How does reform's Medicaid provision impact payers?

States that refuse to expand Medicaid won't get new federal funding

Although the Supreme Court largely left the health reform law intact and constitutional, it made a minor change to the Medicaid expansion provision. Namely, the high court decided that the federal government can offer funds for states to expand Medicaid coverage to new individuals and that states accepting such funds must obey by the accompanying rules. However, the federal government can't withhold all Medicaid funds from states that refuse to expand their Medicaid population.

The Medicaid expansion outlined in the reform law will take effect in 2014, covering people who make up to 133 percent above the poverty line. The federal government will pay 100 percent of the cost for three years and 90 percent of the cost thereafter.

Experts disagree whether states will take the money and expand Medicaid eligibility or leave the cash on the table.

"Many states, maybe most, will decide that they simply cannot afford to choose to expand Medicaid," Sen. Lamar Alexander (R-Tenn.) told The New York Times. "If I were governor of Tennessee, I would not expand Medicaid as the program is currently run."

On the other hand, Alan Weil, executive director at the National Academy for State Health Policy, said he thinks "most states will go ahead" and expand Medicaid. "Even without the stick [of withholding all Medicaid funding], there's still a very strong carrot" in the form of a "very favorable match rate," he told AIS Health. "And I think providers and citizens will find it hard to understand why a state would leave all these people uninsured if they have an opportunity to provide them with coverage at no state taxpayer cost."

But despite the uncertainty surrounding Medicaid expansion, "it's potentially a very fruitful, very opportunity-filled landscape for plans that already have care management capabilities appropriate to the Medicaid population," Mark Lutes, attorney with Epstein Becker & Green, told FierceHealthPayer. Therefore, he recommended that insurers track states' Medicaid activities and help work with state policymakers to bring a solution to the market, including encouraging a switch to private managed care.

"From a managed Medicaid population perspective, it's a very active time," and health plans operating in the Medicaid market have "a lot of public policy work to be doing right now" if they want to be considered by the increasing number of states that are putting additional portions of Medicaid enrollees into coordinated care plans, Lutes said.

"That sector has the potential to become even immensely more attractive and interesting" for insurers, he added, because the risk-adjusted payment per member, per month to handle those enrollees will be "relatively rich." So there's a "large opportunity to make a decent return for those health plans that are able to design care management programs that can deliver quality care for less than the large premium," Lutes said.

To learn more:
- read the AIS Health article (registration required)
- see the New York Times article

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