Featured in Health Business Daily, Feb. 14, 2017

Trump’s HHS Could Prompt Brief Medicaid Enrollment Boom, Tighter Eligibility Rules

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Sign up for a $91 two-month trial subscription today.

By ,
December 12, 2016Volume 26Issue 44

The future of the Affordable Care Act (ACA) is in limbo, but the Medicaid program might be the insurance industry’s biggest uncertainty. Given President-elect Donald Trump’s selections to lead HHS and CMS (HPW 12/4/16, p. 4), it’s expected that states will be granted greater autonomy to experiment with their Medicaid programs. For managed care companies, that could mean enrollment gains if states shift more risk to the private sector. But that boost in business could be short-lived if lawmakers approve moving Medicaid from a federal entitlement program to federal block grants (see box, p. 6), in which the annual appropriations process would determine lump-sum payments to the states to cover elderly, low-income and disabled beneficiaries.

Jeff Myers, president of Medicaid Health Plans of America (MHPA), says his members see potential opportunity with the incoming administration. Medicaid managed care companies are looking for a Medicaid structure that gives the states flexibility to make “good decisions for their most disadvantaged people,” he says. Most states, he notes, already have abandoned the fee-for-service system in favor of a more integrated and capitated program run by Medicaid managed care plans.

Managed care penetration in Medicaid grew from 55% in 2013 to 73% in 2016 (that’s 54.7 million members out of the 75 million covered by Medicaid), according to MHPA and PwC.

Myers says the momentum could pick up speed during the new administration.

Health Plan Week

Medicaid Managed Care to Grow

Bruce Merlin Fried, a partner in Dentons’ health care practice in Washington, D.C., agrees managed care penetration in Medicaid will grow as states push administrative functions to the private sector. He also agrees states will gain more freedom to consider alternate approaches for providing health coverage to the poor. But he’s dubious that it will be good news for carriers or beneficiaries.

“There is a conservative ideological desire to reduce federal involvement in anything perceived as state decisions,” Fried says. He notes that the CMS administrator has very significant discretion to use waiver authority, and the authority of the Center for Medicare and Medicaid Innovation to allow states to develop Medicaid programs that vary from the standard model.

Industry observers contacted by HPW agree that consultant and Medicaid innovator Seema Verma, Trump’s pick for CMS administrator, will give states freedom to try new ideas within their Medicaid programs. Verma worked with Indiana Gov. and Vice President-elect Mike Pence (R) on that state’s Medicaid expansion plan, which includes health accounts, out-of-pocket costs for enrollees and work-for-benefit requirements.

Will Indiana Be a Model?

In early 2015 Indiana received HHS approval to implement its Healthy Indiana Plan (HIP) 2.0 as an alternative to the Medicaid expansion called for by the ACA. The program, which reimburses doctors at Medicare rates rather than lower Medicaid rates, is available to 350,000 Hoosiers. HIP 2.0 is an expanded and updated version of a program that has been serving 60,000 low-income enrollees for eight years.

Based on HIP 2.0, Verma will likely advocate that Medicaid recipients be more financially involved in their coverage. Enrollees can wind up being cut off from the program for six months if they fail to make small monthly payments. While several states have considered following Indiana’s model, they’ve seen how difficult it has been to win CMS approval. Verma was the architect behind Kentucky’s rejected Medicaid expansion proposal, and has consulted for other states.

Government officials in Arkansas say Gov. Asa Hutchinson (R) sees Verma’s appointment as “a great opportunity.” The state’s expansion program uses federal Medicaid funds to provide subsidies to low-income individuals — up to 138% of the federal poverty level — that can be used to buy private coverage through the federally run exchange.

If Verma is confirmed as administrator, proposals that she wrote — and that CMS rejected — will wind up on her desk, says Dennis Smith, the governor’s senior advisor for Medicaid and health care. Hutchinson, he adds, has a number of ideas that would encourage low-income people to receive employer-sponsored insurance. Smith was head of Medicaid under President George W. Bush.

Industry consultant John Gorman, executive chairman of Washington, D.C.-based Gorman Health Group, LLC notes that both Price and Verma have pushed to reduce the scope of Medicaid eligibility.

CBO Missed Mark on Medicaid

While the Congressional Budget Office (CBO) came close in predicting the impact the ACA would have on the uninsured population, it missed the mark on predicting how many of those uninsured would qualify for Medicaid, and how many would buy coverage through the exchanges. Medicaid covers 73 million people, about 17 million more than CBO predicted after the ACA expanded eligibility for all states. Only 31 states and Washington, D.C., have expanded Medicaid. Smith says an additional 8 million people would have enrolled if all states had expanded the program. CBO’s expectation for exchange enrollment was short by about 10 million.

The ACA’s authors initially wanted Medicaid to be available to those with incomes of 133% of the federal poverty level. That percentage was increased to 138%. Smith says eligibility was expanded because lawmakers needed to find additional savings, and Medicaid coverage is less costly than federal premium subsidies. But the move significantly boosted Medicaid enrollment and kept many young and healthy people from buying coverage through the exchange. As a result, Medicaid managed care companies have done very well with the expansion, he says.

States need to be at the table to determine what replacement looks like, he adds.

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