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Despite changing political waters, there may be waves of opportunity for Medicaid

Efforts to repeal and replace elements of the Affordable Care Act (ACA) appeared adrift last month after House Republicans determined they didn’t have the votes to move the American Health Care Act (AHCA) forward. Recent reports indicate that Republican leaders are continuing conversations on reform options.1 Regardless of whether repeal and replace legislation sinks or sails, states will likely have latitude to chart their own courses for Medicaid under the new administration, and as a result, opportunities and challenges for states, health plans, and providers may lie just beyond the horizon.

In a March 15 letter to the nation’s governors, US Department of Health and Human Services (HHS) Secretary Tom Price, MD, and US Center for Medicare and Medicaid Services (CMS) Administrator Seema Verma, suggest they will give states more freedom to experiment with their Medicaid programs (see the March 21, 2017 Health Care Current). They also underscore a willingness to work with expansion and non-expansion states to improve their Medicaid programs.

States have used state plan amendments, 1915 (b) and (c), and 1115 waivers to innovate and transform their programs for many years. However, state leaders have long expressed concern that the existing CMS approval process is too long and too resource intensive. In response, Price and Verma are vowing to knock down some regulatory barriers, and develop a fast-track approval process for waivers and demonstration projects.

The new HHS leadership seems to envision consumer financial responsibility among Medicaid beneficiaries, and has expressed support for making Medicaid parallel private insurance more closely, which could result in new approaches to benefit design.

So what might states do to change up their Medicaid programs? Some have expressed interest in redefining eligibility requirements for non-disabled childless adults. A non-expansion state, for example, might opt to expand eligibility, but only up to 100 percent of the federal poverty level (FPL), rather than the 138 percent of the FPL called for by the ACA. Expanding eligibility to 100 percent of FPL could eliminate the existing coverage gap, and could channel some low-income residents to the individual market where they can purchase federally subsidized coverage through an insurance exchange. States might follow Arkansas’ model, which taps Medicaid funds to allow some beneficiaries to buy subsidized commercial coverage through an exchange. Other states might consider establishing or expanding premium support for low-income individuals who have access to employer-sponsored coverage.

States might introduce co-payments, cost sharing, and premium payments into their Medicaid programs to encourage more price sensitivity of Medicaid consumers in managing their health care needs. They may also consider work requirements for able-bodied beneficiaries – something HHS has not previously allowed. Price and Verma are encouraging such ideas, which they say they hope will boost employment among Medicaid beneficiaries. Under the previous administration, CMS denied 1115 waiver requests from Arizona, Indiana, and Pennsylvania that included work requirements, saying that those requests were inconsistent with the overarching goals of the Medicaid program. Arizona and Kentucky have waivers pending with CMS that include work requirements. Arkansas has recently signaled interest in amending its waiver to include a work requirement.

States will likely continue to experiment with or expand value-based care models, and could further increase the role of managed care in Medicaid. They might continue to seek CMS support for strategies that address the social determinants of health.

These strategies have the potential to improve aspects of Medicaid programs and outcomes for Medicaid beneficiaries – all 73 million of them.

Balancing cost and other program goals in Medicaid is something many states have grappled with since the program’s inception. While Congress and the new Administration are concerned about reducing federal Medicaid spending, states have always had to balance their budgets, and the pressure of Medicaid spending on those budgets will likely only increase as Medicaid enrollment grows. States will need CMS’s support as they implement new strategies in Medicaid. The challenge for many states will be how to leverage these strategies, working in concert with the health plans, providers and other stakeholder communities, to improve performance of the programs and manage costs.

1 Tim Jost, “ACA Round-Up: Negotiations To Revive AHCA, Alexander-Corker Bill, And Risk Adjustment,” Health Affairs, April 14, 2017

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


Author bio

Jim is a Specialist Leader for Deloitte Consulting LLP’s State Health Transformation Services. He has over 30 years of experience working in both the private and public sectors. He focuses on implementing strategies that promote value creation within the health care system.