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fy~\Z%02~V*0\&«. HEALTHECONOMICSRESEARCH,INC. 4W1at1tWhaavme,rlMeAy0O2a4k5s2Road,Suite330 (781)788-8100 (781)788-8101-FAX Evaluation ofthe Oregon Medicaid Reform Demonstration SecondInterimReport m CMSLibrary C2-0 7500Securi Baltimore,MD212* Preparedby: JanetB.Mitchell,Ph.D. SusanG.Haber,Sc.D. A.JamesLee,Ph.D. FredBentley,B.A. HealthEconomicsResearch,Inc. and StevenA.Garfinkel,Ph.D. AnnieMcNeill,M.P.H. ResearchTriangleInstitute NancySwigonski,M.D. IndianaUniversity o^W September18,1998 j'>j4qjL JanetB.Mitchell,Ph.D. Grego e,M.S/ ProjectDirector Scienti Reviewer TBhoeberne,seParrocjhepcrteOsfefnitceedr.inTthhiesrsetpaotrtemweanstspecrofnotramiendeudndienrthHiesalrtehpoCratrearFeinsaonlceilnygtAhdomseinoifstthreataiuotnho(rHsCaFnAd)nCoonetnrdaocrtsNeom.en5t00b-y94H-0C0F56A,Paul shouldbeinferredorimplied. 1 TableofContents Page ExecutiveSummary ES-1 Chapter1 UpdateontheOregonHealthPlan 1-1 1.1 FinancingtheOregonHealthPlan 1-2 1.2 ChangesinEligibilityandEnrollment 1-7 1.3 RevisionstothePriorityList 1-9 1.4 ChangesinMarketStructure 1-1 1.5 PrivateInsuranceSubsidy 1-13 1.6 SpecialAssistanceforSafety-NetProviders 1-15 Chapter2 UsingPremiumstoFinanceOHPfortheExpansion Population 2-1 2.1 ImplementationofPremiumRequirement 2-2 2.2 PremiumRequirementsandRe-enrollmentinOHP 2-4 2.3 PremiumWaivers 2-7 2.4 BillingandCollection 2-10 2.5 TerminationforNon-PaymentofPremium 2-15 2.6 Conclusions 2-22 Chapter3 PayingProvidersinaCapitatedMedicaidManaged CareProgram:LessonsfromtheOregonHealthPlan.. 3-1 3.1 Introduction 3-1 3.2 RateSettingMethodology 3-2 3.3 CapitationRateTrends 3-15 3.4 RiskAdjustment 3-21 3.5 Conclusion 3-27 Chapter4 ManagedCareContractingintheOregonHealthPlan: MarketConsolidationandDeliverySystemImpacts ... 4-1 4.1 Introduction 4'1 4.2 ParticipationofManagedCarePlansinOHP 4-2 4.3 RoleofPhysiciansinOHP 4-21 4.4 ImpactofOHPontheHealthCareMarket 4-25 4.5 LessonsLearned 4-30 HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:i oreg/tntcr2Aocwpd/nd TableofContents (continued) Page Chapter5 ImpactofthePriorityListonOHPEligibles 5-1 5.1 StatementoftheProblem 5-1 5.2 DataandMethods 5-3 5.3 Results 5-9 5.4 ConclusionsandPolicyImplications 5-28 Chapter6 TheRoleofFederallyQualifiedHealthCentersinthe OregonHealthPlan 6-1 6.1 Introduction 6-1 6.2 WhatisanFQHC 6-2 6.3 Context 6-4 6.4 FQHCReimbursementUnderOHP 6-10 6.5 AbilityofFQHCstoCompeteinaManagedCareEnvironment 6-12 6.6 ImpactofOHPEligibilityPoliciesonFQHCs 6-15 6.7 Conclusion 6-19 AppendixA HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:ii oreg/inter2/tocwpd/tid TableofTables,Figures,andExhibits Page Chapter1 Table1-1 PriorInsuranceCoverage,UsualSourceofCare,andCurrentHealth StatusintheOHPExpansionPopulation 1-4 Chapter2 Table2-1 PremiumChargesforOHP'sExpansionPopulation 2-2 Figure2-1 TimeLineforOHPEnrollmentbyExpansionEligibles,Application forRe-enrollment,andPeriodofTimeforWhichthe"ZeroPremium Balance"RequirementisinEffectforEligiblesWhoseEnrollment BeginsonMay1,1996 2-6 Table2-2 NumberandTypeofPremiumWaivers,June1996-June1997 ....2-10 Table2-3 TotalPremiumAmountsBilledandCollected,andPercentages Billed,Collected,Waived,Adjusted,andOutstanding,byMonth ... 2-13 Table2-4 HouseholdsAffectedbyTerminationDuetoPremiumArrears 2-16 Table2-5 NumberofHouseholdsReceivingPremiumBills,Numberand PercentagePaid,andEstimatedPercentagesWaived andDisqualified? 2-18 Figure2-2 RateofHeaidiPlanDisenrollmentDuetoLossofOHPEligibility, byTypeofEligibilityCategory 2-20 Chapter3 Exhibit3-1 OHPRateCategories 3-4 Figure3-1 OHPGeographicPaymentAreas 3-7 Table3-1 StatewideAverageFCHPMonthlyCapitationRatebyEligibility Group,1994-1997 3-17 Table3-2 PercentChangeinStatewideAverageFCHPMonthlyCapitation RatebyEligibilityGroup,1994-1997 3-19 Table3-3 AverageSF-12HealthStatusScoresbyEligibleGroup 3-20 HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:iii oreg/inter2/tocwpd/nd TableofTables,Figures,andExhibits (continued) Page Chapter3(continued) Table3-4 FCHPMonthlyCapitationRateasaPercentofStatewideAverage, 1994-1997 3-22 Table3-5 AverageSF-12HealthStatusScoresforSelectedHealthPlans 3-24 Chapter4 Table4-1 CharacteristicsofPrepaidHealthPlansParticipatingintheOregon HealthPlanSinceitsInception,asofDecember1997 4-6 Table4-2 ChangesinOHPMarketAreas 4-10 Table4-3 DistributionoftheNumberofPlansOperatinginEachCounty 4-14 Table4-4 DistributionofOHPEligiblesbyNumberofPlansOperatingin EachCounty1994and1997 4-16 Figure4-1 NumberofPlansbyCounty:July1997 4-17 Table4-5 StatewideManagedCareEnrollmentandMarketShare:ByPlan 1994to1997 4-19 Table4-6 PlanMarketShareinCountiesofOperation 4-20 Table4-7 EnrollmentinOHPManagedCarePlanswithCommercial Members,June30,1997 4-27 Chapter5 Table5-1 SampleSizes 5-6 Table5-2 CategorizationofUncoveredServicesbyTypeofService 5-8 Table5-3 WhoDoesn'tReceiveaServiceandWhy? 5-10 Table5-4 WhatTypesofServicesDoesOHPNotPayFor? 5-13 HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:iv oreg/inter2/toc.wpd/nd TableofTables,Figures,andExhibits (continued) Page Chapter5(continued) Table5-5 WhoEndsUpGettingtheServiceAnywayandHow? 5-16 Table5-6 WhoPaysfortheMostFrequentlyReceivedUncoveredServices? ..5-17 Table5-7 GettingtheServiceAnyway: RelationshiptoReasonforDenial 5-17 Table5-8 ImpactonHealthStatusofNotReceivingtheService 5-19 Table5-9 SatisfactionandHealthStatusforEligiblesWithandWithout UncoveredServices 5-20 Table5-10 MeansforLogisticRegressions 5-24 Table5-11 OddsRatiosFromLogisticRegressions 5-25 Chapter6 Exhibit6-1 MandatedCoreClinicalServicesforFQHCs 6-3 Table6-1 CharacteristicsofCaseStudyFQHCs 6-5 Table6-2 UninsuredPopulationinOregon,byAgeandPovertyStatus 6-17 AppendixA TableA-1 CumulativeFinancialResultsonOHPLineofBusiness, January1,1994ThroughDecember31,1996,byPlan A-4 TableA-2 TrendsinFinancialPerformanceIndices,byPlan,1994-1996 A-9 TableA-3 ComparisonofOHP-SpecificandCorporateFinancial PerformanceIndices,1996 A-12 HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:v oreg/inter2/tocwpd/nd Acknowledgments WewouldespeciallyliketothankthestaffatOregon'sOfficeofMedicalAssistance Programs,whoprovideduswithuntoldamountsoftimeandresourcestohelpuslearnabout theOregonHealthPlan. StaffattheHealthServicesCommission,theOfficeoftheHealth PlanAdministrator,andinotheragencieswithinOregon'sDepartmentofHumanResources alsowereextremelygenerouswiththeirtime. Wewouldalsoliketothankthephysicians,managedcareplanadministrators,and representativesofadvocacygroupswhometwithustoprovidetheirperspectivesonthe OregonHealthPlan. PaulBoben,Ph.D.,hasbeenresponsibleforoverseeingthisprojectonbehalfofthe HealthCareFinancingAdministration,andwearegratefulforhissupport. Hispatiencewith thechangeinprojectstaffinghasbeenespeciallyappreciated. Finally,wewouldliketothankDouglasConradforprovidingprogrammingsupport andPhilipW.Tyoforadministrativesupport. Ofcourse,responsibilityforallerrors,omissions,oranymisinterpretationsliewith theauthorsalone. HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:vi oreg/tnter2/toc.wpd/nd Executive Summary TheOregonHealthPlan(OHP)isOregon'sinnovativeSection 1115Medicaid waiverprogram. OHPhasgarnerednationalattentionforitsuseofaprioritizedlistofhealth careservicestodefinetheprogram'sbenefitpackage. Inaddition,OHPexpandedeligibility tocoveruninsuredresidentsbelowtheFederalPovertyLevel(FPL),regardlessofwhether they meettraditional categorical Medicaideligibilityrequirements. Funding forthis expansionhascome,inpart,bymovingnearlyallOHPeligiblesintocapitatedmanagedcare plans. This reportpresents selectedanalysesconductedaspartofourHCFA-funded evaluationofOHP. Whilethereport focuses largelyonOHP's Phase 1 population (traditionalADCplusexpansioneligibles),futurereportsalsowillexaminethePhase2 population:SSIdisabledanddualMedicareeligibles. UpdateontheOregonHealthPlan HigherthanexpectedcostshavemeantthatOHPhashadtoseeknewwaystofinance care. Whileonerationalefortheprioritylistwasasatoolforbudgetarycontrol,ithasnot yetservedthisendaswellassomeintheStatehadhoped. Restrictingthelisthasbeen cumbersomebecauseofapprovalrequirementsattheStateandFederallevels. Themost recent(1997)revisiontotheprioritylistbothaddedtwonewtreatment-conditionpairstothe existinglistof741andchangedtheirranking. Thisresultedinafundinglineof574(as opposedto578onthe1995list),andHCFArefusedtoapprovethenewlistuntilMay1998. HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:ES-1 oreg/inter2/execsum.wpd/nd ExecutiveSummary ImpactofthePriorityListonOHPEligibles Likeotherstates,Oregonhasturnedtotobaccotaxrevenuestosupportitsexpanded Medicaidprogram.Anew30-centtaxwaspassedoverwhelminglytosupportOHP,andwill beusedforthefollowing: • ExpandthePLMprogramtocoverpregnantwomenupto170percentof FPL; • Re-extendcoveragetouninsuredPellGrantcollegestudentswhohadlost coverageastheresultofanearlierOHPbudgetshortfall;and • CreatetheFamilyHealthInsuranceAssistanceProgram(FHIAP)to subsidizeprivateinsurancepremiumsforlow-incomeadultsandchildren. ThenewestsourceofrevenueforOHPwillcomefromtheStateChildren'sInsurance Program(CHIP). Oregon'sshareis$39.1millionannually. TheState'splan(whichwas approvedbyHCFAinJune1998)willprovidecoverageforchildrenuptoage18wholive inhouseholdswithincomesfrom100to170percentofFPL. UsingPremiumstoFinanceOHPfortheExpansionPopulation OHP'sexpansionpopulationisrequiredtopaymonthlypremiumsbasedonasliding scale,determinedbyincomeandfamilysize. Waiversareavailableforthoseunabletopay, andhavebeengrantedtoabout3percentofhouseholds(usuallybecausethefamilyreported zeroincome). Themajorityofexpansionhouseholdsappearwillingandabletomakethe premiumpayments,with66percentofbilledpremiumscollectedfromtwo-thirdsofall households. HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:ES-2 oreg/inter2/execsumwpd/nd ExecutiveSummary ImpactofthePriorityListonOHPEligibles Expansioneligibleswhofailtopaytheirmonthlypremiumbillsarecarriedinarrears fortheentiresix-montheligibilityperiod,ratherthanbeingterminatedimmediately. Upon re-application,however,eligibleswillbedeniedcoverageifpremiumpaymentsarenotup todate.Arelativelysmallnumberofsuchindividualsareterminatedfornon-payment:about 1,000individualslivingin700householdsoutofthe79,000householdsbilledeachmonth. Itisnotclearhowmanyexpansioneligiblesfailtore-apply,eitherbecausetheycan notcontinuetomakethepremiumpaymentsorbecausetheyareinarrears(andknowthey willbedeniedanyway). Anecdotalevidencesuggeststhatsome,particularlysingleadults andchildlesscouples,donotre-applybecausetheillnessthatprecipitatedtheirinitial applicationtoOHPhasbeenresolved. Paying Providers in a Capitated Medicaid Managed Care Program: LessonsfromOHP StateadministratorsoriginallydesignedOHP'sratesettingsystemtoensurethat capitationrateswouldadequatelycovertheexpectedcostsoftreatingvariouseligibility groups. Inparticular,thesystemwasdesignedtodiscourageadverseselectionbypayingout higherreimbursementratesforOHPbeneficiarieswhobelongtomoreexpensiveeligibility groups. OHPhasfacedseveralchallengesinsettingcapitationrates,however. First,the Statehashadtorefineitsratecategoriestomoreaccuratelyreflectcostsincurredbydifferent groups.Initially,expansioneligibleswerecombinedforratepurposeswithtraditional Medicaideligibles. Theseeligibilitygroupsprovedtobeveryheterogenouswithrespectto HealthEconomicsResearch,Inc. EvaluationoftheOregonMedicaidReformDemonstration:ES-3 oreg/imer2/execsum.wpd/nd