Medicaid Reform

Ohioans spend more on Medicaid than on any other single item in the budget. And the costs only continue to increase—dramatically. Left alone, Medicaid would increase by 15.4 percent over the next two years and crowd out other priorities. Instead, this budget saves $1.4 billion (all funds) over the biennium, compared to the initial trend. The level of funding in the Executive Budget ensures that Medicaid is sustainable, allows vulnerable Ohioans to continue to receive the services they need and gives taxpayers the accountability they demand.

The time in now for principle-driven reform that includes:

Improve Care Coordination: Coordinate care to achieve better health and costs savings

Effective care coordination across the delivery systems for physical health services, behavioral health services and long-term care services can improve overall health outcomes, reduce the growth in health care costs and the number and length of hospital stays, lead to fewer hospital readmissions and help prevent Ohioans from having to go to nursing homes.

• Promote health homes: Expand on the traditional medical home model by enhancing coordination of medical and behavioral health care to help Ohioans with severe and/or multiple chronic illnesses.

• Provide accountable care for children: Currently, 37,544 children with disabilities are served through Ohio's fee-for-service program at a cost of $313 million per year. These children often have complicated and long-term medical conditions, but receive little assistance in accessing and coordinating care, which results in less than desirable health outcomes. The state will encourage the development of pediatric Accountable Care Organizations (ACOs) to provide the necessary attention and care to meet the unique needs of these children.

• Care coordination planning grant: The Jobs Budget will support Ohio's planning grant proposal to the Center for Medicare and Medicaid Innovation. The proposal outlines an implementation strategy for a new Individual-Centered Integrated Care Delivery System (ICDS) that will provide person-centered care to individuals who are enrolled in both Medicaid and Medicare and addresses all of a person's physical health, behavioral health, long-term care and social needs, no matter who is the payer. It will be the cornerstone of Ohio's efforts to achieve the vision of a balanced delivery system that enables the aged and people with disabilities to live with dignity in their preferred settings.

Integrate Behavioral &Physical Health Care: Treat the whole person by integrating physical & behavioral health services

Adults with serious mental illness (SMI) represent about 10 percent of Ohio's Medicaid population, yet they account for 26 percent of total Ohio Medicaid expenditures. The level of spending is significant and growing. Furthermore, the lack of coordination between service providers often fails to result in positive health outcomes for these individuals. For example, individuals with SMI have about twice the rate of hospitalizations and emergency room visits for chronic conditions, including diabetes, pneumonia and asthma. Past state practice has been to coordinate Medicaid budget and policy for treating people with SMI in separate systems—physical health benefits have been administered by the Department of Job and Family Services (ODJFS), and behavioral health services have been administered by the Departments of Mental Health and Alcohol and Drug Addiction Services. Specific proposals will address these issues:

• Elevate behavioral health financing to the state: Move financial responsibility for community behavioral health from local boards to the state. This change relieves local governments of the expense and effort of running complex programs for the most vulnerable Ohioans and achieves efficiencies and statewide controls necessary to meet the state's obligations to operate and provide hospital services, and to assure better coordination of care for Medicaid recipients.

• Manage behavioral health service utilization: The community mental health Medicaid benefit currently is operated differently than the rest of Ohio Medicaid. This creates significant challenges for budget predictability and prevents any analysis whatsoever of services individuals receive and their health outcomes. Without utilization management controls and cost containment measures, funding for community mental health services will not be sustainable and increased pressure will be placed on state and local financing structures.

• Consolidate Residential State Supplement (RSS) program: The Ohio Department of Mental Health will become the single point of accountability for the administration of the RSS Housing Program and the Adult Care Facilities Program. These programs serve a significant number of RSS consumers with behavioral health needs (80 percent). Consolidating the administration of these programs will result in a more streamlined and efficient administrative structure at the state level.

Rebalance Long-Term Care: Enable seniors and people with disabilities to live with dignity in settings they prefer

Ohio's Medicaid program serves approximately 173,000 individuals with long-term care needs each year. While only 7 percent of the Medicaid population uses long-term services and supports, approximately 41percent of annual Medicaid expenditures stem from services to this population. Today a Medicaid-eligible patient who needs long-term services must choose among as many as five different waivers and two Medicaid state plan delivery models with different enrollment requirements and processes and different service packages for each. Ohio will develop a unified long-term care system so that individuals who need long-term services can easily understand their choices and how to access services.

• Create a unified long-term care budget: To establish a more patient-centered delivery system, spending will be driven by the settings and services individuals choose rather than line item appropriations in the state budget process. Medicaid funding for long-term services and supports will be combined with ODJFS funding to create a single long-term care budget for people with physical disabilities and seniors.

• Create a single waiver: A new single waiver will incorporate self-direction, a single set of provider and enrollment requirements, a service package to meet the needs of individuals with physical disabilities and seniors, and consistent care management across populations. Currently there are five home care waivers (PASSPORT, Ohio Home Care, Ohio Home Care/ Transitions Aging Carve-out, Choices, and Assisted Living).

• Avoid high cost institutional placements: To facilitate individual choice and eliminate barriers for individuals seeking long-term services, ODJFS will establish waiver priorities to maximize individual opportunities to receive long-term services and supports in community based settings.

• Link nursing home payments to patient-centered outcomes: Modify the quality incentive payment included in the Medicaid rate for nursing facility services by replacing current measures with measures focused on person-centered care, and increase the value placed on good outcomes for individuals.

• Align programs for people with developmental disabilities: Consolidate Medicaid programs for people with disabilities in the Department of Developmental Disabilities and eliminate barriers that keep people with developmental disabilities from accessing the services they need.

• Evaluate PACE program: Complete a comprehensive evaluation of the cost-effectiveness of the current PACE sites.

Modernize Reimbursement: Reset Medicaid payment rules to reward value instead of simply rewarding volume

The Jobs Budget proposes to change outdated payment rules that are based on volume and do not reward providers for improving outcomes. These changes will impact providers across the system, putting the needs of beneficiaries and taxpayers first. They will also generate significant cost savings.

• Modernize hospital payments: Medicaid is using prospective payment methods developed in the late 1980s to pay for inpatient and outpatient hospital services. These methodologies are volume-driven and need to be updated to incentivize improved outcomes. Examples of proposed modernizations include reforming how inpatient hospital stays are paid, changes to the reimbursement fee schedules for outpatient services and prohibiting payment for conditions that hospitals could have helped prevent. These proposals also include the continuation of the hospital franchise fee.

• Reform managed care payments: Currently, more than 1.6 million people that are enrolled in Medicaid receive care through a managed care plan. As the Medicaid managed care delivery system has become more mature in Ohio, plans should become better managers of care and in turn be able to reduce the trend in medical cost inflation and become more efficient in running their operations. This suite of proposals includes changes to the capitation rates, language to require Medicaid reimbursement to default to fee-for-service rates for hospitals that will not contract with a managed care plan, and other policy changes to improve care coordination for individuals through managed care.

• Reform nursing facility payments: Nursing facilities are a critically important service in Medicaid. However, Ohioans spend more per capita on nursing homes than citizens in all but five states. Nursing facility rates are approximately $4.75 higher than the national average, and the current reimbursement methodology does not reflect individuals' preferences for personalized care. The Jobs Budget proposes to adjust the nursing home rate methodology and make other changes that will allow the state to invest in home- and community-based services.

• Other benefit and payment reforms: A variety of other payment reform proposals include, for example, an adjustment in nursing and home health services base rates; adjustment of PASSPORT/Choices, assisted living, and PACE provider rates and support for Area Agencies on Aging; implementation of a selective contracting program for diabetic supplies; and establishment of a maximum payment rate and prior authorization review criteria for nutritional products.

THE OUTCOME: BETTER HEALTH, BETTER CARE AND COST SAVINGS THROUGH IMPROVEMENT

• SERVE THE WHOLE PERSON: Individuals will receive person-centered care through a delivery system designed to address all of the individual's physical health, behavioral health, long-term care, and social needs.

• TREAT PEOPLE WITH DIGNITY: Individuals will have access to the services they need in the setting they choose.

• SIMPLIFY THE SYSTEM: The delivery system will be easy to navigate for both the individuals receiving services and the providers delivering the services.

• PROVIDE FLEXIBILITY: Individuals will be able to transition seamlessly among settings and programs as their needs change.

• CONTINUOUSLY IMPROVE: Incentives in the system will be focused on performance outcomes related to better health, better care, and lower costs through improvement.

In addition to modernizing the Medicaid system and improving outcomes for individuals, these proposals will benefit taxpayers by controlling runaway Medicaid costs.

BOTTOM LINE: These proposals will enable the state to transform its Medicaid system into an efficient, navigable, person-centered care system that effectively delivers coordinated physical health, behavioral health and long-term care services based on an individual's needs. In return the state will be able to reduce the growth in its projected share of Medicaid spending.

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