Is Medicaid Managed Care At Risk?

18 Jun Is Medicaid Managed Care At Risk?

The AHCA , which narrowly passed in the House of Representatives, aims to cap federal Medicaid funding. The drastic reduction in funding could potentially put an end to Medicaid Managed Care as we know it. Converting the open-ended entitlement program to a system of per capita caps or block grant payments would make it very difficult for Medicaid managed care plans to continue to operate. The CBO estimates, that over a ten-year period, federal Medicaid spending would be reduced by $834 billion.

States that did not end their Medicaid expansion programs could potentially see an increase in enrollment. According to Joe Moser, “States are going to look for what gives them budget predictability, and that’s what managed care does. You will see more states expanding their managed care populations to more critical populations.”  PwC currently estimates that 73% of Medicaid beneficiaries are covered by Medicaid managed care; however, this does not account for those in need of long-term care or the disabled. It is easy to assume that by shifting these groups to managed care; states could reduce costs as federal funding starts to dry up. Ari Gottlieb, of PwC stated, “A per capita cap could accelerate the trend of managed care.” Still, insurers argue that the proposed fixed-payment formula will put plans at risk. They vehemently disagree that the formula would provide adequate resources for an unexpected economic downturn, new public health needs, or new prescription drugs and treatments.

Under the bill, the baseline for state’s per-capita beneficiary group spending would be based off of the 2016 fiscal year. Payments would rise yearly at the rate of the Medicaid component of the CPI. The elderly, blind, and disabled payments would also increase at CPI plus one percentage point. Medicaid spending in 2016 reached $548 billion. The consulting firm, Health Management Associates calculated that Medicaid managed care spending went from $238 billion in 2015 to $269 billion in 2016.

Anna Gupte, an analyst at Leerink Partners, believes that the 2016 baseline will make it more likely that states will cut payment rates to managed care plans if costs or enrollments increase. Medicaid plans’ operating margins average around 2%. “I expect margin compression as states claw back rates in Medicaid to offset the funding pressure from the rollback in Medicaid funding and a move to per capita caps.”

Insurers are looking to the Senate for a revision in the AHCA’s framework for federal Medicaid payments to the states. More specifically, they would like the calculating baseline year to adjust every two years. Additionally, insurers want states to be required to follow federal actuarial soundness in setting payment rates to Medicaid plans. John Lovelace, president of UPMC, stated, “The concept of a per capita cap is fine. It’s a devil in the details conversation.

The situation could be critical if there are no protections in place and the bill passes without revisions. Meg Murray, CEO of ACAP, whole-heartedly opposes the House bill’s Medicaid provisions. “What we’re worried about is that plans wouldn’t be able to survive. It could end up fundamentally undermining the Medicaid managed care system and all the good things that have come out of it.”