State Budget Update: Medicaid Changes in House Substitute Bill

With the budget in full swing, the Ohio House has offered its first amendments to the governor’s proposed budget. This action is the first in a multi-step process that will soon include another round of consolidated amendments (Omnibus) before it is voted on by the full House and sent to the Senate. Even though we are early in the process, there have been a number of dramatic changes proposed. To assist policy analysts and advocates with learning more about each of these initiatives, the Legislative Service Commission’s Comparison Document (“Comp Doc”) code will be cited to make the information on the changes easier to find.

Deviating from the Administration
CPC Eliminated – MCDCD60
Since the beginning of the Kasich Administration, the Office of Health Transformation (OHT) has focused on value-based payment as a key element of its reform efforts. These policies have included two main activities in the construction of episodic-based payments and the proliferation of patient-centered medical homes (PCMH) through the Comprehensive Primary Care Initiative (CPC). With CPC, OHT is working to enroll primary care practices into a system built on the clinical coordination of care, with the transparency of cost and quality being a mechanism through which enhanced reimbursement would be attached and incented. Now, the Medicaid director, and by proxy OHT, would no longer be permitted to implement this system, but would also lose authority in establishing PCMH services for the developmentally disabled.

MLTSS Delayed, Study Committee Created – MCDCD52
In a rejection of the Managed Care model of delivery, the Ohio House has eliminated the carve-in of the Long Term Services and Supports (LTSS) system into Managed Care (MLTSS). What’s more, the Medicaid director would now be prohibited from enrolling new populations into Managed Care without the approval of the General Assembly. This is not an outright denial of the concept of the MLTSS system, however, as the General Assembly has outlined the creation of a Study Committee comprised of industry and advocacy organizations to review the merits of adding the LTSS population to Managed Care by 2020.

Delays BH Redesign – MCDCD56
Also proposed is another delay of the redesign process for behavioral health services by six months. This delay would apply to both the coding changes being requested (moving implementation from July 1, 2017, to January 1, 2018) and the carve-in into Managed Care (moving implementation from January 1, 2018, to July 1, 2018). Interestingly, this delay would shift the expenditures associated from Fiscal Year 2018 (FY18) to FY 2019 by $122.6 million to $129.6 million.

BCMH Shift Removed – MCDCD45
The administration had proposed to shift some of the population served through the Bureau for Children with Medical Handicaps (BCMH) into the Medicaid program from the Ohio Department of Health. This program provides children with special health care needs and their families with services and treatment. Recently, this program has been running over budget, so this shift would allow Ohio to match its state funding with federal Medicaid dollars for the children who are eligible. The administration has also suggested limiting the enrollment into BCMH once they are Medicaid eligible. There was significant public pushback on this policy proposal and now this suggested change has been removed.

Greater Legislative Oversight
Eligibility Requires Statute – MCDCD66
The substitute legislation makes a number of suggestions that diminish the Medicaid director’s authority to manage the program and, instead, places major decisions with the legislature in a few key areas. Notably, this includes the discretion of the Medicaid director to cover optional eligibility groups unless expressly cited in Ohio Revised Code. This change significantly alters the traditional relationship between Ohio and the federal government and has broad impacts in the ability of the Medicaid director to manage expenses. Notably, eligibility and coverage are under the purview of the director as a measure to remain flexible, especially in times of economic downturn. This would place such decisions in the hands of the legislature, hampering the ability of the department to execute its fiduciary oversight.

Rates Require Oversight – MCDCD68
Another common management tool of the Medicaid director is to have oversight of the rates established to providers. Most of the rate-setting process happens in rule, though Managed Care has the authority to establish its own rates, a process which is reviewed and guaranteed by the principles of actuarial soundness. Outside of Nursing Facilities (NFs), no provider group has their rates in statute or at the discretion of the legislature. This process would now leave rate changes to the oversight of the Joint Medicaid Oversight Committee. With this shift, the Medicaid director would have less authority to implement reforms based on financial incentives, which could hamper a Medicaid director’s ability to manage finances under alternative proposals such as those being offered in Congress (block grants, etc.) and would open up the rate-setting process to the influence of special interests.

Medicaid Waiver – MCDCD59
While no new language seems to be present in regard to an 1115 Demonstration Waiver like “Healthy Ohio,” the eligibility for individuals to be enrolled through the expansion is limited through a new waiver proposal.  Now, individuals must meet one of the following criteria:

  • Be at least 55 years of age
  • Be employed
  • Be enrolled in school or an occupational training program
  • Be participating in an alcohol and drug addiction treatment program
  • Have intensive health care needs

While these exemptions will provide protections for many enrolled, there are still a number of questions that remain. First, the consideration of what constitutes employment and how that is defined is important. Additionally, participation in an alcohol and drug addiction treatment program does not address those with Serious and Persistent Mental Illness (SPMI). In addition, according to Ohio’s recent survey of the expansion population, 32.33 percent of individuals have a Substance Use Disorder (SUD), and 29.9 percent of that group have received regular treatment. Given the gap in diagnosis versus treatment, two-thirds of individuals with an addiction may not qualify for coverage under this scenario.

IMD Waiver – MCDCD54
One amendment would also require the department to create and administer a Medicaid waiver for individuals who require inpatient treatment for a mental disease. This waiver of the “IMD rule,” which we have written about, would be a significant departure in historical Medicaid policy, though it is something being encouraged by the Centers for Medicare and Medicaid (CMS) Director Seema Verma and Secretary of Health and Human Services Tom Price.

The list of amendments in the House process offered a number of significant policy changes that affected the operation of the Medicaid program. Many other changes, including limitations to hospital spending in lieu of a decrease in rates, are contained within the budget, though are not explored here.

In several cases, the amendments seem to suggest that Managed Care models of delivery are under the scrutiny of the legislature. This circumspection is only reinforced by a continued delay in the behavioral health benefit’s carve-in and the rejection of placing LTSS in Managed Care.

Additionally, the House also seems to think that one of the major staples of the Kasich Administration’s efforts, the Comprehensive Primary Care Initiative, is not worth the investment. This decision seems to be at cross-purposes with other state efforts to increase price transparency and program performance, and could hamper efforts with episodic-based payments given the interdependency of these programs. Beyond that, there is an effort to erode the authority of the Medicaid director in taking away two major tools of program management in determining coverage and rates. While legislative oversight is a natural tension in the balance of power, this could cause significant delays in being able to manage the program, especially when there are challenges financially. Additionally, with the federal proposal to change how Medicaid programs are funded, taking away these tools may significantly affect how Ohio would best manage its finances in a restricted or capped environment, likely creating issues with cash flow or requiring the Medicaid director and budget director to examine other options for managing expenses (such as eligibility process), creating confusion for the legislature, consumers, and Ohio departments of Job and Family Services.