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.
See Part 1: 5 Medicaid trends to watch in 2014
Trend 6: Behavioral health takes center stage
Pressure to integrate physical and behavioral health will accelerate, propelled by a combination of extraordinarily high costs and poor health outcomes. States will revisit and continue to “tweak” traditional approaches, including managed care organizations (MCOs) and behavioral health organizations (BHOs), while also deploying health homes and other provider-led care coordination strategies. As integration efforts increase, issues related to data exchange among providers will come to the fore, and states and other stakeholders will seek to address privacy concerns that may limit data sharing among physical and behavioral health providers.
All of these issues will take on heightened importance in states that expand their Medicaid programs. Expansion states will confront the significant mental health and substance abuse needs of the newly eligible adults, as well as the obligation to provide behavioral health benefits that meet essential health benefit (EHB) standards and the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA). States that provide physical and behavioral health through different managed care entities or delivery models will face the new challenge of monitoring parity compliance across their systems. And health plans, insurers and behavioral health organizations doing business in expansion states can expect new regulatory oversight aimed at ensuring compliance with parity.
Expansion and integration will put new pressures on the delivery system. States and providers will focus on workforce development needed to support integrated care models, especially for clinical alternatives to institutional care, and seek coverage for services traditionally excluded from the Medicaid program, including peer supports, housing, and career coaching.
Finally, some, perhaps many, behavioral health providers will face challenges in transitioning to new models of delivery and payment, particularly related to participating in Medicaid and contracting with insurance companies for the first time. These providers will need to bolster their administrative infrastructures, including information systems, to support appointment scheduling, billing, and medical records functions for patients who are newly insured — and may well look to vendors, health plans and provider alliances that can help them do so.
Trend 7: Coordinating care for dually eligible patients
Dually eligible beneficiaries — those who are eligible for both Medicaid and Medicare — account for almost 40 percent of Medicaid spending, but constitute only 15 percent of Medicaid beneficiaries. Most of this spending is attributable to long-term care services. Despite the numbers, dually eligible beneficiaries have been largely excluded from mainstream managed care; and efforts to coordinate service delivery and payment have been hampered by fragmentation of program responsibility, care, and data; differences in Medicare and Medicaid rules; and misaligned payment incentives.
The Patient Protection and Affordable Care Act (PPACA) includes multiple initiatives targeted to enable and encourage care coordination for dually eligible beneficiaries, including establishment of the Medicare-Medicaid Coordination Office within CMS and the creation of State Demonstrations to Integrate Care for Dual Eligible Individuals. Implementation of the duals demonstrations is still in its infancy, and 2013 was largely spent planning. To date, interest in the program has been strong — 26 states submitted proposals for participation in the Financial Alignment Demonstrations (FAD), though only two states have begun enrollment (MA and WA). More than two million beneficiaries (29% of full benefit duals) are expected to enroll in dual demonstrations over the next three years, with more than three-quarters in fully capitated managed care and the balance in managed fee for services shared savings models.
2014 will be a telling year as the dual demonstrations begin enrolling beneficiaries in significant numbers. The primary issue to watch will be rate sufficiency — whether the rates being negotiated in the three-way contract between Medicare, Medicaid and the plans are adequate to cover the costs and generate the savings necessary to make the integrated financing model sustainable. A related issue, and a challenge for plans, has been how to stratify and adjust interventions based on the different needs of various population segments. Other issues to watch include timing (the rollout to date has taken much longer than expected), the success of data sharing and coordination of performance metrics, and how robust requirements for consumer participation and engagement will impact program design.
As additional states roll out care coordination initiatives in 2014, all eyes will be on the ultimate measure of success — can these initiatives improve care and reduce costs? We are likely to see only preliminary findings in the year to come, with more robust outcome data available in 2015 and beyond.
Trend 8: Continuing spotlight on pharmaceutical coverage and costs
In states that expand Medicaid, pharmaceutical spending can be expected to increase significantly; and all states will continue to see an increase in spending for drugs as new and more effective therapies are introduced.
Medicaid formularies are in flux. Traditionally, state Medicaid programs were required to cover all drugs for which manufacturers enter into rebate agreements. However, under the new alternative benefit plan (ABP) for expansion adults, states need only cover the greater of one drug per category and class, or the number of drugs per category and class in the designated EHB base benchmark (or reference) plan. While most expansion states appear to be tracking traditional Medicaid formularies, state choices may not be known until after states submit their ABP plans which could be as late as March 2014.