Manatt on Health Reform: Weekly Highlights

A flurry of support for Medicaid expansion this week…with Virginia hospitals backing a provider assessment, Wyoming's Governor putting forth a budget initiative, and Arkansas announcing plans to extend its waiver. Meanwhile, CMS makes permanent enhanced federal funding for Medicaid eligibility and enrollment systems.

MEDICAID EXPANSION UPDATES:

Arkansas: State Issues Public Notice of Intent to Extend Medicaid Expansion Program

The Department of Human Services notified the public of its intent to submit an 1115 waiver extension application to CMS to continue the State's Medicaid expansion program past its current end date of December 31, 2016. According to the draft extension application, which is open to public comment through December, the Medicaid expansion program (known as the "Private Option") has produced "positive outcomes" in Arkansas, including the nation's largest decrease in uninsured rates, large reductions in uncompensated care costs, and a positive impact on premium rates in the State's individual Marketplace. The State plans to submit a waiver amendment application in spring 2016, which may incorporate initiatives currently being considered by the Arkansas Health Reform Legislative Task Force, including enhanced cost sharing for the new adult group, measures to promote employer sponsored insurance, and a work referral program.

Indiana: Governor Requests Termination of Federal Medicaid Waiver Evaluation

Governor Mike Pence (R) requested that CMS terminate its federal evaluation of the State's Healthy Indiana Plan (HIP) 2.0 waiver demonstration, which expanded Medicaid through a health savings account-like model. As a condition of the waiver's approval, the State contracted with a vendor to conduct an independent evaluation of the demonstration. CMS contracted with a separate vendor to oversee the State evaluation and two other contractors to conduct a separate evaluation of the demonstration. In a letter to Secretary Burwell, the Governor expressed concerns about objectivity and conflicts of interest among the federal vendors and that two independent evaluations may produce conflicting results.

Kentucky: Senate Leadership Takes a Pass on Medicaid Expansion

Republican legislative leaders said they will not interfere with the State's Medicaid expansion program despite the Legislature's opportunity to halt the program by blocking funding, and will instead leave the program's fate in the hands of Governor-elect Matt Bevin (R). The State's expansion program, which was established by Governor Steve Beshear (D) through executive order, was fully funded by the federal government through 2016, so the Legislature was unable to defund the program and the Senate's alternative attempts to prevent expansion at that time were unsuccessful. Governor-elect Bevin has indicated that he will maintain expansion, but will introduce significant changes to encourage "personal and financial responsibility."

Louisiana: Senate Finance Committee Commissions Medicaid Expansion Report

In Monday's Senate Finance Committee session, legislators requested a report from the Louisiana Department of Health and Hospitals (DHH) outlining the State's options for expanding Medicaid, including potential customization through an 1115 waiver. The report, due January 1, 2016, will update a March 2013 report by DHH that analyzed potential costs and savings from Medicaid expansion. Governor Bobby Jindal (R) has staunchly opposed Medicaid expansion, but Governor-elect John Bel Edwards (D) has listed it among his top priorities, favoring traditional expansion that does not require an 1115 waiver.

Virginia: Hospital Association Supports "Provider Contributions" to Fund Medicaid Expansion

The Virginia Hospital and Healthcare Association (VHHA) sent a letter to Governor Terry McAuliffe (D) stating its conditional support for a "provider contribution" as a Medicaid expansion funding mechanism, a reversal of VHHA's longstanding opposition to such a mechanism. VHHA's conditions include among others: (1) the provider contribution program be administered and implemented by the private sector to the extent possible; (2) protections against fund diversions to other parts of the State budget; and (3) any savings generated by the program go to assist financially struggling rural hospitals. VHHA President Sean Connaughton said support for provider contributions was driven by "the mounting financial burden of diminished reimbursements, increased uncompensated care, and federal funding cuts." VHHA has been running an advertising campaign since September to convince lawmakers to expand healthcare coverage and Governor McAuliffe has made Medicaid expansion a priority for his administration. In response to the letter, Republican legislative leaders reiterated they will block any attempt by the Governor to expand Medicaid.

Wyoming: Governor Includes Medicaid Expansion in Budget Proposal

Governor Matt Mead (R) released a two-year, $3.5 billion budget calling for the Legislature to expand Medicaid and cut funds to a number of State programs to cover a budget shortfall caused, in part, by an anticipated decline in oil, natural gas and coal revenues over the next three years. Although the Legislature has historically opposed expanding Medicaid, doing so would bring the State roughly $268 million in additional federal funds. The Legislature will convene in early February to consider the Governor's recommendations and vote on a budget.

OTHER FEDERAL AND STATE MEDICAID NEWS:

CMS Finalizes Rule Allowing Permanent Enhanced Funding for Medicaid Eligibility Systems

CMS released a final rule that permanently extends the 90% federal match for design, development, and installation activities and a 75% federal match for maintenance and operations activities for state Medicaid eligibility and enrollment (E&E) systems. The enhanced funding was previously set to expire on December 31, 2015. The final rule also allows states to use the 90% match for procuring Commercial Off-the-Shelf systems, including initial licensing fees and costs to analyze, configure, install and integrate the software. Additionally, the rule updates standards and funding conditions with an emphasis on modularity and reuse, and aligns requirements across Medicaid E&E systems, Medicaid Management and Information Systems, and Health Information Technology for Economic and Clinical Health to create an enterprise-wide approach.

Arkansas: Governor Outlines Plan for Medicaid E&E System

In a letter to State legislative leaders, Governor Asa Hutchinson (R) asked the Department of Human Services to "pause development of additional features" for the State's new Medicaid eligibility and enrollment (E&E) system until a path forward with Medicaid reform is more clear. Responding to a consultant's review of the E&E system, the Governor noted that the cost of the project has doubled to $220 million due to "mismanagement and federally mandated changes" and identified additional steps he is taking to address the issue, including: putting the remainder of the current IT contract out to bid, and establishing oversight committees to supervise the remainder of the project and to review all future IT contracts over $50 million.

FEDERAL AND STATE HEALTH REFORM ACTIVITY:

Senate Passes Ill-Fated ACA Repeal Bill

The Senate voted 52 to 47 to repeal several central pillars of the Affordable Care Act (ACA), including tax credits for purchasing qualified health plans, Medicaid expansion, and penalties for noncompliance with the individual and employer mandates—a bill that President Obama has already indicated awaits his veto. The bill also eliminates tax measures intended to fund the ACA, such as the "Cadillac tax" on high-cost employer sponsored plans. While the House has voted to repeal the ACA more than fifty times, this is the first time the Senate has passed an ACA repeal bill.

National Health Spending Increases 5.3% in 2014, Per Person Spending Increases 4.5%

Healthcare spending in the United States increased 5.3% to $3 trillion in 2014, driven by increased spending on private employer and individual health insurance, spending on Medicaid, and rapid growth in prescription drug costs, according to the National Health Expenditures Accounts study published in Health Affairs. Spending per capita increased at a similar rate—4.5%—to $9,523 in 2014. Health costs increased faster in 2014 than the previous five years due primarily to the Affordable Care Act's private insurance and Medicaid coverage programs, which saw 4.4% and 11% spending increases, respectively, from 2013 to 2014 as the number of covered lives under both programs increased.

Rhode Island: Innovation Work Group Submits Report to the Governor, Recommends Establishing Health Policy Office

Governor Gina Raimondo's (D) Working Group for Healthcare Innovation presented its recommendations to improve the State's healthcare system while controlling costs in a report that calls for the establishment of an Office of Health Policy, which would set, implement, and coordinate a single, comprehensive statewide health policy plan. The Working Group also encouraged system-wide accountability and transparency through a nonbinding spending target for insurers and providers—rather than a spending cap—though the target would be secondary to the main goal of increasing transparency and accountability for cost and quality. Rather than enforce a spending target, the Office of Health Policy would aim to understand how and why healthcare costs are increasing. The Hospital Association of Rhode Island also opposed setting a target, explaining that its members may not be prepared to meet a spending target and citing a possible risk to economic growth and innovation. Other recommendations are to expand analytic capabilities, create alternative payment models, establish statewide health goals, and expand use of improved health information technology.

STATE STAFFING UPDATES:

Kentucky: Governor-Elect Announces Secretary of Health and Family Services

Governor-elect Matt Bevin (R) announced Vickie Yates Brown Glisson as his administration's Secretary of Health and Family Services. Glisson is a health attorney and serves as president and CEO of Nucleus, a life science business incubator at the University of Louisville. Glisson will oversee Governor-elect Bevin's healthcare agenda, including anticipated changes to the State's Medicaid expansion program and an expected transition from the State's Marketplace, Kynect, to the federal Marketplace.

Minnesota: Governor Names New Human Services Commissioner

Governor Mark Dayton (D) has appointed Emily Johnson Piper as the Commissioner of the Department of Human Services, beginning December 14. Piper was previously the deputy chief of staff and general counsel in the Governor and Lieutenant Governor's office. She replaces Lucinda Jesson, who was appointed by Governor Dayton last week to serve on the State Court of Appeals.

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