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Alternate Medicaid expansion: Crossing the proverbial bridge

We say it to ourselves all the time: “At some point, we’re going to need a new car;” “This tax year is going to be complicated;” or – my personal favorite – “My children’s activities this weekend will require me to be in two places at the same time.” The typical response: “We’ll cross that bridge when we get to it.”

Now, nearly a year after I last covered alternate Medicaid expansion plans (see the February 4, 2014 Health Care Current), many states are crossing their proverbial bridges.

Arkansas, the first state to receive approval from the Centers for Medicare and Medicaid Services (CMS) in September 2013, has enrolled 210,000 individuals on the state’s alternate expansion plan.Since January 2014, Arkansas has been using the ACA’s Medicaid expansion funds to purchase qualified health plans (QHPs) through the health insurance marketplace for newly eligible adults. The uninsured rate in the state has dropped a dramatic 10 percent.2,3 More recently, CMS allowed Arkansas to amend its Section 1115 Waiver to include new cost-sharing requirements for enrollees of the private option plan. Beneficiaries will now make monthly contributions into new health independence accounts.

Soon after Arkansas received its waiver approval, Iowa followed. Using the new expansion funds, Iowa created two programs: the Iowa Marketplace Choice Plan and the Iowa Wellness Plan. The Iowa Marketplace Choice Plan has been purchasing coverage in QHPs for newly eligible beneficiaries whose incomes fall between 100-138 percent of the federal poverty level (FPL), and the Iowa Wellness Plan has enrolled newly eligible individuals with incomes below 100 percent of the FPL into managed care plans in traditional Medicaid. Many of the newly eligible are also responsible for some cost sharing through monthly premiums.As of December 2014, Iowa had enrolled nearly 120,000 into the expansion programs (three-fourths of whom enrolled in the Iowa Wellness Program) setting the state well on its way to meeting its goal of 150,000 enrollees.5

In 2014, CMS approved Michigan’s waiver program. Healthy Michigan built in copayment and cost-sharing requirements for all newly eligible individuals and gives enrollees discounts for healthy behavior. The program began enrolling the new population into Medicaid beginning in April, 2014. Today, Healthy Michigan has enrolled more than 546,000 beneficiaries.Most recently, Indiana received approval of its Section 1115 Waiver to expand Medicaid through the Healthy Indiana Program 2.0 (see the February 3, 2015 Health Care Current).

Even though these states are beginning to cross the Medicaid expansion bridge, it is still unclear what the other side will look like. States will likely face many questions as their journey continues:

  • A common thread built into each of the alternate expansion programs is cost sharing. Whether it’s in the form of health savings account “look-alikes” or monthly premium contributions, states are testing whether newly eligible can handle increased responsibility for the cost of their care. Some might consider the cost sharing modest—in Arkansas it is between $5 and $25 per month depending on an individual’s income level. But patient advocates have expressed concern about the requirements. Are these policies keeping individuals from enrolling? Or are they making people more cost aware in a positive way?
  • Early results indicate these expansions have decreased uninsured rates across the country. A recent study found that community health centers have seen more patients overall, but a sample of “regular” expansion states have seen larger reductions in uninsured patients than non-expansion states (see the January 20, 2015 Health Care Current). Will the states that opted for the alternate expansion see the same results?
  • While uninsured rates may be down, other evidence indicates that some areas of the country are still seeing an increase in emergency department visits. Giving individuals health insurance coverage does not necessarily mean that they will always seek care in the most appropriate setting. It could also mean that health care consumers are still struggling to modify their health behavior. Do patients need more education, do they know how to use their new coverage, and do the networks on their new plans offer sufficient coverage?
  • The policy that raises Medicaid rates to Medicare levels for primary care physicians expired at the end of 2014, leaving states to decide whether to continue the match program. Twenty-three states have indicated they have no intention to continue the increased payment level after 2014. Those states have tended to be the ones where the difference between Medicaid and Medicare rates are the highest; thus, rates there will fall even more than the average, at more than 47 percent.7What impact will the expiration of this policy have on access?
  • Policies adopted in one state may result in different outcomes in another state. What impact will state demographics, social determinants of health, politics and more have on the implementation of each of these programs?
  • Some policymakers and proponents of expansion predicted that it would reduce uncompensated care costs for hospitals. The U.S. Department of Health and Human Services (HHS) estimated that hospitals’ uncompensated care costs were $5.7 billion lower due to the coverage expansions in 2014. Nearly three-fourths of these savings came from the states that expanded Medicaid.8Will costs continue to decrease?

Progress on the alternate expansion programs to date has also brought some larger questions. Will we see more unique expansion programs or have we reached a plateau? Several states have new legislatures and governors that might consider new approaches to expansion. But, many of those states are focused on adding employment requirements. Will CMS continue its hard line that states cannot use participation in a workplace program as eligibility criteria for Medicaid?

Expansion, whether traditional or alternate, will likely require an overhaul of operation strategies, technology functions and IT enhancements to support enrollment system changes. New IT processes and functions could help keep track of the changing enrollee population, especially as individuals’ incomes, and thus eligibility, changes.

Medicaid is the largest component of total state spending, and in 2014 accounted for more than 25 percent of total state spending, an increase over 2013.9Many state leaders and lawmakers are beginning to weigh whether an alternate expansion program might be the best route for them, as well. As states that decided to expand their programs begin to see outcomes from these initiatives, others continue to watch.

Read the entire Health Care Current here and subscribe to receive weekly updates.

1Arkansas Governor, “Transcript of Governor Asa Hutchinson’s Healthcare Speech,” January 22, 2015
2Kaiser Family Foundation, “Medicaid Expansion in Arkansas,” February 15, 2015
4Kaiser Family Foundation, “Medicaid Expansion in Arkansas,” February 12, 2015
5Quad City Times, “Iowa: Nearly 120,000 signed up for Medicaid expansion program,” December 24, 2014
6Michigan Department of Community Health, “Healthy Michigan Plan Enrollment Statistics,” February 9, 2015
7Stephen Zuckerman, Laura Skopec, and Kristen McCormack, Urban Institute, “Reversing the Medicaid Fee Bump: How Much Could Medicaid Physician Fees for Primary Care Fall in 2015?” December 2014
8HHS, Office of the Assistant Secretary for Planning and Evaluation, “Impact of Insurance Expansion on Hospital Uncompensated Care Costs, in 2014” September 24, 2014
9National Association of State Budget Officers, “Overview: Total State Spending Accelerates in Fiscal 2014 After Returning to Positive Growth in Fiscal 2013,” November 20, 2014


Author bio

Jessica has spent more than 25 years of her career helping government develop and implement strategies for large-scale transformation. As a Deloitte board member for the past 10 years, she was at the table helping to drive Deloitte’s evolution into the world’s largest professional services organization. In retirement she will continue to focus her energies on serving both public, private and non-profit organizations through advisory council or board roles.