Expect Medicaid expansion to relieve some cost shifting

September 1, 2012

Reduction in uncompensated care benefits insurers

NATIONAL REPORTS - Many states are still weighing whether they will expand Medicaid eligibility through the Patient Protection and Affordable Care Act (PPACA), however, experts say plans must prepare for a new patient group with distinct characteristics.

A recent report from researchers at the Urban Institute estimates that nearly 15.1 million uninsured adults stand to gain coverage through the PPACA's Medicaid expansion.

"Mostly you are going to see folks who have not had coverage for an extended period of time, so they may not be used to the system and may need additional help, especially at the beginning, navigating the system," says Tim Sweeney, director of health policy for the Georgia Budget & Policy Institute.

Sweeney adds that many newly eligible individuals may have only been receiving healthcare services through the emergency room, so increasing awareness about less costly sites of care will be essential.

From the health plan perspective, Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan, says she believes the Medicaid expansions will be advantageous for the market.

Plans serving the Medicaid population will benefit from the significant growth in the amount of eligible participants, she says, but cost shifting could ease up as well.

"We would expect uncompensated care costs to go down, and therefore the cost on the private side should go down, and therefore premiums for people who are currently covered under private health plans could go down as well," she says.

If states don't expand Medicaid eligibility, Sweeney says health plans and the entire health system could be impacted, in part because of a reduction of Medicare Disproportionate Share Hospital payments.

"Safety net hospitals in particular will see significant uncompensated care without the expansion and that cost has to get shifted somewhere," he says.

As states continue their own financial analyses, Udow-Phillips says health plans need to make their voices heard and begin preparing for the new potential patient population.

"From a health plan standpoint and a community stand point, the planning needs to occur now," she says.

PROVIDER SHORTAGES

If states choose to take advantage of federal dollars and expand their programs, one concern is whether there will be enough primary care physicians willing to see Medicaid recipients. To combat this, PPACA dictates that in 2013 and 2014 primary care providers who see Medicaid patients will be reimbursed at Medicare rates for certain services.

"I see lots of health plans promoting that higher rate now to try to get doctors into their networks because they are anticipating the expansion of coverage and want to have more providers to care for that population," Udow-Phillips says.

Health plans, she says, should also start thinking about the whole continuum of care. For instance, the Center for Healthcare Research & Transformation is working with one health plan to employ social workers to reduce overall costs.

Even without a Medicaid expansion, according to the Urban Institute analysis, Medicaid participation will increase among those already eligible for Medicaid coverage.

"Under health reform, the enrollment and eligibility process for Medicaid is significantly simplified," Udow-Phillips says.