HIDA Health Reform

Medicaid annual report: More home care, more managed care

By Linda Rouse O’Neill

Medicaid Basics

  • Medicaid is a health insurance program for the poor.
  • Medicaid is a state-run program – in fact, it’s 50 different state-run programs, and they differ considerably.
  • The federal government helps states pay for these programs – the average is 60 percent federal to 40 percent state funds – and sets overall rules and guidelines for the states.
  • Medicaid accounts for up to half of all long-term care spending, compared to about 16 percent of total health spending across all settings.

Because reimbursement policies drive provider behavior, each year, HIDA publishes comprehensive updates on both Medicare and Medicaid. This month’s column will examine important Medicaid trends, and we’ll look at Medicare next month.

Three huge shifts are occurring in terms of Medicaid dollars: rapidly increasing enrollment; a shift in spending from institutional care to other settings, especially home care; and increasing use of managed care organizations to run state Medicaid programs.

How is Medicaid enrollment expanding?
The Affordable Care Act (ACA) expanded Medicaid eligibility to nearly all non-elderly adults with income at or below 138 percent of the federal poverty level (FPL) – just over $16,000 for an individual in 2015 – compared to a median cutoff of 61 percent of FPL before the ACA. About one-quarter of Americans are now insured by Medicaid.

However, because the Supreme Court ruled that the federal government could not force states to expand their Medicaid programs, this expansion is extremely uneven. As of December 2015, 31 states and DC have indicated they would expand Medicaid eligibility in line with the ACA. Of the remaining 20 states, all but one are opting out. Also, two states, Kentucky and Arkansas, are currently considering reversing their decision to expand Medicaid.

How are the dollars shifting?
The cost of expanding Medicaid coverage is being offset in part by two specific cost-containment strategies, both very important to suppliers.

1 Shifting care away from institutional settings

  • 47 states, including five added in the past year, have decided to expand home and community-based services programs in order to reduce spending on institutional (hospital or nursing facility) care.
  • Hospital spending through Medicaid is being tightened in most states: 30 states have restricted reimbursement rates in the inpatient hospital setting, while 20 have either kept spending at the same level or increased rates. In the outpatient hospital setting, only five states are restricting their reimbursement rates.
  • For nursing homes, only 20 states are decreasing reimbursement rates, while the rest are keeping rates the same or increasing.

Much of this expansion activity is a direct result of ACA incentives that enhance federal Medicaid matching rates when non-institutional options are used.

Implications: Expect acceleration in the shift toward outpatient departments, skilled nursing facilities, and other lower-case settings and away from inpatient hospital care. At the same time, continued reduction in nursing home length-of-stay and growth in home health likely will occur.

2 Adopting Medicaid managed care programs

Medicaid managed care models are becoming the norm in favor of fee-for-service models.

  • 26 of the 31 states implementing ACA Medicaid expansion are using managed care organizations to cover newly eligible adults.
  • 48 states now use some form of managed care to serve the Medicaid population, including 39 states that contracted with risk-based managed care organizations to serve their Medicaid enrollees.
Implication: Expect more budget tightening as a result of this shift (managed care organizations tend to be very aggressive in ratcheting down costs; programs like competitive bidding for specific product categories are becoming increasingly common).

HIDA’s 2016 State Medicaid Report provides a state-by-state summary of Medicaid policies and changes. For more information on HIDA reports, email HIDAGovAffairs@hida.org.