The 2009 Executive Budget Document
Department of Medical Assistance ServicesMission Statement
To provide access to a comprehensive system of high quality and cost effective health care services to qualifying Virginians.Operating Budget History
|General Fund||Nongeneral Fund||Positions|
|2005 Appropriation||$ 1,947,986,146||$ 2,615,488,502||325.00|
|2006 Appropriation||$ 2,147,195,688||$ 2,773,903,914||331.00|
|2007 Appropriation||$ 2,408,455,441||$ 2,912,055,424||348.00|
|2008 Appropriation||$ 2,567,180,009||$ 3,095,483,568||349.00|
|General Fund||Nongeneral Fund||Positions|
|2009 Base Budget||$ 2,645,408,462||$ 3,196,372,586||363.00|
|2009 Addenda||$ 10,371,382||$ (3,642,730)||(10.00)|
|2009 Total||$ 2,655,779,844||$ 3,192,729,856||353.00|
|2010 Base Budget||$ 2,807,740,460||$ 3,357,430,797||365.00|
|2010 Addenda||$ (95,794,779)||$ 230,235,402||(5.00)|
|2010 Total||$ 2,711,945,681||$ 3,587,666,199||360.00|
Recommended Operating Budget Addenda
Fund Medicaid utilizationProvides additional funding for the increase in the use of Medicaid services and other cost factors that impact those services. Medicaid costs in Virginia are rising at a more rapid rate reflecting a trend across the nation. Enrollment, especially among children, is growing much faster resulting in higher costs. In addition, this amendment adds back $19 million a year the 2008 General Assembly removed from the Medicaid budget. For 2009, $133.8 million (GF) and $129.5 million (NGF). For 2010, $134.6 million (GF) and $115.2 million (NGF).
Adjust funding for the Health Care FundAdjusts the appropriation of the Health Care Fund to reflect a lower estimate of revenues. Medicaid recoveries are expected to be lower than projected last year due to a large recovery from a pharmaceutical company received in FY 2008, which was earlier than expected as the revenue was budgeted in FY 2009. The fund is used as state match for Medicaid so a decrease in revenue requires additional general fund support to offset the impact. For 2009, an increase of $6.7 million (GF) and a decrease of $6.7 million (NGF).
Fund Family Access to Medical Insurance Security plan utilizationProvides additional funding to the program as a result of higher than expected enrollment of children. The Family Access to Medical Insurance Security (FAMIS) program provides coverage of children in families with income from 133 to 200 percent of the federal poverty level. The program receives an enhanced federal match of 65 percent. For 2009, $3.3 million (GF) and $6.2 million (NGF). For 2010, $5.0 million (GF) and $9.3 million (NGF).
Fund medical assistance services for low-income children utilizationAdds funding for the Commonwealth's Medicaid Children's Health Insurance Program. Enrollment is higher than was projected last year. This program applies to children over age six who fall within the income limit of 100 to 133 percent of the federal poverty level. The cost of coverage for this group of children receives an enhanced federal match of 65 percent. For 2009, $966,634 (GF) and $1.8 million (NGF). For 2010, $2.3 million (GF) and $4.4 million (NGF).
Provide funding for medical services for involuntary mental commitmentsProvides funding for the costs of hospital and physician services for persons subject to an involuntary mental commitment. The projections of costs based on the latest information is higher than the amount currently budgeted. For 2009, $1.1 million (GF). For 2010, $687,481 (GF).
Reflect Governor’s October reductions in agency budgetsReflects the reductions approved by Governor Kaine in October 2008 for 2009 and the corresponding continuation of savings in 2010. See Part D of this document for reduction details. For 2009, a decrease of $7.5 million (GF), $6.5 million (NGF), and a reduction of 10 positions. For 2010, a decrease of $8.4 million (GF) and $7.6 million (NGF).
Implement targeted reductionsImplements targeted reductions for 2009 and 2010 included in Governor Kaine's 2008-2010 Budget Reduction Plan. Reduction details can be found in Part D of this document. For 2009, a decrease of $128.0 million (GF) and $128.0 million (NGF). For 2010, a decrease of $231.9 million (GF), and an increase of $107.2 million (NGF) and an increase of five positions.
Increase consumer-directed personal care ratesProvides funding to increase rates for consumer-directed providers of home and community-based care (HCBC) personal care services by three percent. Specifically, this includes consumer directed personal care, respite care and companion care. Consumer-directed personal care services are provided across the Elderly or Disabled with Consumer Direction, HIV/AIDS, Mental Retardation and Individual and Family Developmental Disabilities Support waivers. For 2010, $1.7 million (GF) and $1.7 million (NGF).
Allow full federal reimbursement of Medicaid and indigent care costs for Academic Health CentersAllows the agency to fully reimburse the federal share of the Academic Health Centers' Medicaid and indigent care costs if they can certify their costs. In the 2008 session of the General Assembly, budget language was added limiting the inflation rate for hospitals to two percent. This language also restricted the agency from reimbursing the academic health centers through other means to make up the lost funding, which is required under current rules. This action gives the agency authority to fully reimburse the federal share of those costs. This amendment is embedded in budget language.
Remove home health transportation coverageEliminates coverage of transportation costs for home health transportation providers. Currently, home health providers that drive more than 15 miles to see a client can claim mileage costs for those traveled over 15 miles. This action eliminates that reimbursement to limit costs. Home health providers are the only Medicaid provider group to receive extra funding for extraordinary transportation costs. This action is embedded in budget language.
Budget Reduction Strategies
October Reduction Strategies
Capture rebates on physician-administered drugs
This strategy captures higher than expected savings from rebates on physician-administered drugs. Recent changes to federal law require that all states begin to collect rebates from drug manufacturers on this type of drug. Previous savings had been assumed but the rebates collected have been higher than expected.
FY 2009 FY 2010 General Fund Savings $ (1,000,000) $ (1,000,000) NGF Appropriation $ (1,000,000) $ (1,000,000)
Collect pharmacy rebates on institutional drugs
This strategy captures savings from drug manufacturers from rebates on institutional drugs. These are drugs that are used as part of an institutionalization, like a hospital stay, in which the cost of the drugs are captured in the payment for the inpatient hospital service. Recent changes in federal law require hospitals to report the actual drugs administered and to pass this information on to Medicaid so that states can claim drug rebates from manufacturers.
FY 2009 FY 2010 General Fund Savings $ (125,000) $ (250,000) NGF Appropriation $ (125,000) $ (250,000)
Eliminate optional secondary Mental Illness/Mental Retardation screening
Currently, Medicaid waiver recipients in some of the home and community-based waiver programs undergo a second screening for mental illness or mental retardation. There is no federal or state requirement that this screening must be performed. This strategy eliminates the secondary screening and will likely speed up placement for waiver recipients.
FY 2009 FY 2010 General Fund Savings $ (27,667) $ (55,333) NGF Appropriation $ (83,000) $ (166,000)
Eliminate Policy and Planning Specialist position at Office of Community Integration
Eliminates Policy and Planning Specialist position at Office of Community Integration.
FY 2009 FY 2010 General Fund Savings $ (70,355) $ (87,943) Layoffs 1 0
Enhance pharmacy management initiatives
On July 1, 2008, the Department of Medical Assistance Services (DMAS) implemented a discounted pricing model for specialty drugs (injectables). This strategy adds additional drug classes to the program. In addition, DMAS will also be adding two atypical antipsychotics to the drugs subject to their dose optimization program.
FY 2009 FY 2010 General Fund Savings $ (92,500) $ (218,011) NGF Appropriation $ (125,000) $ (250,511)
Implement provider claim check edits
Medicare and other insurance carriers have instituted Correct Coding Initiative (CCI) edits and this strategy allows the Department of Medical Assistance Services to conform to those standards in its claims editing software. CCI was developed to promote correct coding for health care services by providers and to prevent Medicare from paying for improperly coded services. It involves automated edits used to evaluate claims from a provider when they bill for more than one service for the same beneficiary on the same date.
FY 2009 FY 2010 General Fund Savings $ (375,000) $ (750,000) NGF Appropriation $ (375,000) $ (750,000)
Redesign Family Access to Medical Insurance Security (FAMIS) program outreach activities
The Department of Medicaid Assistance Services (DMAS) conducts advertising and outreach activities to promote the FAMIS program and to encourage families to enroll eligible children in the program. Due to the success of outreach activities over the years, the FAMIS program has grown dramatically and now enrolls over 55,000 children across the Commonwealth as of September 2008. This strategy involves scaling back outreach efforts and focusing the remaining resources in the most effective way to continue to promote the program.
FY 2009 FY 2010 General Fund Savings $ (70,000) $ (253,750) NGF Appropriation $ (130,000) $ (471,250)
Reduce administrative funding for new initiatives
This strategy eliminates administrative funding recently provided in the 2008 Appropriation Act for new initiatives, specifically the Integration of Acute and Long-Term Care Integration Initiative and the Chronic Care Management program. The agency will use existing resources to continue the Integration of Acute and Long-Term Care initiative. The Chronic Care Management program is no longer viable to implement due to its high costs, so funding for the program is no longer necessary. In addition, the agency will eliminate two salaried positions and four wage positions, none of which are currently filled. There are no layoffs of full-time positions associated with this strategy.
FY 2009 FY 2010 General Fund Savings $ (1,249,392) $ (1,249,392) NGF Appropriation $ (1,241,624) $ (1,241,624) Position Changes (4.00) (4.00)
Reduce discretionary administrative expenditures
The agency will achieve savings by reducing contractor expenditures, allowing wage and salaried positions to remain vacant, and bringing the Payment Error Rate Measurement (PERM) contract in house using two full-time positions.
FY 2009 FY 2010 General Fund Savings $ (185,000) $ (233,530) NGF Appropriation $ (185,000) $ (233,530) Position Changes (6.00) (6.00)
Suspend the Indigent Health Care Trust Fund
The Virginia Indigent Health Care Trust Fund was created as a public/private partnership with private acute care hospitals in the state in an effort to equalize the burden of charity care among the hospitals. This redistribution program provides funding to hospitals based on the amount of charity care provided. The Commonwealth contributes general fund money to the Indigent Health Care Trust Fund along with hospital contributions. This strategy suspends the general fund contribution. In recent years Certificate of Public Need (COPN) approvals have required significant charity care contributions by hospitals. These funds now provide critical services to bolster our safety net services such as free clinics and are targeted to services for families at or below 200 percent of the federal poverty level.
FY 2009 FY 2010 General Fund Savings $ (4,285,831) $ (4,285,831) NGF Appropriation $ (3,200,000) $ (3,200,000)
December Reduction Strategies
Cap the Elderly and Disabled waiver
Places a cap on the Elderly and Disabled Waiver with Consumer Direction of 15,250 slots. This waiver is the largest of the seven Home and Community based waivers and currently has no cap on the number of people it services like the others. This strategy caps the number of slots for the wavier at the estimated number being served on July 1, 2009.
FY 2009 FY 2010 General Fund Savings $ 0 $ (5,860,700) NGF Appropriation $ 0 $ (5,860,700)
Change Managed Care Organization monthly payment schedule
Changes the monthly payment schedule for Managed Care Organizations. Beginning in June 2009, the monthly payment will be delayed one month. The action generates a one-time savings and has no impact on services.
FY 2009 FY 2010 General Fund Savings $ (59,768,918) $ 0 NGF Appropriation $ (59,768,918) $ 0
Change quarterly hospital payment schedule
Changes the payment schedule for the fourth quarter hospital payment for FY 2009 to the first quarter of FY 2010. This change generates a one-time savings and will have no impact on services.
FY 2009 FY 2010 General Fund Savings $ (32,211,167) $ 0 NGF Appropriation $ (32,211,167) $ 0
Close Southeastern Virginia Training Center
Closes Southeastern Virginia Training Center as of July 1, 2009. The facility, located in Chesapeake, has a current census of 175 residents and employs 463 full-time and 33 part-time staff. The agency proposes that 55 of the residents will be transferred to other training centers and the remaining will be transitioned into the community through either the Medicaid Mental Retardation (MR) waiver or the Money Follows the Person (MFP) program. 100 MFP slots will be used and 20 MR waiver slots will be used. This strategy requires the quick transition of individuals into the community in order to achieve savings in FY 2010. The agency proposes to pay the separation costs using proceeds from the sale of the land. Pre-planning funds for community housing were included in Chapter 1 of the 2008 Special Session. The $3.2 million in general fund costs is the cost associated with transitioning residents into community placements. Funding includes the necessary funds for waiver slots and Money Follows the Person slots.
FY 2009 FY 2010 General Fund Savings $ 0 $ (8,387,500) NGF Appropriation $ 0 $ (3,887,500)
Convert information technology contractors to full-time positions
Eliminates five information technology contractors and converts them into full-time employees. The savings are generated from the difference between the cost of paying for the contractors and the cost of the new employees.
FY 2009 FY 2010 General Fund Savings $ 0 $ (154,712) NGF Appropriation $ 0 $ (464,136) Position Changes 0.00 5.00
Delay the release of Mental Retardation waiver slots
Delays implementation of 200 mental retardation waiver slots that were scheduled to be released on April 1, 2009. The 2008 Appropriation Act directed that 600 slots be added to the Mental Retardation waiver. In order to cover the costs of the slots within the funding provided, 400 slots were brought online July 1, 2008 and the remaining 200 slots scheduled for release on April 1, 2009. The 200 slots will be delayed until the 2010-12 biennium.
FY 2009 FY 2010 General Fund Savings $ 0 $ (5,847,400) NGF Appropriation $ 0 $ (5,847,400)
Eliminate a contractor/temporary employee
Eliminates a temporary employee.
FY 2009 FY 2010 General Fund Savings $ (12,500) $ (25,000) NGF Appropriation $ (12,500) $ (25,000)
Eliminate funding for the State / Local Hospitalization program
Eliminates the State / Local Hospitalization (SLH) program. The program is a cooperative effort between state and local governments that is designed to provide coverage for inpatient and outpatient hospital care, care in ambulatory settings and care provided in local health departments.
FY 2009 FY 2010 General Fund Savings $ 0 $ (10,865,779) NGF Appropriation $ 0 $ (2,000,000)
Eliminate payments for Hospital Acquired Conditions
Prohibits Medicaid from making payments to hospitals for claims due to the presence HACs. These are conditions that are considered to be the fault of the provider and never should have occurred. The federal Centers for Medicare and Medicaid Services recently implemented new regulations to prohibit Medicare from paying for HACs. Examples of HACs include: pressure ulcers, foreign objects retained after surgery and catheter-associated infections.
FY 2009 FY 2010 General Fund Savings $ 0 $ (67,000) NGF Appropriation $ 0 $ (67,000)
Enhance school revenue maximization
Allows the agency to capture five percent of the federal funding the agency passes on to the local school divisions. Currently, the agency draws down federal Medicaid matching funds for participating local divisions for their expenditures associated with special education services for Medicaid eligible children. The local costs serve as state match so the agency only pays the local school division the federal share. This strategy allows the agency to retain five percent of the funding for their related administrative costs.
FY 2009 FY 2010 General Fund Savings $ 0 $ (516,164) NGF Appropriation $ 0 $ 516,164
Establish a maximum per person expenditure for long-term care waivers
Establishes a maximum per person expenditure cap for home and community-based long-term care waiver recipients equal to the average institutional placement cost. Federal regulations require that a waiver must be cost effective in comparison to its alternate institutional setting. Currently, the policy is that an individual in a waiver can exceed the costs of an institutional placement, but in aggregate the average costs of all individuals in the waiver cannot exceed it. This strategy changes the policy to say that no individual on a waiver can exceed the costs of the alternate individual placement.
FY 2009 FY 2010 General Fund Savings $ 0 $ (9,187,275) NGF Appropriation $ 0 $ (9,187,275)
Implement a provider assessment on Intermediate Care Facilities for the Mentally Retarded (ICF-MR)
Implements a provider assessment that generates additional state dollars used as match to draw down federal Medicaid funds. This amendment imposes an assessment on the revenues of private and state ICF-MRs. This assessment increases the costs of ICF-MRs which can then be reimbursed by Medicaid.
FY 2009 FY 2010 General Fund Savings $ 0 $ (7,115,617) NGF Appropriation $ 0 $ 7,020,365
Implement a two week billing cycle for Medicaid provider payments
Implements a two week billing lag for Medicaid payments to providers. Currently, all Medicaid claims submitted in a weekly period are paid one week later. This action changes the cycle such that payments will be made two weeks after the week they were submitted. This action results in a one-time savings.
FY 2009 FY 2010 General Fund Savings $ (25,000,000) $ 0 NGF Appropriation $ (25,000,000) $ 0
Increase prior authorization of mental health services
Adds prior authorization requirements for mental health case management, day treatment services, mental health supports, psychosocial rehabilitation, and intensive community treatment services. Prior authorization of these mental health services will ensure that the services are being properly utilized and will prevent unnecessary services from being provided.
FY 2009 FY 2010 General Fund Savings $ 0 $ (920,935) NGF Appropriation $ 0 $ (920,935)
Limit special Indirect Medical Education payments to Virginia hospitals
Eliminates special Indirect Medical Education payments to non-Virginia hospitals. In 2005, a special payment for high Medicaid utilization Neonatal Intensive Care Unit (NICU) was provided and due to the wording of budget language resulted in an out-of-state hospital receiving a portion of the payment. This action limits those payments to Virginia hospitals.
FY 2009 FY 2010 General Fund Savings $ 0 $ (97,530) NGF Appropriation $ 0 $ (97,530)
Make June Medicare Part A and B premiums payment in July
Delays payment of the June 2009 Medicaid Part A and B premiums to the federal government into July 2010. This generates a one-time savings and has no impact on services. The federal government allows a grace period for payment, which allows the state to pay it the next month. The June payment for Medicare Part D premiums is already paid in July of each year.
FY 2009 FY 2010 General Fund Savings $ (9,520,431) $ 0 NGF Appropriation $ (9,520,431) $ 0
Modify Health Insurance Premium Program
Modifies the Health Insurance Premium Program (HIPP) to make it more cost-effective. HIPP is a Medicaid program that may reimburse some or all of Medicaid eligible person's share of employer group health insurance premiums when it is cost effective to do so. The modifications to the program will exclude certain Medicaid enrollees from HIPP for which the agency has determined as not being cost-effective under current rules.
FY 2009 FY 2010 General Fund Savings $ 0 $ (600,000) NGF Appropriation $ 0 $ (600,000)
Modify reimbursement methodology for long-stay hospitals
Modifies the reimbursement methodology for long-stay hospitals. These hospitals are reimbursed under the previous hospital reimbursement methodology that is no longer used for reimbursement of acute and rehabilitation hospitals. This amendment modernizes the payment methodology for long-stay hospitals by eliminating some of the policies that are not cost-effective and have not been used for years to reimburse acute hospitals.
FY 2009 FY 2010 General Fund Savings $ 0 $ (990,757) NGF Appropriation $ 0 $ (990,757)
Offset costs of tobacco related illnesses covered by Medicaid with tobacco taxes
Increases tobacco taxes from $.30 to $.60 per pack. The revenue will be deposited to the Health Care Fund, which is used as state match for Medicaid. The funding will offset the costs of care for tobacco related illnesses paid for by the state's Medicaid program.
FY 2009 FY 2010 General Fund Savings $ 0 $ (154,900,000) NGF Appropriation $ 0 $ 154,900,000
Reduce congregate residential services rate increase
Lowers the FY 2010 rate increase of 3.6 percent for congregate residential services to 2.0 percent in FY 2010. The current Appropriation Act provides a 3.6 percent increase for these services beginning in FY 2009. This action lowers that increase beginning in FY 2010.
FY 2009 FY 2010 General Fund Savings $ 0 $ (2,222,223) NGF Appropriation $ 0 $ (2,222,223)
Reduce hospital capital reimbursement
Reduces inpatient hospital capital reimbursement for private hospitals from 80 percent of allowable Medicaid costs to 75 percent. Hospitals with a Medicaid utilization greater than 50 percent are exempt from this reduction and will still be paid 80 percent of their allowable costs.
FY 2009 FY 2010 General Fund Savings $ 0 $ (4,387,953) NGF Appropriation $ 0 $ (4,345,065)
Reduce inpatient hospital reimbursement rates
Reduces inpatient hospital rates to private hospitals. The hospital adjustment factor is the percentage of allowable Medicaid costs that hospitals are paid for inpatient services. This strategy reduces it from 78 to 75 percent for acute and rehabilitation hospitals and from 84 percent to 81 percent for inpatient psychiatric services. Hospitals with a Medicaid utilization higher than 50 percent are exempt from this rate reduction.
FY 2009 FY 2010 General Fund Savings $ 0 $ (15,685,510) NGF Appropriation $ 0 $ (15,442,191)
Reduce part-time staff positions
Eliminates part-time staff positions.
FY 2009 FY 2010 General Fund Savings $ (127,882) $ (255,765) NGF Appropriation $ (127,882) $ (255,765)
Reduce reimbursement rates for freestanding psychiatric facilities
Reduces the rates paid to freestanding psychiatric facility rates by subjecting them to rebasing and setting their reimbursement rate to 100 percent of allowable Medicaid costs. These hospitals were exempted from the previous two hospital rebasings. Hospital rebasing aligns hospital rates with their actual Medicaid costs every three years. Freestanding psychiatric hospitals were exempted because rebasing resulted in substantial reductions in their payments and could have had an adverse impact on those hospitals. However, the exemption from rebasing has resulted in payments now exceeding their Medicaid costs. This action limits payments to their Medicaid costs.
FY 2009 FY 2010 General Fund Savings $ 0 $ (1,108,792) NGF Appropriation $ 0 $ (426,045)
Remove additional funding for pay practices
Removes the half-percent pay practices funding granted to Executive branch agencies in the 2006-08 biennium.
FY 2009 FY 2010 General Fund Savings $ 0 $ (48,611)
Remove newly added services from long-term care waivers
Removes two newly added services, environmental modifications and assistive technology, from the Elderly or Disabled with Consumer Direction, Technology-Assisted, and HIV/AIDS waivers effective January 1, 2009. As part of the federal Money Follows the Person (MFP) grant, these services were added to help facilitate a person's transition from an institutional setting to a community setting. However, after further consideration it has been determined that the services should only be provided to those recipients participating in the MFP program to help them transition to the community and not to all the waiver recipients. The services are relatively new and little impact will be felt by eliminating these services.
FY 2009 FY 2010 General Fund Savings $ (1,288,970) $ (2,577,941) NGF Appropriation $ (1,288,970) $ (2,577,941)
Terminate security contract
Eliminates funding for a contract that evaluates physical security and other types of security related to the Medicaid program to ensure its integrity. The agency has completed the evaluation and can end the contract.
FY 2009 FY 2010 General Fund Savings $ (22,565) $ (50,000) NGF Appropriation $ (22,565) $ (50,000)