Developing Medicare and Medicaid Substance Abuse Treatment Spending Estimates. II. Proposed Methods and Resources Required for Updating Medicaid Estimates with Future Years of Data


ONDCP develops the annual National Drug Control Strategy Budget Summary and so needs an approach for updating the estimates of Medicaid SA treatment spending annually. We recommend direct derivation of the estimates of SA treatment spending from MAX files every 5-7 years or after major policy changes take place, such as implementation of the Affordable Care Act. For the intervening years, we recommend projecting base year estimates forward using the CMS-64 reporting and Medicaid enrollment data. The CMS-64 report summarizes annual Medicaid expenditures for each state. Information from the forms is currently available through FY 2011 for each state by service category. The benefit of using the information from the CMS-64 reports is that the available trends are state and service specific, and are available with only limited lag. One drawback to the CMS-64 data is that they are not broken out by eligibility group. Another limitation is that they are based on date of payment, therefore lump sum adjustments or lags in payment processing can impact trends artificially. Since SA treatment utilization varies by age, gender, and eligibility, we propose using Medicaid enrollment information in combination with the CMS-64 data.

We propose using the following steps to develop projections for each state:

  • Step 1: Obtain data. The CMS-64 reports, containing cost and service data, can be downloaded from the CMS website.1 Medicaid monthly enrollment data for December and June can be obtained from the Kaiser Commission on Medicaid and the Uninsured website.2 Data currently are compiled through June 2011. Projections of SA treatment spending by SA care group and type of SA Spending for FY 2011 are provided in Appendix B. These estimates would be trended forward until updated estimates are directly derived from MAX.

  • Step 2: Map CMS-64 service categories to the five SA care groups. Map the service categories available in CMS-64 data to the five SA care groups included in the FY 2011 projections (Table B.1) developed from MAX data for the base year of the data (FY 2011 for the first round) and the desired year of the estimates. Map services in two steps. (a) First, group together individual categories from the CMS-64 into broader service groups shown in Table 3. Include relevant “C” categories, which represent expenses reported for Medicaid expansion Children's Health Insurance Program (CHIP) populations, and “T” categories, which account for expenses in those states that qualify to expend 20 percent of their CHIP allotment on the Medicaid program and still receive the enhanced CHIP match rate. Table 3 shows the groups by care setting developed based on the 2011 CMS-64 categories. (b) Next, crosswalk these groups to the five SA care groups included in the FY 2011 projections. Table 4 shows this crosswalk.3

  • Step 3: Estimate overall Medicaid expenditures. Estimate the overall level of Medicaid spending represented in the CMS-64s for each state in each SA care group in the base year and the most recent year of CMS-64 data available. Also, estimate the overall level of Medicaid spending for the state in the base year and the most recent year of data available.

  • Step 4: Calculate spending per enrolled month. Divide the total Medicaid spending for each state in each SA care group and overall by 12 times the number of Medicaid enrolled months in the state in June of the given year. The June months are multiplied by 12 to represent a full year of enrollment.

  • Step 5: Estimate the trend in spending per enrolled month. Estimate the overall Medicaid expenditure trend for each state for each SA care group and overall from the base period through the most recent year available.4 In rare cases, where trends for a particular service category indicates more than a 35 percent increase or decrease, replace the service category-specific trend with the overall trend in state Medicaid spending.

  • Step 6: Adjust overall Medicaid general health expenditure trends for the historical difference in growth between SA treatment and general health care spending. Between 1986 and 2005, the estimated trend in Medicaid SA treatment spending based on the SAMHSA Spending Estimates (SSE) was 98 percent of the National Health Expenditure Accounts (NHEA) estimated trend in Medicaid spending. Given that the rate of growth in SA treatment expenditures (as identified in the SSE) historically has fallen below that of general health care expenditures (as identified in the NHEA), multiply the annual trend estimates developed in Step 5 by 0.98.

  • Step 7: Estimate the trend in adult/disabled enrollment. Medicaid expenditures on SA are concentrated in the adult/disabled populations. Ideally, expenditure trend estimates specific to SA treatment services and Medicaid adults would be developed, however, since the CMS-64s are not developed by eligibility nor demographic group and do not include categories tailored to SA, the method proposed in Steps 1-6 uses the expenditure trends per enrolled month across all Medicaid enrollees in each SA care group as a proxy for trends in SA expenditures which are primarily for adults. Since enrollment information is available by eligibility group in this step the Medicaid enrollment information obtained from the June Kaiser enrollment report should be limited to the adult and disabled populations. Then, the enrollment trend between the base and the most recent year of data available should be calculated.

  • Step 8: Project the base period MAX estimates to the most recent year of data available. Multiply the base year SA spending in each SA care group by the trend in expenditures per enrolled month for the group, adjusted for the historical difference between the general health and SA expenditure trends (the latter is 98 percent of the former). Then multiply this product by the trend in enrollment for the adult and disabled population for the same period. Estimates for the non-core SA treatment expenditures reported in Table B.2 were not developed by type of care, so they cannot be trended by SA care groups. Instead, trend these estimates based on the overall spending per enrolled month trend for Medicaid times 0.98 times the enrollment trend for the adult and disabled population.

  • Step 9: Project beyond the observed data. If projections beyond the most recent period of available CMS-64 and Kaiser enrollment data are needed, assess available information on the likely trend in Medicaid expenditures. Although the NHEA projections largely reflect trends in services other than SA treatment, these trends incorporate both anticipated enrollment changes and change in economic conditions. Since the SA treatment expenditure trend is 98 percent of the general health trend in the historical data, 98 percent of the projected increase in Medicaid spending in the NHEA projections could be used to project SA treatment expenditures beyond the period for which observable data is available. Another approach would be to assume that the trend observed in CMS-64 and Kaiser enrollment data for the recent historical period will continue. If there are no economic or policy-related factors that caused shifts in the recent past or are likely to cause a substantial shift in the future trends, then this approach would be reasonable. Under this approach, annualize the trend in expenditures per enrolled month between the base year and most recent year of data available as calculated in Step 5. Multiply the annualized trend by 0.98 reflecting the historical difference between growth in SA treatment spending and overall health care spending. Then annualize the enrollment trend between the base year and the most recent year of data available as calculated in Step 7. Multiply the projection for the most recent period of CMS-64 data available as calculated in Step 8 by the annualized trend in expenditures per enrolled month and the annualized trend in enrollment in the historical data. Repeat this multiplication for each additional year of trend desired.

TABLE 3. Mapping CMS-64 Categories into Groups, 2011
Inpatient Hospital
C-Inp. Hosp. Services -- DSH
C-Inp. Hosp. Serv. -- Reg. Payments
C-Inpatient Mental Health -- DSH
C-Inpatient Mental Health -- Reg. Payment
Critical Access Hospitals
Inpatient Hospital -- GME Payments
Inpatient Hospital -- Reg. Payments
Inpatient Hospital -- DSH
Inpatient Hospital -- Sup. Payments
T-Critical Access Hospitals
T-Inp Hosp -- DSH
T-Inp Hosp -- GME Payments
T-Inp Hosp -- Reg. Payments
T-Inp Hosp -- Sup. Payments
Residential Treatment
C-Other Services
Other Care Services
T-Other Care Services
Prescribed Drug
C-Drug Rebate -- National
C-Drug Rebate -- State
C-Prescribed Drugs
Drug Rebate Offset
Drug Rebate Offset -- State Sidebar Agreement  
Prescribed Drugs
T-Drug Rebate Offset -- National
T-Drug Rebate Offset -- State Sidebar Agreement  
T-Prescribed Drugs
Managed Care
Increased ACA OFFSET -- MCO
MCO -- National Agreement
MCO -- State Sidebar Agreement
MCO -- Natl Agreement
Medicaid -- MCO
Prepaid Ambulatory Health Plan
Prepaid Inpatient Health Plan
T-Increased ACA OFFSET -- MCO
T-MCO -- National Agreement
T-MCO -- State Sidebar Agreement
T-Medicaid -- MCO
T-Prepaid Ambulatory Health Plan
T-Prepaid Inpatient Health Plan
Outpatient Care Group
C-Clinic Services
Clinic Services C-Outpatient Hospital Services
C-Outpatient Mental Health
C-Screening Services
Diagnostic Screen & Preventive Services
EPSDT Screening
Federally Qualified Health Center Outpatient Hospital Service -- Reg. Payments  
Outpatient Hosp Service -- Sup. Payments
Phys & Surgical Service -- Reg. Payments
Phys & Surgical Service -- Sup. Payments
Rehabilitative Services
T- Diagnostic Screening and Preventive Services
T-Clinic Services
T-EPSDT Screening
T-Federally Qualified Health Center
T-Outpatient Hospital Services -- Reg. Payments
T-Outpatient Hospital Services -- Sup. Payments
T-Physician & Surgical Services -- Reg. Payments
T-Physician & Surgical Services -- Sup. Payments
T-Rehabilitative Services (non-school-based)
T-Rehabilitative Services (non-school-based)
Mental Health Facility -- DSH
Mental Health Facility Services -- Reg. Payments
T-Mental Health Facility -- DSH
T-Mental Health Facility Services -- Reg. Payments
Case management -- Statewide
C-Case Management
Targeted Case Management Services -- Com. Case-Man.
T-Case Management -- Statewide
T-Targeted Case Management Service -- Com. Case-Man.  
T-Emergency Hospital Services
Emergency Hospital Services

TABLE 4. Crosswalk of CMS-64 Groups to Study Categories
Study Category   CMS-64 Group Used for Trend  
Inpatient Hospital Residential Treatment  
Outpatient Care Prescribed Drugs
Managed Care (Imputed Expenditures)
Inpatient Group
Other Care Services Group
Outpatient Services Group
Prescribed Drugs Group
Managed Care Group

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