New York has got a federal OK to take $8 billion in Medicaid savings to experiment with some ambitious delivery and payment reforms that build off of, but may upend, its managed care system.
New York Governor Andrew Cuomo has secured a waiver from the Centers for Medicare & Medicaid Services to reinvest $8 billion of the $17 billion in estimated Medicaid savings from a statewide program redesign over the next five years.
"We will finally be able use the billions in savings we generated by reforming the state's Medicaid system to protect and improve health care services for millions of New Yorkers," said Cuomo, in a media statement, after 18 months lobbying now-departing HHS Secretary Kathleen Sebelius.
Under the leadership of health commissioner Nirav Shah, MD (who's soon leaving for an operating VP position with Kaiser Foundation Health Plan in California), New York Medicaid Redesign Team started implementing gradual changes, while plotting long-term ideas for reforming one of the nation's most expensive Medicaid programs.
"We were paying for a lot of things that we shouldn't have been paying for," Shah said in a speech last year, noting that the state's $54 billion Medicaid program was growing 13 percent every year when he started in 2011.
Now having secured a five year waiver, the state is hoping to implement the redesign team's vision of integrated behavioral and physical care that combines patient-centered medical homes and health plans "into a single system of effective care management," all under a Medicaid global spending cap.
For the 2013-2014 fiscal year, the cap was set at $16.4 billion for the state's share, which is within the range of the Cuomo administration's benchmark of a 3.9 percent growth rate, based on a ten-year average of the consumer price index's long-term health component.
Investing the savings
New York Medicaid leaders were hoping to use the Medicaid waiver's funding flexibility to invest in affordable housing, a lack of which the redesign team linked to "unnecessary Medicaid spending" -- beneficiaries dependent on nursing homes and hospitals "who cannot be discharged only because they lack a place to live" and "whose chronic conditions cannot be adequately managed on the streets or in shelters."
Due to the limits of federal health law the waiver's $8 billion in federal funding will not be helping cover supportive housing, although the state has explored using state-only dollars for housing, and, either way, the Cuomo administration is pretty bullish on the ability of other changes to bring long-term savings.
The bulk of the $8 billion, $6.4 billion, will be directed at the new Delivery System Reform Incentive Payment program, which among other goals is targeting a 25 percent reduction in avoidable hospitalizations over five years.
DSRIP, as the program is known, will help New York hospitals at risk of closure stay financially afloat with short-term support while trying to ensure that "delivery system transformation continues beyond the waiver period through leveraging managed care payment reform."
Open to large public hospital systems and safety net providers, the program will help fund collaborative projects with primary care health homes, skilled nursing facilities, home care agencies and behavioral health centers and ultimately try to use a system of performance-based payments, in part through Medicaid managed care plans.
Another $1 billion of the $8 billion approved in the waiver will be devoted to patient-centered health homes, including for health information technology, and investments in long-term care, workforce development and behavioral health.
The vision is to integrate health homes into current managed care networks, and under the waiver's DSRIP program, managed care plans will be one of the vehicles for performance-based payments through capitated and bundled reimbursement contracts.
According to the waiver, the state and Medicaid plans will have to develop a roadmap for CMS demonstrating how the DSRIP program's objectives will be incorporated into contracts.
Statewide, more than three million New Yorkers are covered through 16 Medicaid managed care plans.
The program has been difficult for some insurers, however. Last October, Excellus BlueCross BlueShield withdrew after losing some $100 million in the 2013 fiscal year, an amount the insurer called "simply unsustainable."