Medicaid: Who Could Have Imagined?

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article. 

I was in high school as Lyndon Johnson’s Great Society program became our country’s domestic policy framework from 1964-1966. The President’s sweeping agenda targeted poverty and racial injustice and included legislation about education, transportation, civil rights, and healthcare. Title XIX of the Social Security Act of 1965 authorized Medicare a program for seniors and Medicaid for the poor, against bitter resistance from the American Medical Association that opposed publicly funded healthcare as "socialized medicine." 

Who could have imagined these two programs would grow to cover more than 110 million Americans, and Medicaid would become our largest health plan in the country, covering almost 68 million today.

As the country’s state Medicaid directors convene in D.C. for the National Association of Medicaid Directors conference starting today, some aspects of the program appear clear, and others remain problematic.
 
What’s clear:

  • Medicaid is an important safety net for the poor and disabled. Enrollee health status is substantially better than those lacking coverage and on par with private coverage in some states.
  • Medicaid costs are soaring: enrollment increases, including 8.7 million newly enrolled as a result of the ACA’s expansion, coupled with the complexity of enrollee medical problems put pose enormous fiscal pressure for states. 
  • States are contracting with private managed care organizations (MCOs) to contain costs while accommodating increased demand: in 37 states, private MCOs are contracted for Medicaid, and in 26, private MCOs contract with states for long-term care. 
  • States are the labs for innovation in Medicaid: each state’s approach varies, and all are learning from each other whether Blue or Red. The challenges of Medicaid exceed partisan divides and philosophical ideology: they’re practical and urgent.

But some issues remain problematic:

  • Federal funding: On average, the federal government provides 57% of the funds for Medicaid; states bear the rest. With the passage of the Affordable Care Act (ACA), the states will get 100% funding for new Medicaid enrollees for three years, decreasing to 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and all subsequent years.  But if federal priorities change and funding follows: Will federal dollars be accessible? Will the economy recover and tax receipts support investments in healthcare programs now exceeding 30% of the total federal budget? 
  • State funding: Do states have the wherewithal to manage growing costs for the program while addressing education, transportation, homeland security, and other priorities? Will states have to choose between schools and clinics? Already, Medicaid consumes 17% of general revenues in states: At what point is state funding at its limit, thus forcing curtailment of services, reduction of provider payments, or limits on enrollment?
  • Provider access: Physicians and hospitals lose money on Medicaid patients, and their likelihood of being sued is higher than in other groups. States encourage providers to participate in  their care coordination and population health management programs but offer little protection for providers from the unforeseen risks concomitant with Medicaid populations—high patient turnover, unknown medical histories, and challenging social and economic circumstances. How should states address provider reluctance to participate in the program?
  • Employer pushback: Medicaid reimbursement covers 70% of provider costs: providers routinely offset Medicaid underpayments “hidden taxes” passed through in higher premiums paid by those with private insurance. But employers are increasingly resistant to transfer pricing, and fewer are willing/able to pay. The result: providers will charge more to employers that provide benefits, and fewer employers will provide coverage at all. Might Medicaid payment policies in the state contribute to gradual erosion of employer-sponsored coverage in a state, and indirectly to its attractiveness for economic development and job growth?
  • Medical management: The complexity of the Medicaid population’s health problems leads to higher costs for hospital care, medical specialists and expensive specialty drugs. A third have mental health issues and all face socioeconomic circumstances that limit routine access to health services.  The churn factor among enrollees is high and many end up falling through the cracks. What breakthroughs in medical management are states and their MCO partners willing to test that might mitigate the costs of poorly coordinated medical management, particularly for those in the highest risk cohorts of the Medicaid population?  What’s the innovator’s opportunity?
  • Enrollee accountability: Medicaid is a jointly-run federal-state program. It pays benefits directly to providers, with a few states requiring modest co-payments for prescription drugs, emergency room visits and other services. The program covers 60% of all nursing home residents and 37% of all childbirths in the U.S. On November 25, 2008, a new federal rule was passed that allowed states to charge premiums and higher co-payments to Medicaid participants, but studies like “The Oregon Health Insurance Experiment: Evidence from the First Year,” found limited success in collecting co-payments and higher than expected medical costs among new enrollees. What’s the balance of incentives and penalties that are best correlated to adherence by enrollees to their treatments? How should states and their partners change Medicaid enrollee behaviors to enhance outcomes and lower costs?

Arguably, governors and their Medicaid staff have much at risk in addressing these issues, and most are looking to private MCOs for help.  In the 27 states and the District of Columbia that expanded their programs in concert with the ACA, the issues are no different than the rest. Though their enrollments are increasing faster than in others, the underlying challenges of managing the Medicaid population is nonetheless daunting.  

I wasn’t thinking about Medicaid and Medicare in the 10th grade: there were more important things like football and my Corvair Monza. Who would have thought it would become so important to so many now, including many 10th graders today, for whom Medicaid is their health insurance.

Paul

P.S. Tomorrow is Election Day. In 14 states and D.C., voters will decide on ballot initiatives impacting healthcare ranging from medical marijuana laws in four to a testy fight in Tennessee over abortion limitations, control of health insurance rates in California and requirements that pharmacies be owned by pharmacists in North Dakota. A Kaiser Family Foundation analysis concluded $800M was spent on TV spots about health reform through October 15: $482M about health insurance coverage including spending by HHS (15%), health insurance companies (75%) and states (12%) to increase enrollment, and $300M in political ads, with the significant majority opposing the ACA.  

For a detailed discussion about Medicaid Managed Care, read our latest Issue Brief: Anne Jacobs, Catherine Sreckovich, Patrick C. Maher and Roberta Herman, M.D., “Medicaid Managed Care:  Strategic Considerations for States,” Navigant Center for Healthcare Research and Policy Analysis, October 30, 2014

For a full recap of healthcare ballot initiatives on ballots in states tomorrow, link to “Campaign 2014 Mid-Term Election Health Care Referenda (By State),” Navigant Center for Healthcare Research and Policy Analysis, October 31, 2014; and looking ahead to the lame duck session of congress that starts next week, link to “Lame Duck 2014 – Potential Healthcare Issues,” Navigant Center for Healthcare Research and Policy Analysis, October 31, 2014

Sources: Cindy Mann, “Medicaid and CHIP Enrollment Grows by 8.7 Million Additional Americans,” U.S. Department of Health & Human Services , October 17, 2014; Lynda Flowers, Larry Polivka, Interview with the Innovations Exchange Team, “States Turn to Managed Care To Constrain Medicaid Long-Term Care Costs," Agency for Healthcare Research and Quality, April 9, 2014; "HHS finalizes rule guaranteeing 100 percent funding for new Medicaid beneficiaries," HHS press release, March 29, 2013; Amy Finkelstein, Sarah Taubma, et al, "The Oregon Health Insurance Experiment: Evidence from the First Year," The Quarterly Journal of Economics, Oxford University Press, May 3, 2012; Bianca DiJulio, Mira Norton,  et al, “ACA Advertising in 2014 – Insurance and Political Ads,” Kaiser Family Foundation, October 30, 2014

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

© 2014 Navigant Consulting, Inc.