first quarter of sales is unavailable to establish a payment rate for biosimilars. The IRA also updates Medicare Part B reimbursement for certain biosimilar products for a five-year period beginning on October 1, 2022, by increasing the add-on payment from six percent of the reference product’s ASP to eight percent of the reference product ASP.
  • Medicare Part D Assistance for Beneficiaries and Benefit Design. Increases the qualifying income amount (federal poverty level (FPL)) for the full Low-Income Subsidies (LIS) under Part D, from 135 percent of the FPL to 150 percent of the FPL, starting in 2024. The IRA also adjusts the cost-sharing requirements in the Part D benefit by:
    • Eliminating cost sharing in the catastrophic phase of the benefit in 2024;
    • Setting an annual out-of-pocket (OOP) limit for enrollees at $2,000 beginning in 2025;
    • Capping monthly premium increases for a prescription drug plan in 2024 through 2029 at six percent per year.  The Secretary may make a one-time adjustment to the beneficiary Part D premium contribution percentage in 2030 to ensure longer-term beneficiary premium reduction; and  
    • Adjusting the benefit coverage liabilities for the initial coverage phase and catastrophic coverage phase.
  • Coverage for Insulin. Requires Medicare to cover select insulin products and not apply a deductible or impose cost-sharing more than $35 or 25 percent of the negotiated price (including all discounts) for a 30-day supply. Beginning in July 2023, Medicare must exempt from beneficiary deductibles insulin provided through durable medical equipment (DME) and ensure that coinsurance for a month’s supply of insulin administered through DME does not exceed $35. High-deductible health plans (HDHPs) will be able to cover selected insulin products with no deductible without impacting their status as a HDHP, starting in 2023.
  • Medicare, Medicaid, and CHIP Coverage for Vaccines. Requires full coverage of Advisory Committee on Immunization Practices (ACIP)-recommended adult vaccines under Medicaid and CHIP without cost-sharing. The IRA also increases the Federal Medical Assistance Percentage (FMAP) by one percentage point, for adult medical assistance for such vaccines and their administration, during the first eight fiscal quarters on or after the date of the IRA’s enactment.
    • Requires Medicare Part D provide full coverage without cost sharing of ACIP-recommended adult vaccines for plan years beginning on or after January 1, 2023.
  • Enhanced Temporary Assistance for Marketplace Coverage. Extends the ARPA’s expansion of Advanced Premium Tax Credit (APTC) eligibility and amounts through 2025. ARPA modified the affordability percentages used for the calculation of APTC to increase subsidy amounts for individuals eligible for assistance.

Experts from HMA and HMA companies are supporting clients as they begin to strategize and formulate initial recommendations for federal agencies and plan for implementation.  We will continue to monitor developments in this area and provide additional updates as more information becomes available. 

HMA Identifies Key Trends for Emerging Medicaid Section 1115 Demonstration Proposals

As the urgent needs of COVID-19 Public Health Emergency (PHE) continue to subside, state Medicaid agencies are exploring pathways and concepts to further address the historic inequities and health disparities laid bare by the pandemic. These efforts are closely aligned with the current Administration’s policy objectives for the Medicaid program, specifically:

  1. Addressing health equity
  2. Improving access and coverage
  3. Promoting whole person care

For several decades, Medicaid Section 1115 demonstration programs have provided a powerful lever for federal and state policymakers to design, implement, and evaluate transformative initiatives. All states administer at least one Section 1115 demonstration program. Some demonstrations are narrowly tailored to address services or populations while others capture broader features pertaining to coverage, benefits, and payment and delivery system innovations.

Notably, a new wave of comprehensive and transformative Medicaid Section 1115 demonstration proposals is emerging.

Working closely with the Centers for Medicare and Medicaid Services (CMS), states are developing proposals that place individuals at the center of health care in an entirely new way – by recognizing their medical needs as well as the complexity of circumstances and environmental factors that shape the individual’s medical, physical, and behavioral care needs and outcomes.

Teams of experts from across the HMA family of companies are supporting state agencies, counties, health plans, providers, community and consumer organizations, and other stakeholders with translating federal goals and parameters into concrete proposals as these move through the stages of concept paper, application and negotiation, and implementation. Demonstrations will reflect each state’s unique political and policy landscapes, but the programs will be grounded in certain federal goals and expectations to enhance accountability and improve outcomes.

Our experts identified three trends in state 1115 demonstration programs. In this and subsequent In Focus posts we will share our team’s initial insights and considerations for stakeholders based on our collective “on the ground” expertise. We include illustrative examples from some states with approved and pending Section 1115 proposals.

Section 1115 Trend #1: States are advancing a new vision for Medicaid’s role in addressing health equity, influenced by social drivers and grounded in a community’s needs.

CMS is strongly encouraging states to consider initiatives that address health inequities and community specific social drivers of health. As evidenced by the current state initiatives, Section 1115 demonstration programs will be a primary — but not the only — pathway states utilize to design strategies to address health inequities driven by non-health systems and circumstances. Based on our work with states and stakeholders, it is critical that states ensure the services are directly linked to factors that impact health outcomes for Medicaid enrollees and that they have mechanisms to evaluate the impact of community and social care services.

Several state proposals already signal CMS’ current vision for using Section 1115 authority to test new types of assistance within service categories to include non-medical services, services tailored to populations, and assistance that is linked to desired outcomes. For example:

North Carolina’s Section 1115 pilot program will provide support to certain groups of consumers for an array of community supports ranging from housing related services and transportation access to interpersonal violence and access to food and nutrition services. The program includes help for consumers related to utility set up and moving costs, and support to connect with community services to address legal issues impacting housing and thereby impacting health.

In December 2021, CMS approved California’s Section 1115 demonstration program and linked this to a separate waiver approval allowing the state to further enhance services and accountability within its managed care program. As part of California’s implementation of its statewide whole person care initiative, the state will be able to pay for housing navigation and tenancy services and assistance with first month deposits for certain populations enrolled in its statewide managed care program. This proposal is grounded in the state’s commitment to ensure that the non-medical services were clearly defined and clinically oriented for the intended population.

CMS’ approval of the North Carolina and California programs is paving the way for conversations in other states, including New York, New Jersey, and Oregon among others. Negotiations on similar initiatives to address health equity in other states, include:

New York, like North Carolina, plans to seek CMS’ approval to offer a range of community services that would be provided through newly established networks of community-based organizations in all regions of the state. The state envisions that the CBO networks will include small neighborhood organizations familiar with their communities’ needs and the capacity to address multiple social risk factors as well as larger county or regionally focused entities. In addition, New York is asking CMS to support a health equity focused proposal which would provide certain “in-reach” services for incarcerated individuals before they are released.

Oregon submitted a request to use federal Medicaid spending authority to address community-based health inequities and to establish statewide health equity investments (HEIs). The state is especially focused on supporting consumers during disruptions in coverage, life transitions, or disruptions caused by climate events. Community-based investments will reflect empirical evidence and community assessments and may include efforts to improve building environments and expand culturally and linguistically. Addressing climate events may be of particular interest as it addresses multiple priorities for Administration.

Conclusion

North Carolina and California offer important insights into what may be possible and as importantly, what may be beyond the bounds of CMS’ Medicaid authority. Chief among the outstanding issues for states and stakeholders is whether additional innovative programs for addressing health disparities among justice-involved populations is possible under Medicaid’s demonstration authority.

CMS may use the experience with initial states to provide more concrete information on these general parameters and expectations. Formal guidance would prove helpful to states and stakeholders seeking to apply new knowledge and experiences with health inequities into practice within the Medicaid programs.

HMA’s interdisciplinary teams of Medicaid, human services, and actuarial experts are assisting states as well as stakeholders as they conceptualize, develop, and implement Section 1115 programs. To learn more about our work and the breadth of our services please contact HMA consultant Andrea Maresca, Principal.

CMS Requests Input on Improving Medicare Advantage: Stakeholders Have a Brief Window to Offer Ideas to Inform Agency’s Initial Proposals

This week, our In Focus section reviews the request for information (RFI) on ways to strengthen the Medicare Advantage (MA) program, released by the Centers for Medicare & Medicaid Services (CMS) on July 28, 2022. CMS’s intent is to better align the MA program with the agency’s Vision for Medicare and the CMS Strategic Pillars. The agency is strongly emphasizing the importance of stakeholder comments for this process. This openness to feedback presents MA plans, providers, and other stakeholders an opportunity to inform the agency’s early thinking as it considers potential regulatory actions impacting supplemental benefits, value-based contracting arrangements, risk adjustment, prior authorization, and marketing among other issues.

The questions are grouped into five categories. Throughout each section CMS seeks to better understand operational issues and insights from past or ongoing experiences tackling health equity issues in states and communities. Below we describe several of the questions and themes within each category:

  1. Advance Health Equity: This extensive set of questions is intended help CMS better understand MA plans’ specific programs, screenings, benefits, and data that are components of addressing health equity and how the agency can better ensure that all MA enrollees receive the care they need. CMS also is seeking to better understand the collaborations and reimbursement arrangements between MA plans and providers that partner with community-based organizations, particularly as these arrangements become more central to efforts to address social drivers of health. The agency continues to focus on the dual eligible population, and asks specifically how it can support efforts by Special Needs Plans to provide targeted, coordinated care for enrollees.
  2. Expand Access: Coverage and Care: In this section CMS explores MA plans’ marketing efforts, including the tools beneficiaries use and how plans differentiate themselves to beneficiaries, as well as factors for building and changing plan networks. Additionally, CMS poses many questions about supplemental benefits, including questions about how MA plans design supplemental benefits, how they inform beneficiaries about these benefits and whether there are evaluations or data elements that are used. CMS also anticipates receiving information on how it can ensure that enrollees have access to the covered behavioral health services they need, access and use of telehealth services.
  3. Drive Innovation to Promote Person-Centered Care: Last year, CMS committed to ensuring that 100 percent of Medicare beneficiaries were in accountable care relationships by 2030. This will require changes for more than 30 percent of Medicare beneficiaries. To date, much of the attention around this goal has been focused on fee-for-services arrangement. With this RFI, CMS is turning its attention to value-based arrangements in MA. Specifically, it asks stakeholders about the factors driving MA plans and providers participating in value-based contracting. The agency wants to better understand the data that is crucial for value-based contracting and the experiences of MA plans in trying to align with value-based contracting in other Medicare programs/models, Medicaid, and the commercial payers. Stakeholders also have an opportunity to provide input on how CMS could better support efforts of MA plans and providers to appropriately and effectively collect, transmit, and use appropriate data as well as potential new tops of payment or service delivery models that could be tested.
  4. Support Affordability and Sustainability: This set of questions turns to payment and competition in the marketplace. Specifically, the agency asks for input on potential methodologies to ensure risk adjustment is accurate and sustainable. CMS also wants to understand how stakeholders are thinking about the relationship between risk adjustment and health equity and addressing social determinants of health SDOH. The agency also wants to consider specific local market barriers to entry and advantages and disadvantages in different markets.
  5. Engage Partners: This group of questions provides an opportunity for stakeholders to address information gaps for Medicare beneficiaries. The agency also is interested in how it could promote collaboration among MA stakeholders.

Why It Matters:

As the urgent issues with the pandemic continue to ease, CMS is turning its attention to proposals that could help refocus the Medicare program, including Medicare Advantage, to address health equity, quality, and affordability.

Stakeholders will want to carefully consider how they could use their RFI responses to shape the agency’s potential future proposals. Health plans, providers, community organizations, and vendors have an opportunity to highlight concepts, tools, and other innovations that have proven successful and scalable.

Specific concrete examples of the impact on Medicare beneficiaries would be highly valued by the agency. It will also be important to focus responses on regulatory policy changes and actions that CMS can advance with its existing authority.

HMA experts can assist stakeholders with their responses on these impactful issues including but not limited to:

  • Innovations stakeholders have tried, barriers to concepts and needs they have identified, and other ideas on flexibilities for local partnerships and technology.
  • Approaches to improve the MA experience for the Medicare and Medicaid dually eligible population and rural communities.
  • New risk adjustment methods.
  • Potential improvements to the MA quality program.
  • Strategies for improving the beneficiary enrollment process.
  • The value and opportunity of using technology and telehealth and how these impact the design of provider networks.
  • Framing the factors and dynamics around MA plan and provider value-based contracting.

What’s Next

CMS is accepting comments on this RFI until August 31, 2022. The agency could use input it receives to develop proposals for at least the next two regular rulemaking cycles for the Medicare Advantage program, issue policy proposals outside of the normal rulemaking, or both.

HMA experts are available to provide strategic assistance with framing and developing responses as well as analysis to reinforce points and recommendations to the agency for this expedited RFI response timeline.

For questions please contact Amy Bassano, Managing Director, Medicare; Julie Faulhaber, Managing Director, Medicare and Dual Eligibles; Zach Gaumer, Principal; Andrea Maresca, Principal.