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Revisiting Republican Governors’ 2011 Medicaid Reform Proposals

This week, we revisited a 2011 report from the Republican Governors Public Policy Committee Health Care Task Force. The report, titled “A New Medicaid: A Flexible, Innovative and Accountable Future,” was prepared with input from governors, secretaries of health and human services, Medicaid directors, and other senior policy staff in the 31 states (including two territories) with Republican governors at the time. Across these 31 states, 20 of the governors in office at the time of the report are still in office. Only three of the 31 states (Louisiana, Pennsylvania, and Virginia) now have Democratic governors in office, although Alaska’s new governor is an Independent who expanded Medicaid this year. The report provides more than 30 recommended solutions across seven broad principles that would “increase Medicaid’s efficiency and effectiveness as a part of the overall health care delivery system regardless of whether or not [the Affordable Care Act (ACA)] is repealed.”

The solutions highlighted below align with some of the national policy positions coming from Congress and the incoming Administration, but also include additional ideas that the Republican governors offered for consideration. Given that these proposals are now five years old, some solutions are no longer relevant and are not included in the summary below. Additionally, certain concepts proposed in the Governors Public Policy Committee paper have since been incorporated into Medicaid waiver proposals, including value-based purchasing, health savings accounts, and bundled payments, with a mixed record of federal approval.

Principle #1: States are best able to make decisions about the design of their health care systems based on their respective needs, culture and the values of each state.

  • Provide states the option to define and negotiate a broad outcome-based Program Operating Agreement (POA) with CMS. The only notification required would be when a state elects to update or change an agreed upon POA. States would publicly report the outcome measures established within the POA on a routine basis. CMS oversight should only be triggered when there is a significant deviation in the reported versus projected measure. The number of measures should be finite. Eliminate the onerous federal review process for operating the Medicaid program within each state, such as requiring waivers for designing systems, benefits, services, and payment and reimbursement rates. The relationship between the federal and state government should be based on the principles of value-based purchasing rather than rigorous, complex and lengthy processes.
  • States can create a specific “dashboard” to measure accountability utilizing recognized measures of quality, cost, access and customer satisfaction that reflects the states’ priorities and permits an assessment of program performance over time. Where possible, states will utilize the expertise of state, local and national organizations that have developed appropriate measures. In many cases, states already have developed extensive measures of quality and accountability, including customer satisfaction. These dashboards should utilize those processes instead of recreating onerous administrative burdens for states.
  • Program integrity should be the responsibility of the state. Currently, common practice is to utilize federal contractors for program integrity initiatives, most of whom are not familiar with individual state programs and simply engage in “pay and chase,” where claims are paid and then states seek payments afterward. Instead, states and their staffs should be able to utilize existing federal funding sources to proactively fight fraud and abuse activities.
  • Require the federal government to take full responsibility for the uncompensated care costs of treating illegal aliens.

Principle #2: States should have the opportunity to innovate by using flexible, accountable financing mechanisms that are transparent and hold states accountable for efficiency and quality health care. Such mechanisms may include a block grant, a capped allotment outside of a waiver, or other accountable and transparent financing approaches.

  • Allow states to pilot self-directed alignment structures for state and federal health care programs to reduce the incidence of cost-shifting from one program to another, encourage efficiency in complementary programs and ensure program integrity.
  • If a state can demonstrate budget neutrality, provide states the ability to use state or local funding, now spent as match funding, for certain health services that would pay for Medicaid services or health system improvements that are currently not “matchable,” but are cost effective and improve the value of the Medicaid program. This could include Health Information Exchanges, increased benefits for some individuals, improved care management and local care coordination, and pilot programs to test innovations.
  • States should be encouraged to develop innovative programs to reduce chronic illnesses and the burden of associated health care costs to individuals and the taxpayers. Allow states to invest in alternative programs that reduce hospital emergency room visits and other community-based programs to reduce hospitalizations.
  • Program integrity should be the responsibility of the states. In order to properly insure the taxpayers’ investment in Medicaid is protected:
    • All sources of federal funding allocated to combat waste, fraud and abuse should be included in any block grant or alternative financing mechanism proposal.
    • An enhanced contingency fee should be paid to states for increasing their efforts to decrease waste, fraud and abuse. The current system’s development matching rate of 90/10 should be allowed for improvements to states’ current fraud and abuse, and eligibility systems. Innovative programs that show a positive return on investment for both the state and federal governments should be allowed without the onerous waiver process.
    • The entire appeals process for any recoupments and overpayments should be exhausted prior to paying the federal share of the recovery.

Principle #3: Medicaid should be focused on quality, value-based purchasing and patient-centered programs that work in concert to improve the health of states’ citizens and drive value over volume, quality over quantity, and, at the same time, contain costs.

  • Provide states with the flexibility, without requesting waivers or initiating the state plan amendment process, to pay providers based on meeting quality care and value-based criteria rather than the current fee-for-service approach. Allow innovative payment methodologies to encourage care coordination for all Medicaid eligibles, without exception. Other options could be capitated payments, shared savings, and incentive arrangements when such payments encourage coordination, reduce cost shifting and improve care delivery.
  • Provide states with the ability to implement bundling projects. For example, a provider is paid an amount for a discrete event, such as hip replacement, and that provider pays other providers for all necessary care for the event, with providers sharing in savings.
  • Give states the ability to use only one managed care organization if client volume in an area is insufficient to support two. CMS now requires at least two managed care organizations in each area.

Principle #4: States must be able to streamline and simplify the eligibility process to ensure coverage for those most in need, and states must be able to enforce reasonable cost sharing for those able to pay.

  • Establish reasonable, rational and consistent asset tests for eligibility. Amend [ACA]’s definitions of income to count child support payments (current law in Medicaid), and reverse the use of Modified Adjusted Gross Income (MAGI) in order to avoid new eligibility for higher-income Americans.
  • Give states the flexibility to streamline and improve the eligibility determination system by contracting with private firms.
  • Within a state’s fair share of federal funding, there should be significant flexibility regarding how a state provides eligibility for its population in need.
  • Eliminate the marriage penalty.

Principle #5: States can provide Medicaid recipients a choice in their health care coverage plans, just as many have in the private market, if they are able to leverage the existing insurance marketplace.

  • Eliminate the obsolete mandatory and optional benefit requirements. Provide states the flexibility to design appropriate benefit structures to meet the needs of their recipients in a cost-effective and efficient manner as part of the state’s negotiated plan.
  • Eliminate benefit mandates that exceed the private insurance market benchmark or benchmark equivalent. Design benefit packages that meet the needs of specific populations, including allowing a plan that puts non-disabled populations into Section 1937 benchmark plans. Amend Section 1937 to include cost-sharing provisions and allow states the authority to enforce cost sharing.
  • Purchase catastrophic coverage combined with an HSA-like account for the direct purchase of health care and payment of cost sharing for appropriate populations determined by each state.
  • Provide states the option of rewarding individuals who participate in health promotion or disease prevention activities.
  • Provide states with the ability to offer “value-added” or additional services for individuals choosing a low-cost plan or managed care plan (i.e., additional services and benefits offered by coordinated care companies for successful completion of healthy baby programs, or an adult dental benefit).
  • Allow states the option of contributing to a private insurance benefit for all members of the family. Require all members of the family to participate in cost- effective coverage.
  • Lower the threshold for premium payments to 100 percent FPL to encourage a sense of shared beneficiary ownership in health care decisions.

Principle #6: Territories must be ensured full integration into the federal health care system so they can provide health care coverage to those in need with the flexibility afforded to the states.

  • The territories should be treated consistently, fairly and rationally in funding, services and program design.

Principle #7: States must have greater flexibility in eligibility, financing and service delivery in order to provide long-term services and support that keep pace with the people Medicaid serves…. [T]he innovative power of states should be rewarded by a shared-savings program that allows full flexibility to target and deliver services that are cost effective for both state and federal taxpayers.

  • At a state’s discretion, permit states to redesign Medicaid into multiple parts. Medicaid Part A would focus on preventive, acute, chronic and palliative care services; and Part B would focus on long-term supports and services (LTSS). This would enable a state to better manage the different needs between populations who only need LTSS. Eligibility for Part B would be based on income and functional screening of an individual’s long-term services and LTSS needs.
  • Engage in shared savings arrangements for dual eligible members when the state can demonstrate the Medicare program reduced costs as a result of an action by a state Medicaid program.
  • Repeal restrictions that impede self-direction of long-term care supports and services (LTSS) and allow states the ability to design programs that meet their needs and are cost effective.
  • At the state’s option, replace Medicare cost-sharing with state- administered, 100 percent federal grants.
  • Give states the flexibility to enroll more members, especially families, in premium assistance programs including Medicare benefits, when it is cost efficient. Medicaid should be the payer and insurer of last resort.
  • Extend Medicare coverage of skilled nursing facilities by 60 days.

Link to Republican Governors Public Policy Committee Paper

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