Alaska Medicaid Trends - Report By Janet Clark to House Finance

How to present all this information?  Back to the Fire Hose analogy.  I've got my notes while I was there.  I could also try to go through and pick out key points, plus there was the Powerpoint presentation and the Report and Janet Clarke emailed me copies of those today.
So, the easiest way is to give you the Executive Summary.  And then I'll give you my written notes of the mostly questions and answers from the committee members.  The previous post gave a short summary of what people in this meeting said about ways to control costs of Medicaid.

You can also listen to the audio of the meeting from Gavel to Gavel.

EXECUTIVE SUMMARY (from the Report by Clarke)

PURPOSE
In January 2010 the House Finance committee requested consulting assistance to review Medicaid expenditures and projections (which are expected to spike by 17% in FY2010) to better understand the cause of the increase and impacts on budgets. 

 
Three questions were asked

1. What caused the large increase in Expenditures from FY2009 to FY2010 and why did it happen?
2. What is an appropriate level to budget for Medicaid spending in FY2010?
3. What is an appropriate level to budget for Medicaid spending in FY2011?

METHODOLOGY
Several different sources of data including Medicaid spending, enrollment, recipients, Food Stamp caseloads, Alaska Population trends, and the Consumer Price indices were used in the analysis.  Interviews with State officials supplemented the data.

ANALYSIS 
Medicaid spending is based on three main components:  

• PRICE
• RECIPIENTS
• UTILIZATION

       
Each of these components has been analyzed for their impact on Medicaid spending. 
Expenditure trends were developed and spending over time was analyzed.  Reviews were completed of the current budget supplemental budget request and FY2010 and FY2011 forecasts by the Department of Health and Social Services were analyzed.

CONCLUSIONS
Over 11,000 more Children are now enrolled in the Medicaid program than they were one year ago, causing the substantial spike in the budget.
Recipients (those who use services) grew at a slower pace than enrollees.
The cause of the increase is primarily tied to Economic conditions (Unemployment rate at 8.8%) and Alaska’s population increase.
Other factors such as price and utilization also contributed to the increase.
The most recent monthly trends in Medicaid spending show a slowing of expenditures.
RECOMMENDED LEVELS OF SPENDING
Recommended FY2010 Supplemental:     

• $36.8 Million GF (General Fund)(Alaska Pays)
• $37.7 Million Fed (US pays)
• $74.1 Million TOTAL

[NOTE:  This is a recomendation for a SUPPLEMENTAL Increase.  The Total is below:]

Recommended
FY2011 Medicaid Budget:   [FY 2011 = Fiscal Year 2011, which goes from June 2010-June 2011]

• $    441.6 Million GF
• $ 1,318.2 Million TOTAL

My notes convey the back and forth between the committee members and the people presenting.   And the questions you surely have from the above are discussed.   I've tried to clean up the typos.


KEY PLAYERS:  Janet Clarke  was hired by the Finance Committee to review the department budget proposals on Medicaid.  She used to work in the Department and if I got things right, she left about two years ago.  She clearly knew what she was doing.  And the Finance Committee clearly respected her knowledge.

Finance Committee Members: 

CO-CHAIR: Representative Hawker CO-CHAIR:Rep Stoltze  Absent

VICE-CHAIR:	Representative Thomas
MEMBER:	Representative Austerman
MEMBER:	Representative Fairclough
MEMBER:	Representative Joule  Absent
MEMBER:	Representative Kelly Absent
MEMBER:	Representative Doogan
MEMBER:	Representative N.Foster
MEMBER:	Representative Gara
MEMBER:	Representative Salmon

So, Janet Clarke came up to present her report.  The rest is my running notes, which I've gone through to highlight and clean up spelling a bit.  But recognize these are a ROUGH RECORD not a true record.  You get here Clarke's presentation (without the charts) and the questions and answers.

Clarke:  Page 1 of Report: Page 3 - Medicaid declined 2007 and 2008, without cut in service, in part due to good economy, but also cost cutting.

But itʻs back up now. Terms like FMAP  - Federal Medicaid Authorized Percentage - is the federal matching rate.  Alaskaʻs FMPA would have fallen to 50% but the Economic Stimulus Bill (ARRA) increased the rate to 61.12%.Asst When the stimulus FMAP goes away in 2011, the state will be faced with another $100 million.

Thomas:  You mentioned tribal.  Without them, how big would this be? Clarke:  Itʻs about $150 million. Salmon:  We had a report from non-profits out of Anchorage and mentioned the state was funding their program - about $1 million.  Do you know what area of the state that is coming from?

Clarke:  I do not.

Doogan:  So I can understand this, if this were a 50/50 match, it would be about $900 million each, but because itʻs 60/40 it would be lower, but the stateʻs share would still be higher than now.  Is that because some of the programs are 100% Fed?

Clarke:  Youʻre absolutiley right, some are 100%, some 90% and other formulas.

Doogan:  If we go back to 50/50 - how much is it going to jump up?

Clarke:  It will depend on the National formula.  Iʻve seen numbers from $100-120 million.

Clarke:  Factors that determine the spending.  Itʻs an entitlement program.  If people are eligible, they can get the services. Slide: 

Three components of growth:  Price, Population (Enrollment and Recipients) and Utilization.

Part I:  Price: 
1.  Change in CPI. [Consumer Price Index] Now 3% is general cost increase. 2.  Physician rate increases are within normal CPI, but this cost was beyond the CPI.  There were changes in the Medicaid formula that increased Dental rates by 5% and the second which increased medical rates by 15%.  The medical rate increase wasn't anticipated and was linked to a change in the formula the feds use to calculate rates.

Part II:  Population:
1.  Enrollment in Medicaid     
children  , adults, seniors
- main growth is children     Medicaid children monthly enrollment (6100 increase July 09-Dec 09)     
- red Denali Kid Care (2300)(150-175%)     
-grey Regular poverty level (about 9000) [I'm not sure what these numbers mean, perhaps I got them wrong - I think she was dividing the kids into those who got Denali Kid Care and those who qualified through poverty.  But the numbers don't add up.]

Hawker:  Timing on chart is that the low point was last January and so the increase began after we funded last year.

Clarke:  Part III - Recipients - those covered who actually use it. (Medicaid Recipients Chart) Children, Disabled Adults, Adults, Elderly, Disabled children Medicaid Children Monthly Recipients: Last January trend was declining, then it hit.

So, itʻs the children that are increasing.  How to measure?
1.  Look at numbers of enrollees and look at how many use services?  2009 97% used services.
2.  Look at costs/medicaid enrollee. 2006-2009  fairly stable.  About $8200 per enrollee. 2010 - Three models.
a)  high forecast - >$9000 for FY2000
b) low forecast (really moderate, I wouldnʻt call it low)
c) check write and thatʻs $8243(?)

Austerman - thru 2008 actual?  Yes.  2010 been what so far?

Clarke:  Between checkwrite and low projection.

Austerman - pretty much following the trend

Clarke:  Couple things. 
1)  in spring spending accelerates 
2) Also some programs that department pays lump sum payments - some tribal payments and others, special one to API, and thatʻs not taken into account.

Austerman:  so that number will continue to go up?

Clarke:  Yes

What are the factors that led to increase?
Price:  about 3% Population:  11,000 more kids enrolled, about 5% Utilization:  a little bit

Whatʻs causing this?  Alaska Public Assistance Caseload Trends.
Economy is having an impact. Food stamps and medicaid growth almost exactly the same.  FS is a leading indicator, shows where medicaid enrollment will go

Gara:  Food stamps qualifier?  150%

Salmon:  Simple, yellow line on the bottom is what?

Clarke:  ATAP & Tribal TANF  - itʻs very stable and has been great success, Welfare reform set 5 year limit. Alaska Temporary Assistance Program - Remarkable decline in that program.

Clarke:  Dept. of Labor website - Alaska population grew at highest rate in years, birthrate highest since 1992.  Previous studies.  Medicaid pays for 40-50% of births in Alaska.  So population has contributed to cost increase. Delayed impact from SB 27, 2007, Denali Kid Care Program, had been at a 200% Poverty level and was change in 2003 to 175%.  But changed to fixed rate, whatever the number in 2003 = 175%  but in 2007 it actually was 150% of poverty level.  So in 2007, they put it into the law that it was 175%.  They thought kids would return by 2008.  There was a delayed impact.

Last thing:  Two issues that have garnered a lot of media attenion
1. H1N1
2.  Health Care reform These seem to increase utilization

Salmon:  Why is the Adult Public Assistance a straight line?

Clarke:  Itʻs for elderly

Foster:  Would be interesting to see correlation between cost of energy and utilization.  Also, looking at this geographically - urban or rural?

Clarke:  One good thing about Medicaid program:  They have data.  You can get any info you like, just depends how deep you want to drill. 

Hawker:  Medicaid democraphics follow Alaska Demographics.  In urban areas, youʻll see - itʻs not that the services are different between rural and urban - if they are in rural Alaska and they have access to native health care, theyʻll get 100% from the feds.  This allows the state to afford more for the rest of the state.  And transportation costs are high.  And feds keep asking about transportation costs because they are so high.

Chart:  Medicaid Projections Three different monthly forecasts.  Which is most accurate? April 2008 high forecast 1.13Billion for FY 2008, low $984.   Come together in June when we get the actual spending Jan 2010:  suggests 1.26 billion 1.2 and 1.16 Billion. Chart:  Monthly Medicaid Spending Goes back to October 2008.  Weekly trends, but shown as monthly.

Fairclough:  p. 17 after birthrate in Alaska, State lost three cases that were restricted by 2006 intent v. court ruling on controlling costs.

Clarke:  Dept of Law Iʻm sure will talk to you.  When the intent went into place, it dropped and has slowly come back up.  Urge Leg. to consider.
1.  Because of special stimulus FMAP.  If we accept the money, we canʻt cut eligible for services.
2.  I think in the future if Legislature needs to contain costs, will have to put it in legislation.  Legislative intent is just legislative intent.  Having lived through cost containments, there will be challenges by people being cut.

Fairclough:  Want to know what was reinstated and how that related to intent?

Clarke:  Austermanʻs earlier question.  $682 million since Jan. 2010.  Thatʻs $1.2 billion for the year if it continues. 

Gara:  People w/o health insurance going to emergency room.  Those people arenʻt even covered by medicaid.

Clarke:  If they do go in and then qualify for medicaid theyʻre signed up, but ask the department.

Austerman:  Please repeat numbers Clarke:  getting close to $1.2 billion figure. Next charts boring.  Just numbers.  Medicaid Supplemental Alternatives $88.4 million.  that would be $1.264 billion.  I think it is trending to $1.2 billion, about $64 million less, but Iʻm sensitive to the unexpected.  I recommend give them this extra cushion.  That would save $7 million in general funds.

Hawker:  Making judgment calls around the margins.

Gara:  This isnʻt going to impact their costs, just whether there is a supplemental.

Clarke:  This is the supplemental.

Gara:  Through June.  Youʻre hoping theyʻll need $70 million less.  But whether you are right or they are right, it wonʻt affect the actual costs.

Clarke:  I was asked to give my best guess.  But youʻre right Medicaid spending is what it is.

Gara:  If we overestimate, they wouldnʻt overspend it, right?

Clarke:  Typically, there are controls.  This isnʻt to say there arenʻt transfers.  But this department has been historically upfront and returning any extra.

Foster:  Dept. basically is guessing $88 million and youʻre recommending we come in at $74 million.  This is the low forecast plus 2%. Austerman:  Does this increase their starting base next yearʻs budget.

Clarke:  No, it does not affect the base.

Hawker:  it doesnʻt affect the base.

Foster:  You said in response to Gara that Medicaid is what it is.  But one area we do have control.  If there were more facilities around the state IHS, then the state would be paying less of that 50% correct?

Clarke:  I think youʻre correct on an individual basis. FY 2011:  Last Page:  FY 2011 Medicaid Budget: DHSS & Consultant Comparison Both come to the same place.  We get there through different paths.  I think weʻll spend less this year.  I think Medicaid will grow 12% this year and about 7% next year.  (not 100% sure of the numbers.)  Yes, these are large numbers and they are reasonable.

Austerman:
1.  I want to go back and look at containment issues and how they were handled back to 07 and 08.
2.  Behoove us to look at FMAP and changes needed at end of that, possibility of legislation...?

Gara:  Follow up on Rep. Fosterʻs question.  Lack of education.  The IHS funding, if you qualify it is 100% payment.  If it happens in IHS facility that helps us a lot.  Iʻm not clear if someone who qualifies goes to Providence, can you qualify automatically if you go to a non IHS facility?

Clarke:  No.  Has to be in qualified IHS facility.

Gara:  Is there a saving if there are more IHS facilities.

Clarke:  Looking at long term care and nursing homes, there are few in rural Alaska, thatʻs the one area you have.

Hawker:  Let Ms. Clarke off the stand.

Doogan:  I still donʻt get the big spike in medicaid costs that begins in 2009.  3% CPI increase, but not for long.  Some charge changes but not tht big.  Population graph - medicaid recipients total - those trend lines are flat or going down.  Then utilization, I donʻt actually see a particular chart here, but if the other two arenʻt doing it, it has to be more people using the service.

Clarke:  If you go to page 10.  I didnʻt put all charts in powerpoint presentation.  In the Report

Switch to the Commissioner and two Deputy Commissioners:
Bill Hogan Commissioner 
Alison Elgee Assistant Commissioner Finance Management Services
Bill Streur Deputy Commissioner for Medicaid & Health Care Policy

Commissioner Hogan:  If anyone knows this, itʻs Janet and I think itʻs an excellent report. Respond to Rep. Doogan.  Page 13. This is serious stuff.  We take this very seriously.  Iʻve spoken with the Gov.  who committed to the Leg. Leadership to look at this for FY 12. Economic Stimulus.  We have the enhanced FMAP rate through Jan. 2011.  Various things that extend that through June 2011. 

So beginning FY 2012, weʻll need about $125 million more.  (was that billion?) You can see there were circumstances occurring - change in unemployment rate.  26% increase inf food stamps and 9% unemployment. Best way to address this is economic development and more jobs.  As jobs are developed, but we also provide many safety net programs.  Medicaid is one of them.

Hawker:  to your last comments.  Would like to give your clairvoyant, Mr. Streuer, I would like to eat some crow.  Last year you did warn us there was a change on the horizon.  We were looking at the trends to the data points up to the point when we sat here.  Mr. Streuer, I donʻt know how you did it, but you predicted the state economy better than anyone else.
Disclosure:  Heʻs also one of my constituents.

Fairclough:  If we cross tab unemployment and  industries that they are coming from - construction academy, health industry, retail outlet?

Hogan:  Itʻs possible, we have data on people leaving public assistance rolls and where they might go.

Austerman:  What kind of analysis can we get if we have 9% unemployment and itʻs higher Outside, are people moving here to get work? 

My fingers are getting tired.

Salmon: Today I got call from DOT and two days ago from DOL, theyʻre coming back with answers.

Hogan: Cost containment measures several years ago. ONly those eligible were actually getting the program and were only getting the right amount of service. We scrutinized that carefully.

Hawker: We were getting documentation of serious abuses.

Hogan: Absolutely correct. We began to reduce hours people eligible for. Some legal entities felt we didnʻt have legal criteria, objective criteria for determining that. One of the lawsuits. The technical term is ʻmaterial improvementʻ. Since then weʻve adopted a more defendable tool. If you have further qustions, Stacy Crayley? at Department of Law can help.

Hawker: Weʻre trying to encapsualte 8 years of budget reviews into a two hour abstract.

Hogan: REspond to Gara about emergency rooms. Our providers, get the person to sign up if they are eligible, and that eligibility is retroactive. But there are many individuals who do not qualify for medicaid and who do not have insurance. Hospitals are not compensated.

Gara: Iʻm not going to pretend there is some easy solution there. Is that a significant expense and if it is, is there a way to redirect them to less costly service.

Mr. Streuer: Frequent flyers - people who use emergency in lieu of personal physician which could be dealt with much lower costs. We can identify these people and try to put them in touch with primary care provider. To avoid this. Constant problem. New system will give greater lattitude to identify. A couple areas weʻre looking at: Medical home. Assigning someone to work with a particular provider and get all their care through that provider. IHS facility and ocmmunity health centers willing to step forward.

Gara: Anything in the works in cost savings relating to Rep. Fosters comment about getting more federal funding through use of IHS programs.

Streuer: Ongoing program. Itʻs money in the bank.

Gara: Using Neighborhood Health Center. Hard to make an appointment, first come first served, so people go to emergency room.

Doogan: Look at anual medical spending, looks like in 2000 Medicaid was an inoffensive $600 million and in ten years has gone up 100% and in next two years it will have tripled in those 12 years. At some point Iʻll need that answer before the budget leaves the committee.

Hawker: 2003 legislature, remember chart we saw where it was marching upward. I asked. Then they said Iʻm not sure why, it just keeps growing. We intuitively knew it was those three components. We attempted to fund, but took a while, an appropriation for agency to engage consultant to analyze system to look at causal factors. To see how we might contain costs. I think a year or two before - you were working as a staffer - people were looking at 20 years having a $3billion medicaid program. I take pride that we have leveled and stabilized the program. I donʻt think itʻs that mysterious. Med costs are going up like crazy, population going up like crazy.

Allison Elgee, Asst for HHS: Department did develop a model. Annually you get a report with a ten year look assuming no changes. Weʻre looking at a program in 20 years it will be $3.5 billion. We arenʻt talking about reducing meicaid, were talking about bending the curve.

Another point to clarify, need to replace $120 costs in funds that disappear, thatʻs before projection for growth. so it will be higher.

Foster:
1.  how many IHS qualified patients are seen under medicaid program?
2. In trying to save money. Hospital near native population incurring costs fo $10 million and all qualify and FMAP is 50%, can state pay for IHS facilities? And shift the costs to the feds.

Hogan:
1. Yes, very specific info about IHS beneficiaries who are eligible for medicaid etc. and we can give you that.
2. Longterm facilities in Anchorage, Bethel and ?? With help of legislature weʻve given these facilities capital monies.

Austerman: Iʻm not out to take anything away from anyone at this time. But if I understand Janetʻs presentation. Partly set on how we set the eligibility. At one time we fixed it at 175% of poverty level and then it drove back down, but then it generated more kids coming into the system. It behooves us in the long term to look at price of oil and dribble coming out of oil pipeline, somewhere weʻre going to have to figure how these two points cross. Not going to do it in this budget cycle.

Hawker: this conversation is a recurring theme. Iʻm musing philosophically on the record, always dangerous, within the stte budget, we the leg were having the biggest difficulty with University for a number of reason. Way to address that was to restructure the subcommittee and have those sessions directly without being filtered. Iʻd be telling this committe to comtemplate doing the same and looking at this as a committee as a whole since it has great economic challenges.

Hogan. With you, it helps that you understand our budget. We have confidence we can do something about this, not helpless. We can bend the curve. We arenʻt helpless. We can insure people get quality services, but bring this under control. There will be painful decisions and we need to work together. The Gov. is absolutely committed.

Hawker: No bearing at all on Rep. Jouleʻs handling of that subcommittee.

Fairclough: Bending the curve. Invest truly in what is harming Alaskans in many ways. Some are duplicated. They access as many services as possible to find help, and not in a very cost effective way. Trying to find relieve. Housing and everything else. Suggest to Austermann. Instead of bending the curve, maybe we throw everything out of the box onto the floor to produce a totally different curve. Bending the curve doesnʻt work for me. Waiting on prevention only costs us more dollars exponentially.

Hogan: Echo Rep. Faircloughʻs comments on prevention. A challenge. Medicaid doesnʻt pay for prevention. Have to think of other ways to affect number of people eligible for medicaid.

[NOTE:  THESE ARE VERY ROUGH NOTES.  LISTEN TO THE AUDIO (ABOVE) FOR A WORD FOR WORD ACCOUNT.]