Maintaining a Healthcare Safety Net for Indigent Californians

Medi-Cal Redesign Waiver Development

Maintaining a Healthcare Safety Net:Securing Federal Medicaid Funding for Indigent Services

April, 2004

California Association of Public Hospitals and Health Systems

Medi-Cal RedesignPresentation Purpose

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To describe a proposal designed to maintain and protect healthcare access for Medi-Cal and medically indigent Californians

To respond to requests from key State officials to develop alternatives for providing more cost-effective and medically appropriate Medi-Cal healthcare services

To explore the potential use of local resources currently earmarked and expended for local indigent care as the state share of expenditures for services at public safety net facilities not normally recognized as Medi-Cal services

To build on a highly successful state and local partnership in obtaining federal Medicaid payments to protect and stabilize the public healthcare safety net and generate state savings

Medi-Cal Redesign Opportunities

Components of the statewide Medicaid Demonstration Project would be designed to:

Better protect healthcare access and promote coordinated systems of care for Medi-Cal and medically indigent patients

Stabilize and transform the public healthcare safety net

Better utilize existing local resources to increase federal Medicaid funding

Better navigate Medicaid payment limits and address uncertainty with current Medicaid inpatient payments

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Medi-Cal RedesignKey Safety Net Pressures Today

Steadily growing demand by vulnerable population for public healthcare safety net services

Funding sources at local, state, federal levels will either decline significantly or remain flat absent change

Significant expansion in Medi-Cal coverage has not been accompanied with Medi-Cal rate increases to ensure access to services

Rising labor, pharmaceutical, and supply costs

State and local budget crises

Widening expense and revenue gap

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Medi-Cal RedesignWhy Action is Necessary for Public Safety Net

Significant progress in implementing efficiencies and expanding outpatient services to low-income Californians needs to continue

Fiscal constraints are leading to service curtailments – current volume, scope, and intensity of services cannot be maintained without addressing structural financial threats

Medi-Cal payments are critical to ability to sustain services to medically indigents and to fulfill Welfare and Institutions Code (WIC) Section 17000 obligation

Heavy reliance on Medicaid inpatient payments juxtaposed with increasingly strict limits on IGT-financed inpatient payments to public safety net facilities

Increased reliance on the public safety net by high-cost Medicaid and uninsured Californians

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Source: OSHPD Annual Financial Disclosure Report 2002

Concentration of Hospital Care to Medi-Cal and Medically Indigent Patients

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Medi-Cal RedesignStatus of Public Hospital Safety Net Cont.

6%

94%79.3%

20.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

# of Hospitals

Hospital Costs Medi-Cal

35.2%

64.8%

Hospital Costs Indigent

All Other Hospitals

Public Hospitals

Medi-Cal Redesign Widening Expense-Revenue Gap

Expense-Revenue Gap at Public Hospitals and Health Systems

$7.0

$7.2

$7.4

$7.6

$7.8

$8.0

$8.2

$8.4

$8.6

$8.8

2002 2003 2004 2005 2006 2007

Bil

lion

s

ExpensesRevenues

Source: OSHPD Annual Financial Disclosure Report

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Status of Medi-Cal Inpatient Supplemental Payments

CMAC SPCP Supplemental Payments (1255, GME, 1732)

Transition to Medi-Cal Public Inpatient UPL to 100% Waiver expires December 2004 OIG skepticism over cost savings and policy debate over intergovernmental

transfers (IGTs)

SB 855 DSH Supplemental Payments

OBRA ’93 DSH cap at 175% OIG findings and policy debate over IGTs Administrative issues

Structural reforms needed to respond to these pressures

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Current payment structure severely limits Medi-Cal payments to public hospitals and health systems.

Medi-Cal Redesign CAPH Proposal Components

Pursue a Medicaid match for indigent services in public safety net facilities under a statewide Medi-Cal 1115 demonstration project

Design coordinated systems of care for both Medi-Cal and indigent populations

Develop local indicators of access and care coordination for both Medi-Cal and indigent populations

Ensure continuance of SPCP supplemental payments

Restructure SB 855 DSH cap for public hospitals to ensure receipt of Medicaid match for indigent services

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These proposal components in the Medicaid demonstration are designed to demonstrate:

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Medi-Cal Redesign CAPH Proposal Objectives

Coordinated systems of care for all low-income groups result in efficient and economical provision of Medi-Cal services

Support of public safety net infrastructure results in broader access to appropriate and cost-effective care for Medi-Cal services

Reduction in inappropriate emergency room and inpatient services can be obtained without financial penalty to public hospitals and health systems

Increased quality and a reduction in the burden of disease for all low-income populations can be obtained

Medi-Cal Redesign Structure of Indigent Care Match

New Medicaid payment (state share and federal match) for indigent care provided at public safety net facilities and coordinated by county health systems

Potential use of current Realignment funds as state share of Medicaid indigent payment -- $850 million currently provided to public hospitals alone

Local flexibility in developing and administering the healthcare delivery structure, designed to assist localities in maintaining current level of WIC 17000 responsibilities

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Medi-Cal Redesign Flow of Indigent Care Match

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Maximum number of indigent patients to be served under each project and appropriate payment amount will be prospectively determined

County will have option to voluntarily redirect a portion of Realignment payments to fund state share of a Medicaid payments to serve these patients

County will be responsible for receipt of new Medicaid indigent payment, coordinating care and managing the program at the local level

Periodic payments will be made as services are rendered to indigent patients up to prospectively determined maximum

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Medicaid Demonstration Indigent Care Project Payment(State and Federal match)

CurrentIndigent CareCounty Support

CurrentCounty IndigentHealthcare Services

Medi-Cal RedesignFlow of Indigent Care Match

Cont.

Proposed Flow of Payments to Public Safety Net Facilities

Portion of RealignmentFunding

Cur

rent

R

eali

gnm

ent

Fun

ding

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Medi-Cal Redesign Indigent Care Match Promotes Transformation

Helps further transition patient care toward coordinated care model for both Medi-Cal and indigent populations that emphasizes high-quality, efficient primary care and secondary care, in conjunction with viable teaching hospitals providing necessary tertiary care

Helps financially stabilize the public healthcare safety net

Improves access to specialty care

Promotes development and maintenance of personnel and resources to support new healthcare delivery systems.

Helps ameliorate the financial penalty to public hospitals that currently flows from reducing inpatient services

Medi-Cal Redesign Indigent Care Match: Key Structural Elements

Sizing of local program must be consistent with and related to current level of services provided by public healthcare safety net facilities

New payments must be directed to public healthcare safety net

Program cannot become an insurance product or an entitlement program

Localities must have the flexibility to define scope of services subject to resources and appropriate utilization limitations

Level of program funding must be predictable and stable

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Clear designation of target population for services under the program

Statewide Medi-Cal Demonstration Project, including new Medicaid indigent payments, must meet federal budget neutrality requirements

Program must include special treatment of new Medi-Cal indigent care revenue in, or relief from, the SB 855 DSH cap for public safety net hospitals

Medi-Cal indigent payments will help offset any declines in IGT-funded supplemental payments

Medi-Cal Redesign Indigent Care Match: Key Structural

Elements

Work paper under development

Continued financial analysis and modeling

Proposed expansion of the current close working relationship with the State to include this proposal

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Medi-Cal Redesign Indigent Care Match – Process

Ongoing CAPH activities include:

Promoting coordinated systems of care for both Medi-Cal and indigent populations

Stabilizing and transforming the public healthcare safety net

Obtaining appropriate levels of Medicaid federal financial participation

Implementing structural change to address pressures on public hospital Medi-Cal payments

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Medi-Cal Redesign Indigent Care Match – Conclusion

This proposal seeks to build on the highly successful state and local partnership in obtaining federal Medicaid payments to protect the public healthcare safety net and generate state savings by: