Featured Health Business Daily Story, Feb. 5, 2018

2018 Outlook: Uncertainty Continues to Cloud Managed Medicaid Market

Reprinted from RADAR ON MEDICARE ADVANTAGE, biweekly strategies and analysis for Medicare Advantage, Medicare Part D and managed Medicaid. Subscribe today!

By Lauren Flynn Kelly, Managing Editor
January 4, 2018Volume 24Issue 1

The start of 2017 contained vast uncertainty for Medicaid stakeholders, as a president intent on repealing and replacing the Affordable Care Act (ACA) assumed control of the White House and the GOP counted implementing block grants and doing away with Medicaid expansion among their many health care reform goals. One could say the same uncertainty hangs over the program a year later, although industry experts interviewed for AIS Health’s annual Outlook Survey point out that what did and did not happen last year may provide a clearer view of things to come for managed Medicaid plans in 2018 and beyond.

“It’s kind of like being in a major gunfight when the gun smoke’s all around you. It’s still very cloudy and there are going to be lots of challenges this year, but I think 2017 kind of changed the nature of the debate,” remarks Jeff Myers, president and CEO of Medicaid Health Plans of America. Policy makers now have “a very different perception of Medicaid” and are aware that “trying to swing a hammer at it is not effective,” suggests Myers, referring to failed legislative efforts by both the House and the Senate that proposed moving the current federal medical assistance percentage funding (FMAP) structure for Medicaid to fixed per capita allotments and offering states the option to accept block grants (MAN 6/29/17, p. 1).

The Congressional Budget Office (CBO) projected that those proposals would have led to reductions in federal outlays to Medicaid of about $772 billion and $834 billion, respectively, over 10 years. Both bills also sought to phase out enhanced FMAP funding for Medicaid enrollees.

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Recognizing that Medicaid is a large, complex program with a “meaningful impact on state budgets far beyond just treating their most disadvantaged citizens,” Myers predicts that congressional leaders are unlikely to pursue major changes to the financing of Medicaid.

“As concerns about the deficit reemerge, [congressional leaders] will be looking to cut programs and cut back spending across the social safety net, from early intervention programs to rates that they pay for Medicare patients,” weighs in Jerry Vitti, the founder and CEO of Healthcare Financial, Inc., a company that connects low-income, elderly and disabled populations with public benefit programs. “I still think the House Republicans [which passed the American Health Care Act (AHCA) in May] have a very big appetite to go after Obamacare again. I’d say something AHCA-like isn’t going to get through, but how they are going to chip away in a substantive but less dramatic fashion” remains a question.

Meanwhile, a sweeping tax reform bill that passed just before Christmas has implications for the program. Signed into law by President Trump on Dec. 22, the Tax Cuts and Jobs Act of 2017 (H.R. 1) eliminates the ACA’s penalty imposed on individuals who do not purchase health insurance coverage. The CBO in a November 2017 analysis estimated that repealing the individual mandate would lead to 4 million more uninsured by 2019, and 13 million more by 2027.

Bob Atlas, president of the EBG Advisors consulting unit of health care law firm Epstein, Becker & Green, points out that of the 4 million projected by the CBO to be uninsured the first year in which the law takes effect, 1 million would have been on Medicaid, and 5 million fewer will be on Medicaid in 2027. “Medicaid is implicated because when people in fulfilling their obligations under the mandate go to sign up, many of them discover they are eligible for Medicaid and by law are steered in that direction,” he explains. “So, if fewer uninsured people are going through the enhanced process of seeking coverage, fewer are going to end up on Medicaid.”

Will More States Expand Medicaid?

With enhanced FMAP funding intact for the foreseeable future, another wild card is whether states that did not expand will seek to do so, adds Atlas. Maine in its November 2017 election passed a referendum to expand Medicaid, although Gov. Paul LePage (R), who thwarted the legislature’s attempts to enact Medicaid expansion, has demanded that the legislature first find a way to pay the state’s share.

Meanwhile, Virginia Governor-elect Ralph Northam (D) intends to pursue expansion efforts despite the state legislature’s repeated opposition to proposals from Gov. Terry McAuliffe (D). The fate of expansion there hangs on a deadlocked House of Delegates race that at press time was unresolved. The outcome could result in a legislature equally comprised of Democrats and Republicans.

The new tax law also limits the deductibility of state and local income and property taxes at $10,000 per household per year, which could put states having higher taxes under pressure from their taxpayers to lower such taxes, observes Atlas. This could place additional financial strain on state Medicaid budgets, he suggests.

MHPA maintains that if Congress really wants to address Medicaid spending, it needs to get at the three biggest drivers of cost — behavioral health costs, drug spend and long-term care costs — by making significant changes to Title XIX of the Social Security Act that established Medicaid. And the trade group is busy finalizing a proposal on changes to the Medicaid Drug Rebate Program, which it contends is leading to perverse pharmceutical pricing incentives. MHPA would like to see drug purchasing in Medicaid modeled after the Medicare Part D program and “make the plans bear risk and integrate the provisioning of drugs into the total cost of care and the value of services that plans can provide to the disadvantaged Americans who need them,” Myers tells AIS Health.

Work Requirements Are on the Horizon

Meanwhile, Atlas and Myers agree that states are likely to address financial pressures by seeking changes through the Section 1115 demonstration waiver process that will allow them to tinker with Medicaid enrollment. “A number of Republican-led states are proposing to implement work requirements as a condition of eligibility for so-called nondisabled people,” says Atlas. At least seven states have submitted waiver requests to CMS that included some type of work provision and others are considering them (MAN 11/16/17, p. 1). In advance of such changes, Medicaid managed care organizations in some states are already partnering with local agencies to connect their beneficiaries with employment opportunities.

But there are changes beyond work requirements, such as measures that could increase the frequency of eligibility recertification or eliminate retroactive eligibility that “cumulatively will...erode enrollment in Medicaid,” predicts Atlas. If approved, however, these types of changes are likely to be met with lawsuits “from people who believe that Medicaid as an entitlement program can never be conditioned on any behaviors by the individuals; they’re already eligible,” he suggests.

Plans Await Managed Care Reg Revisions

Another development plans are eagerly awaiting this year is the release of CMS’s revisions to the Medicaid managed care rule that was finalized in May 2016 (MAN 5/5/16, p. 1). CMS Administrator Seema Verma last year promised to conduct a “full review of managed care regulations in order to prioritize beneficiary outcomes and state priorities.”

“I think generally the questions we have are, if they’re going to redo the managed care regs, are they making it easier for our state partners to provide data to CMS that’s valuable to both, are they ensuring that there’s no duplication of efforts so that plans aren’t being asked for one more thing that people don’t actually use, and then lastly, in any type of reform are they ensuring that the actuarial soundness requirements are met? Because if those aren’t met, then services can’t be provided,” remarks Myers.

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