Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > State Regulation

5 Medicaid trends to watch in 2014

Your article was successfully shared with the contacts you provided.

Medicaid is a growing economic powerhouse, anchoring the new coverage paradigm under the Patient Protection and Affordable Care Act (PPACA) and wielding increasing influence within the healthcare sector and beyond. Already the largest source of federal funding flowing to states and a major revenue stream for providers, health plans, pharmaceutical companies, and vendors, Medicaid is projected to cover a record 65 million people and expend close to $500 billion dollars in 2014. Twenty-five states and the District of Columbia have expanded their Medicaid programs to include new adult populations under PPACA, and several others are evaluating expansion options, fueled at least in part by mounting research pointing to positive impacts on state and local productivity, jobs and earnings. By 2020, Medicaid could provide health insurance coverage for as many as 1 in 4 Americans.

This growth, combined with increasing sophistication from state purchasers, continued pressure to contain state budgets, and a national drive for payment and delivery reform, will make 2014 a transformative year for Medicaid programs across the country. The following trends will be central drivers behind this transformation in the year ahead.

Trend 1: New wave of Medicaid Expansions: Looking to the private market

In June 2012, the Supreme Court effectively made the Medicaid adult expansion under PPACA optional, and as 2014 begins, half of all states are expanding Medicaid. However, the debate is far from over, and as it continues, look for the remaining states to pursue Medicaid expansion through increasing integration with the private market. States are seeking to re-shape their Medicaid programs in a manner that makes practical and political sense for their constituencies, putting federalism to the test in the form of proposals that incorporate private insurance principles including premiums, cost sharing and incentives for healthy behavior.

For some states, like Arkansas and Iowa, expansion in 2013 turned on being allowed to use Medicaid funds to purchase coverage for some or all expansion adults through qualified health plans (QHPs). While it is too early to assess the impact of this “private option,” initial results in Arkansas show a dramatic increase in the size of the Marketplace, enrolling younger adults into QHPs, and providing commercial-level reimbursement rates for providers. Watch for interest in the private option to grow in 2014.

Several states now considering the private option differ from Arkansas and Iowa in that they already have significant Medicaid managed care (MMC) programs. For these states, the private option raises the question of how to rationalize MMC and QHP coverage. This will create new opportunities and challenges for traditional MMC plans — which have experience treating Medicaid populations but may not have the licensure or capital necessary to secure QHP certification.

Finally, states are looking to make greater use of Medicaid premium assistance in the employer-sponsored insurance (ESI) market, requiring Medicaid-eligible adults with access to ESI to take up that option with the state contributing to the cost of premiums and cost-sharing, and “wrapping” benefits where necessary. Taken together, these premium assistance strategies are driving a convergence of the public and private insurance markets with implications for beneficiaries, providers and issuers alike.

As the implications of non-expansion become more apparent — particularly for racial and ethnic minorities, low-income populations, population health, hospitals, and local governments — states will be under increasing pressure to expand. Facing mandated cuts in their uncompensated care funding, hospital associations will likely redouble their efforts to persuade state officials to embrace broader coverage. They will no doubt be joined by a range of other stakeholders anxious to expand Medicaid before the 100 percent federal matching rate starts its decline at the end of 2016.

Trend 2: Calls for personal responsibility: Expecting “skin in the game”

For many years, states have sought greater flexibility to use cost-sharing in their Medicaid programs and, in regulations published in early 2013, the federal Department of Health and Human Services (HHS) responded by authorizing states to charge more for non-preferred drugs and for non-emergency use of the emergency room. However, some states are looking to go even further. As additional states debate the Medicaid expansion in 2014, we expect the calls for beneficiary “skin in the game” and personal responsibility to ratchet up.

See also: Feds shift Medicaid costs to states

In light of the reality that individuals with incomes between 100% and 138% of the federal poverty level (FPL) would, absent expansion, be required to pay 2% of their income to purchase Marketplace coverage, CMS has provided some expansion states with waivers to increase the financial obligations of beneficiaries in this income range. As 2013 came to a close, CMS approved waivers in Iowa and Michigan authorizing premiums up to 2% of income for adults with income between 100% and 138% of the FPL. Both states reduce the premiums if the enrollee completes a health assessment (Iowa) or meets certain preventive care standards (Michigan). Notably, the states are not permitted to condition eligibility on payment of premiums. Look for more states to jump on this bandwagon in 2014.

The debate on work requirements continues with some state policy makers seeking to require Medicaid beneficiaries to demonstrate they are working or looking for work. Our prediction: It is highly unlikely that HHS will permit states to condition Medicaid eligibility on work requirements that were eliminated in 1996 when Medicaid was delinked from cash assistance.

Finally, the emphasis on healthy behaviors should gain traction as states begin to glean some early lessons from demonstration projects underway in 10 states to provide incentives to Medicaid beneficiaries participating in prevention programs and engaging in healthy behaviors.

Trend 3: Aligning and integrating with the private market

In 2014, look for acceleration of the convergence of commercial and government sponsored insurance markets, playing out in three main arenas:

• Decline of Insurer Market Segmentation – Incentivized by new revenue opportunities, especially in Medicaid expansion states, commercial insurers will enter the Medicaid market in greater numbers. On the flip side, recognizing that their target customers (low-income adults and families) now have access to federal tax credits to subsidize health insurance, Medicaid managed care companies will increasingly seek to compete on the Marketplaces.

• Operational Infrastructure – PPACA has triggered a sea change in eligibility and enrollment operations, integrating and automating the eligibility process for Medicaid, CHIP and PPACA premium tax credits and cost-sharing reductions. We predict some states will accelerate and extend integration to plan shopping, plan selection and enrollment — extending the transparency of the marketplace to Medicaid/CHIP for plan differentiators like networks and quality performance. In the same vein, state regulators can be expected to increasingly coordinate and align regulation of issuers across markets, including quality and network standards, rate review, marketing standards and certification.

• Multi-payer Purchasing – Supported by significant federal funding and market momentum, states will ratchet up efforts to align and integrate Medicaid purchasing strategies with state employee and commercial insurance as a means for driving broader payment and delivery system change. Watch for continuing pressure on federal officials to bring Medicare to the table, and on states to modernize Medicaid payment policies.

Trend 4: Promoting stability of coverage

With the heavy focus over the past year on getting people enrolled in coverage, many states put off the equally important work of making sure they can keep it. It is nothing new that people lose and gain jobs, have babies, get married and experience other changes in life that cause them to move in and out of Medicaid eligibility. But this “churning” will take on new significance in 2014 given that some 9 million people are expected to move between Medicaid and Marketplace plans. Coverage stability — or lack thereof — has implications for plan revenue, patient-provider relationships, and ultimately, quality and continuity of patient care. In response, states will be exploring the following strategies under the watchful eye of health plans:

• Extending Medicaid until Marketplace coverage starts. Even if consumers’ circumstances change in the middle of a month, states may continue their Medicaid until Marketplace coverage begins.

• Creating consistency across Marketplace and Medicaid plans. Some states may require or encourage their Medicaid plans to offer a product on the Marketplace with the same provider network, or vice versa.

• Allowing people to complete a course of treatment. Marketplace and Medicaid plans may be required to fill prescriptions or continue with other treatments for a transitional period (even if they otherwise do not cover the drug or treatment) to accommodate people moving between coverage programs.

• Using premium assistance to purchase Marketplace plans. In states using Medicaid funds to buy QHP coverage for some Medicaid beneficiaries, consumers can keep the same health plan as they move from Medicaid to Marketplace eligibility.

• Adopting 12 months continuous eligibility. HHS has authorized states to pursue waivers to provide 12 months continuous eligibility in Medicaid. With the recent HHS announcement that states may receive enhanced federal funding for the costs of newly eligible adults covered under this option, watch for more states to implement it.

• Beyond 2014. A few states may consider more sweeping initiatives, such as using the Basic Health Plan option or even the State Innovation Waivers coming up in 2017, to create a health care system that relies on the same plans to serve a broad swath of Medicaid and subsidized Marketplace beneficiaries.

Trend 5: Medicaid managed care and beyond: Payment reform in an expanding market

With continued pressure to reduce state expenditures, federal funding available to stimulate innovation, and mounting industry-wide momentum towards achieving the Triple Aim, Medicaid payment and delivery reform will accelerate in 2014. Expect continued growth in Medicaid managed care, as well as increasing sophistication in other purchasing strategies as states seek to leverage their growing market power to reduce costs and improve patient outcomes. Integration of public health priorities and a focus on social determinants of health will be recurring themes.

State Medicaid programs have moved steadily away from volume-based payment, and in 2014 can be expected to further ramp up reimbursement models designed to delegate risk and drive care coordination. Managed care organizations will be big winners, as expansion states increase the number of enrollees, and expansion and non-expansion states alike extend Medicaid managed care to include more high cost/high need populations, including the aged, blind and disabled and waiver populations, and a broader range of previously carved out benefits, including pharmacy, behavioral health, and long-term care services. Look for this growth to be accompanied by increased federal scrutiny of contracting, rate setting, and provider payment arrangements, prompted in part by the federal financing of the Medicaid expansion, but likely to be felt in all states.

States also will increase efforts to promote provider-driven reforms in managed care environments, either through requirements in managed care contracts or through initiatives outside managed arrangements. States without managed care programs will look to other strategies to obtain more fiscal certainty, shift budgetary risk away from the state, and reduce overall spending. Locally tailored experimentation will be the norm, including a combination of enhanced payments for coordinated care models (patient-centered medical homes, health homes), outcomes-based incentives (pay for performance, accountable care/shared savings programs), and value-driven reimbursement (bundled payments, global payments, full capitation).

Expect some market confusion as regulators, providers and payers test the boundaries that currently define risk-bearing entities and seek to create the operational and financial infrastructures necessary to support new payment relationships. The need for more robust data collection and standardized performance measurements will continue to be a challenge, as well, particularly for providers who have not focused on population health management.

See also: 


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.