State Medicaid Program Trends

By November 6, 2017Commentary

When the ACA was passed, a lot of attention was focused on the individual mandate and insurance exchanges, but the real source of expansion was the Medicaid eligibility change, and that change is a time bomb of much greater state and federal spending.  A brief from the Kaiser Family Foundation examines how states are attempting to deal with the massive strain Medicaid is placing on their budgets.   (KFF Brief)   As a bribe for the expanded coverage, the federal government paid much of the cost for several years, but that will end and the states will be on their own.  Some states refused to implement the expansion, so they just have the already heavy cost of Medicaid to bear.  Most states realize they have a serious problem and are looking at a variety of mechanisms to limit costs.  The primary strategy, already implemented in a number of states, is to move all eligibles to contracted managed care plans.  But the sheer volume of people still drives spending up.  The report highlights five areas for trends.  The first is eligibility, where a number of states are attempting to control spending by limiting who gets Medicaid.  States need federal permission for some of the changes they would like to implement, including work requirements and elimination of retroactive liability.  (What!! I might have to make some effort to work and earn some money instead of just loafing around and getting medical care free, and I can’t just wait til after I need health care to sign up!!  What kind of world is this becoming?)

The second area is use of managed care organizations.  One trend here is adding all Medicaid populations, including complex cases, to managed care and including benefits which often were excluded from managed care, like mental health and substance abuse.  Given the belief that integrated mental health and physical care has significant benefits, this seems sensible.  Another trend is to require the contracting plans to take social needs into account in helping beneficiaries and to pay plans on a value-based basis and/or require use of things like medical home or ACO approaches.  The third area is long-term care, since Medicaid is the primary payer of long-term or residential nursing home care for low-income people this has become the number one expense issue in state budgets.  The main response is to try to keep people in the community for as long as possible, since this is usually cheaper.  So states are pushing more home care and monitoring of people in a residential setting.  Since there can be a shortage of housing for low-income people, this complicates the effort, and there is also a significant shortage of home health workers, so states are looking at wage rates and other means to increase that workforce.

The fourth area is payments to providers, which often are so low that access problems are created.  Most states with fee-for service programs are planning to increase outpatient provider rates, while less will do so with hospitals.  But at the same time most states continue to rely on taxing providers as a way to generate Medicaid funds.  Makes no sense.  States are also mandating that contracted health plans pay providers a certain floor amount.  The last area is benefits, especially pharmacy benefits.  Despite the spending crunch, a majority of states have added or expanded benefits, but many are also raising required copayments.  Medicaid programs are hit hard by expensive specialty drugs, like those to treat hepatitis C, so new utilization controls for speciality medications are widespread.  In addition, opioid addiction is frequently found in Medicaid populations so specific guidelines for opioid use and specific treatment programs are becoming common.

The biggest problem with Medicaid is that there is no defensible rationale for why it should be a federal program.  The federal role should be eliminated and the question of health care for low-income people turned back to the states, accompanied by a reduction in federal taxes.  This would give states room to design a program that they believe works best and have a funding source for the cost.  And whatever a state comes up with, it should force people to demonstrate responsibility to become or maintain eligibility.  Taxpayers shouldn’t have to pay for people who simply don’t make an effort to work, or who maintain unhealthy habits like obesity, smoking, or alcohol or drug use.  It is unfair to the taxpaying population which is struggling with the own health costs to let others get a free ride.

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