Setting the Medicaid Growth Rate

‍What is the Medicaid Growth Rate?

The Consumer Price Index (CPI) is published by the Unties States Bureau of Labor Statistics. It includes the Inflation rate for medical care for the Midwest region, referred to as the CPI medical inflation rate. Reforms to the Ohio Revised Code have tasked the Medicaid director with limiting the growth in the per member per month cost of the Medicaid program, for all eligibility groups each fiscal biennium. To do this, a process is outlined to use data from the average annual increase in the Consumer Price Index (CPI) medical inflation rate for the most recent three-year period, weighted by the most recent year of the three years. The Joint Medicaid Oversight Committee utilizes an actuary to develop the JMOC projected medical inflation rate based on information from the CPI and the CPI medical inflation rate, with an aim to ensure that the growth in the Medicaid program is sustainable.

The reform directs the Medicaid director to do the following things that influence the Medicaid growth rate:

Limit the growth in the per member per month cost of the Medicaid program.

• The average annual increase in the Consumer Price Index (CPI) medical inflation rate for the most recent three-year period for which the necessary data is available as of the first day of the fiscal biennium, weighted by the most recent year of the three years
• The JMOC projected medical inflation rate for the fiscal biennium.

Achieve a limit in the growth of the per member per month cost of the Medicaid program.

• Improve the physical and mental health of Medicaid recipients;
• Providing for Medicaid recipients to receive Medicaid services in the most cost-effective and sustainable manner
• Remove barriers that impede Medicaid recipients' ability to transfer to lower cost, and more appropriate, Medicaid services, including home and community-based services
• Establish Medicaid payment rates that encourage value over volume and result in Medicaid services being provided in the most efficient and effective manner possible
• Implement fraud and abuse prevention and cost avoidance mechanisms as much as possible.

Improve specific health outcomes among Medicaid recipients

• Reduce the prevalence of comorbid health conditions among, and the mortality rates of Medicaid recipients
• Reduce infant mortality rates among Medicaid recipients

How is the Medicaid Growth Rate determined?

As outlined in Ohio Revised Code, before the beginning of each fiscal biennial budget, the Joint Medicaid Oversight Committee is instructed to contract with an actuary to determine the projected medical inflation rate for the upcoming fiscal biennial budget. The actuary is tasked with determining classifications and subclassifications of medical care based on those used in the United States Bureau of Labor Statistics. The United States Bureau of Labor Statistics uses certain classifications to determine the inflation rate for medical care and the consumer price index. After completing this projected medical inflation rate for the upcoming fiscal year, the actuary is then tasked with providing a report to the Joint Medicaid Oversight Committee at least 120 days before the governor is required to submit a state budget for that biennium.

After the actuary’s report, the Joint Medicaid Oversight Committee must determine if they agree with the projected medical inflation rate.

After the actuary’s report, the Joint Medicaid Oversight Committee must determine if they agree with the projected medical inflation rate. If there are any disagreements with the actuary’s predicted medical inflation rate, the Joint Medicaid Oversight Committee will then be tasked with determining a different medical inflation rate for the upcoming fiscal biennium. In addition, if the actuary and the Joint Medicaid Oversight Committee determine a different projected medical inflation rate for the state, that is not practicable then the decision will be made for the Midwest region, as to whether or not these biennial projections of medical inflation align from both the Joint Medicaid Oversight Committee and the actuary.

The Joint Medicaid Oversight Committee is still tasked with including a copy of the Joint Medicaid Oversight Committees report, stating whether it agrees with the actuary’s projected medical inflation rate and if it disagrees, why the Joint Medicaid Oversight Committee disagrees and the different medical inflation rate that the Joint Medicaid Oversight Committee has determined. This occurs at least 90 days before the governor is required to submit a state budget for the upcoming fiscal biennium to the General Assembly. Copies of the report are sent to the general assembly and to the governor and the Medicaid director.

We will also discuss issues relative to Medicaid at our budget training later this year.

Where is the Joint Medicaid Committee in the growth rate setting process?

On October 1^st of each calendar year, the Medicaid director submits a report to the Joint Oversight Committee detailing progress on implementation of the reforms.  This year, the report includes the Ohio Department of Medicaid’s historical and projected program expenditures and utilization trend rates by Medicaid service category for each year of the upcoming fiscal biennium and an explanation of how the trend rates were calculated. 

At the JMOC meeting on September 9, 2024, Optumus, the actuary with which the Committee contracts, stated a draft report would be resubmitted to the Committee after reviewing ODM’s report. 

In a JMOC meeting held on October 17, 2024, Optumus provided an update on the actuarial process, noting things that the Ohio Department of Medicaid (ODM) could control and things that Ohio Department of Medicaid could not control. A few of the things that Optumus described as being out of the control of ODM included federal requirements, federal reimbursements, mandated coverage of certain population benefits, and market-driven prices. Optumus noted that the largest share of the increase for prices per member per month was pharmacy costs, accounting for over 1/3 of the total increase.

We will continue to monitor the growth rate setting process, along with the latest Joint Medicaid Oversight meeting, in a future blog. We will also discuss issues relative to Medicaid at our budget training later this year.