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AHCCCS Update

Arizona Health Care Cost Containment

System (AHCCCS) Summary

z AHCCCS model has been documented to provide

higher quality coverage at lower cost

z AHCCCS has had to administer significant

reductions in response to ongoing fiscal crisis

z Arizona has implemented or is pursuing all

suggestions from Secretary to Governors

z Waiver proposal promotes the objectives of Title XIX

by maintaining core program for members and

providers

z Waiver proposal is term limited until January 1, 2014

AHCCCS Milestones

z 1965 – Congress enacts Medicaid

z 1982 - Arizona was the last state to join Medicaid –

z Created Arizona Health Care Cost Containment System

(AHCCCS)

z Established Mandatory Managed Care through 1115

waiver

z 2000 Voters approve Proposition 204 providing

coverage up to 100% of the federal poverty limit

z 2010 – Federal Health Care Reform is enacted

AHCCCS Population as of July 1, 2010

1985 – 2010

144,450

456,385

508,917

318,383

1,047,982

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Prop 204 Expansion Population

(January 1

)

50000

100000

150000

200000

250000

300000

350000

400000

2005 2006 2007 2008 2009 2010 2011

SSI Parents Childless Adults

AHCCCS Total Population

Child 0-21

54%

Adult 22-64

41%

Adult 65 +

Child 0-21 Adult 22-64 Adult 65 +

Arizona/AHCCCS Overview

z 6.5 million people in state - 14

largest

z 80% of Population in Maricopa (Phoenix) and Pima

(Tucson) counties

z Arizona 6

largest State in size

z All members enrolled in mandatory managed care

except American Indians and Federal Emergency

Services

z AHCCCS contracts with 10 plans for Acute –

geographically based

z AHCCCS contracts with 9 Long Term Care plans –

geographically based

z AHCCCS contracts with Department of Health

Service for Behavioral Health carve-out – In turn

contract out with 4 entities – geographically based

American Indians in AZ & AHCCCS

Arizona Residents

z Arizona population: 6,343,952

z 285,183 AI Arizona residents

AHCCCS Members

z AHCCCS members: 1,344,173

z 140,442 AI AHCCCS members

Arizona has 22 different tribes located throughout the State

State conducted 12 consultations in 2010 – 2 on tribal lands

AHCCCS Model for Medicaid

Managed Care

z Member choice & Competitive Plans

z 6 plan options in Phoenix metro (Maricopa)

z 5 plan options in Pima County

z 3 Long Term Care plan options (Maricopa)

z Acute care choice statewide

z Cost Containment –

z Overall lowest cost – Kaiser

z Overall lowest pharmacy PMPM – Part D Implementation –

Lewin Report

z Gold Standard for Managed Care Purchasing – Rockefeller

Institute

z Arizona employs “best practice” for date of death records –

HHS OIG

AHCCCS Model for Medicaid

Managed Care

z Quality Measures – 17 of 25 quality measures are

above HEDIS Medicaid Mean

z Member Satisfaction – less then 3% of members

change plans annually

z Provider Participation – remains high with little

change even after rate reductions

z Plan Oversight – 2 plans with membership caps in

past 18 months – transparent actions on WEB –

System CYE 2009 profitability <2%

Arizona Model and Health Care

Reform

z Population Expansion – Childless adults – Only limited

number of states cover this population to 100%

z Appropriate Payment to ensure access –

Professionals 95% of Medicare – outpatient at

Medicare

z Emphasize home and community services

z Over 70% EPD – over 98% DD

z Dual Eligible Population – National leader – Members

in managed care - one third members aligned in SNP

– application submitted for CMMI contract

z Streamlined Eligibility – Web based Application – 30-

40% of applications submitted using Health E –

Arizona – Great community response

100

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09

Percentage %

Nursing Facility

Home and

Community

Effective Use of Home and

Community Based Care

ALTCS Trend in HCBS Utilization

Health E-Arizona Applications

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010

Public

Subscriber

AHCCCS Program Integrity

z Agency created central Office of Inspector General

z IG received Medicaid Integrity Inst. Distinguished Service Award

z Even with 30% reduction in agency staff, resources dedicated to

program integrity have increased

z Signed contract with Data analytics vendor

z Had 3rd lowest error rate of 17 states in national study (PERM)

z Conducted two significant date of death comparisons with

minimal findings

z Developed and distributed 3 training modules to staff – plans –

members and providers

z Applied for OMB Program Integrity Funding Grant

z Program Integrity Results – FY 2010

z Cases investigated – AHCCCS – 1183

z Total Convictions – 14

z Total OIG Fraud Avoidance and Recoveries - $34.7 m

z Total Prepayment Coordination of Benefits - $1,376.4 million

10%

15%

20%

25%

Arizona 2008 PERM results

States

AHCCCS Budget

z 3 Options for Policy Makers when dealing

with AHCCCS budget reductions

z Eligibility – Limit - Health Care Reform

z Payment Rates – Limit–Network & Access to

Care

z Benefits – several optional services eliminated 10-

1-10 –

z Each has limitations but to date all have been

utilized

AHCCCS Budget changes to

Date

z AHCCCS Program is $874 million less in FY 2011

as a result of policy changes (total fund)

z $413 million in provider rate reductions

z $241 m in institutional rate freezes

z $121 m in eligibility reductions (KidsCare & KC parents)

z $39 m in benefit changes

z $29.5 m in admin reductions

z $28 m in increased member cost sharing

z Additional 5% reduction scheduled 4-1-11 $300 m

AHCCCS Budget Cont.

z Difficult decisions have been made with the

elimination of most optional services – very

few left – pharmacy and HCBS

z Approval of sales tax helped program avoid

additional 10% rate reduction

z Establishing annual Inpatient limit for adults

on Oct 1, 2011

z Cost Sharing has been maximized at federal

limits for acute

AHCCCS Staffing Levels

800

900

1000

1100

1200

1300

1400

1500

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Oct-09

Jun-10

Oct

Employees

Secretary Sebelius Checklist

z Benefits

z Eliminate Optional Benefits – Done

z Limit Benefits – Done – IP 10-1-11

z Cost Sharing – Done – beyond federal limits through

waiver – still awaiting final SPA approval (13 months)

z Manage Care

z Integrate Acute and Long Term Care – Done

z Emphasize HCBS – Done

z Primary Care/Medical Home – Done

z ACA – 90% Health Home – Community 1

Choice Option -

Ready

Secretary Sebelius Checklist

z Pharmacy

z Reduce Spend – Done - # 1 in Country

z Program Integrity

z Ongoing – Analytics – Increased resources – PERM results

– OIG recognition – date of death –Grant request OMB

z Duals Eligible Members

z National Leader with aligned managed care model and

applied for CMMI contract authority

Executive Budget makes painful reductions throughout

State Government but still $500 million short in FY

2012– Now What??

1115 Waiver Proposal

z In 2000, voters expanded Medicaid coverage to

all residents at or below 100 percent of the

federal poverty limit – Proposition 204

z FY 2012 General Fund support for the

expansion population is estimated to be $810

million

z The Executive recommends limiting Prop. 204

costs to dedicated tobacco settlement and

tobacco tax revenues

z Would be time limited until January 1, 2014

1115 Waiver Proposal

z Arizona requests a waiver from the Maintenance of eligibility

requirements

z Eliminating coverage for childless adults and medical

expense deduction category (250,000)

z Capping TANF parents at a level that can be sustained

(30,000 parents lose coverage – approx 90,000 maintain)

z Continuing coverage for 30,000 Aged, Blind and Disabled

z The State is requesting a waiver from the Transitional Medical

Assistance requirements for those categorically eligible that

would lose coverage

z FY 2012 General Fund savings are estimated at $541.5

million ($1.1 billion in federal match)

z FY 2013 proposal would generate almost $1.0 billion GF

savings

1115 Waiver Proposal

Section 1115 Waiver – Promoting the objectives of Title XIX -

focus on maintaining “core” Medicaid Program

z Preserve core provider network – cannot keep reducing

provider rates – >25% additional reduction in FY 2012 to

generate same dollars as waiver proposal

z Allows Arizona to Preserve coverage for traditional

Medicaid groups – children – elderly - disabled

z Preserve remaining benefits

z Preserve core plan and administrative infrastructure

z Maintain federal/state partnership and flexibility that are

core principles of Medicaid program

z Establishes Eligibility levels similar to other states

Mitigation Proposal

The Executive recommends two steps to mitigate

the impact of the change in eligibility:

z Create a $151.0 million uncompensated care pool

($50.0 million GF, $101.0 million matching funds)

z Allocated to Arizona healthcare providers for

uncompensated care. (hospitals – clinics –

emergency transportation)

z Funds will be available to reimburse healthcare

providers for continuing care for the most seriously

ill.

z Majority would be allocated to hospitals but other

providers could qualify

Mitigation Proposal

Seriously Mentally Ill

− Provide $10.3 million state only to DHS to fund

prescription drug coverage

− 5,200 SMIs are in childless adult category

− Agency working with DHS and expects to reclassify

>80% of SMIs into different category.

Children

− Currently 11,000 kids in adult category due to family

unit budgeting

− Looking at a SPA change to have kids made eligible

for SOBRA category

Proposition 204 Language

z Ballot language stated

z “A ‘yes’ vote shall have the effect of providing funding for

…increasing healthcare coverage eligibility…using

tobacco litigation settlement money”

z “A ‘no’ vote shall have the effect of not requiring

appropriation of tobacco settlement money to support

these programs.

z The ballot language also directed that the Tobacco

Settlement monies shall be “supplemented, as necessary,

by any other available sources and federal monies”

z Legislature has authority based on no available sources

and case law is supportive of this position

z Ultimately State Supreme Court would decide if litigated

Provider Tax Status

z Hospitals have been discussing provider tax for 2+

years

z 1% of revenues equals approximately $100m

z Proposal would be for $300 m tax

z Would want $100 m for rate increases

z Requires two-thirds vote from legislature

z Proposal currently insufficient

z Still significant details to work through

z Proposal is for 1 year Assessment

Summary

z AHCCCS model has been documented to provide

higher quality coverage at lower cost

z AHCCCS has had to administer significant

reductions in response to fiscal crisis

z Arizona has implemented or is pursuing all

suggestions from Secretary to Governors

z Waiver proposal promotes the objectives of Title XIX

by maintaining core program for members and

providers

z Waiver proposal is term limited until January 1, 2014