You asked for information on changes to the Medicaid programs in Kentucky and West Virginia, including their emphasis on personal responsibility. (The bulk of the information in this report derives from the summary and analysis of the Kentucky and West Virginia Medicaid program changes done by the Kaiser Commission on Medicaid and the Uninsured. )

SUMMARY

Kentucky and West Virginia are the first two states to amend their Medicaid programs under a new federal law (The Deficit Reduction Act of 2005) that gives states more flexibility in determining benefits and out-of-pocket costs. Kentucky is establishing separate Medicaid coverage plans, under the general title of KYHealth Choices, with different benefits for the general population, children, the elderly, and people with developmental disabilities. Kentucky's new program also rewards beneficiaries for certain actions that hold down program costs, such as selecting generic medications or participating in disease management programs for chronic conditions.

West Virginia is changing its Medicaid benefit package for children and parents by creating a “Basic Plan” and an “Enhanced Plan. ” The basic plan includes all mandatory Medicaid services and some optional ones but is more limited than the state's current benefits. Parents can access additional benefits for themselves and their children by signing a “personal responsibility contract” (member agreement) that allows them to enroll in the enhanced plan. Under the agreement, the parent agrees to certain activities such as not missing physician appointments and visiting the hospital emergency room only for emergencies. Beneficiaries who fail to meet their agreement obligations will be put in the basic plan. The state will require providers to monitor and report on patients' compliance with the agreement.

BACKGROUND—DEFICIT REDUCTION ACT OF 2005

The federal Deficit Reduction Act of 2005 (DRA), signed into law on February 8, 2006, allows states increased flexibility in determining benefits and out-of-state pocket costs. It includes a number of Medicaid policy changes focused on reducing federal program spending.

Cost Sharing

Prior to the DRA, states could impose nominal cost sharing for certain populations, but premiums were generally prohibited. The DRA allows states to impose co-payments on most Medicaid beneficiaries and premiums on those with family incomes above 150% of the federal poverty level and to vary cost sharing among beneficiary groups and areas of the state. Certain groups and services remain exempt from cost sharing.

Total cost sharing and premium accounts cannot exceed 5% of family income over a one month or quarterly period. The DRA also allows states to make co-payments enforceable, meaning that providers can deny services if beneficiaries cannot pay their co-payments.

Benefits

The DRA also affects Medicaid benefits. Before the DRA, states were required to provide certain mandatory services, but could also receive federal matching funds to cover some people and services not mandated by federal law. States determined the amount, duration, and scope of the services they offered. A state generally had to offer a covered service to all of its Medicaid beneficiaries as long as it was medically necessary.

The DRA allows states to replace the Medicaid benefit package for certain groups with “benchmark” coverage or “Secretary-approved” coverage, which is any coverage the Department of Health and Human Services (HHS) secretary determines is appropriate for a population, and to vary benefits across beneficiary groups and areas in the state. Benchmark coverage includes the standard Blue Cross Blue Shield Plan offered under the Federal Employees Health Benefits Plan, health coverage offered for state employees, or health coverage offered by the largest commercial HMO in the state.

States must continue to provide Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services to children as a wraparound benefit to cover all medically necessary care.

Long-Term Care Services

The DRA allows states to provide home and community-based services and self-direction of personal services for individuals with long-term care needs through a state plan option instead of a waiver.

KENTUCKY

Kentucky is one of the first states to use the new options available through the DRA, receiving state plan amendment approval from the federal government on May 3, 2006. Under the plan, the state will enroll most of its current Medicaid population into four targeted benefit plans (for the general population, children, the elderly, and people with developmental disabilities) and utilize new options to increase cost sharing and expand access to community based long-term care services. Kentucky is changing the name of its Medicaid program to KYHealth Choices. (The state still needs waiver approval for some changes proposed in the plan. )

The state, through its Medicaid plan amendment, seeks to improve health status; ensure that people receive the right care, in the right setting, at the right time; and ensure the solvency of Kentucky Medicaid. The state expects these changes to save $ 1 billion over the next seven years.

Four Targeted Benefit Plans

The first plan, Global Choices, covers pregnant women and parents, foster children, medically fragile children, SSI-related groups and women with breast and cervical cancer (the general Medicaid population, about 235,000 people). This plan includes basic medical services, not including long-term care services, but with increased cost sharing and new benefit limits compared to the state's current benefit package. Kentucky currently covers working parents with incomes up to 68% of poverty ($ 10,880 for a family of three in 2006).

Family Choices covers most children, including KCHIP children (Kentucky's children's health insurance program, about 263,000 people). Kentucky currently covers infants up to 185% of poverty and children through age 19 up to 150% of poverty under Medicaid and up to 200% of poverty through KCHIP. Compared to Global Choices, Family Choices has no prescription drug limits and a higher vision care maximum.

Optimum Choices covers individuals with mental retardation and developmental disabilities in need of long-term care services (about 3500 people). It includes all benefits in Global Choices and three levels of long-term care services determined by individualized care plans: high intensity, targeted, and basic. The high intensity level includes institutional care.

Finally, Comprehensive Choices covers elderly people and those with disabilities in need of a nursing facility level of care (about 27,900 individuals) covering all benefits in Global Choices plus services offered through the state's current home and community-based waivers in two care levels: high intensity and basic. High intensity includes institutional care.

DRA Options to Impose Cost Sharing and Limit Benefits

In Kentucky, new cost sharing requirements for most beneficiaries took effect on June 1, 2006. For example, Global Choices includes a 50% co-pay for inpatient services; $ 3 to 6 for physician services; and a $ 1 co-pay for generic drugs, $ 2 for preferred drugs, and 5% coinsurance for non-preferred drugs; $ 225 annual out-of- pocket maximum for prescription drugs; and $ 225 annual out-of-pocket maximum for medical services. There are no co-pays for preventive services such as annual check-ups, and mandatory children and pregnant women are exempt from cost sharing.

The plan also includes new benefit limits such as a limit of four prescription drugs per month and 15 occupational or physical therapy visits per year. None of the limits are “hard” limits; services beyond these limits may be approved through a prior authorization procedure.

Emphasis on Disease Management

Under the new Kentucky plan, individuals can earn “Get Healthy Benefits” after one year of compliance with a disease management program. The state will offer disease management programs for diabetes, adult and pediatric asthma, pediatric obesity, and cardiac or heart failure care. Individuals can receive awards for such things as keeping appointments or filling prescriptions in a timely manner. These awards can be used for additional dental and vision services, nutritional counseling, and smoking cessation programs. After selecting their award, individuals have six months to use it. A person loses Get Healthy Benefits if he loses Medicaid eligibility.

Premium Assistance

KYHealth Choices allows individuals to receive a subsidy for employer-sponsored coverage rather than direct coverage. Individuals can choose any plan that meets the state employee plan benchmark, but the state determines if the coverage meets “economy and efficiency” criteria. There is no wraparound coverage, but individuals may move back to direct coverage at any time.

WEST VIRGINIA

On May 3, 2006, West Virginia received federal government approval for a state plan amendment to its Medicaid program. Using the new DRA options, West Virginia is changing its benefit package for children and parents. Parents will sign a member agreement for themselves and on behalf of their children to access certain benefits, and providers and managed care plans will monitor and report to the state their patients' status concerning meeting member agreement responsibilities. Parents and children will continue to be covered for mandatory services, and the state must continue to provide EPSDT services to children. These changes will affect about 160,000 beneficiaries.

West Virginia wants to “emphasize personal empowerment and responsibility” and, like Kentucky, “ensure that participants receive the right care at the right time by the right provider. ” The state also seeks to bring program costs down, while helping with disease prevention.

The state began implementing the changes on July 1, 2006 in three counties and plans eventually to expand them statewide and to more populations. These changes are part of a broader four-year plan undertaken by the state legislature and the state Medicaid program. Further changes, such as cost sharing and co-payments, will require additional state plan requirements.

Changes to West Virginia's Medicaid Program

Children and parents will be moved to “Secretary-approved” benefit packages. The eligibility groups affected are:

1. Infants from families with incomes below 150% of poverty ($ 24,900 for a family of three in 2006);

2. Children age one to six with incomes below 133% of poverty ($ 22,078 for a family of three);

3. Children age six to 19 with incomes below 100% of poverty ($ 16,600 for a family of three);

4. Working parents with incomes below 37% of poverty ($ 6,142 for a family of three); and

5. Non-working parents with incomes below 19% of poverty ($ 3,154 for a family of three).

A “Basic Plan” and “Enhanced Plan” will be available for children and parents. The basic plan includes all mandatory and some optional services but is more limited than the state's current benefits. Parents can obtain additional benefits for themselves and their children by signing a member agreement (see below) that allows them to enroll in the enhanced plan. Some of the additional benefits are prescription drugs above the basic plan's four-drug limit, and mental health services and diabetes care, which are not covered by the basic plan.

Children are covered for EPDST in both the basic and enhanced plans.

Member Agreement

Individuals must sign a member agreement in order to obtain enhanced plan benefits. The agreement includes broad responsibilities such as “I will do my best to stay healthy,” “I will go to health improvement programs as directed,” “I will show up on time when I have my appointments,” and “I will use the hospital emergency room only for emergencies. ” The member agreement also addresses members' rights, such as “I have the right to pick my medical home,” “I have a right to decide things about my health care and the health care of my children,” and “I will be treated fairly and with respect. ”

Provider Responsibilites. Physicians will monitor and report to the state on patients' compliance with their member agreement. For individuals signing the agreement to enroll in the enhanced plan, in the first year the state will determine compliance with screenings as directed by the provider, adherence to health improvement programs, missed appointments, and medication compliance. If the state determines an individual has not met his responsibilities under the agreement, the individual or his child will be moved to the basic plan. A parent moved to the basic plan would lose certain benefits, such as diabetes and mental health care. But the state must continue to provide EPDST services to children. (In the case of children, parents will sign the member agreement on their behalf. ) The individual must wait 12 months or until re-determination to re-sign the member agreement and re-enroll in the enhanced plan.

Effect on Providers. Some commentators on the West Virginia changes have noted that changes will occur in the provider-patient relationship. The provider or managed care plan will be responsible for monitoring and reporting to the state on the patient's status in meeting the member agreement responsibilities. Liability and privacy issues, as well as uneven compliance enforcement, may arise and affect the provider-patient relationship, according to some observers (see attached materials).

JK: ro