Post on 13-Jan-2016
description
Government Human Services Consulting
Final Trend Estimates and CY07 Rates
Tim Doyle, FSA, MAAA Brad RhodesJeff Smith
July 28, 2006
Mercer Government Human Services Consulting 2
Outline of Presentation
A. Rate Impact
B. Rate-Setting Methodology
Mercer Government Human Services Consulting 3
A. Rate Impact
Recall from the June 22, 2006 presentation that Trend = Rate Increase
Aggregate rate increase/decrease is due to– Medical inflation (trend)
– Benefit program changes
– Demographic mix changes (enrollment distribution across rate cells)
– Other (e.g., rebasing)
Overall revenue increase/decrease is additionally due to– Total enrollment changes
Mercer Government Human Services Consulting 4
A. Rate Impact (continued)
Program-wide CY07 PMPM increase of 5.2 percent over mid-year CY06 rates based on March member months simulations
MCO-specific PMPM increases to be distributed after the presentation today
Mercer Government Human Services Consulting 5
B: Rate-Setting Methodology
1. CY04 adjusted HFMR base as starting point
2. Program changes
3. Medical trends
4. Administrative and profit load
5. Relational modeling
6. Regional factors
7. Low birth weight babies
Mercer Government Human Services Consulting 6
B.1: CY04 Adjusted HFMR Base as Starting Point
MCOs submitted CY04 HFMRs adjusted for– C&G and L&E reviews
– Non-State Plan services Removal of adult dental
– FQHC pricing
Mercer Government Human Services Consulting 7
B.2: Program Changes
Physician fee schedule– Increase to specified codes effective July 1, 2005 and July 1,
2006
– Impacts physician PMPM by 16 percent
Pharmacy copay– $3 copay for all brand drugs not on the preferred drug list, $1
copay for all generic drugs for adults. Pregnant women, children, and family planning drugs are excluded from copays
Increase in dental fees for restorative services– $0.52 million increase
Mercer Government Human Services Consulting 8
B.2: Program Changes (continued)
TPL– $1.5 million removed from total expenses
Mercer Government Human Services Consulting 9
B.3: Medical Trends
Preliminary trend ranges presented on June 22, 2006
Final trend estimates presented in this section
Mercer Government Human Services Consulting 10
Trend Methodology
Data analysis– Analyze MCO-reported financial and encounter data
– Analyze HSCRC hospital data
Trend estimation– Past trends: Assessed based on the historical data
– Future trends: Assessed with past trends as baseline compared to other benchmarks
Mercer Government Human Services Consulting 11
Inpatient Hospital Unit Cost Trends: HSCRC Component
Year Rate Update
FY05 4.81%
FY06 5.01%
FY07 3.56%
FY08* 3.91%
*Forecast
HSCRC rate updates
Mercer Government Human Services Consulting 12
Inpatient Trend Considerations
CY04–CY05 (also 3 months of CY06) trend estimates based on program-specific data
CY05–CY07 trend forecasts driven by HSCRC rate updates
Trends estimates incorporate HSCRC DRG day limit and GME discount impact
Mercer Government Human Services Consulting 13
Inpatient Hospital PMPM Annual Trend by COA and Year
F&C Disabled SOBRA AIDS HIVDelivery/
BirthTotal
CY04/05 5.4% 4.9% 5.4% 5.4% 5.1% 4.6% 5.0%
CY05/06 8.8% 8.2% 8.8% 8.3% 8.1% 6.7% 7.9%
CY06/07 7.7% 7.2% 7.7% 7.3% 7.2% 6.2% 7.0%
Total 7.3% 6.8% 7.3% 7.0% 6.8% 5.8% 6.6%
Mercer Government Human Services Consulting 14
Outpatient Hospital Unit Cost Trends: HSCRC Component
*Forecast
Year Rate Update
FY05 3.78%
FY06 3.98%
FY07 3.56%
FY08* 3.22%
HSCRC rate updates
Mercer Government Human Services Consulting 15
Outpatient Trend Considerations
CY04–CY05 (also 3 months of CY06) trend estimates based on program-specific data
CY05–CY07 trend forecasts driven by HSCRC rate updates
Trends estimates incorporate GME discount impact
Mercer Government Human Services Consulting 16
F&C Disabled SOBRA AIDS HIVDelivery/
BirthTotal
CY04/05 8.0% 8.2% 8.0% 8.5% 8.5% 8.0% 8.1%
CY05/06 12.1% 13.3% 12.1% 12.1% 12.1% 12.1% 12.5%
CY06/07 11.4% 12.6% 11.4% 11.4% 11.4% 11.4% 11.8%
Total 10.5% 11.4% 10.5% 10.7% 10.7% 10.5% 10.8%
Outpatient Hospital PMPM Annual Trend by COA and Year
Mercer Government Human Services Consulting 17
Pharmacy Trend Considerations
CY04–CY05 (also 3 months of CY06) trend estimates based on MCO-specific data
CY05–CY07 trend forecasts based on pharmacy industry research
Mercer Government Human Services Consulting 18
F&C Disabled SOBRA AIDS HIVDelivery/
BirthTotal
CY04/05 5.5% 6.1% 5.5% 7.6% 7.6% 5.5% 6.1%
CY05/06 7.6% 8.4% 7.6% 9.9% 9.9% 7.6% 8.3%
CY06/07 7.6% 8.4% 7.6% 9.9% 9.9% 7.6% 8.3%
Total 6.9% 7.6% 6.9% 9.1% 9.1% 6.9% 7.6%
Pharmacy PMPM Annual Trend by COA and Year
Mercer Government Human Services Consulting 19
Physician Trend Considerations
CY04–CY05 (also 3 months of CY06) trend estimates based on MCO-specific data
CY05–CY07 trend forecasts based on above baseline and industry research
Mercer Government Human Services Consulting 20
Physician PMPM Annual Trend by COA by Year
F&C Disabled SOBRA AIDS HIVDelivery/
BirthTotal
CY04/05 3.2% 3.0% 3.3% 4.0% 4.0% 3.0% 3.2%
CY05/06 5.0% 4.7% 5.0% 5.9% 5.9% 5.0% 4.9%
CY06/07 5.0% 4.7% 5.0% 5.9% 5.9% 5.0% 4.9%
Total 4.4% 4.2% 4.4% 5.3% 5.3% 4.3% 4.4%
Mercer Government Human Services Consulting 21
Summary of Average Annual Trends by COA and COS(CY04–CY07)
F&CDisabled
SOBRA AIDS HIV
Delivery/ Birth
Total
Inpatient Hospital 7.3% 6.8% 7.3% 7.0% 6.8% 5.8% 6.6%
Outpatient 10.5% 11.4% 10.5% 10.7% 10.7% 10.5% 10.8%
Physician 4.4% 4.2% 4.4% 5.3% 5.3% 4.3% 4.4%
Dental 6.7% 5.4% 6.7% 5.4% 5.4% 0.0% 6.7%
Pharmacy 6.9% 7.6% 6.9% 9.1% 9.1% 6.9% 7.6%
All Other* -1.0% -0.6% -1.0% -0.6% -0.5% -1.0% -0.8%
Total 6.7% 6.8% 7.2% 7.5% 7.7% 5.6% 6.6%
*Reflects -9.3% trend for CY04/05 and 3.8% trend for both CY05/06 and CY06/07.
Mercer Government Human Services Consulting 22
F&CDisabled
SOBRA AIDS HIV
Delivery/ Birth
Total
CY04/05 4.4% 4.3% 5.0% 5.3% 5.5% 4.3% 4.4%
CY05/06 8.0% 8.3% 8.5% 8.8% 9.0% 6.5% 8.0%
CY06/07 7.7% 7.8% 8.1% 8.3% 8.6% 6.0% 7.5%
Total 6.7% 6.8% 7.2% 7.5% 7.7% 5.6% 6.6%
Summary of Consolidated COS Annual Trend by COA and Year
Mercer Government Human Services Consulting 23
B.4: Administrative and Profit Load
From the audited CY04 HFMR base cost, grouped separately by F&C and Disabled– Medical management costs
– Administrative costs
Administrative trends– Medical management (at CPI +): 3.76 percent
– Administrative costs (at CPI): 2.80 percent
Additional items– Underwriting Gain: 1.5 percent of medical expense
– Reinsurance Administration Costs: $2.4 million added to base
– Risk/Contingency Margin: 0.4 percent of medical expense
State policy decision: loading capped at CY06 level of 12.6 percent
Mercer Government Human Services Consulting 24
Administrative and Profit Load Allocation
Premium Tax: 2.3 percent of medical expense Overall, loading over medical portion of CY07 rates is 14.9 percent
– Medical management, underwriting gains, risk/contingency margin, reinsurance administration, and premium tax as variable loading (proportionally to medical component of rate)
– Administrative costs as fixed loading Variable by F&C and Disabled Variable by rate cell groupings
– Administration costs for RACs 75 percent fixed and 25 percent variable
Mercer Government Human Services Consulting 25
B.5: Relational Modeling
Standard actuarial step
For smoothing
To reflect improved RAC assignment due to better encounter data and RAC relativities
To incorporate aging of RAC cohorts
Mercer Government Human Services Consulting 26
B.6: Regional Factors
City versus Rest of State (ROS) regional factors based on the regional analysis presentation on June 22, 2006
Results in City/ROS differential of 23 percent for demographic rate cells and 14 percent for RACs– Last year the differential was 27 percent for demographic rate
cells and 17 percent for RACs
Mercer Government Human Services Consulting 27
B.7: Low Birth Weight Babies
UMBC analysis applied to newborn/delivery kick payment and < 1 F&C
Adjusted to recognize 90 percent of differential in base cost analysis
Adjusted for differential trend