Managed care for long-term services working for states

Using section 1115 waivers to provide Medicaid managed long-term services and support (LTSS) allows states to expand access to home- and community-based services (HCBS) to beneficiaries at risk of institutionalization. The Kaiser Family Foundation (KFF) surveyed enrollment, spending, and program policies for the 11 states using managed LTSS in 2015, and found that while states used these waivers in an effort to improve administration efficiencies, most of the states did not pursue this method in an attempt to make costs more predictable.

Managed care

States that use managed care for LTSS contract with private health plans, paying these plans a set monthly rate per member. Spending on LTSS as a percentage of all Medicare spending is growing quickly, from 5 percent in 2009 to 15 percent in 2014. In response to this growth, CMS included LTSS provisions in recent revisions to Medicaid managed care regulations (see Final rule modernizes Medicaid managed care, April 26, 2016). States using this payment method are now required to identify and comprehensively assess enrollees with LTSS needs and create stakeholder advisory groups to oversee LTSS programs, while plans must comply with person-centered planning regulations. Even in light of these new responsibilities, states are using managed care to authorize HCBS for multiple populations and add in other Medicaid initiatives in order to streamline coordination.


The KFF analysis revealed some differences in states’ approaches and results in using managed care for LTSS. Most waivers expand financial eligibility for HCBS, while six of the states expand eligibility for HCBS to those who are “at risk” of institutionalization, attempting to prevent the need for costly future services by allowing beneficiaries to remain in their homes. The majority of LTSS waiver beneficiaries in the nine states reporting enrollment by setting were served in the community, but three of 11 states reported an HCBS waiting list. Almost all states require plans to cover a wide range of benefits, including nursing facilities, acute and primary care, and behavioral health services.


The KFF noted that states’ concerns about implementation could inform policymakers considering these programs in the future. In particular, the growing number of seniors and beneficiaries with disabilities, combined with the shortage of LTSS workers, has caused apprehension about keeping up with the pace of needed services. Despite this looming issue, the KFF believes that states will continue to choose managed care to provide LTSS.

Alabama wants to push back Medicaid managed care demonstration

Alabama wants to delay the transition of its Medicaid program to a managed care model. In a letter to CMS, the state requested CMS’ acceptance of amended terms for the state’s Medicaid transition demonstration. The request makes no substantive changes to the program. Its purpose is to allow the state more time to appropriate funding and complete readiness activities.


In 2016, CMS approved a Section 1115 waiver permitting Alabama to transition its Medicaid program to a managed care model relying on regional care organizations (RCOs). Under the waiver, Alabama was granted almost $750 million to start and improve its RCO program. However, even with the federal funds, the state says it does not have the necessary funds to get the program up and running.


The state is requesting to change the demonstration time period from April 1, 2016, through March 31, 2021 to April 1, 2017, through March 31, 2022. The change is driven primarily by financial concerns. Alabama officials say the delay allows more time for the appropriation of additional state funding and completion of readiness activities. Finally, the letter indicated the delay would also help the state meet broader demonstration goals: addressing fragmentation in health care delivery, improving chronic disease prevention and management, improving access and care coordination, improving birth outcomes, and enhancing the financial efficiency of the health care delivery system.

Highlight on Florida: State agency paid managed care $26M—for deceased beneficiaries

The Florida state Medicaid agency made an estimated $26 million in overpayments to managed care organizations (MCOs) for deceased Medicaid beneficiaries, according to the HHS Office of Inspector General (OIG). The Florida Agency for Health Care Administration made the payments during the July 1, 2009, through November 5, 2014, audit period due to a failure to timely update dates of death (DODs) in its information management system and a failure to collaborate with other agencies or use additional sources to identify inconsistencies in DODs. The state agency claims to have already recovered $24 million in overpayments and is making efforts to improve collaboration. The OIG emphasized the need for the state agency to remove all beneficiaries with DODs listed in its information management system from managed care plans and improve its system to remove variances from data sources  (OIG Report, A-04-15-06182, November 30, 2016).

Since 2011, the state agency has managed the Florida Statewide Medicaid Managed Care Program (SMMC), which is an expansion of a pilot created through a section 1115 waiver in 2006.  As of 2014, nearly all Medicaid beneficiaries in the state were enrolled in the SMMC. In return for the provision of specified services, the state pays MCOs monthly capitation payments for each enrolled beneficiary, regardless of whether the beneficiary receives services during the covered time period. The state agency maintains the capitation payment database through the Florida Medicaid Management Information System (FMMIS). It uses the FMMIS to ensure that payments are properly adjusted. DODs obtained through three different databases–the State Data Exchange (SDX), the state Department of Health, Bureau of Vital Statistics (BVS), and the Florida Online Recipient Integrated Data Access System (FLORIDA)–are updated in the FMMIS.


The OIG reviewed 124 capitation payments made during a more than five-year time period that were preceded by DODs and focused on 113 overpayments that were recoverable but had not yet been recovered. In 62 of these instances, the state agency did not timely update DODs in the FMMIS and beneficiaries’ enrollments were not updated. In 42 instances, DOD information derived from the three sources was incorrect or inconsistent.  Where data were inconsistent, the state agency removed the DODs from the FMMIS to ensure that beneficiaries would continue to receive services until the DODs were determined.  However, the state agency failed to collaborate with the DOD sources or the Department of Children and Families (DCF) to identify the source of the inconsistencies, and failed to use alternative sources, such as Accurint, the Massachusetts Registry of Vital Records and Statistics, or the Indiana State Department of Health, Vital Records.  In nine instances, DOD information was missing and the FMMIS did not identify the beneficiaries as deceased.


The OIG recommended that the state agency identify and recover more than $26 million in overpayments to MCOs and return the roughly $15 million federal share; perform monthly FMMIS reviews to ensure that deceased individuals are removed from the SMMC; implement policies and procedures for quickly identifying and correcting inaccurate death information; and improve collaboration with the Social Security Administration (SSA), DCF, and BVS to identify and resolve inconsistencies. The state agency indicated that it had recovered roughly $24 million in overpayments and identified slightly more than $200,000 in payments as correct. It also outlined steps it is taking to improve collaboration among agencies. However, it claimed that it could not identify instances in which individuals with DODs were not removed from plans, an argument the OIG combatted with the 62 instances described in its report.  The state agency also indicated that its Medicaid Fiscal Agent Operations (MFAO) bureau already implements an automated system hierarchy to resolve variances, but the OIG determined, based on its findings, that the system is inadequate.

Medicaid spending growth up as enrollment surge slows

National growth in Medicaid enrollment and total Medicaid spending slowed substantially in fiscal year (FY) 2016 and are projected to continue to slow, despite record increases in FY 2015. The decline occurs as the initial enrollment surge under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) coverage expansions tapers off and prices for high-cost and specialty drugs rise, according to the Kaiser Family Foundation’s annual 50-state Medicaid Budget Survey.

Medicaid spending on the rise

The survey projects an increase in state Medicaid spending growth in FY 2017 related to the requirement that Medicaid expansion states begin paying a five percent share of expansion costs on January 1, 2017. Before this date, the federal government committed to paying 100 percent of expansion costs. In expansion states, the median growth in Medicaid spending is estimated to be 5.9 percent in FY 2017, up from 1.9 percent in FY 2016. In non-expansion states, state Medicaid spending is projected to increase by 4 percent in FY 2017, compared to 3.9 percent in FY 2016. Thus, the differential in rates across expansion and non-expansion states is narrowing continually. As growth in overall state revenues slows or declines, pressure to control Medicaid spending increases.

Continued delivery system reforms 

The survey also found that the majority of states are refining their pharmacy programs to control costs and are adopting or expanding strategies to deal with the opioid crisis. States are increasing reliance on managed care, with at least 75 percent of Medicaid beneficiaries enrolled in risk-based managed care organizations (MCOs) in the majority of states that contract with MCOs. Additionally, 29 states are adopting or expanding delivery system reforms, such as patient-centered medical homes and accountable care organizations (ACOs). Nearly every state reported actions to expand the number of people served in community settings.