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By: Dennis L. Kodner*

OPENING COMMENTS: I wanted Dr. Kodner to prepare an updated report on the status of managed care experience in the four states we identified in the paper he prepared in 2011. As many states are proposing moving more persons with developmental disabilities into managed care, it is critically important to understand the lessons learned from the initiatives in these four states. The balance between ensuring access and adequate coverage with financial risk continues to be an issue in these experiments. Adequate and timely government funding is one of the public policy issues that require constant attention otherwise programs could suffer financial distress or collapse. What is encouraging is that managed care can work for populations that like those with developmental disabilities if there is adequate preparation and planning on the part of the state officials and providers of care. The one big lesson is that it takes time for all the kinks to get worked out and even then government officials have to be patient. What is disconcerting are the limited evaluations, if any, of these four experiments either at e state or federal levels. In Wisconsin, there was an important legislative report that helped improve the initiative. Arthur Y. Webb INTRODUCTION Intellectual Developmental disabilities (IDD) are a diverse range of severe chronic conditions that are the result of mental and/or physical impairments. Affecting less than 2 percent of the population, IDD includes mental retardation (MR), cerebral palsy (CP), autism spectrum disorders, Down syndrome, Spina Bifida, and other complex genetic, chromosomal and fetal disorders. People with IDD experience problems with language, mobility, learning, self-care, independent living, and economic self-sufficiency. Depending on the specific condition, however, there may also be many associated physical health and/or mental health problems, as well as challenging and abnormal behaviors. Needs as complex as the above demand a wide range of IDD- and non-IDD-specific services from the medical, behavioral health, long term care, and social support systems. As a result, the IDD popula-


tion frequently experiences problems with respect to their ongoing care, especially the lack of coordinated services. Moreover, the group is among the most costly of Medicaid beneficiaries. As a result, the states are becoming increasingly interested in adopting a managed care strategy to improve the accessibility, quality and cost-effectiveness of services and supports for people with IDD.1 Arizona, Michigan, Vermont and Wisconsin have taken the lead in implementing managed care solutions for Medicaid beneficiaries with IDD. While the four models differ, the experiences and the lessons learned to date can nonetheless help policy-makers and providers in New York and in other states as they contemplate and plan how to best harness the potential of managed care for the IDD population. The following briefly updates a discussion of these pioneering Medicaid managed care programs presented in an earlier paper.2 REVISITING FOUR PIONEERING MEDICAID MANAGED CARE PROGRAMS After a short description of each states model, we will examine issues and lessons learned to date, including any major challenges. ARIZONA Program: Arizonas Medicaid program for people with IDD operates with a long-standing Section 1115 waiver under a unique structure known as the Arizona Health Care Cost Containment System (AHCCCS). AHCCCS is both the single state Medicaid agency and a state-operated, statewide managed care plan.3 The IDD program serves children and adults. The Medicaid programs unique structure enables the pooling of funds from Medicaid home and community-based services (HCBS), ICF/MR, health plan services, behavioral health services, and limited stated-only IDD-specific services. Home- and community-based services (HCBS) are an entitlement available to individuals who are at immediate risk of institutionalization. AHCCCS subcontracts on a capitation basis with the States Division of Developmental Disabilities (IDDD) to manage all covered services for Medicaid beneficiaries with IDD. Health care and long term care services are managed by a network of contracted health plans on a capitation basis.4 Behavioral health services are provided on a capitated basis through Regional Behavioral Health Agencies (RBHAs). IDD-specific services are reimbursed on the basis of published charges; these services are directly purchased by IDDD from qualified vendors that have been traditionally part of the IDD network.

1 New York State has received an 1115 waiver from the Centers for Medicare and Medicaid Services (People First Waiver) to transform the states current IDD system into a managed care program. 2 See Kodner, D. New York States Peoples First Waiver: Concept Paper on Strategic Issues and Options Related to the Development of Innovative Medicaid Managed Care Models for Developmentally Disabled Adults, Arthur Webb Group, Ltd., 2011. 3 A companion statewide program, the Arizona Long Term Care System (ALTCS), specifically focuses on Medicaid beneficiaries with long term care needs and serves two groups: 1) older persons and adults with physical disabilities; and, 2) individuals with IDD (both children and adults). 4 All Medicaid beneficiaries, including those with IDD, must enroll in a contracted health plan. Some of these health plans cover long term care benefits as well. When individuals who are eligible for long term care are enrolled in a health plan that does not cover long term care benefits, they have two options: 1) enroll in a health plan that covers both acute and long term care benefits; or, 2) receive needed long term care through enrollment in a separate plan that covers long term care benefits-only.


A support coordinator, i.e.., case manager, is responsible for coordinating services across the entire continuum of care and in all settings. Experience and Lessons to Date: The Arizona Medicaid system is currently serving 32,000 enrollees with IDD. According to IDDD5, 24,000 enrollees (75% of the total) are receiving a combination of acute/behavioral health and long term care benefits. Total IDD enrollment is increasing at about 4.6% per year. The 2012 blended capitation rate for this combined group is $3,199/month, which covers all services regardless of the provider payment method used (capitation or published charges). Arizonas 30+ year history of Medicaid managed care appears to serve the states IDD population well.6 No major problems have been reported with the program. It operates within budget. And, the payment system works from the state, health plan, and provider points of view. Care coordination can be a challenge in the overall design of Arizonas Medicaid IDD program. This is because ongoing support for the individual can cut across four different service bundles (health care, behavioral health care, long term care, and IDD-specific services) and as many as 3-4 organizations with clinical and financial accountability. Nonetheless, it appears that the support coordinator (case manager), who is backed-up by a number of specialized team members and support systems, is well-equipped to handle most, if not all of the challenges involved. MICHIGAN Program: Michigan established a managed care programthe Michigan Specialty Services and Support Program (MSSSP)in 1998 for children and adults with mental health, substance abuse, and IDD. The program operates with both Medicaid 1915 (b) and (c) waivers; this enables individuals to receive needed HCBS whether or not they are eligible for institutional care. The three populations are served by the same Prepaid Inpatient Health Plan (PIHP). PIHPs are capitationfinanced health plans operated by the network of county-run Community Mental Health Services Programs (CMHSPs).7 CMHSPs remain as the single point of entry for mental health, substance abuse and IDD services.8 However, the PIHP is responsible for the delivery and costs of all mental health, substance abuse, IDD, and LTC services and supports for its enrollees, including the HCBS waivered services.9 Since 2010, each PIHP receives capitated per member per month (PMPM) payments from the Department of Community Health. There are two monthly payments: One covers mental health, substance abuse, and IDD state services (including targeted case management and special childrens Medicaid services); the other is for services provided to people with IDD who live in a residential group home and are enrolled in the Habilitation Support Waiver (HSW) Program. All per capita payments are blended (i.e., they cover the three types of enrollees) and structured around Medicaid eligibility (DAB, TANF, and HSW) rather
5 Telephone interview on May 3 and 4, 2012 with Sherri Winse, AZ Department of Economic Security, Division of Developmental Disabilities. 6 The apparent overall success of AHCCCS reflects years of fine-tuning; see Health Management Associates (HMA), Final Report on Pilot to Serve Persons with Intellectual and Developmental Disabilities Submitted to 81st Texas Legislature by the Texas Health and Human Services Commission (HHSC), October 2010. 7 PIHPs were supposed to be run by their respective CMHSPs. However, as a result of the State minimum enrollment requirement (at least 20,000 enrollees per PIHP) mandated in 2001, counties were encouraged to partner with nearby counties to operate PIHPs jointly. Today, there are 18 PIHPs in 49 counties. 8 They also manage all non-Medicaid dollars and services. However, the trend has been to contract with PIHPs to arrange and/or provide these services on their behalf. 9 HCBS waivered services are only available to individuals with IDD.


than disability designation (e.g., MI, IDD). After calculating the base rate for each Medicaid eligibility group, the figure is multiplied first by an age/gender factor and then by a geographic factor for each enrollee to obtain the total PMPM capitation payment. Experience and Lessons to Date: MSSSP is the end result of Michigans gradual efforts over nearly 30-years to achieve greater flexibility over state and federal funds, increase program performance and accountability, enhance the delivery and integration of services, improve client outcomes, and contain the overall cost of care for several high-risk populations, including people with IDD. In Fiscal Year 2011, the program served over 220,000 Medicaid beneficiaries, including 41,273 individuals with IDD.10 The 2011 capitation for the IDD group under the 1915 (b) waiver was $1,384/ month; for the IDD group under 1915 (c) waiver, $4,299/month.11 VERMONT Program: Vermont operates virtually its entire Medicaid program under an 1115 waiver, the Global Commitment Waiver (GCW).12 In essence, the State has entered into a managed care arrangement with the federal government and acts like a managed care organization (MCO). In order to secure federal backing, Vermont has agreed to assume a degree of financial risk by operating the program under a global spending cap set at $4.7 billion spread over a 5-year period. In return, Vermont has gained the ability to include state expenditures which were not previously counted toward federal match, as well as the flexibility to use excess dollars (savings) to invest upstream in new and expanded programs and services. IDD services were rolled into the GCW arrangement. The states existing IDD system continues to operate as previously. A network of ten (10) area-wide non-profit Designated Agencies (DAs)funded on the basis of a budgeted allocation from the Vermont Department of Disabilities, Aging and Independent Living (DAIL)determine client eligibility for both children and adults, develop an initial plan of care, and provide and/or purchase needed services from local contractors.13 The agencies submit reimbursement claims on a bi-weekly basis for services actually provided; these claims are processed by an outside vendor for the states Medicaid Agency, the Department of Vermont Health Access (DVHA). Since the inception of the DAs, these agencies have employed managed care approaches like case management to coordinate services. Experience and Lessons to Date: GCWs sole impact on Vermonts IDD system is to leverage Medicaid matching funds for two previously unmatched services, i.e., employment supports and family supports. This additional federal financial participation accrues to the State and not necessarily to DAIL or the DAs.

10 According to the Michigan Department of Community Health (DCH), the breakdown of the IDD population is as follows: 19% (children) and 81% adults; 69% (IDD-only) and 31% (Mental Health plus IDD). 11 According to DCH, there were 8,114 enrollees in this category. They receive additional services under the Habilitation Supports Waiver (HSW) because of their serious disabilities. 12 The GCW does not include LTC services and supports for the low-income elderly and other adults with physical disabilities; this is provided under a separate Section 1115 waiver/demonstration program. 13 There are five (5) so-called special service agencies involved in the program as well. These agencies specialize in particular types of clients or services. While they deliver services, they are not engaged in the initial intake, eligibility, assessment, and care planning functions assigned to the DAs.


To keep costs within budget, Vermont has implemented a priority system for the provision of services and supports for people with IDD. In Fiscal Year 2011, Vermont served 4,029 people with IDD; 2,539 were receiving services under the HCBS waiver. The constant increase in numbers of individuals served by the program, however, has recently led to cuts in the budget allocations for the DAs and special service agencies; 2.7% in FY 2011 and 1% in FY 2010. DAIL gives these agencies the flexibility to address budget allocation reductions through operational efficiencies, vacancy savings, etc. Overall, Vermonts approach to serving the Medicaid IDD population is the most cautious and conservative of the states reviewed in this paper, but works well. WISCONSIN Program: A 1999 law established a new Medicaid managed care programFamily Carefor people in need of long term care (LTC) services and supports.14 Family Care was implemented in 2000 and operates under the authority of a combo 1915 (b) and (c) waiver. These waivers enable the program to pool HCBS waiver and ICF/MR dollars, certain state plan coverages, and state and county matching funds. Family Care covers all LTC services and supports, including nursing homes, ICF/MR, HCBS waiver services, state plan HCBS (for example, home health and therapies, but not acute care-oriented services), and behavioral health services. Covered services are delivered and/or arranged by MCOs contracting with the Department of Health Services (DHS). For the most part, these are home grown entities formed in part by elements of the IDD network. DHS pays each MCO a monthly capitation payment for each participant for comprehensive care and intermediate care.15 Until recently, capitation was calculated on the basis of the most recently available functional characteristics of Family Care participants (derived from the functional screen assessments prepared for each individual) in each MCO and the actual 2008 service expenditures reported by the five original pilot counties adjusted for current inflation.16 In 2010, monthly capitation rates for the comprehensive care level ranged from $2,689/month to $3,542/month. The program began as a successful pilot,17 and has been gradually expanded statewide since 2008; it is currently available in 53 of the states 72 counties. In 2008, Family Care served 15,688 participants18 (slightly over 4,000 participants with IDD or about 25% of total participants); as of June
14 The Family Care program should not be confused with the Wisconsin Partnership Program. The former program involves the management of LTC services and supports in a single, capitated managed care organization, while the latter combines the management of health and long term care services under a single, and capitated managed care organization. Most Medicaid beneficiaries with IDD are enrolled in Family Care; this program is the focus of this paper. 15 Intermediate care is made available to participants with less severe clinical or behavioral health needs, and consists of more time-limited services. Family Care participants with IDD fall into the more extensive and higher-cost Comprehensive Care category. 16 The rate is calculated jointly by DHS and PricewaterhouseCoopers, LLC. 17 Family care was piloted in a limited number of counties; the pilot received a positive evaluation. Initial programs eliminated waiting lists, substantially improved participant choice, achieved high consumer satisfaction, and reduced costs vis--vis traditional fee for service arrangements. It was on this basis that Wisconsins Governoron recommendation of DHSmade the decision to expand statewide. 18 The State prefers to refer to individuals enrolled in Family Care as participants rather than enrollees.


2010, there were 28,885 participants (11,905 participants with IDD or 41.2% of total participants). People with IDD (both children and adults) are the fastest growing group of program participants, and are considered the most costly to serve because of their high-needs.19 Wisconsins network of Aging and Disability Resource Centers (ADRCs) are linked to the FC system. ADRCs make elderly and disabled citizens aware of long term care services and supports throughout the state, as well as eligibility requirements for various programs including FC. Perhaps this is a feature that needs further consideration for other states. Experience and Lessons to Date: The Wisconsin Joint Legislative Audit Committee (see footnote 11 below) recently performed an evaluation of Family Care. The report provides a good overview of the program, including the challenges faced. According to the analysis, Family Care has improved access to LTC services and supports, provides participants with choice and care tailored to individual needs, and achieves high participant satisfaction. However, serious questions have been raised about the programs financial stability. Two (2) major fiscal problems were identified in the report: X Several MCOs in the program have incurred operating deficits. Although the overall fiscal picture for the MCOs began to improve in 2009/2010, three (3) of the nine (9) plans continue to be at serious risk of insolvency; and, X Five (5) of the Family Care MCOs owed substantial amounts in required reserve funds. The following two (2) factors appear to be responsible for this unstable fiscal situation: X MCOs maintain that they are being underpaid, i.e., capitation payments are lower than actual participant costs, especially for rapidly increasing numbers of participants with IDD and other highcost needs. X Newer MCOsthose that joined the program during the expansion phaseare less experienced in managing care and the financial risks involved.20 To remedy this situation, DHS has increased its financial oversight. Equally as important, starting in 2010, capitation rates were calculated with a new formula which takes into account the proportion of participants in each of the three groups served (IDD, physically disabled, and elderly).21 It is not clear whether this new formula will generate an adequate level of funding.
19 According to the Wisconsin Joint Legislative Audit Committee, in Fiscal Year 2009-10, average monthly service costs per participant with IDD ranged from $2,900-$4,600, and from $1,800-$2,800 per participant who was physically disabled or elderly; see Wisconsin Joint Legislative Audit Committee, An Evaluation of Family Care, Department of Health Services, Report 11-5, April 2011. 20 DHS acknowledges that it takes at least three (3) years, perhaps even longer, to become a well-managed program that is capable of aligning expenditures with available resources. 21 First, calculate the baseline rate for each of the three (3) types of Family Care participants (developmentally disabled, physically disabled, and IDD); second, adjust the amount based on costs associated with the functional characteristics of participants in the MCO (using data from the functional screen assessments); third, create a weighted average amount for each MCO using the three (3) rates and the proportion of each type of program participant served.


In addition to the above, DHS is considering the recommendations made by a consultant (APS Healthcare) in February 2011 to make additional modifications of the capitation rate-setting formula. This includes the possibility of additional risk-sharing payments (up to five years) for new MCOs, as well as further adjustments for participant characteristics that better predict high-use/high-cost. IMPLICATIONS There are wide variations in how Medicaid managed care can be used to meet the complex needs of people with IDD. The programs operated by Arizona, Michigan, Vermont and Wisconsin were sketched in this paper. These states were early adopters of managed care for children and adults with IDD. Although the approaches differ in major ways, they represent some of the most innovative models. Our review of these four states experience suggests that Medicaid managed care is capable of effectively delivering the broad range of services and supports for the IDD population. There are, however, two further lessons that can be learnedprimarily from Wisconsins Family Care program: First, homegrown health plans, i.e., those which are organized by local providers and are new to managed care, will need 3-5 years to mature to the point where they can satisfactorily manage care and the financial risks involved for IDD enrollees on a capitated basis. This will require creative risksharing arrangements. Second, capitation rate-setting models for the IDD programs must be carefully calibrated to take into account those enrollee characteristics which best predict the high costs of this population.

*This paper was authored by Dr. Dennis L. Kodner with the support of the Arthur Webb Group, Inc. About the Author: Dennis L. Kodner, PhD is a global thought leader and strategist on integrated systems and services, and an expert on coordinated and managed care strategies and solutions for people with chronic, disabling and medically complex conditions whose needs cut across the acute, long term care, mental health and social support systems. In addition to consulting with providers, payers and policy makers, he is currently an International Visiting Fellow at The Kings Fund, London, UK, where he co-directs an Aetna Foundation-funded project on coordinated care for complex populations.