Nebraska Medicaid Program

Current Initiatives

MMIS Replacement Project

Summary of Alternatives Analysis Report, October 19, 2004
In fiscal year 2004 the MMIS was used to process nearly 10 million Medicaid claims, and issued over $1.3 billion in payments to providers.  Over the past ten years, the number of Medicaid claims processed has nearly doubled, and the average monthly number of Medicaid eligible persons has increased from 135,159 in fiscal year 1994 to 197,152 in 2004.

The Centers for Medicare and Medicaid Services (CMS) requires a certified and continuously operational MMIS to fully fund administrative functions. CMS funds the MMIS at 75 percent for operations and 90 percent for MMIS enhancement and replacement.  The federal fiscal year 2005 budget proposal released on February 5, 2004 proposed to cut the federal matching rate for MMIS enhancements and replacements from 90 percent to 75 percent.  Although this proposal was not adopted, the potential elimination of federal funding exists.

Significant problem areas of the current system

Benefits of a new MMIS

Four MMIS alternatives

Summary of the consultant’s analysis

Projected annual cost for each alternative


Summary of Alternative Validation Report 2007

DHHS recognizes the importance of Nebraska’s MMIS.  Federal Health Insurance Portability and Accountability Act (HIPAA) regulations have and will continue to impose significant requirements on the MMIS.  A Request for Proposals was released on April 8, 2004, for an analysis of the current MMIS and recommendations.  First Data Government Solutions was selected and performed the analysis.  

Three significant problem areas of the current system are:

  1. Outdated Technology: Nebraska’s MMIS was developed 27 years ago and has outlived most other states’ Medicaid Management Information Systems.  The current MMIS uses outdated technology and an older, inflexible technical design.  Staff have worked hard to maintain the functionality of the MMIS; however, it is an extremely tenuous system often requiring   “Band-Aid” solutions.  The consultants have concluded that the current MMIS is incapable of meeting expectations and future needs.

  2. Needs Outgrew System: The Medicaid program has become increasingly complex, with service changes (e.g., hospice, behavioral health), eligibility changes, and new regulations (e.g., HIPAA).  New program needs are difficult to address with the existing system.  Labor-intensive “workarounds” are used to address these changes in the short-term, but do not represent a long-term solution.

  3. Costly to Maintain: Because the MMIS is based on outdated technology and older, inflexible programming, it is costly to maintain, operate and enhance.

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The benefits of a new MMIS are:

  1. Administrative Benefits: A new MMIS will result in improved customer service, enhanced reporting, improved decision-making tools, and better use of staff (shift staff to activities such as Quality Assurance, Utilization Review and Customer Service).

  2. Cost Savings: A faster and more efficient claims processing system will save money through reduced manual processes, increased recoveries, reduced information technology staffing needs, and the potential to incorporate claims processing for other health programs.  The Hospice program MMIS modifications required 11 staff (six programmer analysts, three business analysts, and two testers) and over 6,000 hours of staff time.  A new MMIS would have required only four staff (two business analysts and two testers) and less than 400 hours of staff time to make the same modifications, resulting in significant savings.

  3. Positioned for the Future: A new MMIS, with a more adaptable design, will better position DHHS for the future.  The ability to more quickly address Medicaid program change. A new MMIS will also take full advantage of new technologies such as a secure web portal for electronic transactions.

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Four MMIS alternatives were analyzed:

  1. MMIS Procurement: A replacement MMIS is transferred or developed by a vendor and maintained by state staff or the vendor.

  2. In-House Development: A replacement MMIS is developed and maintained by State of Nebraska staff.

  3. MMIS Replacement with Fiscal Agent Maintenance: A replacement MMIS is developed and maintained by a vendor.  The vendor also performs all system maintenance and claims processing functions, including activities to manage providers.

  4. Enhance Current MMIS:  Modification of the current MMIS performed by either a vendor or by state staff, but maintained by state staff.

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Summary of the consultant’s analysis:

- 10-Year Total System and Processing Costs (federal and state) Implementation Timeframe Overall Risk Operational Flexibility
1) MMIS Procurement $164 million
(costs less than continuing the FY2005 funding level for 10 years)
24 months

·Experienced vendors with skilled staff
· Transfer knowledge to state staff

· State owns and maintains system

2) In-House Development $193 million 48 months

· Staff not experienced in required technology

· State owns and maintains system
· Staff can be reassigned to meet priorities

3) MMIS Replacement w/Fiscal Agent $200 million 24 months Medium:
·Experienced vendors
· Transition many state positions to contractor
· State must negotiate all changes
4) Enhance
Current MMIS
$205 million 48 months High:
· Technical complexity
· Staff not experienced in required technology
· State must negotiate changes for off-the-shelf products

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Projected annual cost for each alternative:

Below is a graph of the projected annual state's share cost of each alternative. Solution 1 (navy blue line on graph) represents the lowest ten-year costs for implementation and maintenance.

Below is a graph of the projected annual state's share cost of each alternative. Solution 1 (navy blue line on graph) represents the lowest ten-year costs for implementation and maintenance.

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Recommendation: Solution 1 - MMIS Procurement

Install a new MMIS with the help of a vendor, which State staff would maintain and operate.  MMIS procurement is the lowest cost, lowest risk and most timely for the State’s system.

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Summary of Alternative Validation Report, February 8, 2007

In 2006, an independent consultant was hired to review, validate and update the October, 2004 alternatives analysis.   The report –
  • Validated that the MMIS development option selected by the State in 2004 was appropriate and that the advantages and disadvantages of each option’s cost, timeframe, overall risk, and operational flexibility factors were generally the same;

  • Identified additional deficiencies of the legacy MMIS;

    • Confirmed that the option to procure a contractor to transfer and install an MMIS would be the most beneficial to the State from both a development and administrative approach; and

    • Emphasized the advantages of a State operated MMIS.

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