Navigating Next Steps on Payment Reform

The National Press Club: Zenger Room
Tuesday, April 25, 2017

9:00 – 9:05 a.m. Welcome and Introductions

• Marilyn Serafini, Alliance for Health Reform

9:05 – 9:35 a.m. Presentations

• Joan Alker, Georgetown University Center for Children and Families
• Trish Riley, National Association of State Health Policy
• Josh Archambault, Foundation for Government Accountability

9:35 – 10:15 a.m. Question and Answer Session

Please click play below to listen to audio of this event.   PLEASE NOTE: This is an unedited transcript. Please refer to the audio recording, above, to confirm exact quotes. Marilyn Serafini: Let me first introduce our panelists. We’re really lucky today. We have a crazy expert panel with us. To my right it Trish Riley. She is Executive Director of the National Academy for State Health Policy and President of its corporate board. She has had two stints at NASHP. She helped to build it in the ’80s and up to 2003, then she was the Director of the Governor’s office of Health Policy and Financing in Maine and now she is back at NASHP. To her right is Josh Archambault. He is a Senior Fellow at the Foundation for Government Accountability. So previously he spent some time in Washington as a fellow at the Heritage Foundation and also he did some work in Massachusetts to then Governor Mitt Romney. To my far right is Joan Alker. She is Executive Director of the Center for Children and Families. She is also a research professor at the Georgetown University McCourt School of Public Policy. She focuses on health coverage for low income children and families with emphasis on Medicaid and CHIP and the ACA. Just very briefly could we just go around the room and could you just say your name and your affiliation so our speakers know who they are talking to today and they can assess how in depth to get. Marilyn Serafini: Great. Good. Okay. So Trish, take it away. Trish Riley: Okay. Given who is in the room, let me just talk a little bit about level set a little bit. My job is to level set and hopefully we will engage in a conversation with you so let me just spend a few minutes reminding you of course of what we know. Medicaid now covers 73 million people. It’s bigger than Medicare. The states have an enormous responsibility for a very complex program that is really four programs. It represents pregnant women and kids, people with disabilities both physical and mental, the elderly, and now the expansion adults. It is a profoundly complex program but it has been extremely facile in its life. When the aids epidemic occurred, it was the Medicaid program who covered when insurance companies were redlining. Katrina. Zika. Flint. This is a program that is able to turn on a dime as big and bulky and complex as it is. Let’s jump into the current debate because I think it is a two-fold discussion. One is a debate about federalism in itself and the other is about the role of the program. What is Medicaid’s primary function? In the end, though, I think the discussion is about the money. Who pays and how much? So I think that’s the core question before us sometimes disguised under other discussions. In the federalism debate, the notion of flexibility and block granting and per capita caps is really met at the state level. States have always asked for flexibility; I was a Medicaid director in the ’80s and I asked for flexibility. But it’s a tension. How much flexibility versus how much cutting and how much can you really save from flexibility? So the per capita cap proposal had a 25% cut in the program. The only kind of flexibility that would get you those kind of savings is to remove people from eligibility or profoundly restructure the program to be something quite different. So those are discussions about sort of the balancing act and the reality is even though the per capita cap would have been inflation adjusted by the medical CPI, the medial costs have always exceeded that. So it would have been significant cuts. The second is the role of the program and this is not a new discussion either. Here we hear the program not to cover able-bodied people, it ought to cover the most vulnerable. It reminds me of the debates about the deserving poor. Who really is the program for? Its roots were indeed in welfare but it moved in the welfare reform act and in the ACA to become a low-income program, a program for low income health insurance. This debate isn’t new and I think we have to sort of think back on some of that. The notion of the able bodied ought not to be covered by the Medicaid program, they’re higher income, they ought to buy health insurance. Certainly the Medicaid program serves high-income people. Look at those in long-term services and supports. They have incomes that are twice the poverty level. We sometimes forget that. In the waiver initiatives, the waivers are a big part of the discussion, of course, everywhere at the moment. The earliest waiver that I remember was in the Regan administration in ’82, the Katie Becket waivers. Here again the discussion, the rub, who is the program for? Is it for low income people no matter what or is it a program for those who are very vulnerable? The Katie Becket waiver, the first really big waiver, was around allowing families, regardless of their income, to qualify their profoundly disabled children for the Medicaid program. That was an important first step and it was an argument in the states about whether we can charge premiums. No, this was a Medicaid program no matter the wealth of the parents. But then it switched. So then you saw the next wave of waivers in Oregon. Legislator Dr. Kitzhaber, then Governor, was a needy doctor and he said, “Something is wrong here. I keep seeing people in the emergency department who are the working poor and they have nothing and it is Medicaid program that has rich benefits for some people but not for everybody.” Thus was born the priorities list in Oregon and then very controversial 1115 waiver where they basically set criteria about what were appropriate services, what were evidence based services, limiting services in order to expand? The Tenn-care waiver where they moved the Tennessee Medicaid program into managed care was also an attempt to expand coverage as were all the managed care waivers in the ’90s. It was to reduce and make more efficient the program so that it could cover more people. So this debate about able-bodied and who should get Medicaid is not a new one and certainly Secretary Price has signaled to the governors more flexibility for the states. When we look at the base we see today, the program is complex in large part because of its flexibility because of the extraordinary number of waivers that exist in the states. There are 1950, all kinds of different waivers, let’s focus on the 1115 that are the comprehensive reform waivers that are supposed to be research and testing of new ideas. There are currently 33 of those waivers operating in 41 states. So there is great flexibility going on in the states. The majority of them are around delivery system payment reform. Medicaid is alive. They are a big, big payer. They are alive with activities to really move from volume to value and buy what matters. So they by far and away the most waivers and often they are by the ACA, through the CMMI systems proposals. So even governors who deeply resent the ACA and wouldn’t expand have embraced the funding for payment and delivery reform. Seven of then are the private option expansions, and I think Josh is going to talk more about the wave of those coming forward, 12 are long term services and supports to turn long term services and supports into a managed care program, 12 are for behavioral health, often with an opioid focus. In Oregon, we see a new model emerging. In Oregon, Colorado, Illinois, New York. These continuing key organizations. It’s sort of the new wave of managed care. The notion that we as Medicaid programs have been buying healthcare but the population needs more than that. Recognizing the social determinants, the frustration of seeing kids with asthma constantly in the ED and returning to homes that are moldy. So the notion that we can somehow invest and begin to pay for some of the social determinants. There is a new round coming. Josh will talk about those. We will see some, I think, around pharmacy. We will see more around IMD, Institutes of Medical Diseases, so mental health diseases, so that we can see more focus on opioids. But just let me close with sort of the state of the states and, again, returning to it’s always about the money, 31 Medicaid agencies are reporting serious budget problems. Governor’s budgets this year, while they did rise, they rose less than the 5.5% we’ve seen over the last couple of years. That’s particularly true in the states that are fossil fuel dependent. They are in deep, deep budget troubles. We need to always remind people states have balance budget requirements. They budget usually for two years and they have to balance that budget. Medicaid is always the challenge and more so now as states confront the uncertainty before us. It’s really hard to meet with your legislature and try to figure out a budget around a time when you don’t know what the Medicaid program is going to look like in the future. Here is this program of 556 billion dollars and 73 million people and it looks a lot-the administration looks a lot like it did when I ran a Medicaid program in the ’80s. We did not spend an adequate amount of time thinking about what it takes to administer this program. It’s phenomenal what the states have been able to do with this program, the change, its adaptability, but the reality is the tenure of a Medicaid director is 19 months. The vacancy rate in Medicaid programs is 14%. It’s a program where we don’t invest in the management. We invest in program integrity, fraud, and abuse, boy oh boy, we’ll pay that, but we don’t invest in the management of the program. Finally, I think we will see some changes and so new discussions emerge this year and next. It’s important to keep in mind the face of states is very red. The states are Republican, governors and legislators, 33 governors are Republicans, 16 Democrats and independent. In 2018, 36 of them are up for re-election and of those, 28 are Republicans, 15 are open seats, 9 Democrats, 6 open seats. So I think the discussion about Medicaid and whatever the congress and the administration does around it will be fast and furious in those elections. Marilyn Serafini: Great, thank you. Josh. Josh Archambault: Well thank you all so much for having me this morning. For those of you who aren’t as familiar with FGA, we are a relatively unknown entity in DC although we are playing here a little bit more these days. We are active in about 37 states. We are a think tank and we work just on health and welfare issues. So we have been involved in DC more recently obviously because of the connection to states and as we’ve talked to state leaders around the country and their frustration with I don’t want to say the lack of dialogue but the lack of understanding at times of federal policy makers of what some of the state realities are, particularly around Medicaid in particular. I think I’m on this panel to represent a slightly different perspective so let me do that. We hear a lot of frustration from states about flexibility in Medicaid. While I don’t disagree with what Trish said, the flexibility potential is there, I think a lot of states are frustrated for a variety of reasons. One, they have to come ask. They partially fund this program or half in some states fund this program and they have to come ask father or mother government in DC, “Can I do this on my Medicaid program?” They have to balance their budget. When they come to Washington and they are on a ten year budget window, and some states are on an annual budget, some are on every two years, those conversations aren’t the same conversation about flexibility in a program and how quickly you can change something, enrollment levels or benefit levels or whatever it might be that a state might be looking for. I think the average 1115 waiver takes over a year to get approval, which, again, is a problem when you’re budgeting on a year-to-year basis and you want to try and change your program. With that being said, I think with the new administration here in DC, it really is a whole new world for a lot of these republican governors in particular as they’re thinking through what do they want to ask for and there is a fundamental question here, do governors view Medicaid as a welfare program or a health insurance program? Depending on how they answer that question probably influences what they are going to ask for. So there is a number of governors who view it as a welfare program so they are going to ask for things like time limits and work requirements, which, again, sound very familiar based on the welfare reform discussion. If they view it as a health insurance program, they might ask for more co-pays or penalties for not showing up to appointments or higher penalties for non-emergency medical visits or you can’t have unlimited mandatory non-medical transport. So these are the sorts of things that governors are thinking through and Governor Bevin in Kentucky already has a waiver in for work requirements for his expansion population. Governor Ducey in Arizona will follow shortly. Kansas and Maine are actively working on and have already been public about major waivers that will be put in in the next probably five to six months with a lot of these elements. Sometimes they will be a blend of them, of the kind of health insurance and welfare things and at times it will be different for different populations because as Trish said, this is a-there are different silos within Medicaid. It is not a uniform program. With that all being said, what happens with the repeal bill certainly is on a number of their minds and expansion states in particular, I think there is a couple of things they are looking at. There is probably two camps on the expansion population with what’s in the repeal bill. Some who actually view it as a good off-ramp if they don’t want to cover the able-bodied adult population for a variety of reasons. They are starting to feel the pinch in their state budgets of their share of the expansion populations. We pulled together data, every state where there is public available data, enrollment was on average 110% of projections so the cost of that is starting to be felt in these expansion states as these have to start to pick up their share. So for them, they want to know how is the financing going to change in the future and how much flexibility are they going to be given on plan design? Can they do things like grandfathering? So think about pension reform. The current enrollees are held harmless but every new person that comes on is under a different scenario or different plan design. Or can we cap enrollment? Can we freeze enrollment? These are things that are happening in CHIP and other areas but haven’t been as widely applied in these other populations. So those are-that is some of the thinking that is happening at the state level. I also know that a bunch of governors have actually expressed concern that Medicaid is the public health response to Zika and opioids and others so I think that-I’m not sure that they have a response yet on what to do differently but I think they want the federal government to think that Medicaid isn’t the default for all of those things. The elephant in the room that will not go away, and I’m not sure where we go from here, is long-term care. It is an issue that is just crushing state’s budgets. Moving people out of nursing homes and starting to pay family members isn’t always a silver bullet. There is a couple of anecdotal examples in Minnesota where they actually started spending more money because family members were taking care of elderly family members in their home for no compensation so all of a sudden you started paying for it. So certainly it saves a lot of money in most cases but not always so I think states really are just scratching their head trying to figure out how do you get out of this? Is there a tradeoff with the federal government where they take all long-term care and states take all other populations? This is the sort of out of the box thinking that I think is there and the block grant per capita cap proposal in conversation is a little bit more nuanced at the state level. I’m not sure it will be more nuanced here but at the state level it is about what populations are in it versus out, what is the growth. I know we have been part of some of those conversations and seeing documents governors trying to really think that through for the first time in a long time. Trying to, again, influence DC people’s thinking and it’s a long, messy process, as you all know but that is kind of what we’re hearing at the state level. Marilyn Serafini: Good. Okay. Thank you. Joan. Joan Alker: Well thanks so much and it’s great to put a name to some of the faces that I’ve emailed with and spoken with on the phone. I’m going to try to just step back and offer some observations on some of these themes that we’ve been hearing about. It’s a nice opportunity to do that rather than dive deeply into some of these specific states. I want to really second Trish’s point. I think a lot of this debate is really about the money. I’m not going to actually talk about the money. I’m going to talk about the debate but I think at the end of the day it really is about the money and clearly we could see from the exercise of the American Healthcare Act that Medicaid became the piggy bank. Medicaid was the source for enormous cuts, 840 billion in the final version. That was by far the largest source of cuts. So I think that tends to get obscured sometimes by this debate about state flexibility. I want to spend some time on packing that a little bit. Unfortunately, like many things, a lot of debates typically about health policy but really about anything, the facts get obscured by the ideology and the objectives that may be hidden. Again, here I think it’s about money. So the reason I think the state flexibility debate is flawed and really you all have to question some of the assumptions that you hear is there is a couple of reasons. First of all, for those of you who don’t cover Medicaid all the time and many of you do cover it a lot, but I think those that have been around Medicaid for any period of time, there is sort of a famous saying, “If you’ve seen one Medicaid program, you’ve seen one Medicaid program.” How many of you have heard that? Yes. I think mostly everybody and that’s because Medicaid is already very flexible. That’s because states have a lot of options not only through waivers which we’re talking about today but also through simply state amendments and choices they make every day, every month, every year in their programs and as a result, their programs look different across the states. So that’s critical. I think the second reason that I think it is very important to question he state flexibility debate is because state flexibility sounds benign and it is one of those sort of apple pie terms. Who wouldn’t want states to have flexibility? Well, again, if you unpack this from a policies perspective and think about it this way because Medicaid is very complicated. We all know that. But if you think about what Medicaid is spending money on, it’s really coming from three things: who you cover, what you cover for them, and how much do you pay the providers to provide those services. So those are sort of the-very simply, those are the three things that you are spending money on. The last of these three things, how much you’re paying the providers to provide those services, states already decide that by and large. They decide how much they pay the providers. So that leaves you the first two areas, who you cover and what you give them, as the areas I which the federal government is now being approached for more flexibility. So you can see.as Josh has just alluded to, explicit requests we can see to limit enrollment, things like enrollment freezes and caps. That’s a very clear limit on enrollment that will result in fewer people being covered. You can see less explicit but also, at the end of the day, restrictions on enrollment like work requirements, like time limits. And then you can see restrictions on what you cover, both potentially benefit limitations, we have seen the transportation benefit was actually waived by the Obama administration. I think we can expect to see more requests to waive certain benefits and the costs that families absorb in accessing those benefits, both higher cost sharing as well as higher premium which really fall in both categories because we know from plenty of research that the higher the premium is, the fewer people get coverage. So really these new areas of state flexibility, when you unpack them by and large and the action we’re going to see in the months going forward as this becomes increasingly important in the Medicaid program, is in restricting the number of people who are able to be on the Medicaid program, stay on the Medicaid program, and limiting of what they get or increasing the cost. So I, as folks know, have a lot of concern of these approaches. I think fundamentally, they reduce access to care. I think that is short sighted both is it unfortunate for the beneficiary and the vulnerable folks who rely on this program but I think from a healthcare policy perspective it’s short sighted simply because we limit somebodies access to care does not mean their healthcare needs to go away and in fact their healthcare needs get worse and their prime conditions get worse and they wind up in the emergency room, which is the worst place to deliver care. The other aspect of these kinds of approaches like Indiana, like Kentucky, and others we will see coming forward is that they are extraordinarily complicated and involve very considerable administrative outlays, new systems, new contractors to run all of the aspects of these programs, and really, frankly, on the ground, nobody understands them. You are starting to see more research about that but to imagine that a system as complicated as Indiana, I think at one point we counted six different benefit packages under the waiver, to imagine that it is not just the beneficiaries that don’t understand it, it is the providers, it is the eligibility workers, and then people who have to make the program run. So this is a problem. So fundamentally, I don’t think that these programs actually meet their stated objectives in a number of ways as well. So with that, I think just to note that we will continue to see more and more waiver activity I think although at the moment, I would say the real activity is emanating from those states that are red states that did expand already but they had a waiver approach and now they want to modify their waiver approach and it’s worth noting that some of these states, these changes are not actually emanating from the governor, they’re emanating from the legislature where opponents of expansion originally lost and they keep coming back and saying, “We want to make changes. We want to nibble around the edges.” We see that in Ohio. We see that in Arizona and Kentucky of course where Governor Bevin ran on an anti-ACA platform and inherited the Medicaid expansion. So a lot of these tensions is, as I said before, the election is true now. The Medicaid expansion itself is a purely a Republican fight within the Republican Party. It is not a partisan issue. It is a fight within the Republican Party and I think you are going to continue to see that playing out and particularly, if congress ultimately does not act with respect to repeal and replace, with respect to Medicaid reforms, most of the locust of the activity around Medicaid will focus on the waiver process. This is exactly what we saw happen in the Bush administration. Early on in the Bush years, there was an attempt to block grant the Medicaid program. It didn’t get very far at all in congress and as a result, they moved to waiver strategy. So that is certainly something we could see here. So with that, I’m probably out of time. I’m going to hand it back. Marilyn Serafini: That’s great. Thank you. In a moment I am going to turn it over to you all for your questions but I-we’ve spoken-I’m going to just take the opportunity to ask the first question and dig a little bit deeper. We’ve been talking in general terms about what states generally are looking for, what we’re seeing generally. Specifically, who is doing what right now? Are we seeing a handful of states that are still looking to expand? Is that going to happen? Is that impossible? Do we have-are there particular kinds of waivers? Can you give us an example of where we are seeing this and who may be moving forward? Can we just try to get a little more specific? Joan Alker: I can quickly answer that. I was sort of getting there when I was talking about we have this group of states. It’s under ten states who did expand and who already had approached their expansion through a waiver but who may be coming back to make some modifications. So I will give an example of Arkansas. They are going to have a special session, I think next week, to make some changes. It will appear in a waiver. Arizona has an amendment that will be coming in shortly. It is receive public ______ at the state level. It does have work requirement, time limit, things like that. That was something is that the Arizona legislature passed a few years ago and they said to the governor, “You must submit this waiver every single year. If it is denied, you’ve got to go back the next year.” So that is why Arizona is doing that. Kentucky, of course, I think Josh mentioned this. Kentucky is pending. That came in in the last administration. Basically, after the election, the last administration decided they weren’t going to decide on that until the new administration came in. So Kentucky is pending and I think Kentucky may be the first significant waiver decision we see. I would be curious to hear both of your opinions on that. And then we have a few others as well but I think that gives you the flavor. Trish Riley: Indiana’s renewal. Joan Alker: Indiana’s renewal. Yep. We have a couple of states that are really fascinating that are looking at moving forward on expansion potentially, even in this very uncertain climate with the possible appeal. I think folks probably saw Kansas, the republican legislature voted to expand right around the time repeal and replace was being debated, which I though was really pretty interesting. They are having a special session and that issue is going to come up again. North Carolina is I think more of a long shot but we did see some republican legislators there, particularly interest from the rural health community there, to think about some kind of expansion. So we do have a couple of states, again, they’re all Republican states, who are, despite where the national climate is, having some pretty active debates about picking up expansion and I expect both of those would approach it through a waiver. Josh Archambault: Yeah, I actually don’t know if I agree with your assessment that it’s just expansion states asking. Governor Walker is putting together a waiver request. Maine and Kansas who have not expanded to this date are putting together requests. I think what’s interesting about this is that Kansas is not in a vacuum. That was a concerted effort by the hospitals to fund candidates who said they would vote for expansion. So I think what happens here in DC makes a big difference, obviously. As we have been saying, the funding. But you also have states like Oregon saying on the tables may be ending expansion because of the budget crisis. Is that likely to happen in Oregon? Probably not but it’s an active discussion and that should tell you something about the pressure that states are starting to feel on the budget side. So again, we can cherry pick back and forth, I don’t expect a ton of action on expansion over the next year or so, Kansas being one of the exceptions because of the small campaign by the hospitals, because I think folks are starting to look around the country. Let me just make one side point here that I think almost never gets covered. This is not purely an ideological issue or even a partisan issue. There are people at the state levee who have waiting lists that are concerned about disabled populations or they have public education concerns or they have infrastructure concerns and let’s not kid ourselves to say that you can spend one dollar twice. If you expand and you have state dollars on the table, that is one less dollar to be spent on something else. So there are genuine people who are not mean who are concerned about these things at the state level and they have to write this budget every year and make really hard decisions and the expansion discussion makes that conversation even harder going forward with the caveat, let’s see what happens at the federal level. Trish Riley: I think the federal discussion has somewhat of a chilling effect on those states that want to do really creative reforms. I think we have to be cautious about leaping to-the Oregon discussion is a legislature-in Maine-Maine is a great example. I live there so I watch this every day. The governor very much has proposed a waiver that is very much like the Arkansas one, work time limits, work requirements, the works. The legislature is about to consider expansion proposal that has been vetoed six times because it’s going for citizen’s referendum, a citizen referendum to expand coverage. So it’s the yin and yang across all of the states. The issue of waiting lists that you do hear often from conservative states who very much favor limits to the Medicaid program. Keep in mind, the waiting lists are for expanded services. They’re for waiver services. Those populations of disabled people still get regular Medicaid benefits. So it’s not a waiting list for services. I would just finally end on the CHIP example that Joan talked to us about. CHIP is a program that had waiting lists because of it was block grant but looked what happened. Every time there was a waiting list in CHIP, the congress expanded the appropriation for it. So, hmm, isn’t that interesting that every time there was a real rubber hits the road where people weren’t getting covered, there was a new appropriation. So effectively, it didn’t work quite as one would expect a block grant to work. Joan Alker: If I can just jump in on this expansion creating these waiting lists, I think that is a very flawed argument. There is not only… Josh Archambault: I didn’t say creating waiting list. I said complicates the situation. Trish Riley: Yeah. Joan Alker: Okay. I guess what I will just raise for everybody is that if you’re concerned about pitting vulnerable populations against each other, the worst proposal that would create such a situation would be to block grant and per capita cap the program federally. That is exactly what the American Healthcare Act did and that would pit vulnerable populations against each other with declining federal funds and states having more ability to make cuts, which would have to do with the cost shift. So to me, that’s the worst nightmare is to cap the block grant. That will lead to pitting vulnerable populations against each other. We just had a new study last week in Health Affairs that showed that the Medicaid expansion had not impacted state budgets, frankly positively… Josh Archambault: It was 100% federal dollars. Of course not. Joan Alker: And it wasn’t pitting it against education funding. Josh Archambault: Let’s just put that aside for a second. I just think it’s a broader question here that do we believe that Medicaid delivers value? What is the point of Medicaid? Is it to get as many people on it as possible or is it to make sure that the people who are on it have good access and good quality outcomes and the people that shouldn’t be on it aren’t or the people that can be on some other source of coverage should be there instead. I think that’s the ultimate question and I think we instead, right and l