Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination (2018)

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13 Medicaid is a joint federal and state program that provides health coverage for individuals and families with limited income and resources. Understanding NEMT starts with learning about Medicaid. In the Medicaid program, NEMT is a benefit for eligible Medicaid beneficiaries who need transportation to an authorized medical service. The purpose of this chapter is to provide information on the Medicaid program in the United States and the impact of recent federal legislation. What Are the Medicare and Medicaid Programs? Medicare and Medicaid are two different federal programs created in 1965 for older and low- income Americans who could not afford private health insurance. Congress passed legislation as Title XVIII and Title XIX of the Social Security Act, establishing the Medicare and Medicaid programs, respectively (4). Medicare Medicare is a federal health insurance program for people ages 65 and over and people with permanent disabilities, regardless of income. Medicare helps to pay for hospital and physician visits, prescription drugs, and other acute and post-acute care services. Medicare provided health insurance for 57 million people and accounted for 15 percent of the federal budget, about $540 billion, in the federal fiscal year (FY) 2015 (5). Reported expenses included mandatory Medicare spending—less income from premiums and other offsetting receipts in FY 2015. Medicaid Medicaid is a joint federal and state program that provides health coverage for individuals and families with limited incomes and resources (4). Congress added the Children’s Health Insurance Program (CHIP) to the Medicaid program in 1997 as Title XXI of the Social Security Act. CHIP provides health coverage for infants and children in low-income families that do not qualify for Medicaid but cannot afford private health insurance (6). Changes in Medicaid and CHIP services under the ACA took effect on January 1, 2014. In addition to extending Medicaid eligibility to individuals under 65 years of age with an income below 133 percent of the federal poverty level, the ACA gave states the option of creating a Basic Health Program (BHP). Under the BHP, states have the option to provide coverage to individuals who do not qualify for Medicaid, CHIP, or other minimum essential health coverage and have an income between 133 percent and 200 percent of the federal poverty level (7). The Medicaid program is jointly funded by the federal and state governments (including in the District of Columbia and the U.S. territories) to assist states in furnishing medical assistance C H A P T E R 2 Medicaid

14 Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination to eligible persons. The federal and state expenditures for Medicaid in FY 2015 were $334 billion and $198 billion, respectively, for total federal and state expenditures of $532 billion (8). The federal share for Medicaid was about 9 percent of the federal budget in FY 2015 (5). For state expenditures, Medicaid accounted for 18.7 percent of all state general fund spending in FY 2015, in second place behind state spending on primary and secondary education (35.6 percent of state general fund spending in FY 2015) (9). Medicaid and CHIP currently provide health insurance for over 74 million of America’s poorest people (10). Figure 2 illustrates the relative enrollment for Medicaid and CHIP by state as of December 2016. Centers for Medicare and Medicaid Services CMS oversees the federal Medicare and Medicaid programs. Considering both Medicare (15 percent of the federal budget) and Medicaid (9 percent of the federal budget) expen- ditures, CMS was responsible for almost one-fourth (24 percent) of all federal spending in FY 2015 (5, 8). The Medicare and Medicaid share of the federal budget in 2015 is illustrated in Figure 3. The Center for Medicaid and CHIP Services is one of six centers within CMS and serves as the focal point for the three national health insurance programs for low-income people: Medicaid, CHIP, and BHP, collectively referred to as Medicaid. Each of these programs is administered at the state level. The state role in administering the programs means each state has the flexibility, within federal guidelines, to design programs to meet specific state needs. Under the Medicaid program, the CMS mission is to work with states and other partners to advance state efforts to ensure access to affordable health care, promote health, improve quality of care, and lower health care costs (11). Source: Center for Medicaid and CHIP Services, December 2016 Data. Figure 2. State Medicaid and CHIP enrollment as of December 2016.

Medicaid 15 What Do I Need to Understand About Medicaid? In the Medicaid program, NEMT is a benefit for eligible Medicaid beneficiaries who need transportation to an authorized medical service. When state Medicaid agencies discuss NEMT, the policies and practices as well as the terminology used are from this perspective. This section discusses NEMT within the context of the Medicaid program. Regional and local transportation providers (including human services transportation but particularly state-level public transportation officials and public transit providers) view NEMT as a transportation service and may not be familiar with the policies, practices, and terms from Medicaid. To understand NEMT from the perspective of state Medicaid agencies, one must first know about Medicaid and its state-level administration. State Medicaid Programs Including NEMT Vary from State to State As stated previously, Medicaid is a shared federal-state program. Within broad national guidelines established by federal statutes, regulations, and policies, each state establishes its own eligibility standards; determines the type, amount, duration, and scope of Medicaid services; sets the rate of payment for services; and administers its own Medicaid program, including its own NEMT program. Medicaid policies for eligibility, services, and payment are complex and vary considerably from state to state. Thus, a person who is eligible for Medicaid and NEMT in one state may not be eligible in another state, and the Medicaid-funded services provided by one state may differ considerably in amount, duration, or scope from services provided in another state. In addition, within overall federal guidelines, state legislatures may change Medicaid eligibility, services, and/or reimbursement at any time. Based on program flexibility, spending per Medicaid enrollee varies significantly across eligibility groups and states. Medicaid policies for eligibility, services, and payment are complex and vary from state to state. Source: Congressional Budget Office as provided by the Kaiser Family Foundation. Figure 3. Medicare and Medicaid as a share of the 2015 Federal Budget.

16 Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination Minimum Federal Requirements for Medicaid While Title XIX of the Social Security Act gives states considerable discretion over Medicaid program administration and design, the law establishes a series of federal requirements that participating states must satisfy. Each state must have a state Medicaid plan that meets the following: • Statewide availability. The plan is available in all political subdivisions of the state (referred to as statewideness in Medicaid policy). • Comparability. The plan is furnished in the same amount, duration, and scope to all individuals in a group. • Freedom of choice. The plan is available to eligible recipients from qualified providers of their choice. Two additional key federal requirements are that Medicaid services be provided with reason- able promptness and in a manner consistent with the best interests of the recipient of the service. These minimum federal requirements apply to any medical service, including NEMT, provided under a state Medicaid plan, unless a state applies for and receives CMS approval for a waiver. Some Federal Requirements May Be Waived Federal Medicaid law requires a state to have an approved state plan to operate its Medicaid program including NEMT. Section 1115 of the Social Security Act allows states to waive some of the federal requirements in the state plan. Medicaid waivers are a basic policy tool for many states’ Medicaid programs. Public transportation audiences are familiar with FTA regulations that allow grant recipients to submit a waiver requesting FTA to permit some local practices not addressed or otherwise prohibited under a regulation. The perspective for waivers in public transportation is the exception and not the rule. Transit agencies infrequently request a waiver, and FTA even less frequently grants a waiver. An approved Medicaid waiver means that a state is not required to comply with one or more of the minimum requirements for statewideness, comparability, and freedom of choice. Many states use waivers for NEMT. The two primary types of waivers that apply to NEMT policy and practice are: • Section 1115 demonstration waivers. States can apply for waivers to test and implement approaches that diverge from federal Medicaid rules. The purpose of these demonstrations is to use innovative service delivery systems that improve care, increase efficiency, and reduce costs. • Section 1915 (a) and (b) managed care waivers. States can apply for waivers to provide services through managed care delivery systems or otherwise limit beneficiaries’ freedom of choice of providers. States must submit a written application to CMS for the approval of the requested waivers. Federal Medicaid Payments to States for NEMT Expenses State spending for NEMT can be reimbursed as a medical service expense or as an admin- istrative expense for purposes of federal matching. States choose the type of reimbursement, which affects the amount of federal reimbursement for NEMT costs. NEMT as an optional medical service allows for reimbursement at the state’s regular federal matching rate for medical services, which ranges from 50 percent to 74.6 percent in FY 2017 (see additional discussion of federal matching payments later in this chapter). As a medical service State spending for NEMT can be reimbursed as a medical service expense or as an administrative expense for purposes of federal matching.

Medicaid 17 expense, NEMT is subject to additional federal guidelines, including statewideness, compara- bility, and freedom of choice of providers. Reimbursement for NEMT as an administrative expense caps the federal match at 50 percent, like other administrative expenses. NEMT as an administrative expense gives states greater flexibility in the delivery of NEMT services and eliminates the freedom of choice of provider requirement, allowing for contracts with a single provider and alternative types of payment, like vouchers for NEMT clients (12). NEMT as a medical service is the perspective of many state Medicaid agencies. This is different from the perspective of many public transportation and human services transportation providers who think that NEMT is a transportation service. Federal Matching Payments If a state chooses to include NEMT as a medical service expense, the federal government matches state spending for eligible beneficiaries and qualifying medical services by a formula set in statute that is based on a state’s per-capita income. The formula is known as the federal medical assistance percentage (FMAP). Under current law, Medicaid provides a guarantee to states for federal matching payments with no preset dollar limit. Federal matching with no preset limit is a perspective unique to the Medicaid program and applies to the NEMT program when NEMT is a medical service expense. In public transpor- tation and human services transportation, federal matching payments are limited by annual apportionments and transportation program budgets. FMAP is designed so that the federal government pays a larger share of Medicaid costs for medical services in states with lower average personal incomes. FMAP varies by state from a floor of 50 percent to a high of 74.6 percent (FY 2017). In FY 2015, the federal government paid about 60 percent of Medicaid costs, with states paying 40 percent. If a state chooses to include NEMT as an administrative expense, the federal match rate for Medicaid administrative expenses is 50 percent. Administrative expenses represent a relatively small portion of the total Medicaid spending (13). Medicaid is the largest source of federal revenues for state budgets and is critical to state finances (14). Federal funds for Medicaid expenses were $334 billion in FY 2015. Of that total, federal NEMT expenditures are estimated to be approximately $3 billion annually, or less than 1 percent. State funds for Medicaid expenses were $198 billion in FY 2015. In most states, Medicaid expenses are the second largest expenditure category in the annual state budget, behind expenditures for primary and secondary education. To address long-term strategies for cost control, more states are implementing payment and medical service delivery system reforms, including a move to managed care. The $3 billion federal NEMT expense compares to $10.9 billion federal funds appropriated to FTA for all grant programs, capital and operating, for public transportation in FY 2015. While most federal funds for public transportation go toward capital expenses, FTA reimbursed public transit agencies about $3 billion for operating expenses in FY 2015. This includes eligible operat- ing expenses (preventive maintenance and paratransit) that are reimbursable at the capital rate of reimbursement. Fee for Service and Managed Care States have the discretion as to how they want to purchase covered Medicaid services and the amounts to pay to providers. These purchase-of-services choices also apply to NEMT: In most states, Medicaid expenses are the second largest expenditure category in the annual state budget, behind expenditures for primary and secondary education.

18 Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination • Fee for service. Under the fee-for-service method, providers (doctors, hospitals, and other service providers such as NEMT) are paid for each service performed. For example, a primary doctor may be paid per office visit and an NEMT provider is paid per passenger trip. • Managed care. Managed care describes a variety of techniques intended to reduce the cost of providing health benefits and improve the quality of care. A managed care organization (MCO) supervises the medical care delivered to members. For example, an MCO manages who provides the health care, where services are provided, and the different kinds of doctors in that particular system (15). Managed care can include services such as NEMT. An MCO typically uses a capitated pay system (see the discussion later in this chapter). Purchase of service in public transportation is typically fee for service, based on service con- sumed (per passenger trip) or based on units of service supplied (per mile or per hour of service). Capitation Payment in Managed Care Capitation payment is a part of managed care. The word capitation is derived from the term per capita, which means per person. Capitation payment for NEMT services is not a practice or term used in public transporta- tion or other human services transportation. Understanding the benefits and disadvantages of capitation payment can help to understand the use of the payment method for NEMT brokerages and MCOs. Formally defined, capitation is a flat periodic payment per enrollee to a health care pro- vider; it is the sole reimbursement for providing services to a defined population. Generally, capitation payments are expressed as some dollar amount per member per month (PMPM), where member means the enrollee in some managed care plan. For example, a primary care physician group may receive a capitated payment of $25 PMPM for attending to the health care needs of 250 members of an MCO. Under this contract, the physician group receives $25 PMPM × 250 members × 12 months = $75,000 in total capitation payments over the year, and this amount must cover all of the primary care services offered to the 250-patient population specified in the contract (16). The following are some potential benefits from the health care provider perspective associated with capitation: • Providers receive a fixed payment regardless of the services actually rendered. • Providers receive capitation payments before services are provided, not based on reimburse- ment, as under fee for service. • Capitation revenues are predictable and timely. • Capitation increases an emphasis on cost control. The potential disadvantages associated with capitation are: • Service providers are motivated to provide only needed services. • Capitation increases emphasis on earnings and the lowest cost for expenses will increase earnings. Capitation payment to NEMT brokers is discussed in the next chapter. What Is the Impact of the Affordable Care Act of 2010? Effective January 1, 2014, the ACA provides states the authority to expand Medicaid eligi- bility. The ACA also standardizes the rules for determining eligibility and providing benefits through Medicaid.

Medicaid 19 States Have the Option to Expand Eligibility The ACA created the opportunity for states to expand Medicaid to cover nearly all low- income Americans under age 65. Eligibility for children was extended to at least 133 percent of the federal poverty level (FPL) in every state, and states were given the option to extend eligibility to adults with income at or below 133 percent of the FPL. In addition, the ACA gave states the option of providing coverage to individuals that have an income between 133 percent and 200 percent of the FPL. For states that implement the expansion, the federal government financed 100 percent of the costs of the newly Medicaid-eligible beneficiaries from 2014 to 2016. After 2016, the federal contribution is phasing down to 90 percent by 2020 and beyond date. States continue to pay the traditional Medicaid FMAP match rate for increased participation among those currently eligible (11, 17). As illustrated in Figure 4, 31 states and the District of Columbia had elected to expand Medicaid as of December 2016. In November 2017, voters in Maine approved a ballot mea- sure to expand the Medicaid program under the ACA. Maine is the 32nd state to expand Medicaid. Figure 5 illustrates the cumulative Medicaid/CHIP enrollment change pre-ACA summer 2013 to post-ACA December 2016 by state. Source: Center for Medicaid and CHIP Services, December 2016 Data. Figure 4. Status of state Medicaid expansion decisions as of December 2016.

20 Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination Source: Center for Medicaid and CHIP Services, Data as of December 2016. Note: Data represent 48 states and the District of Columbia. Connecticut and Maine did not provide pre-ACA baseline data to CMS. Maryland New Hampshire Rhode Island Oregon West Virginia California Washington Montana New Mexico Arkansas Colorado Michigan Pennsylvania Iowa Massachusetts Indiana Ohio North Dakota Vermont Delaware D.C. New York Illinois Hawaii Minnesota Louisiana New Jersey Alaska Arizona Nevada Tennessee North Carolina Idaho Florida Missouri Georgia South Carolina Alabama Kansas Texas Mississippi Virginia Utah Wisconsin South Dakota Oklahoma Nebraska Wyoming Kentucky –20% 20% 40% 60% 80% 100% 120%0% States that Did Not Expand Medicaid under ACA States that Expanded Medicaid under ACA Figure 5. Medicaid/CHIP enrollment change Pre-ACA 2013 to Post-ACA 2016 by state.

Medicaid 21 Impacts of ACA Expanded Eligibility The comparisons illustrated in Figure 6 show the important impacts of ACA expansion: • Prior to ACA, implemented in 2014, about 57 million Americans were enrolled in the Medicaid programs in the 48 states that reported relevant data and the District of Columbia— 18 percent of the population. Connecticut and Maine are not included because they did not report pre-ACA data to CMS (10). • After ACA expansion, as of December 2016, about 74 million Americans were enrolled in the Medicaid programs—approximately 23 percent of the U.S. population (10). Nearly 17.2 million additional individuals were enrolled in Medicaid and CHIP in Decem- ber 2016 compared to the data available for the period prior to the start of the first ACA open enrollment period (July to September 2013). Medicaid enrollment change differs from state to state: • In states that implemented Medicaid expansion by December 2016 (31 states and the District of Columbia), growth in Medicaid enrollment from 2013 pre-ACA to December 2016 post-ACA was an average of 38.9 percent. • In states that did not expand Medicaid (19 states), growth in Medicaid enrollment for the same period was an average of 13.7 percent. Although the federal government pays a share of Medicaid’s costs, which ranged from 50 percent to 74.6 percent in FY 2017, the state’s share ranges from 25.4 percent to 50 percent and has an impact on the state budget. Facing substantial Medicaid enrollment increases, almost all states are implementing or planning Medicaid cost-containment strategies. Source: Center for Medicaid and CHIP Services, December 2016 Data. Note: Data represent 48 states and the District of Columbia. Connecticut and Maine did not provide pre-ACA baseline data to CMS. Figure 6. Medicaid/CHIP enrollment Pre-ACA and Post-ACA in 48 states and the District of Columbia.

22 Handbook for Examining the Effects of Non-Emergency Medical Transportation Brokerages on Transportation Coordination Summary Understanding NEMT starts with learning about Medicaid. Medicaid is a shared federal- state program. Within federal guidelines, each state administers its own Medicaid program, including choices about how to deliver NEMT services. Medicaid policies for eligibility, services, and payment are complex and vary considerably from state to state. Medicaid expenses represented 9 percent of all federal outlays in FY 2015. In most states, Medicaid is the second largest expenditure in the state budget. Although NEMT is a small frac- tion of the total cost of Medicaid, states have adopted policies and practices to contain NEMT expenses. The next chapter describes the different models available to state Medicaid agencies for pro- viding NEMT and discusses how the Deficit Reduction Act (DRA) of 2005 has influenced the manner in which states have decided to deliver NEMT services.