The U.S. Department of Health and Human Services (HHS) has approved Iowa’s proposed Medicaid expansion plan. The plan will provide subsidies for adults earning up to 138% of the federal poverty level to buy health insurance on the state exchange.
Iowa is the second state to have this type of alternative Medicaid expansion model approved. The HHS signed off on a similar plan proposed by Arkansas in September. For more perspective on the financial implications of these expansion models, read Rob Damler’s article “Considerations for Medicaid expansion through health insurance exchange coverage.”
Expanding state Medicaid eligibility under the Patient Protection and Affordable Care Act (ACA) will introduce new populations of parents and childless adults to state Medicaid roles. These populations will have a significant impact on the demographic profiles of states that are expanding their Medicaid programs.
In his article “Medicaid expansion under the Affordable Care Act,” Rob Damler highlights various issues that states will encounter related to the enrollment of these new populations in Medicaid. Here is an excerpt from the article:
• Eligibility Changes: Under the ACA, many of the current Medicaid-eligible populations will have different eligibility rules regarding income and assets. Income will be converted to a Modified Adjusted Gross Income (MAGI) standard for all states. Medicaid eligibility for the children, parent and childless adult populations will no longer have an asset test. In addition, the Medicaid program will receive referrals from the health insurance exchanges. All of these eligibility changes may create enrollment delays as individuals are navigating the new eligibility rules.
• Presumptive Eligibility: Many current Medicaid programs provide presumptive eligibility for pregnant women. Presumptive eligibility provides immediate coverage based on the individual meeting certain criteria. Under the ACA, presumptive eligibility is expanded beyond the pregnant women population. Hospitals may provide presumptive eligibility for individuals who meet certain eligibility criteria. The expansion of the presumptive eligibility provision may increase the average health care costs for the Medicaid populations since individuals will be receiving eligibility at the point of care.
• Pent-up Demand for Services: Individuals who are currently uninsured may have pent-up demand for health care services. In 2008, the state of Indiana implemented a Medicaid expansion program: the Healthy Indiana Plan. The Healthy Indiana Plan provided expanded Medicaid eligibility for parents and childless adults through an 1115 waiver. During the first year of the program, it was observed that individuals incurred overall health care costs 20 percent greater during the first three months of enrollment in the program, with hospital inpatient and outpatient services 20 to 40 percent higher. Pharmacy expenditures tended not to be greater during the earlier months of enrollment; however, the pharmacy expenditures increased after six months of enrollment.
• Access to Providers: On a national basis, the average physician reimbursement rate under the Medicaid program is approximately 60 percent of the Medicare reimbursement rate. Physician reimbursement varies significantly on a state-by-state basis. The ACA provides for increased physician reimbursement to qualifying primary care physicians for evaluation and management services during calendar years 2013 and 2014. While this provides for short-term enhanced funding to primary care physicians, the long-term funding issue remains for physicians under Medicaid. The newly eligible population may encounter issues related to physician access, especially as the newly eligible population ramps up into the system and more people seek care.
To read Damler’s report on the implementation of Indiana’s Medicaid expansion program, click here.
This article was originally published in Health Watch, October 2013 by the Society of Actuaries.
The October 2013 edition of Health Watch focuses on the “three Rs” of the Patient Protection and Affordable Care Act (ACA): reinsurance, risk corridors, and risk adjustment. Milliman consultants contributed three articles on these issues:
• The cover article, “Risk corridors under the ACA” by Doug Norris, Mary van der Heijde, and Hans Leida, examines the technical and strategic considerations of the risk corridor provision.
• In the article “Strategies for leveraging the ACA risk adjuster,” Jason Siegel outlines operational strategies that health plans could deploy to optimize their risk adjustment performances.
• Rob Damler’s article, “Medicaid expansion under the Affordable Care Act,” examines how expected increases to the Medicaid population could affect different demographics and risk compositions within existing state programs.
Arkansas has proposed using Medicaid expansion dollars to provide subsidies so that eligible individuals can purchase health insurance through the exchange. The U.S. Department of Health and Human Services has indicated that it will consider approving such proposals.
The Arkansas proposal has various financial implications, especially with regard to provider reimbursement levels and various aspects of the Patient Protection and Affordable Care Act (ACA), including the minimum medical loss ratio requirement and the “3Rs” (reinsurance, risk corridors, and risk adjustment). This healthcare reform briefing paper by Rob Damler, “Considerations for Medicaid expansion through health insurance exchange coverage,” examines these key considerations for a state contemplating this approach.
Health Plan Week looks at the future of Medicaid managed care plans as states wrestle with the question of whether to expand their Medicaid programs. Here’s an excerpt:
This is the type of interest you’re seeing from Medicaid health plans, whether you’re in a big state like Ohio, or the smallest of states,” [Mlliman’s Rob] Damler says, adding that mounting competition in the Medicaid space will push carriers to make their bids as compelling as possible by ensuring they have “a strong provider network, strong quality measures, experienced staff, good contracting.” But more aggressive bidding from larger, well-capitalized carriers could make it difficult for smaller carriers to compete, he adds.
However, a growing interest in quality measures could give some small, local carriers an advantage over much larger entitites. In their RFPs, some states are increasing the amount they will withhold from carriers that don’t hit quality measures, says Damler. While states historically might have withheld one-quarter to one-half percent of their capitation rate, more recent contracts have boosted that percentage to between 1% and 3%, he says.
Managed Healthcare Executive digs into the kinds of nuanced mistakes that can complicate risk-sharing efforts. Here is an excerpt:
Experts agree that the 1990s’ capitation agreements were not adjusted for the risk of the population, leaving some winners and some losers in risk sharing without any correlation to how well providers did their job. Typically, payers counted on controlling costs by contracting with provider organizations in capitation models.
Today, they need better ways to identify variance in the underlying morbidity of the populations they serve or they might not be getting an accurate picture of the capitated population and its risk proposition.
Robert M. Damler, principal and consulting actuary for Milliman, says failing to adjust for age and intensity in the capitation model, and simply using an average of the total population and calculating a value at the beginning of the year, could have a significant impact on risk sharing. While most experts agree that no risk-adjustment methodology is perfect, the process could become a key to driving the payer’s bottom line.
“Some groups look profitable, but when you adjust for the underlying morbidity, they may actually be creating an issue,” Damler says.
For more perspective on how this time it may be different, check out this paper.