36C10G19R0041-009.pdf

VA Enrollee Health Care Projection Model Documentation Report

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2013 VA ENROLLEE HEALTH CARE

PROJECTION MODEL

- BASE YEAR 2012 -

2013 MODEL DOCUMENTATION & ANALYSIS

JUNE 28, 2013

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work.

recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

TABLE OF CONTENTS June 28, 2013

A Executive Summary A1 Executive Summary Set 1, Tab 1

B Enrollee Health Care Projection Model – Overview & Tutorials B1 Overview of the Enrollee Health Care Projection Model 2 B2 Model Tutorial – Enrollment Projections 3 B3 Model Tutorial – Private Sector Based Projections 4 B4 Model Tutorial – VA Experience Based Projections 5 B5 2013 Model (BY12) Updates 6

C Enrollment Projections & Analyses C1 Enrollment Projection Methodology 7 C2 Creation of the Master Enrollment File 8 C3 Veteran Population Proxy Development 9 C4 Enrollment Rates 10 C5 Geographic Means Test (GMT) Split Analysis 11 C6 County Consolidation Methodology 12 C7 Priority and Morbidity Class Transition 13 C8 Geographic Migration 14 C9 Mortality Rates 15 C10 Patient Projection Analysis 16 C11 Enrollment and VetPop Proxy County Allocations 17

D Private Sector Based Service Projections D1 Private Sector Based Service Benchmarks 18 D2 Covered Benefits Package and Adjustments 19 D3 Copay Levels and Adjustments 20 D4 Geographic Area Adjustments 21 D5 Age & Gender Adjustments 22 D6 Inpatient Efficiency Analysis 23 D7 Inpatient Hospital Under/Over Coding Analysis 24

E VA Experience Based Service Projections E1 Modeling Methodology for VA Experience Based Service Projections 25 E2 Special Modeling Adjustments for VA Experience Based Service Projections 26 E3 Blind Rehabilitation Program Projections 27 E4 Spinal Cord Injury Service Projections 28

F Long-Term Care Projections F1 Long-Term Care Projections 29

G VA Morbidity & Reliance Adjustments G1 Overview of Reliance and Morbidity Modeling 30 G2 Morbidity Risk Weight Development 31

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work.

recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

G3 Enrollee Morbidity Analyses – Ages 65 and Over Set 2, Tab 1 G4 Enrollee Morbidity Analyses – Under Age 65 2 G5 Enrollee Reliance Analyses – Ages 65 and Over 3 G6 Enrollee Reliance Analyses – Under Age 65 4 G7 Morbidity Birth Year Cohorts 5 G8 Morbidity and Reliance Drift Adjustments 6 G9 Initial and Long-Term Utilization Adjustment 7 G10 Institutional Long-Term Care Morbidity Adjustments 8

H VA Workload Data Manipulations H1 VA Inpatient Workload Data 9 H2 VA Ambulatory Workload Data 10 H3 VA Prosthetics Workload Data 11 H4 VA Pharmacy Workload Data 12 H5 VA Dental Workload Data 13 H6 FY 2012 Baseline Database Construction 14

I VA Unit Costs I1 VA Base Year Unit Cost Development 15 I2 VA Inpatient Base Year 2012 Unit Cost Development 16 I3 VA Ambulatory Base Year 2012 Unit Cost Development 17 I4 VA Pharmacy Base Year 2012 Unit Cost Development 18

J Model Calibration J1 Actual-to-Expected Utilization Adjustment 19 J2 Unit Cost Reconciliation Methodology 20

K Policies, Populations, Events, and Initiatives K1 OEF/OIF/OND Enrollee Assumptions 21 K2 Mental Health Policy Assumptions 22 K3 Hurricane Katrina Enrollment Impact Modeling 23 K4 Trend Rate Assumptions 24 K5 Enrollment Policy Assumptions 25 K6 Women's Health Assumptions 26 K7 Impact of Economic Forecasts 27 K8 Inpatient Efficiency Assumptions 28 K9 Outpatient Efficiency Assumptions 29 K10 Pharmacy Efficiency Assumptions 30 K11 Dental Prophylaxis Policy Assumptions 31 K12 El Paso BRAC Impact Set 3, Tab 1 K13 Homeless Initiative Policy Assumptions 2 K14 Long-Term Care Policy Assumptions 3 K15 Civilian Wage Freeze Assumptions 4 K16 Patient Aligned Care Team (PACT) Policy Assumptions 5 K17 Telehealth Policy Assumptions 6 K18 Orlando Expansion Impact 7

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work.

recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

K19 Dialysis & Related Services Policy Assumptions 8 K20 Post Exclusion Enrollee Type Development 9

L Special Projections to Support Capital, Strategic, and Workforce Planning L1 Special Projections to Support Capital, Strategic, and Workforce Planning 10 L2 Work RVU Projections 11 L3 Ambulatory Strategic Planning Category Development 12 L4 Treating Facility Allocation Methodology 13

M Data Sources M1 2013 Model (BY12) Data Sources 14

N CHAMPVA Projections N1 CHAMPVA Cost Projection 15

O Newborn Care Projections O1 Newborn Care Projections 16

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work.

recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

Section A1 (by12) Executive Summary

VA has developed two actuarial models to support the VA health care budget, strategic and capital planning, and assess the impact of potential policies and changes in a dynamic health care environment. The Enrollee Health Care Projection Model (Model), which was first developed in 1998, projects Veteran demand for VA health care services. Actuarial methodology for projecting institutional and non-institutional long-term care services were developed and integrated into the 2012 Model (BY11). The remaining non-modeled services are readjustment counseling, foreign medical program, spina bifida, and non-Veteran medical care. The methodology, supporting analyses, and assumptions in the Model are discussed in Sections B through O. The CHAMPVA Model, which was new in 2010, projects CHAMPVA beneficiaries and the claim costs associated with their health care. The CHAMPVA Model is documented in Section N.

OVERVIEW OF THE ENROLLEE HEALTH CARE PROJECTION MODEL

The Model is an assumption-based demand projection model. The multitude of assumptions used in this model make it possible to project future utilization and expenditures by making explicit assumptions (through research and analysis) about how specific utilization and expenditure patterns may differ from current patterns under various scenarios. One of the strongest features of the Model is that it can easily be modified, by changing assumptions, to reflect the VA health care system as it evolves.

The Model projects enrollment, utilization, and expenditures for the enrolled Veteran population for 82 categories of health care services 20 years into the future. First, the Model determines how many Veterans will be enrolled in VA in each projection year and their age, priority, and geographic location. Next, the Model projects the total health care services needed by those enrollees and then estimates the portion of that care that those enrollees will demand from VA.

Finally, total health care expenditures are developed by multiplying the expected VA utilization by VA unit costs.

Section A1 (by12) – Page 1 Executive Summary

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

The Model produces enrollment, utilization, and expenditure projections for OEF/OIF/OND Veterans using a force-deployment scenario originally developed by the Congressional Budget Office (CBO) and subsequently adjusted for the Administration’s force withdrawal policy.

The Model is updated and enhanced each year, and Section B5 (by12) of this report describes enhancements in the 2013 Model (BY12). The BY12 reference indicates that FY 2012 is the Model base year.

OVERVIEW OF THE CHAMPVA PROJECTION MODEL

CHAMPVA (Civilian Health and Medical Program Veterans Administration) provides medical coverage to the spouse or widow(er) and to the children of a Veteran, also referred to as a sponsor, who is rated permanently and totally disabled due to a service-connected disability, or was rated permanently and totally disabled due to a service-connected condition at the time of death, or died of service-connected disability, or died on active duty and the dependents are not otherwise eligible for Department of Defense TRICARE benefits.

The CHAMPVA Model was developed using multiple data sources provided by the VHA Health Administrative Center to project the future cost and utilization of the CHAMPVA program.

Data from fiscal years 2005 to 2012, publically available research, and input from a development team (including subject matter experts from VHA and VHA’s CHAMPVA program) were used to develop model assumptions. The CHAMPVA Model consists of two major components: the enrollment model and the claims cost model. The enrollment model projects the number of beneficiaries enrolled in CHAMPVA, while the claims cost model delivers a costing scheme of the CHAMPVA program.

The enrollment model projects the number of CHAMPVA beneficiaries in two phases. For each fiscal year, the number of sponsors is projected and then the number of beneficiaries of those sponsors is projected. Within a given year, sponsors are projected by age, gender, degree of service-connected disability, living status (whether the sponsor is living or deceased), and the sponsor’s enrollment lag (the number of years a sponsor delays enrolling a beneficiary), while beneficiaries are projected by age, beneficiary type, and gender (if the beneficiary is a spouse).

The claims cost model is driven by several factors including: enrollment counts produced from the enrollment model, assumed annual claim cost trends, age/gender factors, and actual fiscal

Section A1 (by12) – Page 2 Executive Summary

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided year 2012 CHAMPVA medical claims data. The projected number of beneficiaries from the enrollment model are then linked to the claims cost model and aggregated into total expenditures. A more in-depth look at the CHAMPVA Model can be found in Section N1.

MODEL LIMITATIONS

This analysis relies in part on data and other listings provided by various personnel at VA. That data has been reviewed for reasonableness and compared to past data submissions and other information, when possible. The information has not been audited by for accuracy. If the data or other listings are inaccurate or incomplete, this analysis may also be inaccurate or incomplete.

Some of the information in this analysis is based on modeling assumptions and historical data.

Estimates presented in this report will only be accurate if future experience exactly replicates those data and assumptions used in this analysis. Actual experience will likely vary from this analysis to a degree for a number of reasons. In addition, many of the modeling variables are assumed to be constant over time. Therefore, emerging experience should be continually monitored to detect whether expectations based on this analysis are appropriate over time.

The results contained in these reports are projections. Actual results will differ from those projected here for many reasons. For example, it is impossible to determine how world events will unfold. Those events that impact the economy and the use of the nation's military may have a profound impact on enrollment and expenditure projections into the future. The analysis has not attempted to present results for events where data is not yet available to consider their impacts on enrollment and expenditures. It is important that actual enrollment and costs be monitored and the projections updated regularly based on this changing environment.

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

Section A1 (by12) – Page 3 Executive Summary

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided

Section B1 (by12) Overview of the Enrollee Health Care Projection Model

This section provides an overview of the methodology used to develop the enrollment, utilization, and expenditure projections in the VA Enrollee Health Care Projection Model (Model). It also provides an overview of the modeled health care services.

MODELING OVERVIEW

VA developed the Model to assess Veteran demand for VA health care services over a 20-year planning period. For each year, the Model projects the number of Veterans expected to be enrolled, their priority, age, gender, special conflict status, and geographic location. The Model then projects the total health care needs of the enrolled Veteran population and determines the portion of care that they are expected to receive from VA versus their other health care options.

VA uses the 20-year projections from the Model to support the development of the VA health care budget and for capital and strategic planning. The Model is also used to project the impact of policy scenarios and legislative initiatives on enrollment, utilization and expenditures.

Because the Model is built at a very detailed level and accounts separately for all of the major drivers of utilization and cost, VA can look at different views of the future based on changes in:

• Veteran enrollment,

• Enrollee morbidity and mortality,

• Enrollee reliance on VA versus other health care providers,

• Health care access policies,

• The broader health care policy environment, and

• VA health care system.

VA is at risk for providing health care to the enrolled Veteran population, therefore the utilization and expenditure projections are developed for the enrolled Veteran population, not just those enrolled Veterans who are currently VA patients. Also, many policies and legislative proposals have the potential to change enrollee demand for health care. Since the projections are based on enrollees, the Model can easily provide alternative views of the future under different

Section B1 (by12) – Page 1 Overview of the Enrollee Health Care Projection Model

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided assumptions about enrollee demand for VA health care. Patient projections are also produced, and the methodology is discussed in Section C10 (by12), Patient Projection Analysis.

The utilization and expenditure projections are developed based on where enrollees live to support population-based long-term planning. The results based on enrollee residence are then allocated to VA facilities following current practice patterns. This allows VA to view the future workload under the assumption that care would be provided in the same facility configuration over the 20-year planning timeframe.

Exhibit B1-1, VA Model Methodology Flowchart, provides a graphic description of the Model methodology.

MODEL DETAIL

The Model projects Veteran enrollment, utilization, and expenditures at a very detailed geographic and demographic level. This section outlines these levels of projection by sector/submarket/market, age group, gender, priority, enrollee type, special conflict status, and Post Exclusion Enrollee (PE) status.

Sector/Submarket/Market

Geographically, projections are developed at the sector level. Sectors are either large counties or groupings of smaller counties and are designed to ensure that there is a large enough Veteran population in the geographic area to produce credible projections. The 3,000 plus counties in the United States are mapped into 514 sectors.

Sector-level projections are then aggregated to 116 submarkets, which are contiguous counties made up of one or more sectors. The submarket-level projections are then aggregated to 82 markets, and the market-level projections are aggregated to the 21 VISNs. Market and submarket boundaries were identified by the VISNs to aid in strategic and capital planning.

Age Groups & Gender

Projections are developed for five-year age bands that are aggregated to four age groups for health care projection reporting purposes: under age 45, ages 45 to 64, ages 65 to 84, and ages

Section B1 (by12) – Page 2 Overview of the Enrollee Health Care Projection Model

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85 and over. Projections also include gender detail. This level of detail ensures that the Model can capture the impact of aging and gender on enrollment and enrollees’ utilization of health care services.

Priority

Projections are developed for Priorities 1a, 1b, 2, 3, 4, 5, 6, 7a, 7c, 8a, 8b, 8c and 8d.

Enrollee Type

Projections are developed separately for enrollees who used VA health care before eligibility reform (pre enrollees) and enrollees who enrolled after eligibility reform (post enrollees) because their morbidity and reliance profiles are significantly different. Pre enrollees have higher morbidity and greater reliance on VA health care and use more of VA’s special program services than post enrollees.

Special Conflict Status

Special conflict status enables VA to model separately for OEF/OIF/OND enrollees in order to account for their unique morbidity and reliance on VA health care services.

Post Exclusion Enrollee (PE) Status

PE refers to a group of Veterans that enrolled in October 1998 or March 11-12, 1999; see Section K20 (by12) Post Exclusion Enrollee Enrollment Type Development for more details.

ENROLLMENT PROJECTION METHODOLOGY OVERVIEW

The Model produces several types of enrollment projections:

• Unique Enrollment – enrollees alive during any part of the year. This is the highest enrollment number for any given year. Generally, enrollment projections are reported using unique enrollment.

Section B1 (by12) – Page 3

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• Average Enrollment – reflects exposure months. For example, a Veteran who enrolls three months into the fiscal year would represent nine exposure months (and therefore be counted as ¾ of a year of exposure). The average enrollment projections are used in developing the utilization projections.

• Beginning of Fiscal Year – enrollees alive at the beginning of the fiscal year.

• End of Fiscal Year – enrollees alive at the end of the fiscal year.

• Suspended Enrollment – the number of Priority 8 Veterans who would have enrolled if enrollment had not been suspended in 2003.

The enrollment projections begin with VetPop data, 20-year projections of the Veteran population that are produced by the VA Office of the Actuary. At this time, VetPop does not provide Veteran projections by priority so VetPop data is combined with other data sources to create VetPop proxy data, which provides Veteran projections by priority.

Historical enrollment data are analyzed to develop enrollment rates by priority, age band, geographic area, and special conflict status. The enrollment rates are then applied to the enrollment pool, which is VetPop minus the enrolled Veteran population, to determine projected enrollees for any given year.

Mortality rates specific to age, gender, and priority are then applied to the enrollee population, and the enrollment and potential enrollee pool are aged one year at the end of each fiscal year to arrive at the projections for the beginning of the next fiscal year. The process of applying enrollment and mortality rates then repeats for the duration of the enrollment projections.

The Model also accounts for geographic migration and enrollees who transition between enrollment priorities.

The development of the enrollment projections is discussed in detail in Section B2, Model Tutorial – Enrollment Projection Model.

UTILIZATION & EXPENDITURE PROJECTION METHODOLOGY OVERVIEW

VA provides many health care services that are comparable to those provided in the private sector and some health care services that are unique to VA. The utilization and expenditure projections for these services are developed using two approaches with the same basic

Section B1 (by12) – Page 4 Overview of the Enrollee Health Care Projection Model

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided methodology, but with several key differences. Exhibit B1-2 identifies the modeling approach used for each modeled health care service.

Private Sector Based Methodology – VA services comparable to the private sector; for example, inpatient medical and surgical care, ambulatory care, and prescription drugs.

Section B3, Model Tutorial – Private Sector Based Projections, discusses this approach in detail.

• Projections for these services are developed using national utilization rates reflecting the health care provided in the United States in the commercial and Medicare markets. These utilization rates are then adjusted for the demographics of the enrollee population and the VA health care delivery system.

• The large volume of private sector and Medicare data available enables the Model to project health care service utilization for these services at a very detailed level. For example, these services are projected at the sector level. In addition, the volume and breadth of the data support a very robust assessment of the impact of age, gender, copayments, and health care benefit structure on health care utilization.

VA Experience Based Methodology – Special program ambulatory and non-acute bed services, ambulatory mental health services, prosthetics type services, dental services, over-the-counter pharmacy, pharmacy supplies, medication therapy management, compensation & pension exams, nutritional counseling, recreational therapy, home telehealth and long-term care. Section B4, Model Tutorial – VA Experience Based Projections, discusses this approach in detail.

• Projections for these services are developed using national utilization rates developed from VA workload data. The national VA utilization rates are also adjusted for differences in age/gender, morbidity, and geographical area based on an analysis of the VA workload data.

• The small volume of VA workload data for many of these services limits the level of detail at which credible projections can be developed. For example, projections for most of the VA special program services are developed geographically at the submarket level, rather than the sector level.

Section B1 (by12) – Page 5

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided

The Model Tutorials use examples that walk the reader step-by-step through the methodology for developing utilization and expenditure projections. Many sections of the 2013 Model (BY12) report refer back to the Model Tutorial examples. As an example, Section J1 (by12), which discusses the development of Actual-to-Expected factors, contains this reference:

OVERVIEW OF MODELED HEALTH CARE SERVICES

Actuarial methodology for projecting institutional and non-institutional LTC services was developed and integrated into the 2011 Model (BY10). The remaining non-modeled services are readjustment counseling, foreign medical program, spina bifida, and non-Veteran medical care.

The Model projects health care services in two service definition structures: health care service categories (HSCs) and strategic planning categories (SPCats). Exhibit B1-3 presents the modeled HSC and SPCat services and the utilization projection basis for each. This section discusses the differences between the HSCs and SPCats as well as how VA workload aligns with both structures. The workload data manipulations performed to assign VA’s workload experience into HSCs and SPCats is discussed in Section H.

Many HSC and SPCat services are identical and reflect aggregations of detailed VA workload:

dental services, pharmacy, prosthetics, some mental health and homeless outpatient programs, inpatient mental health, special VA program bedsections, non-institutional LTC, and some institutional LTC services. See Exhibits B1-4 through B1-16 for details.

For acute inpatient services, the projected HSC and SPCat services are identical. However, VA acute inpatient workload is recorded by bedsection, or location of care, and the acute inpatient HSCs and SPCats are defined by diagnoses. Modeling acute inpatient services using the

Model Tutorial Exhibit B3-1: Office Visit Projection Example

• The methodology described above generates an Actual-to-Expected adjustment factor of 0.924 for office visits for enrollees in Priority 3, Post, OEF/OIF/OND, non-PE, ages 30-34, in Submarket 03-c-9.

• In the office visit example, 0.924 is entered into the utilization formula on line “s.”

Section B1 (by12) – Page 6

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Diagnosis Related Group (DRG) based HSCs allows the projections to reflect how the type of care provided in the acute inpatient environment is expected to change over time. See Exhibits B1-11 and B1-12 for details of the HSC categorization.

Starting in BY10, long-term care HSCs and SPCats were included in the Model. See Exhibit B1- 10 for the LTC non-institutional mapping and Exhibit B1-9 for the LTC institutional mapping.

LTC non-institutional is identified and mapped by clinic stop or fee purpose of visit code (FPOV). LTC institutional HSCs and SPCats are defined by bedsection; some are further defined by treating facility, diagnosis code, and data type.

The most significant categorization and counting differences between HSCs and the SPCats occur in ambulatory services, excluding the VA special outpatient mental health programs discussed above. VA records each ambulatory visit in one or more clinic stops that represent the location where the care was provided, such as a primary care clinic stop. VA also records the Current Procedural Terminology (CPT) workload associated with each clinic stop.

The ambulatory HSCs represent groupings of CPT services. CPTs are used to report medical procedures and services. Modeling ambulatory services using the CPT-based HSCs allows the projections to reflect how the type of services, tests, and procedures provided in a clinic stop is expected to change over time. The CPT workload recorded in each clinic stop is assigned to HSCs based on the nature of the service provided.

To support strategic and capital planning, the ambulatory and mental health HSC projections (defined by CPTs) are allocated to SPCat projections (defined by clinic stops) and converted to clinic stop counts based on the observed relationship between HSCs and SPCats. Exhibits B1-14 and B1-15 detail the transition from VA workload to HSCs to SPCats. The ambulatory SPCat allocation process is discussed in Section L3 (by12).

Inpatient Workload Allocation Exhibit

Exhibit B1-20 outlines how actual FY 2012 inpatient bedsection days were assigned to HSCs based on diagnoses. This exhibit lists FY 2012 inpatient bed days by bedsection down the rows.

For each bedsection, the columns demonstrate the ultimate number of bed days assigned to each

HSC.

Section B1 (by12) – Page 7

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For example, of the total 37,191bed days provided under bedsection 2 (cardiology), 25,285bed days were assigned to medical related DRGs, 11,418bed days were assigned to surgical related DRGs, and so on. The mapping of DRGs to inpatient HSCs is included in Exhibit B1-19.

Ambulatory Workload Allocation Exhibit

Exhibit B1-21 outlines how the actual FY 2012 CPT workload was assigned to HSCs based on the nature of the service provided. This exhibit lists FY 2012 clinic stops down the rows (grouped into SPCats). For each clinic stop, the columns demonstrate the ultimate number of CPT based procedures from the clinic stop assigned to each HSC.

For example, clinic stop 203 (Audiology) had a total of 1,219,472 stops in FY 2012, and 2,206,104 CPT-based procedures were recorded within those clinic stop visits. These CPT-based procedures were then assigned to HSCs, including 51,075 office visits (Office Visits/Urgent Care/Physical Exams in the exhibit), 100 outpatient mental health procedures, and so on. The mapping of CPTs to ambulatory HSCs is included in Exhibit B1-19.

MODEL LIMITATIONS

This analysis relies in part on data and other listings provided by various personnel at VA. That data has been reviewed for reasonableness and compared to past data submissions and other information, when possible. The information has not been audited by for accuracy. If the data or other listings are inaccurate or incomplete, this analysis may also be inaccurate or incomplete.

Some of the information in this analysis is based on modeling assumptions and historical data. Estimates presented in this report will only be accurate if future experience exactly replicates those data and assumptions used in this analysis. Actual experience will likely vary from this analysis to a degree for a number of reasons. In addition, many of the modeling variables are assumed to be constant over time. Therefore, emerging experience should be continually monitored to detect whether expectations based on this analysis are appropriate over time.

The results contained in these reports are projections. Actual results will differ from those projected here for many reasons. For example, it is impossible to determine how world events

Section B1 (by12) – Page 8 Overview of the Enrollee Health Care Projection Model

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided will unfold. Those events that impact the economy and the use of the nation's military may have a profound impact on enrollment and expenditure projections into the future. The analysis has not attempted to present results for events where data is not yet available to consider their impacts on enrollment and expenditures. It is important that actual enrollment and costs be monitored and the projections updated regularly based on this changing environment.

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided by its own actuary or other qualified professional when reviewing the work product.

Section B1 (by12) – Page 9 Overview of the Enrollee Health Care Projection Model

This report and associated databases were prepared solely to provide assistance to the Department of Veterans Affairs. Neither the Department of Veterans Affairs nor assume any duty or liability to other parties who receive this work. recommends any recipient be aided

Exhibit B1-1 VA Model Methodology Flowchart

A. Enrollment Projections

Note: In addition to the data inputs indicated, model assumptions may be adjusted to reflect the expected impact of VA policies and initiative

VA

VetPop

OEF/OIF/OND

Deployment and Veteran Projection

VA

Enrollment & User Data

Veteran Enrollee Mortality

Assumptions

Develop Historical and Projected Enrollment Pools

Develop Enrollment Rates

Apply Enrollment Rates & Anticipated Enrollment Policy to Projected Pools

Apply Mortality and Age of Enrollees for Each Projection Year

Enrollment Projections to B‐2 to Cto B‐1

A.

Projected Enrollment

B.

Projected Utilization Rates

C.

Trended Unit Costs

Projected Health Care Expenditures

Apply Geographic Migrations and Priority Transitions

Exhibit B1-1 Flow Chart - Page 1

VA Model Methodology Flowchart

B-1. Private Sector Based Utilization Projections

CDPS*

CDPS

CDPS

HEI

HEI**

HEI

Note: In addition to the data inputs indicated, model assumptions may be adjusted to reflect the expected impact of VA policies and initiative *CDPS: Chronic Illness and Disability Payment System (a risk-adjustment grouper) **HEI: the Hospital Efficiency Index (developed by

Adjust Private Sector Utilization Rates & Unit Costs for MBP & Copays

Adjust Utilization & Unit Costs for Enrollee Age & Gender Mix

Assess VA Relative Morbidity & Adjust Utilization

Assess VA DoCM and Adjust Utilization & Unit Costs

Assess Enrollee Reliance on VHA & Adjust Utilization

Assess Residual Model Differences & Adjust Utilization

Trend Utilization & Unit Costs

VA Medical Benefit

Package (MBP), Copay Levels

VA

Workload

VA Enrollee Age & Gender

VA Patient Diagnosis Data

VA Inpatient Workload with Diagnoses & Procedures

A.

Private Sector Acute Utilization & Unit Cost Average by Geographic Area

Commercial & Medicare Diagnosis & Claims Data

VA/Medicare Data Match

Inpatient

LOS

Benchmarks

Community Loosely Managed Levels

VA

Enrollee Surveys

A.

Projected Enrollment

B.

Projected Utilization Rates

C.

Trended Unit Costs

Projected Health Care Expenditures

Enrollment Projections

Projected Utilization Rates

Medicare Allowable & Community Billed Charges by Submarket to C to C

Unit Cost Process Unit Cost Process

Exhibit B1-1 Flow Chart - Page 2

VA Model Methodology Flowchart

B-2. VA Experience Based Utilization Projections

Psychology Clinic - All Others

Note: In addition to the data inputs indicated, model assumptions may be adjusted to reflect the expected impact of VA policies and initiative

Enrollment Projections

A.

VA

Workload

VA

Enrollment

Data

VA Experience Based Services & LTC Utilization

Rates

A.

Projected Enrollment

B.

Projected Utilization Rates

C.

Trended Unit Costs

Projected Health Care Expenditures

VA Experience Based Projection Model

Exhibit B1-1 Flow Chart - Page 3

VA Model Methodology Flowchart

C. Unit Costs By Submarket

Note: In addition to the data inputs indicated, model assumptions may be adjusted to reflect the expected impact of VA policies and initiative

Develop Unit Costs by Facility

Develop Sector, Age, and Gender specific unit costs using HCG based Medicare Allowable relativities for

Private Sector Based Services

Calculate Unit Cost Reconciliation Adjustments

Projected VA Unit Costs by Submarket

A.

Projected Enrollment

B.

Projected Utilization Rates

C.

Trended Unit Costs

Projected Health Care Expenditures

VA Unit Cost Data (DSS)

VA

Workload

VA Base Year Budget

Obligations

A. B‐1

B‐2

CMS RBRVS RVUs for Physicians and

Outpatient Hospital RVUs

Exhibit B1-1 Flow Chart - Page 4

Modeled Service Private Sector

Based VA Experience

Based

AMBULATORY PRIMARY AND SPECIALTY CARE - DIAGNOSTICS AND THERAPIES

Radiology - General X Radiology - CT/MRI/PET X Pathology X Cardiovascular X Misc. Medical X Office Administered Drugs X Dialysis and Related Services X Physical Medicine X Chiropractic X Recreational Therapy X Immunizations X Allergy Immunotherapy X Allergy Testing X

AMBULATORY PRIMARY AND SPECIALTY CARE - EVALUATION AND MANAGEMENT SERVICES

Office Visits/Urgent Care/Physical Exams X

AMBULATORY PRIMARY AND SPECIALTY CARE - PROFESSIONAL SERVICES AND PROCEDURES

Surgery X Anesthesia X Emergency Room Visits X Hearing/Speech Exams X Hearing Aid Services X Prosthetic and Orthotic Services X Vision Exams X Maternity X Nutritional Counseling X Compensation & Pension Exams X OP Medication Therapy Management X Ambulance X

DENTAL

Preventative and Basic Dental Services X Minor Restorative Dental Services X Major Restorative Dental Services X

INPATIENT ENCOUNTERS

IP Medication Therapy Management X

INPATIENT MEDICINE AND SURGERY

Medical X Surgical X Maternity Deliveries X Maternity Non-Deliveries X

LONG-TERM CARE INSTITUTIONAL

VA Community Living Centers (CLC) Long Stay X Short Stay X

Community Nursing Home (CNH) Long Stay X Short Stay X

LONG-TERM CARE NON-INSTITUTIONAL

VA Adult Day Health Care X Community Adult Day Health Care X Home-Based Primary Care X Home Respite Care X Purchased Skilled Home Care X Home Hospice Care X Homemaker/Home Health Aide Programs X SCI&D Home Care X Community Residential Care X Home Telehealth X

Utilization Projection Modeling Methodology Approach Modeled Health Care Services

Exhibit B1-2

Exhibit B1-2 Models - Page 5

Modeled Service Private Sector

Based VA Experience

Based

Utilization Projection Modeling Methodology Approach Modeled Health Care Services

Exhibit B1-2

MENTAL HEALTH - INPATIENT

Acute Psychiatric X Acute Substance Abuse X MH Residential Rehab X Comp Work Therapy/Transitional Residence (CWT/TR) X Sustained Treatment and Rehab (STAR I II III) X

MENTAL HEALTH AND HOMELESS - OUTPATIENT

Outpatient Mental Health X Psychotherapy (Ind. 45+ min / Group) X Outpatient Substance Abuse X Psychosocial Rehabilitation and Recovery Centers X Mental Health Intensive Case Management (MHICM) X Work Therapy X MH RRTP Aftercare/Screening/Outreach X Homeless X

PHARMACY - OUTPATIENT PRESCRIPTIONS

Prescription Drugs (Brand & Generic) X OTC Medication X Rx Medical Supplies X Rx DME Supplies X Rx Simple Supplies X Rx Unknown/Chemical X

PROSTHETICS

Glasses/Contacts X Hearing Aids X Surgical Implants X Cardiothoracic Surgical Implants X Medical Equipment & Supplies X Home Telehealth Devices X Oxygen X Respiratory Equipment X Wheelchairs X Orthotics X Prosthetics - Artificial Limbs X Blind Aids X VA Specialized Products and Services X

SPECIAL VA PROGRAM BEDSECTION CARE

Blind Rehab X Spinal Cord Injury & Disorders X

Exhibit B1-2 Models - Page 6

Exhibit B1-3 Modeled Health Care Services

Modeled Service Utilization Utilization AMBULATORY - Heath Care Service Categories Strategic Planning Categories

AMBULATORY PRIMARY AND SPECIALTY CARE - DIAGNOSTICS AND THERAPIES Audiology Clinic Stops Radiology - General CPTs Primary Care Clinic Stops Radiology - CT/MRI/PET CPTs Urgent Care Clinic Stops Pathology CPTs Cardiology Clinic Stops Cardiovascular CPTs Dialysis Clinic Stops Misc. Medical CPTs Digestive/GI/Endoscopy Clinic Stops Office Administered Drugs CPTs Eye Clinic Clinic Stops Dialysis and Related Services CPTs EEG/Neurology Clinic Stops Physical Medicine CPTs Geriatrics Clinic Stops Chiropractic CPTs Nuclear Medicine Clinic Stops Recreational Therapy Clinic Stops Pathology Clinic Stops Immunizations CPTs Pulmonary/Resp Care Clinic Stops Allergy Immunotherapy CPTs Radiation Therapy Clinic Stops Allergy Testing CPTs Radiology Clinic Stops

Rehab Medicine Clinic Stops AMBULATORY PRIMARY AND SPECIALTY CARE - EVALUATION AND MANAGEMENT SERVICES Endocrine/Metabolic and Diabetes Clinic Stops

Office Visits/Urgent Care/Physical Exams CPTs Observation Beds (23 hour) Clinic Stops Oncology Clinic Stops

AMBULATORY PRIMARY AND SPECIALTY CARE - PROFESSIONAL SERVICES AND PROCEDURES Orthopedics Clinic Stops Surgery CPTs Urology Clinic Stops Anesthesia CPTs Podiatry Clinic Stops Emergency Room Visits CPTs Recreational Therapy Clinic Stops Hearing/Speech Exams CPTs NonSurg: Allergy & Immunology Clinic Stops Hearing Aid Services CPTs NonSurg: Dermatology Clinic Stops Prosthetic and Orthotic Services CPTs NonSurg: Infectious Diseases Clinic Stops Vision Exams CPTs NonSurg: Nephrology Clinic Stops Maternity CPTs NonSurg: Rheumatology Clinic Stops Nutritional Counseling CPTs NonSurg: All Other Clinic Stops Compensation & Pension Exams CPTs Surg: Cardiovascular and Thoracic Surgery Clinic Stops OP Medication Therapy Management CPTs Surg: Colon Rectal Surgeon Clinic Stops Ambulance CPTs Surg: General and All Other Surgery Clinic Stops

Surg: Neurological Surgery Clinic Stops Surg: Obstetrics & Gynecology Clinic Stops Surg: ENT Clinic Stops

*HSC and SPCat services are identical for Recreational Therapy and Ambulance. Surg: Plastic Surgery Clinic Stops **OP Medication Therapy Management is not Modeled for SPCats

DENTAL

Preventative and Basic Dental Services CPTs Minor Restorative Dental Services CPTs Major Restorative Dental Services CPTs

INPATIENT ENCOUNTERS

IP Medication Therapy Management CPTs Not Modeled

INPATIENT MEDICINE AND SURGERY

Medical Days Surgical Days Maternity Deliveries Days Maternity Non-Deliveries Days

LONG-TERM CARE INSTITUTIONAL

VA Community Living Centers (CLC) Long Stay Days Short Stay Days

Community Nursing Home (CNH) Long Stay Days Short Stay Days

LONG-TERM CARE NON-INSTITUTIONAL

VA Adult Day Health Care Clinic Stops Community Adult Day Health Care CPTs Home-Based Primary Care Clinic Stops Home Respite Care CPTs Purchased Skilled Home Care CPTs Home Hospice Care CPTs Homemaker/Home Health Aide Programs CPTs SCI&D Home Care Clinic Stops Community Residential Care Clinic Stops Home Telehealth Clinic Stops

MENTAL HEALTH - INPATIENT Strategic Planning Categories Acute Psychiatric Days Acute Substance Abuse Days MH Residential Rehab Days Comp Work Therapy/Transitional Residence (CWT/TR) Days Sustained Treatment and Rehab (STAR I II III) Days

HSC and SPCat services are identical

HSC and SPCat services are identical

HSC and SPCat services are identical

HSC and SPCat services are identical

HSC and SPCat services are identical

Exhibit B1-3 Services - Page 7

Exhibit B1-3 Modeled Health Care Services

Modeled Service Utilization Utilization MENTAL HEALTH AND HOMELESS - OUTPATIENT Strategic Planning Categories

Outpatient Mental Health CPTs Psychosocial Rehabilitation and Recovery Centers Clinic Stops Psychotherapy (Ind. 45+ min / Group) CPTs Homeless Clinic Stops Outpatient Substance Abuse CPTs Mental Health Intensive Case Management (MHICM) Clinic Stops Psychosocial Rehabilitation and Recovery Centers Clinic Stops Work Therapy Clinic Stops Mental Health Intensive Case Management (MHICM) Clinic Stops MH RRTP Aftercare/Screening/Outreach Clinic Stops Work Therapy Clinic Stops Day Hospital Clinic Stops MH RRTP Aftercare/Screening/Outreach Clinic Stops Mental Health Clinic - All Others Clinic Stops Homeless Clinic Stops Psychology Clinic - All Others Clinic Stops

Substance Abuse Clinic Clinic Stops Mental Health Clinic - Psychotherapy Clinic Stops Psychology Clinic - Psychotherapy Clinic Stops

PHARMACY - OUTPATIENT PRESCRIPTIONS

Prescription Drugs (Brand & Generic) 30-day equ scripts OTC Medication 30-day equ scripts Rx Medical Supplies 30-day equ scripts Rx DME Supplies 30-day equ scripts Rx Simple Supplies 30-day equ scripts Rx Unknown/Chemical 30-day equ scripts

PROSTHETICS

Glasses/Contacts Supply Count Hearing Aids Supply Count Surgical Implants Supply Count Cardiothoracic Surgical Implants Supply Count Medical Equipment & Supplies Supply Count Home Telehealth Devices Supply Count Oxygen Supply Count Respiratory Equipment Supply Count Wheelchairs Supply Count Orthotics Supply Count Prosthetics - Artificial Limbs Supply Count Blind Aids Supply Count VA Specialized Products and Services Supply Count

SPECIAL VPsychology Clinic - All Others Blind Rehab Days Spinal Cord Injury & Disorders Days

HSC and SPCat services are identical

HSC and SPCat services are identical

Exhibit B1-3 Services - Page 8

Exhibit B1-4 VA Workload, Health Care Service Categories (HSCs) and Strategic Planning Categories (SPCats)

Ambulatory Services*

Stop Code Util Basis HSC Util Basis SPCat Util Basis

AMBULATORY PRIMARY AND SPECIALTY CARE -

DIAGNOSTICS AND THERAPIES

102 Admit/Screening Stops HM037_037 Radiology CPTs SMS01_S01 Audiology stops 104 Pulmonary Funct Stops HM063_063 Radiology - General CPTs SMS02_S02 Primary Care stops 105 X-Ray Stops HM064_064 Radiology - CT/MRI/PET CPTs SMS03_S03 Primary Care - Nurse/PA stops 106 EEG/Neurology Stops HM034_034 Pathology CPTs SMS05_S05 Urgent Care stops

Stops HM021_021 Cardiovascular CPTs SMS06_S06 Cardiology stops Stops HM030_030 Misc. Medical CPTs SMS11_S11 Dialysis stops Stops HM040_040 Office Administered Drugs CPTs SMS12_S12 Digestive/GI/Endoscopy stops Stops HM058_058 Dialysis and Related Services CPTs SMS13_S13 Eye Clinic stops Stops HM036_036 Physical Medicine CPTs SMS14_S14 EEG/Neurology stops Stops HM054_054 Chiropractic CPTs SMS16_S16 Geriatrics stops Stops HM026_026 Immunizations CPTs SMS24_S24 Mental Health Clinic - All Others stops Stops HM018_018 Allergy Immunotherapy CPTs SMS25_S25 Nuclear Medicine stops Stops HM019_019 Allergy Testing CPTs SMS26_S26 Pathology stops Stops SMS28_S28 Psychology Clinic - All Others stops Stops SMS29_S29 Pulmonary/Resp Care stops Stops SMS30_S30 Radiation Therapy stops Stops HM081_081 Office Visits/Urgent Care/Physical Exams CPTs SMS31_S31 Radiology stops Stops SMS35_S35 Rehab Medicine stops Stops SMS37_S37 Substance Abuse Clinic stops Stops SMS38_S38 Endocrine/Metabolic and Diabetes stops Stops SMS45_S45 Observation Beds (23 hour) stops Stops HM038_038 Surgery CPTs SMS46_S46 Oncology stops Stops HM020_020 Anesthesia CPTs SMS47_S47 Orthopedics stops Stops HM023_023 Emergency Room Visits CPTs SMS74_S74 Mental Health Clinic - Psychotherapy stops Stops HM025_025 Hearing/Speech Exams CPTs SMS78_S78 Psychology Clinic - Psychotherapy stops Stops HM059_059 Hearing Aid Services CPTs SMS82_S82 Podiatry stops Stops HM060_060 Prosthetic and Orthotic Services CPTs SMS50_S50 Urology stops Stops HM042_042 Vision Exams CPTs SMS52_S52 Surg: Cardiovascular and Thoracic Surgery stops Stops HM028_028 Maternity CPTs SMS53_S53 Surg: Colon Rectal Surgeon stops Stops HM057_057 Nutritional Counseling CPTs SMS54_S54 Surg: General and All Other Surgery stops Stops HM056_056 Compensation & Pension Exams CPTs SMS55_S55 Surg: Neurological Surgery stops Stops SMS56_S56 Surg: Obstetrics & Gynecology stops Stops SMS57_S57 Surg: ENT stops Stops SMS58_S58 Surg: Plastic Surgery stops Stops SMS60_S60 NonSurg: Allergy & Immunology stops Stops SMS62_S62 NonSurg: Dermatology stops Stops SMS63_S63 NonSurg: Infectious Diseases stops Stops SMS65_S65 NonSurg: Nephrology stops Stops SMS66_S66 NonSurg: Rheumatology stops Stops SMS69_S69 NonSurg: All Other stops Stops Stops CPTs Stops

999 Employee Health Stops HM045_045 Ambulance CPTs SM045_045 Stops

202 Recreational Therapy Stops

AMBULATORY PRIMARY AND SPECIALTY CARE -

DIAGNOSTICS AND THERAPIES SM109_109

HM109_109 Recreational Therapy Stops

HM065_065 OP Medication Therapy Management CPTs SUS83_S83 Not Modeled

*The CPT code definitions for CPT Based Ambulatory HSC services are listed in Exhibit B1-19. The clinic-stop definitions for SPCat Ambulatory services are listed in Exhibit H6-6.

AMBULATORY PRIMARY AND SPECIALTY CARE -

PROFESSIONAL SERVICES AND PROCEDURES

VA OP Clinic-Stop Workload

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HSC Projections: CPT Based* SPCat Projections: Clinic Stop Based**

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AMBULATORY PRIMARY AND SPECIALTY CARE -

EVALUATION AND MANAGEMENT SERVICES

AMBULATORY PRIMARY AND SPECIALTY CARE -

PROFESSIONAL SERVICES AND PROCEDURES

AMBULATORY PRIMARY AND SPECIALTY CARE -

PROFESSIONAL SERVICES AND PROCEDURES

HSC and SPCat services are identical

These VA clinic stops do not included non-modeled clinic stops listed in B1-18 or VA clinic stops modeled elsewhere , including Exhibits B1-6, B1-7, B1-8, B1-10, B1- 14, B1-15, B1-17

Exhibit B1-4 AMB - Page 9

Exhibit B1-5 VA Workload, Health Care Service Categories (HSCs) and Strategic Planning Categories (SPCats)

Dental, Pharmacy and Prosthetics Services

Dental Services

HSC Projections: CPT Based SPCat Projections: CPT Based CPT Code Util Basis HSC Util Basis SPCat D0120 Periodic Oral Evaluation CPTs HM841_841 Preventative and Basic Dental Services CPTs SM841_841 D0140 Limit Oral Eval Problem Focus CPTs HM842_842 Minor Restorative Dental Services CPTs SM842_842 D0145 Oral Evaluation Pt Under 3 Yrs CPTs HM843_843 Major Restorative Dental Services CPTs SM843_843 D0150 Comprehensive Oral Evaluation CPTs D0160 Extensive Oral Eval Prob Focus CPTs

Pharmacy

HSC Projections: 30-day Equivalent Supply Based SPCat Projections: 30-day Equivalent Supply…