Despite uncertainty about ACA most states moving forward with Medicaid expansion

Although the future of Medicaid funding is unclear with the ongoing efforts to repeal and replace the Affordable Care Act (ACA) (P.L. 111-148), many states were still working to expand Medicaid services and benefits, according to a joint Kaiser Family Foundation (KFF) and Health Management Associates (HMA) report. In an annual survey collecting data about Medicaid policies in place or implemented in fiscal year 2017 and policy changes that will be implemented or are being discussed for fiscal year 2018 in each state and the District of Columbia, KFF and HMA noted that some of the biggest changes are occurring in eligibility policies, managed care reforms, and the expansion of benefits.

Eligibility and Premiums

In 2017, seven states made changes to expand Medicaid eligibility and in 2018 another seven are planning to implement eligibility expansions. These changes include eliminating the 5-year bar on Medicaid eligibility for lawfully-residing immigrant children or providing coverage for a new eligibility group of individuals who are chronically homeless, justice-involved, or in need of substance abuse or mental health treatment with an income below 5 percent of the federal poverty level. A few states are looking to make changes to restrict Medicaid eligibility by imposing work requirements and asset tests.

In recent years, many states have made changes to the way Medicaid coverage is handled when beneficiaries are in the criminal justice system. Some states have opted to suspend coverage when someone is incarcerated rather than terminate coverage, as they have done previously, so it is easier to reinstate coverage when the beneficiary is released. Additionally, some states have developed initiatives to work with and train criminal justice employees to assist with Medicaid applications after a person is released.

Managed Care

Twenty-nine of 39 states with risk-based managed care organizations (MCOs) reported that 75 percent or more of their Medicaid beneficiaries were in enrolled in MCOs as of July 1, 2017. Most states carve-out certain services, such as behavioral health services, from their MCO contracts. In 2017 at least six states took steps to carve in behavioral health services into their MCO contracts and ten states reported plans to work toward carving in behavior health services in 2018. Twenty-six of the 39 MCO states reported that they would use the funds available for inpatient psychiatric treatment or substance use treatment under the 2016 Medicaid Managed Care Final Rule; however, many states commented that the 15-day limit was too restrictive for the type of treatment that it was meant to cover. Sixteen states in 2017 and 17 states plan in 2018 to include specific initiatives to encourage MCOs that cover LTSS to expand access to home and immunity-based services (HCBS).


Twenty-six states reported new or enhanced benefits in 2017 and 17 states plan to add or enhance benefits in 2018. These added benefits include mental health and substance use disorder services, alternative plain therapies, family planning and cancer screenings. Nineteen states reported new or expanded initiatives to expand dental access or improve oral health outcomes in 2017 or 2018. Additionally, 19 states reported initiatives to expand the use of telehealth in 2018 or 2019. For 2018, 22 states reported plants to adopt or expand initiatives such as patient-centered medical homes or accountable care organizations in an effort to encourage integrated care. Fourteen states in 2017 and 13 states plan in 2018 to report expansions and additions to the HCBS programs, including personal supports, supported employment, home delivered and medically tailored meals among others.

Although most states are continuing to look ahead to expand Medicaid benefits and eligibility, almost all states are still concerned about the negative fiscal consequences that they would face in the proposed limits on federal Medicaid spending. Medicaid directors from the 32 ACA Medicaid expansion states reported the states would not be able to continue providing coverage for expansion population, or the coverage would be at a substantial risk, if the ACA federal match was terminated.

Highlight on Virginia: Medicaid agency fails to collect $2.9M in drug rebates

For a covered outpatient drug to be eligible for federal reimbursement under the Medicaid program’s drug rebate requirements, manufacturers must pay rebates to the states. States bill the manufacturers for the rebates to reduce the cost of the drugs to the program. Previous HHS Office of Inspector General (OIG) reviews found that states did not always bill and collect all rebates due for drugs administered by physicians to enrollees of Medicaid managed-care organizations (MCOs).

An OIG review of Virginia’s Department of Medical Assistance Services, Division of Health Care Services (Virginia), from January through December 2013, found that Virginia did not bill manufacturers for some rebates for physician-administered drugs dispensed to enrollees of Medicaid MCOs. As a result, it failed to collect an estimated $2.9 million (federal share) in rebates.

Virginia uses a contractor to manage its drug rebate program. According to the OIG audit, in calendar year 2013, Virginia paid MCOs $2,411,629,093 ($1,238,462,930 federal share), which included expenditures for physician-administered drugs.

The OIG found that Virginia properly billed manufacturers for rebates for drugs associated with the National Drug Codes (NDCs) in its audit sample. However, Virginia did not have valid NDCs for other drug utilization data submitted by MCOs for physician-administered drugs, and it did not bill manufacturers for rebates for these drugs. Virginia estimated average rebates per claim billed to manufacturers, and the OIG determined these estimates to be reasonable. The OIG applied the estimates and determined that Virginia did not bill rebates of $5,831,528 ($2,915,764 federal share) to manufacturers for physician-administered drug utilization without valid NDCs.

The OIG concluded that Virginia did not bill manufacturers for rebates for these drugs because the MCOs submitted utilization data to Virginia with a blank NDC field or an invalid NDC. Although Virginia required MCOs to submit valid NDCs for all physician-administered drug utilization, Virginia did not implement edits in its Medicaid Management Information System to ensure that MCOs submitted valid NDCs. As a result, Virginia did not obtain rebates for these drugs.

The OIG recommended that Virginia: (1) work with CMS to resolve the drug utilization data without valid NDCs by determining the correct NDCs, billing manufacturers for the estimated $5,831,528 ($2,915,764 federal share) in rebates, and refunding the Federal share of rebates collected; (2) implement Medicaid Management Information System edits to verify that NDCs are present and valid in all drug utilization data; and (3) ensure that MCOs submit drug utilization data containing NDCs for all physician-administered drugs.

Virginia concurred with the OIG’s findings and plans to take corrective actions.


Kusserow on Compliance: OIG advisory opinion relating to hospice

The HHS Office of Inspector General (OIG) released Advisory Opinion No. 16-08, which involves an arrangement “in which a hospice would make a supplemental payment to the nursing facilities in which the hospice’s dually eligible patients reside when the nursing facilities–instead of the hospice–receive payment for their patients’ room and board expenses.”  The OIG concluded that while this arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute (AKS), it would not impose administrative sanctions under that statute.

The facts presented to the OIG related to a “Proposed Arrangement” in which a hospice would make a supplemental payment to the nursing facilities in which the hospice’s dually eligible patients reside when the nursing facilities—instead of the hospice—receive payment for their patients’ room and board expenses.  The “Requestor” was a non-profit corporation licensed by the state to provide hospice care and the state has developed a “Demonstration Program” to test a fully integrated care system that manages the continuum of benefits for dually eligible beneficiaries. The state selected several “Participating MCOs” to provide services to dually eligible beneficiaries in the Demonstration Program. Under the Proposed Arrangement, Requestor would require a nursing facility to provide evidence of the amounts the Participating MCO pays the nursing facility for patients who have, and patients who have not, elected hospice. For a Dually Eligible Hospice Patient, Requestor would pay the nursing facility a standalone amount that, when combined with the payment the nursing facility would receive from the Participating MCO for the Dually Eligible Hospice Patient, would result in the nursing facility receiving the same amount as it would have received if the patient had not elected hospice.   Requestor certified that these steps would prevent the nursing facility from being reimbursed more than the Participating MCO pays for a patient who has not elected hospice.

The OIG found the Proposed Arrangement would involve the transfer of remuneration by Requestor to potential referral sources, the nursing facilities, in the form of the supplemental payment.  It cited its 1998 Special Fraud Alert that covered a situation in which a hospice remits payment to nursing facilities for Dually Eligible Hospice Patients’ room and board expenses only after first receiving payment for such expenses from a state’s Medicaid program and found the Requestor’s prior arrangement to that situation. The Proposed Arrangement was found to be consistent with that Special Fraud and it would help to ensure that the nursing facility has no incentive to provide a lower level of room and board services to Requestor’s Dually Eligible Hospice Patients or to discourage patients from electing hospice.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.

Medicaid MCOs ABPs, CHIP join the mental health parity party

CMS finalized proposals to strengthen access to mental health and substance abuse services for beneficiaries of certain Medicaid plans and Children’s Health Insurance Plans (CHIP), an initiative that was originally born out of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) (P.L. 110-343). The Final rule, published in the Federal Register on March 30, 2016, was announced in connection with President Obama’s attendance at the National Rx Drug Abuse and Heroin Summit. At the same time, CMS released a summary of its “latest efforts to increase access to improve mental health and care for low income individuals, especially in light of the opioid abuse epidemic, which constitute significant health risk and cost drivers in the Medicaid program.”

Legislative and regulatory history

The MHPAEA, which generally requires that health insurance plans treat mental health and substance abuse treatment as they would surgical or medical benefits, amended the Public Health Service Act (PHSA) (42 U.S.C. §6a et seq.) to apply mental health parity requirements to certain Medicaid and CHIP coverage. That is, the MHPAEA requires plans within its scope to offer the same benefits that private health insurance plans offer. Parity requirements under the MHPAEA were expanded through the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), which mandated that parity requirements be applied to qualified health plans (QHPs) and Medicaid non-managed care benchmarks and benchmark equivalent plans.

The new requirements issued as a part of the Final rule, which were first introduced in the Proposed rule, are meant to ensure that Medicaid and CHIP beneficiaries retain parity in regard to this type of treatment regardless of whether the coverage is delivered through a managed care organization (MCO) or alternative plan models. The Final rule made only minor changes to the regulations set forth in the Proposed rule (see CMS Proposed rule would extend mental health parity to Medicaid MCOs, Health Law Daily, April 7, 2010; Proposed rule, 80 FR 19418, April 10, 2015).

Targeted coverage and new requirements

Specifically, the Proposed and Final rules focused on the application of parity requirements under the MHPAEA to the following coverage: (1) Medicaid MCOs; (2) Medicaid benchmark and benchmark-equivalent plans, which are referred to as Medicaid alternative benefit plans (ABPs) in the Final rule; and (3) CHIP. CMS explained that states currently have flexibility in terms of care delivery mechanisms under Medicaid and that states are free to use entities other than MCOs, including prepaid inpatient health plans or prepaid ambulatory health plans, to provide services to beneficiaries. According to CMS, the Final rule, “maintains state flexibility in this area while guaranteeing that Medicaid enrollees are able to access these important mental health and substance abuse services in the same manner as medical benefits.” According to CMS, the Final rule will positively affect over 23 million people who are enrolled in Medicaid MCOs, ABPs, and CHIP.

Pursuant to the Final rule, affected plans will be required to disclose both the information on mental health and substance use disorder benefits as well as determinations of medical necessity for these services whenever the information is requested. Further, the reasons for denial of reimbursement or payment for these types of services must be disclosed by the state.

Other mental health parity initiatives

Besides announcing the release of the Final rule for Medicaid and CHIP mental health and substance abuse treatment parity, the agency also summarized other initiatives that it has promoted to transform the behavioral health system and, specifically, to target the opioid abuse epidemic. These initiatives include:

  • the CMS Innovation Accelerator Program of 2014, which was a new strategic and technical support platform that aimed to improve delivery of substance use disorder treatment to high need and high cost individuals;
  • guidance that explained a new Social Security Act 1115 demonstration opportunity that encouraged the development of full coverage through a continuum of care for beneficiaries with substance abuse issues;
  • information on effective safeguards and options to prevent over-prescribing of opioid pain medication; and
  • information regarding screening and intervention services for children and youth with mental illness and/substance abuse issues.