CMS updates Medicaid eligibility and payment oversight programs

CMS finalized changes to the Payment Error Rate Measurement (PERM) and Medicaid Eligibility Quality Control (MEQC) programs designed to improve payment oversight and state eligibility determinations in the Medicaid program. The changes—contained in an advance release of a Final rule set to publish in the Federal Register on July 5, 2017—implement provisions of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The Final rule ends a pilot phase for the two programs and resumes the eligibility measurement component of the PERM program and the MEQC program for Fiscal Year (FY) 2019.

PERM

The PERM program measures improper payments in Medicaid and the Children’s Health Insurance Program (CHIP) based on reviews of the fee-for-service (FFS), managed care, and eligibility components of Medicaid and CHIP. Due to changes in Medicaid eligibility law—including expansion under the ACA—CMS did not conduct the eligibility measurement component of the PERM program for FYs 2015 through 2018 (see CMS proposes updates to Medicaid eligibility and payment oversight, June 21, 2016). During that time, CMS conducted a pilot program known as the Medicaid and CHIP Eligibility Review Pilots to maintain oversight of state eligibility determinations. In addition to reestablishing the eligibility measurement component of the PERM program for FY 2019, the Final rule makes several updates to program requirements. Changes to the program include:

  • eligibility reviews for payments made by states between July and June of a given year (a change from the previous October through September review period);
  • federal contractor review of determinations;
  • sampled reviews based upon FFS and managed care payments;
  • inclusion of federal improper payments when the federal share is incorrect, even if the total computed amount is accurate;
  • the development of a national sample size; and
  • payment reductions in cases where a state’s eligibility improper payment rate exceeds the 3 percent threshold and the state does not demonstrate a good faith effort to meet the threshold.

MEQC

The MEQC program requires states to report to HHS the ratio of erroneous excess medical assistance payments to total expenditures for medical assistance. Under Section 1903(u) of the Social Security Act (SSA), HHS is required to withhold payments in excess of a 3 percent threshold for eligibility-related improper payments. Like the PERM program, CMS did not operate the MEQC program for FY 2015 through 2018 so that CMS could make updates to the program to reflect changes in eligibility. The Final rule aims to restructure the MEQC program to better compliment the PERM program. The changes include:

  • state flexibility to design MEQC programs unless states have consecutive improper payment rates over the 3 percent threshold;
  • requirements to conduct reviews beyond the scope of the PERM program; and
  • corrective action submission requirement for identified errors.

House Committee urged to extend funding for federal safety net programs

Extend funding for the Children’s Health Insurance Program (CHIP) to ensure continuity of coverage for children, particularly in light of the current uncertainty surrounding other sources of health coverage in the U.S., witnesses urged at a House Committee on Energy and Commerce hearing titled “Examining the Extension of Safety Net Health Programs.” The purpose of the hearing was to examine the extension of funding for two federal safety net health programs that provide health care and coverage for low-income adults and children, CHIP and the Community Health Center Fund (CHCF).

CHIP

CHIP is a program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but have no health insurance. It is jointly financed by the federal government and states, and the states are responsible for administering the program. A memo from the committee majority staff states that in fiscal year (FY) 2015, 8.4 million children received CHIP-funded coverage.

Section 2101 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) increased the CHIP enhanced federal medical assistance percentage (E-FMAP), which varies by state, by 23 percent from October 1, 2013 through September 30, 2019. Since the ACA did not include additional or extended funding for CHIP, MACRA extended funding through September 30, 2017. The Medicaid and CHIP Express Lane Option, Child Enrollment Contingency Fund, CHIP Qualifying State Option, and CHIP Outreach and Enrollment Grants also expire September 30, 2017.

At the hearing, Cindy Mann, partner at Manatt, Phelps & Phillips, touted the success of CHIP, which covers 8.9 million children nationwide. She stated that Congress must consider the overall level of funding for CHIP, in addition to the E-FMAP funds, which “are now fully integrated into states’ budgets and a key source of funding for sustaining CHIP.” She said that Congressional action is needed as soon as possible to ensure program continuity, budget certainty for states, and stable coverage for children, particularly those with special health care needs. She urged a five-year extension instead of two to provide needed stability (see Extend CHIP, protect DSH payments, MACPAC tells Congress, March 16, 2017).

Jami Snyder, Director of the Medicaid and CHIP programs for the state of Texas, noted that a decision to not reauthorize the CHIP program would result in a loss of over $1 billion in annual funding to the state of Texas and a loss of coverage for more than 380,000 Texas children.

Health Center Program

The Health Resources and Services Administration’s (HRSA) Health Center Program, authorized under Section 330 of the Public Health Service Act, awards grants to federally qualified health centers (FQHCs). The program is supported by discretionary appropriations and the CHCF, a mandatory multibillion-dollar fund established by Section 10503 of the ACA. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10) extended funding through fiscal year 2017. According to the staff memo, the CHCF represents over 70 percent of the Health Center Program’s FY 2016 funding.

Michael Holmes, the chief executive officer of Cook Area Health Services, an FQHC in Minnesota, testified that as a result of CHCF investments new FQHC were added in more than 1,100 communities. With the extension nearing its expiration date, he “strongly urged” Congress to renew funding for at least five years to allow FQHCs to provide a stable and reliable source of access to patients and recruit and retain a comprehensive health care workforce.

HHS Sec. Price: Trump’s FY 2018 budget does not ‘confuse spending with success’

On May 23, 2017, President Trump submitted his fiscal year (FY) 2018 budget proposal to Congress. The proposed budget contained the administration’s tax, spending, and policy proposals for FY 2018. The proposed budget was greeted with much criticism due to various program cuts (see $3.6T in cuts spells R-E-S-P-E-C-T in Trump budget, Health Law Daily, May 23, 2017). On June 8, 2017, HHS Secretary Price appeared before the House Ways & Means Committee and discussed the President’s proposals involving HHS programs.

Confusing spending with success

Because the President’s FY 2018 budget was met with so much criticism due to various program cuts, Price began by taking on that issue directly: “President Trump’s budget request does not confuse government spending with government success. The President understands that setting a budget is about more than establishing topline spending levels. Done properly, the budgeting process is an exercise in reforming our federal programs to make sure they actually work—so they do their job and use tax dollars wisely.”

Price continued: “The problem with many of our federal programs is not that they are too expensive or too underfunded. The real problem is that they do not work—they fail the very people they are meant to help. Fixing a broken government program requires a commitment to reform — redesigning its basic structure and refocusing taxpayer resources on innovative means to serve the people that the program is supposed to serve. And sometimes it requires recognition that the program is unnecessary because the need no longer exists or there are other programs that can better meet the needs of the people that the program was originally designed to serve.”

To emphasize this point, Price spoke directly about two federal programs, Aid to Families with Dependent Children and Medicaid.

Aid to Families with Dependent Children

According to Price, the Aid to Families with Dependent Children program undermined self-sufficiency and work. He applauded Congressional action that created the Temporary Assistance for Needy Families (TANF) program that promoted the empowerment of parents through work. He pointed out that TANF caseloads have declined by 75 percent through FY 2016. And that under the TANF program, the employment of single mothers increased by 12 percent from 1996 through 2000, and even after the 2008 recession, employment of single mothers is still higher than before welfare reform.

Medicaid

With regards to the Medicaid program, Price stressed that 20 years ago, annual government spending on Medicaid was less than $200 billion; and that within the next decade, that figure is estimated to top $1 trillion. Despite these investments, Price noted that: (1) one-third of doctors in America do not accept new Medicaid patients; and (2) research shows that enrolling in Medicaid does not necessarily lead to healthier outcomes for the newly eligible enrollee.

To illustrate the failure to achieve healthier outcomes, Price pointed to the results of an Oregon Health Insurance Study that replicated a randomized clinical trial by enrolling some uninsured people in Medicaid through a lottery. Comparing this population to those who remained without coverage, the data showed an increase in emergency room use for primary care, the probability of a diagnosis of diabetes, and the use of diabetes medication. The data also showed no significant effects on measures of physical health such as blood pressure, cholesterol, or average glycated hemoglobin levels (a diagnostic criterion for diabetes).

According to Price, “This mixed impact of Medicaid coverage on health outcomes suggests we need structural reforms that equip states with the resources and flexibility they need to serve their unique Medicaid populations in a way that is as compassionate and as cost-effective as possible.” This is what the President’s FY 2018 budget does, according to Price. It uses state innovation to save and strengthen Medicaid by unleashing state-level policymakers to advance reforms that are tailor-made to meet the unique needs of their citizens. Price estimates that over the next decade, these reforms will save American taxpayers $610 billion.

CHIP

Price further testified that the FY 2018 budget includes provisions to extend funding for the Children’s Health Insurance Program (CHIP). The budget would rebalance the federal-state partnership through a series of reforms, including ending the requirement under section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) that states move certain children from CHIP into Medicaid and capping eligibility at 250 percent of the federal poverty level to return the focus of CHIP to the most vulnerable and low-income children.

Health security and preparedness

Price affirmed HHS’ role as “the world’s leader in responding to and protecting against public health emergencies — from outbreaks of infectious disease to chemical, biological, radiological, and nuclear threats — and assisting the health care sector to be prepared for cyber threats.”

To support HHS’ public health emergency preparedness and response, Price noted that the President’s budget provides $4.3 billion for disaster services coordination and response planning, biodefense and emerging infectious diseases research, and development and stockpiling of critical medical countermeasures.

Key Public Health Priorities

In his testimony, Price described three new public health crises: (1) serious mental illness; (2) substance abuse, particularly the opioid abuse epidemic; and (3) childhood obesity. He stressed his commitment to these new challenges and noted that the President’s budget would:

  • invest $5 million in new funding authorized by the 21st Century Cures Act for Assertive Community Treatment for Individuals with Serious Mental Illness;
  • include a demonstration within the Children’s Mental Health Services program to test the applicability of new research from the National Institute of Mental Health on preventing or delaying the first episode of psychosis;
  • provide $811 million — an increase of $50 million above the FY 2017 continuing resolution — in support of HHS’ five-part strategy to combat the opioid epidemic; and
  • establish a new $500 million America’s HealthBlock Grant, which will provide flexibility for states and Tribes to implement specific interventions, including those designed to spur improvements in physical activity and the nutrition of children and adolescents, and to treat leading causes of death such as heart disease.

Women’s health services

Price also testified that the President’s budget would increase funding for the Maternal and Child Health Block Grant and Healthy Start to improve the health of mothers, children, and adolescents, particularly those in low-income families. The budget would also maintain funding for a variety of programs serving women, including, community health centers, domestic violence programs, women’s cancer screenings and support, mother and infant programs, and the Office on Women’s Health.

Medicaid block grants would pose challenges for states

If federal support for Medicaid was transformed into a block grant to states, with a per capita cap set by Congress, the impact would vary widely on different states, according to participants in a webinar sponsored by the Alliance for Health Reform. The webinar also focused on the reauthorization of the Children’s Health Insurance Program (CHIP) and state Medicaid waiver requests. The American Health Care Act (H.R. 1628) would transform the federal part of Medicaid into a block grant to states starting in 2020, with a per capita cap on spending. Also, it would roll back the enhanced federal spending for adult Medicaid beneficiaries newly eligible under the Affordable Care Act. (The legislation, which passed the House on May 4, has not yet been considered by the Senate.).

Current Medicaid challenges

Robin Rudowitz, associate director at the Kaiser Family Foundation, noted that certain states are at higher risk if federal funding for Medicaid is transformed into block grants with per capita caps. These states have challenging demographics, including higher populations of people with poor health status, high cost health markets, and limited ability to raise tax revenues. Tony Leys, a reporter with the Des Moines Register, noted that state Medicaid programs already struggle to cover expensive blockbuster drugs, such as those for treating hepatitis C. If the federal Medicaid payment was capped, Leys said, states would struggle to pay for the next blockbuster drug that comes along.

Per capita caps 

Chris Pope, senior fellow at the Manhattan Institute, noted that per capita caps do nothing to prevent future expansions of benefits or eligibility by future Congresses, and may be preferable to the long-term health of the Medicaid program rather than “letting the program continue on autopilot without any real scrutiny.” Hemi Tewarson, program director for the National Governors Association Center for Best Practices’ Health Division, noted, however, that because of the way most states have to prepare their annual budgets “if we were to introduce every year uncertainty around whether the per capita caps would be raised or lowered…that would throw a lot of chaos into state operations, not just impacting health care, but all the their programs they have to make decisions on.”

Pope said that it’s a political decision for states to maintain coverage for Medicaid enrollees if expansion funding from the federal government is rolled back. He added, “There is a substantial overlap between the Medicaid expansion population and the population that would be eligible for substantial subsidies at the bottom of the income distribution covered by the exchange.” These are people who would be eligible for basic insurance plans with capped out-of-pocket spending.

Leys noted that in Iowa, this would be difficult because the state is about to lose its last participating insurer in the Exchange. In addition, Rudowitz said that after the per capita caps would go into place in 2020, the restriction of growth in federal spending would compound over time, putting Medicaid beneficiaries in the higher risk states noted above at greater risk of losing any insurance coverage. Tewarson agreed, noting that for some states disenrollment would be necessary over time as the restriction in federal spending grows.

CHIP reauthorization

The transformation of Medicaid into a federal block grant is not a sure thing, but the deadline for reauthorizing CHIP is. Congress has to regularly reauthorize CHIP, which provides enhanced federal funding to states who offer expanded Medicaid coverage for children; the program is currently extended only until September 30, 2017. Tewarson noted that as states prepare their 2018 budgets, some are planning on the enhanced match being renewed, while others plan on it going away, in which case states have to budget reserves to make up for the lost matching funds. Rudowitz also noted that the continuation of CHIP is a coverage issue; if the program is not reauthorized or the enhanced funding is cut back, states will have to make decisions about coverage and contact beneficiaries in a timely manner.

Medicaid waivers

States have been able to request waivers from federal Medicaid requirements for years; waivers are used by states for demonstration programs related to delivery system reforms, long-term care, behavioral health, among other things. As of February 2017, 33 states have 41 approved Medicaid waivers in place. Since President Trump was inaugurated, states have submitted waivers that would require certain Medicaid beneficiaries to be employed, although none of these waivers have been approved.

Tewarson noted that one of the big question states have regarding waivers is the administrative aspect—”how do you operationalize them?” In considering work requirement waivers, the administrative issues get bigger, she said. “How do we connect systems? What are the real outcomes we want to see from this? How do we define work requirements and who would be exempt?” She also noted that while the Obama administration approved many Medicaid waivers, they had guideposts as to what would or would not be acceptable; work requirements were not one of the acceptable waiver options previously.