LEGISLATIVE FISCAL ESTIMATE

[Fourth Reprint]

SENATE, No. 3000

STATE OF NEW JERSEY

219th LEGISLATURE

 

DATED: JUNE 29, 2021

 

 

SUMMARY

 

Synopsis:

Codifies and establishes certain network adequacy standards for pediatric primary and specialty care in Medicaid program.

Type of Impact:

Indeterminate impact on State Medicaid Costs and Revenue.

Agencies Affected:

Department of Human Services, Division of Medical Assistance and Health Services.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Annual

 

State Cost Impact

Indeterminate

 

State Revenue Impact

Indeterminate

 

 

 

 

·         The Office of Legislative Services (OLS) concludes that the bill will result in an indeterminate impact on State costs and revenues due to the countervailing effects of enhancing network adequacy standards for pediatric primary and specialty care, as established under the bill, on the capitation rates paid by the Division of Medical Assistance and Health Services (DMAHS) to the Medicaid managed care organizations (MCOs).  To the extent that State Medicaid expenditures are matched by federal Medicaid funds, State revenues may also be affected under this bill. The OLS notes, however, if MCOs are granted waivers of any network adequacy provision, as authorized under the bill, the fiscal impact of enhancing such network adequacy standards will be adjusted. 

 

·         The OLS also estimates that the DMAHS may incur certain indeterminate expenses to establish a waiver process and a system to assess MCO compliance with the network adequacy standards outlined in the Medicaid contract.  To the extent that these provisions overlap with the division’s current efforts, such costs may be minimized.

 

·         It is possible that any expenses incurred may be partially offset by an increase in State revenue due to the collection of fines imposed under the bill.  However, the OLS cannot determine the nature and number of such infractions and, therefore, the amount of revenue that may be generated. 

BILL DESCRIPTION

 

      This bill codifies and establishes certain network adequacy standards for pediatric primary and specialty care in the Medicaid program.  The bill defines network adequacy to mean the adequacy of the provider network with respect to the scope and type of health care benefits provided by the managed care plan, the geographic service area covered by the provider network, and access to medical specialists pursuant to the standards in the regulations promulgated pursuant to State law and in the existing contract between a MCO and the DMAHS in the Department of Human Services.

      Currently, pursuant to the contract between Medicaid MCOs and the DMAHS, all MCO networks are required to ensure that 90 percent of the enrollees must be within six miles of two primary care physicians (PCPs) in urban counties, and that 85 percent of enrollees must be within 15 miles of two PCPs in non-urban counties.  Under the contract, no enrollee is to be more than 30 minutes from a PCP.

      The existing network adequacy requirements for medical specialists are outlined under State regulation.  Specifically, all Medicaid MCO networks are required to ensure that 90 percent of enrollees must be within 60 minutes or 45 miles of each type of medical specialist.

      Under the bill, the DMAHS, at the next regular opportunity, is required to amend the Medicaid MCO contract provisions on network adequacy to require:

      1) a sufficient number of pediatric PCPs to assure that: (a) at least two physicians eligible as PCPs are within five miles or 10 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in urban counties;  (b) at least two physicians eligible as PCPs are within 10 miles or 15 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in non-urban counties; and (c) 100 percent of all pediatric enrollees live no more than 30 minutes from at least one physician eligible as a PCP;

      2) a sufficient number of pediatric medical specialists to assure: a) access within 15 miles or 30 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in urban counties; and b) access within 40 miles or 60 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in non-urban counties;

      3)   a sufficient number of pediatric oncologists and developmental and behavioral pediatricians and psychiatrists to assure: a) access within 10 miles or 20 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in urban counties; and b) access within 30 miles or 45 minutes driving time or public transit time, whichever is less, of 90 percent of the managed care plan’s pediatric enrollees who live in non-urban counties; and

      4) the following types of pediatric medical specialties represented within the plan’s network: adolescent medicine; allergy and immunology; cardiology; developmental and behavioral pediatrics; psychiatry; emergency medicine; endocrinology and diabetes; gastroenterology and nutrition; general pediatrics; general pediatrics – dermatology; hematology; human genetics and metabolism; infectious disease; neonatology; nephrology; neurology; oncology; ophthalmology; orthopedics; otolaryngology; plastic surgery; pulmonary medicine, including sleep medicine; radiology; rehabilitative medicine; and rheumatology.

     Under the bill, in each reporting period, a MCO may seek a waiver of a specific network adequacy provision established in paragraphs 2) and 3) above from the DMAHS.  The division is required to establish a waiver process where, at a minimum, the MCO must demonstrate both an active, good faith effort to meet requirements for applicable specialties in each applicable county, and certify to the division which specialty or specialties, and in which counties, for which insufficient providers exist.  The division is also required to direct each MCO to establish a process by which a patient or provider may submit a grievance regarding the adequacy of the provider network.   When a MCO is notified that care is needed for a Medicaid beneficiary in a county where the MCO was unable to certify that it meets, or received a waiver of, the network adequacy standards as required under the bill, the MCO is to initiate negotiations with non-participating providers of that service, and provide timely authorization to ensure services can be provided to the beneficiary without delay and consistent with timeframes defined in the managed care contract for all routine and urgent services. 

      Finally, the bill directs the division to establish an enhanced system to assess the network adequacy of a MCO contracted with the division to provide benefits under Medicaid, including, but not limited to, requiring the MCO to certify, at a minimum on an annual basis, that the MCO meets the network adequacy requirements contained in their contract.  The division is to enforce appropriate sanctions for non-compliance with the bill, including, but not limited to, financial penalties that accrue during the period of non-compliance.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS concludes that the bill will result in an indeterminate impact on State costs and revenues due to the countervailing effects of enhancing network adequacy standards for pediatric primary and specialty care, as established under the bill, on the capitation rates paid by the DMAHS to the Medicaid MCOs.  To the extent that State Medicaid expenditures are matched by federal Medicaid funds, State revenues may also be affected under this bill.  The OLS notes, however, if MCOs are granted waivers of any network adequacy provision, as authorized under the bill, the impact of enhancing such network adequacy standards will be adjusted. 

      The division pays MCOs based on a per-beneficiary per month capitation rate.  Federal regulations require that capitation rates be approved by the Centers of Medicare and Medicaid Services and be actuarially sound, meaning the rates are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the managed care plan for the time period and the population covered under the terms of the contract.  When developing capitation rates, the contracted actuary utilizes encounter claims data from the fiscal year that is two years prior to the rate setting period, MCO financial reports, and monthly beneficiary data collected by the MCOs and the division.

      The OLS assumes that over time the enhanced network adequacy standards imposed under the bill would influence capitation rate setting through the application of both downward and upward pressure.  For example, research demonstrates the potential for long‐term reduction in utilization and costs with better patient access to primary care, as provided for under the bill.  Essentially, ready access to primary care would appropriately shift care away from more intensive and expensive care provided in urgent care, emergency departments, specialty departments, and inpatient settings.  The resultant lower costs may provide for a decreased capitation rate.  Similarly, improved access to specialty care, as provided for under the bill, can result in improved medical outcomes, while also avoiding potentially higher costs from emergency department visits and hospitalizations.

      Conversely, in order to comply with the increased access standards required under the bill, particularly regarding costly specialty care, MCOs may have to increase provider reimbursement rates to draw the necessary providers into the Medicaid network.  Generally, low Medicaid reimbursement rates are the main barrier for beneficiaries to access specialty care in a timely manner. However, the OLS does not have access to current managed care rates, and cannot  predict the magnitude of the impact the bill may have on such rates and, as a result, on any increase in the MCO capitation rate.

      The OLS also estimates that the DMAHS may incur certain indeterminate expenses to establish a waiver process and a system to assess MCO compliance with the network adequacy standards outlined in the Medicaid contract.  To the extent that these provisions overlap with the division’s current efforts, such costs may be minimized.

      It is possible that any expenses incurred may be partially offset by an increase in State revenue due to the collection of fines imposed under the bill.  However, the OLS cannot determine the nature and number of such infractions and, therefore, the amount of revenue that may be generated. 

 

 

Section:

Human Services

Analyst:

Sarah Schmidt

Senior Research Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).