Managed care fuels Medicaid

April 1, 2013

States contract with plans to cover expanded populations, many of which need high-cost care

Cash-strapped state governments increasingly are turning to managed care plans for a growing number of individuals, many requiring high-cost care. Even states led by Republicans opposed to “Obamacare” and Medicaid expansion are eyeing innovative coverage models that utilize private insurance to extend coverage to additional low-income populations.

More than 300 managed care plans currently provide health benefits to more than half of some 30 million Medicaid recipients. While most address the basic Medicaid population of women and children, more states are extending programs to cover elderly and disabled patients, who account for a high proportion of state healthcare costs and stand to benefit from coordinated care.

In addition, 25 states and the District of Columbia plan to expand Medicaid programs under health reform. Analysts project that will bring 7 million more people into Medicaid next year, rising to 12 million more by 2020.

In most cases, state health departments are looking to MCOs to absorb these newly eligible populations. Ideally, online systems operating new health insurance “marketplaces” will be able to determine eligibility and enroll individuals in Medicaid and other options.

Exploring new models

Political concerns about Washington playing a larger role in state health programs has generated opposition to Medicaid expansion in many states, including Florida, South Carolina, Texas, Louisiana and Alabama. Yet, the prospect of giving up millions in federal funds is prompting several hold-out states to explore models that utilize the private insurance market to extend coverage. Governors in Arkansas and Ohio, for example, have proposed tapping federal Medicaid expansion money to purchase private insurance for low-income patients, and Florida lawmakers are considering a similar approach. 

Although many states are holding off on expansion for 2014, Dan Crippen, executive director of  the National Governors’ Assn. (NGA), expects almost all will sign up in three years. Some exchanges won’t be ready next year to handle expanded Medicaid enrollment, he noted at last month’s policy conference sponsored by American’s Health Insurance Plans (AHIP). Yet, state officials are under intense pressure to extend coverage from hospitals and providers that face reimbursement cuts as well as from employers that might have to pay stiff penalties for failing to provide insurance to low-income workers left out of the program.

To assist states, the NGA is establishing best practices for managed care contracting to help state regulators address issues such as risk adjustment. Crippen expects the information to encourage states to look to contracting, as opposed to heavy-handed regulation, to ensure that private plans provide expected benefits and quality care to Medicaid programs.

Increased use of private plans to serve Medicaid patients also promises to simplify enrollment and reduce churn in beneficiaries between Medicaid and private insurance. A long-time challenge for states has been to manage the shift of individuals from public to private coverage as their income changes.

Such shifts will be aggravated by the added need to determine eligibility for federal subsidies through the exchanges. Those plans that service both public and private customers, Crippen notes, will facilitate a smooth transition in and out of Medicaid as individuals’ income changes.