Using Parametric Estimation to Find Budgetary Consequences of Parity

State and Federal policy decisions would greatly benefit from systems analysis and econometric cost estimates to determine the impact of decisions before implementation of programs.  We provide decision makers with a holistic landscape of their entire portfolio of programs by combining systems integration techniques, econometrics, Lean Six Sigma methodologies and other tools.  Our techniques provide a framework for identifying program gaps, duplications, program effectiveness, and a methodology for improving services while reducing costs.

For the past decade, the Department of Defense (DoD) and the Department of Veterans Affairs (VA) have reacted to multiple issues as an outcome of the conflicts in Iraq and Afghanistan.  High on the list of issues are: post-traumatic stress disorder (PTSD) and traumatic brain injury (TBI); a surge of Wounded Warriors and disabled Veterans; a rise in sexual assaults and suicide rates.  In every instance, after significant public events, DoD and VA have reacted by deploying and/or developing multiple initiatives and programs without the benefit of an integrated strategy or policy, established metrics for evaluation of program effectiveness, or performance-based oversight of scarce resources.

These same issues may appear outside DoD and VA as well – particularly as the Affordable Care Act (ACA) is implemented.  One ACA driven change is that mental health is now considered an essential benefit, creating parity between Mental Health Services (MHS) and physical health.  Based upon the Government Accountability Office (GAO), in the state of Michigan only 12.4% of enrolled Medicaid beneficiaries were enrolled in benefit plans providing MHS compared to almost 93% in Colorado.  This variation is largely due to differences in whether mandated parity was required by the state for MHS – Michigan and Colorado applies parity differently.  As the ACA takes effect, Mental Health (MH) will be an essential benefit and parity of MHS will increase beneficiaries for these services in states such as Michigan.  While federal matching funds may cover the increased Medicaid expansion, states such as Michigan will clearly experience increased requirements for oversight and administration.  States such as Colorado will likely experience marginal increases in federal funds and workload.  The issue becomes more complicated with the start of 42 CFR Part 447, Medicaid Program; State Disproportionate Share Hospital Allotment Reductions.  The ACA amends the statute to require aggregate reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments on the assumption that the number of uninsured people will fall sharply beginning in 2014.  The statute reforms an existing Medicaid payment program for hospitals which serve a disproportionate share of low income patients, and therefore, may have uncompensated care costs.  These policy changes may result in administrative and business process challenges for states and hospitals.  Through modeling of cost estimating relationships, econometrics, and root-cause analysis coupled with desired outcome measures, our proven approach provides a systematic decomposition and then synthesis of an integrated implementation strategy.  Our innovative methodology seeks the baseline cost of programs, determines their potential efficiency, identifies best practices, and seeks alternatives to provide decision makers actionable recommendations to reduce cost and maintain services.