Assessment of the Milliman Report on Medicaid Managed Care Expansion in Ohio.

Assessment of the Milliman Report on Medicaid Managed Care Expansion in Ohio

Download Assessment of the Milliman Report
(April 2005, pdf format, 389 KB)
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The Ohio General Assembly is considering adding a provision to the budget to require moving a selected group of the non-Dual Adult Disabled Medicaid population into full risk managed care plans as quickly as possible.

The Health Policy Institute of Ohio (HPIO) received requests of assistance from several staff members of the Ohio General Assembly regarding this proposal, especially regarding the projected estimated savings. To provide assistance, HPIO reviewed a report submitted to the Ohio Commission to Reform Medicaid entitled “Implementation Plan for Medicaid Managed Care Expansion in Ohio.” This report provided the initial framework for the proposal now in front of the legislature. HPIO further reviewed a letter from Mercer which evaluated the Milliman Report and a follow up Milliman document that gave additional details on its managed care budget savings estimation methodology.

Our assessment of the Implementation Plan for Medicaid Managed Care Expansion in Ohio includes the following:

• Mercer’s analysis agrees with use of a 7.6% managed care savings discount from fee-for-service expenditures for the non-Dual Adult Disabled Medicaid population.
• Any assessment of savings must consider how the new federal actuarial soundness test for managed care rates—which does not let states set managed rates as a specific discount off of fee-for-service expenditures—will affect future savings.
• Given the timeline assumptions in the report, this expansion could not begin enrollment until January 2007. Moreover, these timeline assumptions may be overambitious. As the Mercer analysis notes they are “overly aggressive.”
• Accepting all of the report’s assumptions, the incurred savings from expanding managed care to the non-Dual Disabled population will be no more than $24.5 million (state General Revenue Fund money, which excludes the federal Medicaid match) in SFY 07, with no savings in SFY 06. Because this effort will not be at full enrollment beginning January 2007, the incurred savings will likely be appreciably less than $24.5 million (state GRF money, excluding the federal match).
• The report notes that ODJFS faces a need for a 13% increase in spending during the first fiscal year of full implementation to cover implementation costs.
• If this spending increase requires state GRF dollars, these start up costs will be greater than the first year savings, requiring additional dollars in SFY 2006/07.
• The report also overstates total savings from this expansion because it does not subtract the savings that the ECM projected is already expected to generate and it does not deal with the fact that some of ABD dollars go to hospitals as payment for Graduate Medical Education, a payment they will still expect to receive.
• The move to full risk managed care could threaten the viability of financing mechanisms to aid hospitals that serve a large portion of low income consumers, such as the upper payment limit for public hospitals and HCAP.
• The report’s timeline is ambitious. It is likely to take longer to implement this program than the report suggests for several reasons including: federal resistance to the proposed managed care assessment to pay for implementation costs; the time it takes for new managed care plans to become operational; and time required to deal with potential consumer or provider resistance before CMS will approve the required waiver and/or JCARR will pass the rules needed for the expansion.
• This expansion proposal does not alleviate future annual budgetary pressures. The report’s own numbers assumes that the annual increase in managed care expenditures would be 8.7% per year. The second Milliman report states that Milliman assumes that trend for managed care spending will grow at .5% less than the trend for the fee-for-service system.

HPIO agrees that Ohio Medicaid needs to increase its use of care management tools, especially for the ABD population (even if it requires an upfront investment of money). Without investing in care management, Ohio Medicaid will not be able to effectively improve health outcomes while also saving money. A key question for the Ohio General Assembly is whether to go with the full risk managed care option or the enhanced care management proposal of the Administration.

For more specific information, please download HPIO’s complete assessment.

For more information on the different issues that arise in attempting to reform Ohio’s Medicaid program, please refer to the Health Policy Institute of Ohio’s publication Ohio Medicaid Reform: Key Issues to Consider. For more general information about Ohio’s Medicaid program, including federal eligibility requirements, benefits, financing, and administration, please refer to the Institute’s publication Ohio Medicaid Basics.