Medicaid Programs Embrace Managed Care, Home Care

Repertoire Post-Acute – HIDA Insights

Medicaid Programs Embrace Managed Care, Home Care

By Linda Rouse O’Neill ,
Vice President of Government Affairs, Health Industry Distributors Association

State Medicaid programs nationwide are in the middle of three major shifts: enrollment growth, movement from institutional care to home care, and increasing use of managed care. In this month’s HIDA Insights column, we examine these trends and their impact.

Enrollment growth
The healthcare reform law 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 Affordable Care Act (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 D.C. 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.

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

Shift toward home care
Many states are moving fast to rein in hospital spending while expanding home and community-based services.

• 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.
• 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.

As a result of this trend, 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.

More Medicaid managed care programs
Medicaid managed care models are fast 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.

The growth in managed care will lead to more budget tightening as managed care organizations tend to be very aggressive in ratcheting down costs, and 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.