Medicaid Managed Care in Health Care Reform

Nobody knows how the health care debate will be resolved nor do we know what the final package will include when it reaches President Obama's desk.  However, that hasn't stopped many health care reform watchers from both inside and outside the beltway from making well reasoned assumptions about what might be included in a final package.   Aside from the question of how to pay for it, the expansion of Medicaid is one such idea that commentators and journalists mention frequently as something likely to be included in a final package.  Among other factors, this could be attributed to an infrastructure already in place and the program's ability to enroll individuals quickly.

With each state and territory administering their own Medicaid program, it is dangerous to make sweeping statements regarding the impact of an expansion with any specificity.  With that in mind as a caveat, we explore below on how this Medicaid expansion might impact a major method of health care delivery in this joint state-federal program, Medicaid health plans.  This commentary highlights what this proposed expansion might mean for Medicaid health plans, a leading delivery system for Medicaid enrollees in many states. 

Medicaid Health Plan Enrollment: Going Up

Depending on the eligibility levels included in any final legislation, the Congressional Budget Office estimates that 15 million new individuals will be newly enrolled in state Medicaid programs - a 25% hike between now and 2017.  However, that would not be the case in every state.  In Medicaid, all states are not equal.  Given the different levels of eligibility in the states, the enrollment increases will be disproportionately distributed among the states.  States in the south and west are likely to see the largest increase, while states with already relatively high eligibility levels, such as Massachusetts, Vermont, Minnesota and New York, will see little to no increase in their Medicaid enrollment.

Much has been said, written and blogged about how to finance this planned expansion.  A great deal of this focus has been on a provision in the Senate-passed bill that ensures 100% of the cost of the Medicaid expansion is borne by the federal government in the State of Nebraska. If that provision was changed to allow all states to have this financing arrangement, the cost would be an additional $35 billion over the next 10 years.

Yet, financing is only one of the questions that remain.  The delivery system has not been the focus of many conversations and it may be just as important to the overall success of health care reform, since the delivery of care will greatly impact the program's long term financial sustainability and impact the quality of care. 

While it is both hard and dangerous to predict the future, this national expansion of Medicaid will likely increase the number of lives enrolled in Medicaid health plans.  After all, the new enrollee population is already disproportionately enrolled in full risk plans and those states that will have the largest numbers of new enrollees currently largely depend on Medicaid managed care plans for the delivery of service - California, Florida and Texas to name a few. 

Some states will continue to shy away from fully capitated managed care, either due to strong policy disagreements, scarcity of providers, or a political situation makes it untenable to create or expand managed care in a state.  State budget woes will also play a part in determining what portion of the new enrollees will be cared for by Medicaid managed care plans and which ones in fee-for-service.  Many states are experimenting with pilot programs and seeking waivers from CMS to place more of their Medicaid beneficiaries in fully capitated plans.  Some are looking to better manage dually eligible individuals, those higher cost beneficiaries who are eligible for both Medicaid and Medicare.  One can reasonably expect this trend to continue.  Based on a number of factors, we estimate that as many as 6-8 million new individuals will be in Medicaid health plans once implementation is complete.  One to two million lives will also likely shift from CHIP plans to Medicaid managed care plans.

However, an increase in the number of lives in health plans does not necessarily mean an increased bottom line in the board room. 

Given state budget situations, states continue to squeeze savings from their Medicaid budgets, which nationally account for 21% of state budgets according to the National Association of State Budget Officers.  To deal with this, states enacted and are proposing cost containment initiatives, the most common of which was reducing provider reimbursements.  States are also facing potential federal restrictions on reducing or cutting eligibility if some provisions in the health care reform bill make it through to enactment. 

With their experience in managing care for the Medicaid population, many Medicaid health plans have been creative in working with their state partners to developing and implementing a number of innovative programs to concurrently help improve quality and help the bottom line. 

The navigation of all of these factors and more will be important for health plans to consider to take full advantage of the opportunities that exist during expansion and implementation.

To learn more or to discuss how Medicaid health plans may be impacted by health care reform, please contact Christopher Labonte at clabonte@sellersdorsey.com.