Purpose: The purpose of this amendment is to reflect the changes governing the allocation of funds to regional support networks for provision of community mental health services based on funding directives from the Center for Medicare and Medicaid Services and the 2006-2007 biennial budget passed by the Washington state legislature and signed by the governor on May 17, 2005.

     Citation of Existing Rules Affected by this Order: Amending WAC 388-865-0201.

     Statutory Authority for Adoption: RCW 71.05.560, 71.24.035 (5)(m), (13), 71.34.800.

     Other Authority: Freedom of Choice Waiver under section 1915(c) of the Social Security Act, 42 C.F.R. 438, ESSB 6090 (section 204, chapter 518, Laws of 2005) DSHS Mental Health Division Program Budget.

     Under RCW 34.05.350 the agency for good cause finds that state or federal law or federal rule or a federal deadline for state receipt of federal funds requires immediate adoption of a rule.

     Reasons for this Finding: These rules are necessary to implement the mandates required by the Center for Medicare and Medicaid Services (CMS) Freedom of Choice Waiver under section 1915(c) of the Social Security Act. These are regulations implementing section 1903 (m)(2)(A)(iii) of the Social Security Act requiring payments in risk contracts to be made on an actuarially sound basis. ESSB 6090 Section 204 (1)(b) also directs new methodology for distributing non Medicaid ("state only") funds to regional support networks.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 1, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 1, Repealed 0.

     Date Adopted: June 24, 2005.

Andy Fernando, Manager

Rules and Policies Assistance Unit

     (1) Funding allocations are projected at the beginning of each fiscal year, using forecasted Medicaid enrollees for that fiscal year.

     (2) Payments are made on the number of actual Medicaid enrollees disabled and nondisabled adults and disabled and nondisabled children each month, which may result in actual payments being higher or lower than projected payments, depending on whether actual Medicaid enrollees are more or less than forecasted enrollees.

     (3) The mental health division (MHD) ((uses two different methodologies to allocate funds:)) allocates funds according to a formula.

     (a) ((Historical method;

     (b) Eligibles method.

     (4) For the period July 1, 2001 to June 30, 2005, the funds will be allocated using the methodologies as follows:

     (a) For July, 1, 2001 to June 30, 2002, seventy-five percent of funds of will be allocated using the historical method and twenty-five percent of funds will be allocated using the prevalence method;

     (b) For June 1, 2002 to June 30, 2003, fifty percent of funds will be allocated using the historical method and fifty percent of funds will be allocated using the prevalence method;

     (c) For June 1, 2003 to June 30, 2004, twenty-five percent of funds will be allocated using the historical method and seventy-five percent of funds will be allocated using the prevalence method;

     (d) For June 1, 2004 forward, one hundred percent of funds will be allocated using the prevalence method. These percentages will remain in effect unless the department is directed otherwise by the state Legislature.

     (5)(a) Historical method means that federal Medicaid funds projected to be paid to the RSN/PHPs are calculated using actuarially determined per member per month (PMPM) rates specific to each regional support network multiplied by the number of persons enrolled in the Medicaid program in each regional support network for each month during the fiscal year.

     (b) The actuarially determined rates were determined at the beginning of the managed care program (1992 for outpatient services and 1997 for inpatient services) and have been increased periodically by the Legislature.)) Medicaid funds are allocated based on the product of rates and enrollees by category disabled and nondisabled adults and disabled and nondisabled children.

     (i) ((Rates differ by RSN and by category of enrollee (disabled and nondisabled adults and disabled and nondisabled children))) Rate ranges for each category of Medicaid enrollee disabled and nondisabled adults and disabled and nondisabled children are set by an independent actuary. Actulal rates paid are set by the MHD within these rate ranges to ensure both the rates are actuarially sound and within the budget authority. The rate study is conducted every five years or as directed by the Centers for Medicare and Medicaid Services (CMS).

     (ii) ((These)) Rates are tracked by MHD.

     (iii) The number of Medicaid enrollees is tracked by the medical assistance administration.

     (((c) The product of rates and enrollees is the projected amount of Medicaid funding each RSN/PHP will receive during the year.

     (i) This amount is divided into two portions - federal funds and state match funds.

     (ii) The two portions of Medicaid funds are determined by a percentage known as the Federal Medicaid Assistance Percentage (FMAP). This percentage is set by the federal Health Care Financing Authority and changes each year.

     (d) In the inpatient program, each RSN/PHP is allocated the amount of federal and state funds projected in the calculations explained above.

     (e) State funds in the outpatient program (also called "consolidated") to be paid to the RSN/PHPs are set by the Legislature. These funds are allocated to the RSN/PHPs according to the RSN/PHP's calculated percentage of the total funds. The RSN/PHP's percentage is based primarily on historical fee-for-service data.

     (i) The RSN/PHP percentages are tracked by MHD and are carried forward each year.

     (ii) The percentage of consolidated funds paid to each RSN/PHP is adjusted each year by the Legislature through budget proviso direction, generally requiring that new funds in the program be allocated according to Medicaid enrollees in each RSN. Therefore, the amount of consolidated funds in the outpatient program at the beginning of the fiscal year (also called "base funds") are allocated according to the percentage tracked by MHD (put in place by the Legislature in the previous year).

     (iii) New consolidated funds are allocated as directed by the Legislature, generally according to the number of Medicaid enrollees residing in each RSN.

     (f) The base allocation and new consolidated allocations are combined into one percentage that serves as the RSN/PHP's percentage allocation for the next year's base funds.

     (g) The sum of federal Medicaid funds, state match funds in the inpatient program, and consolidated funds equals the amount of funding provided to each RSN/PHP.

     (6) Eligibles method.

     (a) Medicaid and non-Medicaid funds are allocated based on a formula that reflects prevalence of mental disorders in each county. The formula takes into consideration each RSN's:

     (i) Concentrations of priority populations;

     (ii) Commitments to state hospitals under chapters 71.05 and 71.34 RCW;

     (iii) Population concentrations in urban areas;

     (iv) Population concentrations at border crossings at state boundaries; and

     (v) Other demographic and workload factors such as number of MI/GA-U clients, commitments to community hospitals under chapters 71.05 and 71.34 RCW, and number of homeless persons.

     (b) The RSN/PHP historical method rates for 2001 have been used to calculate a weighted average statewide rate (WASR) for each category of Medicaid eligible (disabled and nondisabled adults and disabled and nondisabled children).

     (c) The WASR for each category is determined by:

     (i) Adding the RSN/PHP's inpatient and outpatient rates to create one combined rate;

     (ii) Multiplying each RSN/PHP's rate by the number of Medicaid enrollees residing in that RSN/PHP;

     (iii) Adding the results; and

     (iv) Dividing the sum by the statewide number of Medicaid eligibles.

     (d) WASR rates are tracked by MHD.

     (e) The number of Medicaid enrollees is tracked by the medical assistance administration.

     (f))) (b) To project the amount of Medicaid funding each RSN/PIHP will receive during the year, MHD multiplies the RSN/PIHP's ((WASR)) rates for each category by the projected number of Medicaid enrollees in each category.

     (i) ((This amount is divided into two portions - federal funds and state match funds.

     (ii))) Each RSN/PIHP's projected allocation includes both portions of Medicaid funding (federal and state match funds).

     (((iii))) (ii) Payments to the RSN/PIHP are made based on the actual number of Medicaid enrollees.

     (((g))) (4) The level of non-Medicaid funds appropriated to the community mental health services program is determined by the state Legislature.

     (((i) Eighty percent of the non-Medicaid funds appropriated are allocated to the RSN/PHPs according to the number persons enrolled in the state funded general assistance-unemployable, medically indigent and state only "v" programs (persons in the state only "v" program are counted at thirteen percent of the total enrolled).

     (A) The number of persons enrolled in these programs is tracked by the medical assistance administration.

     (B) The projected number of persons in these programs residing in each RSN, divided by the total persons projected to be in these programs, is multiplied by eighty percent of the total funds appropriated to determine the amount of funding provided to each RSN/PHP.

     (ii) Twenty percent of the non-Medicaid funds appropriated are allocated according to a summary z score factor that is calculated using four subfactors:

     (A) The number of urban counties in each RSN;

     (B) The number of state and country border counties in each RSN;

     (C) The number of homeless persons in each RSN; and

     (D) The number of ITA commitments from each RSN.

     These subfactors are weighted differently, with the urban factor weighted at 0.3, the border county factor weighted at 0.05, the homeless factor weighted at 1.0 and the ITA commitments factor weighted at 0.2. For each of these factors, information is tracked by MHD and the most recent complete year of data is used to calculate z score factors for each subfactor. These factors are combined into a summary z score factor for each RSN that is multiplied by the total funding available (twenty percent of non-Medicaid funds appropriated).)) (a) A portion of the funds are allocated based on fiscal year 2003 non-Medicaid expenditures incurred by each RSN

     (b) A portion of the funds are allocated based on population in each RSN.

     (c) The remaining funds are allocated to ensure that each RSN projected total revenue (include PIHP revenue and state only revenue) remains at the same level as their projected FY 2005 total revenue.

     (((7))) (5) The mental health division does not pay providers on a fee-for-service basis for services that are the responsibility of the mental health RSN or PIHP, even if the RSN or PIHP has not paid for the service for any reason.

     (((8))) (6) To the extent authorized by the state legislature, regional support networks and mental health prepaid inpatient health plans may use local funds spent on health services to increase the collection of federal Medicaid funds. Local funds used for this purpose may not be used as match for any other federal funds or programs.

[Statutory Authority: RCW 71.05.560, 71.24.035 (5)(c), 71.34.800, 9.41.047, 43.20B.020, and 43.20B.335. 01-12-047, § 388-865-0201, filed 5/31/01, effective 7/1/01.]

     Reviser's note: The spelling error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.

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