Eight ways Trump could change Medicaid

Dec 11, 2016

Experts share their ideas on how President-elect Trump could change the single largest source of insurance in the country.

Medicaid is the single largest source of insurance in the country, covering more than 71 million Americans, according to CMS. That means that one in five Americans, today, receives healthcare services paid for by the Medicaid program.

Barker

However, the Medicaid program is a 1965 healthcare benefit living in a 21st century world, says Tom Barker, co-chair of Foley Hoag’s healthcare practice. “Although the Obama administration should be commended for trying to make Medicaid work better, the program is still lacking the tools that it needs to adapt to today’s healthcare system,” Barker says. “The Trump administration has a unique opportunity to do so.”

That being said, here are 8 ways that Trump could change Medicaid.

1.   Repeal or modify Medicaid expansion.

The Affordable Care Act (ACA) sought to offer coverage to a portion of the nation’s uninsured population by mandating that states offer Medicaid to all Americans who fell below specified income levels, according to Piper Su, vice president, McDermott+Consulting.

Su

“In order to assist with the cost of covering these new enrollees, the law provided ‘enhanced’ federal fund matching rates that started at 100% and phased down to 90% over time,” she says. “The Supreme Court modified this requirement in its decision in NFIB [National Federation of Independent Businesses] vSebelius to make Medicaid expansion a voluntary option, but still more than 30 states elected to take advantage of the generous match to cover more individuals, and 16 of those states are led by Republican governors.”

In the context of repeal, Su says that the new Congress could modify the ACA language to eliminate the enhanced match altogether, thus leaving states to cover a much greater portion of the cost of the population-meaning many may be forced to cut back eligibility. 

“It could repeal the expansion language altogether, or it could place additional restrictions on the program expansion,” she says. “All of these would potentially result in the loss of coverage for millions of individuals covered under the expansion option. The Trump administration could also take administrative action to limit benefits or place additional restrictions on coverage, which would also likely result in reduced access to Medicaid. That said, if a state’s experience in Medicaid innovation yield quantifiable cost savings and positive improvements in beneficiaries’ health, that state(s)’ model could be viewed as a model and diffused across additional states-the original purpose of CMMI [Center for Medicare & Medicaid Innovation].

Barker shares a similar viewpoint. “The existing Medicaid program, since the enactment of the ACA, creates a gross inequity among states and beneficiaries,” he says. “Under the ACA, states receive higher federal matching payments for able-bodied adults with income above the federal poverty level than they do for elderly or disabled individuals-including children-with income below the federal poverty level. Revising the Medicaid expansion enacted as part of the ACA may attempt to address this inequity.”

2.   Continue driving the trend to Medicaid managed care, especially if the program is converted to a block grant or to a per-capita allotment. 

“States will continue to rely on managed care plans to manage the benefit,” says Barker. “Certain benefits (e.g., mental health, dental, vision) are likely to continue to be carved out, even for states that retain some form of fee-for-service Medicaid.”

3.  Transition Medicaid to a block grant program.

“Republicans have long voiced a preference for changing Medicaid funding to a block grant structure, whereby states would get increased flexibility in operating their program and the federal government would provide a locked-in amount of funding that caps its liability for additional costs in the program,” Su says.

She explains that while governors in both parties are warm to the concept of increased program flexibility, they also fear that the block grant structure would ultimately be used as a federal spending reduction tool, thus shifting more of the program costs to states over time. “Supporters of the block grant proposal tout the benefits of program flexibility and less interference by federal regulators, while critics cite concerns about decreased federal support and the resulting limitations on program access and benefits,” she says.

4.   Provide more flexibility to states.

Much of this can be done administratively, Barker says, without the need for legislation, by reforming and simplifying the section 1115 waiver process, revising the ACA section 1332 waiver process, and enhanced indications of flexibility to states through state Medicaid directors’ letters. 

“CMS can also revise and amend regulations issued by the Obama administration, including the Medicaid managed care regulation issued earlier this year,” he says.

Next: Children's Health Insurance Program

 

 

5.   Address the Children’s Health Insurance Program (CHIP).

Brill

“This is a federal-state program that provides coverage to youngsters whose families are slightly over the Medicaid eligibility, which expires if not reauthorized by Sept. 30, 2017,” says Managed Healthcare Executive editorial advisor Joel V. Brill, MD FACP, chief medical officer, Predictive Health.

Under CHIP federal funds are capped, nationwide, and each state operates under an allotment, according to Brill. "States are permitted to use CHIP funds to create a separate CHIP program, expand their Medicaid program, or adopt a combination approach. Compared to Medicaid, states receive more flexibility around benefits and cost-sharing when operating separate CHIP programs. If not reauthorized, millions of children could end up without health insurance,” he says.

6. Address the many flaws in the current prescription drug rebate program. 

According to Barker, the Average Manufacturer Price rule published on February 1, 2016, did not finalize policies in key areas. “The current rebate system is ill-equipped to address the revolution in payment system reform such as value-based purchasing and pay-for-performance; in fact, it actively disincentivizes manufacturers from entering into these arrangements. Finally, some states are not living up to their responsibilities when it comes to formulary design,” Barker says.

7. Require beneficiaries to make monthly contributions.

Making low-income adults pay part of the cost of their coverage and care helped convince Republican elected officials in several states to approve the Medicaid expansion for adults with incomes up to 138% of the federal poverty level, according to Brill.

"Supporters say making beneficiaries pay gives them more'“skin in the game' and leads them to take better care of their health and use healthcare services more appropriately and thriftily. These contributions could be up to  2% of their annual household income to an account similar to a health savings account," according to Brill.

8. Shift to per capita payment.

Some Republicans also have proposed shifting from the current “matching” methodology for Medicaid funding to a “per capita” payment method where the federal government would pay states a capitated amount for each beneficiary in the Medicaid program (typically on a monthly basis), according to Su.

“The use of a per-capita method in isolation would allow program funding to rise and fall with program demand-and thus be more responsive to needs than a block grant method,” Su says. “But it also serves to cap the funding obligation of the federal government, meaning that it could simply reduce federal spending and also result in a cost shift to states in the Medicaid program. There are multiple variations of how a per capita proposal could be implemented, with some offering more program and beneficiary protections than others. Used simply as a cost-cutting measure, this proposal would likely be opposed by governors, provider groups and beneficiary groups because of its potentially negative impact on care access and coverage but that would depend upon the specifics of its structure.”

The details of these proposals will be very important considerations so it is potentially dangerous to make general predictions on the impact, according to Su. “But all of them would represent very significant changes in the philosophy that guides Medicaid as a safety net program and could shift the dynamic of the state-federal partnership upon which the program was built,” she says. “They could not only alter the financial structure of the program, which would be important to both healthcare providers and managed care plans, but could also mean changes to coverage, access and benefit design, which would be relevant to the community as a whole.”

One last consideration in this mix would be the ongoing state innovation work, which is currently anchored within CMMI but spans a broader program range, according to Su.

“That work has largely been driven in states led by both Republican and Democratic governors and generally enjoys bipartisan support,” she says. “So there is some hope and expectation that there is room for agreement on continuation and expansion of state-led reform initiatives under the Trump administration.”

 

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