Medicaid Managed Care Plans Push Sustainability

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By Victoria Pelham

Managed care plans are hoping they can help shape the future of Medicaid, now that efforts to make large cuts to Medicaid have stalled in Congress.

Medicaid, the federal-state program that provides health coverage to a largely poor population, is “not fully sustainable,” Jeff Myers, president and chief executive officer of the Medicaid Health Plans of America, told Bloomberg BNA Aug. 21. The program’s problems need to be addressed “and there are some big challenges ahead,” Myers said. “Plans are now very focused on, how can we demonstrate we are effective stewards of the taxpayer dollar and how can the program exist over time in a way that is sustainable?”

Insurance companies offering managed care plans include Aetna, Centene, Cigna HealthSpring, Meridian Health Plan, UnitedHealthcare, and WellCare Health Plans.

Myers said the failure of recent Republican bills to repeal and replace Obamacare, which the MHPA didn’t support, underscores how important Medicaid is in today’s health-care landscape. Those proposals would have stripped Medicaid of more than $800 billion over a decade through spending ceilings and by winding down the Affordable Care Act’s coverage expansion, in return for greater state flexibility.

But with those ACA efforts dead—at least for now—and a greater understanding of how Medicaid works, managed care now sees an opportunity to pursue reforms that would control spending in the $550 billion-and-growing safety-net health insurance program without sacrificing care. The MHPA is turning its attention to three key drivers of spending: high drug costs, behavioral health, and long-term care, Myers said.

Handling Pressures

Medicaid now covers more than 77 million people, more than any other health program including Medicare. At least 60 percent of the Medicaid population is covered through a comprehensive managed care plan instead of traditional fee-for-service, according to the Medicaid and CHIP Payment and Access Commission. Medicaid is a primary insurer for childbirth, substance abuse treatment, and nursing home care, paying for two out of three nursing home beds for seniors. Further, the Affordable Care Act’s expansion of Medicaid, which not all states adopted, added some 11 million newly insured to the rolls.

“It’s no longer a small program that can just be tinkered with,” Myers said. “When you start changing the program it really does have major impacts in a lot of areas that maybe would not have been focused on before.”

Recent attempts to overhaul the Medicaid funding mechanism to block grants or per-capita caps have drawn that reality into the light. Medicaid directors and plans have taken notice of increased public awareness and support for the program in the days following the repeal-and-replace frenzy.

But Medicaid’s vast, critically important role in modern health care means that its current design won’t carry it into the future, Myers warned.

The Congressional Budget Office has estimated that federal spending under Medicaid will reach $624 billion by 2026. That’s up from around $349 billion in federal spending on Medicaid in fiscal 2016, according to the Kaiser Family Foundation. The foundation also estimates that the federal government paid 63 percent of the total medicaid tab in 2016.

The Long-Term Care Puzzle

Brian Rye, a Bloomberg Intelligence health-care policy analyst, called long-term care especially a “ticking time bomb” for Medicaid that, as baby boomers start to age, needs to be tackled.

Managed long-term services and supports cost Medicaid $29 billion in fiscal 2015, up by 24 percent ($6 billion) from fiscal 2014 and 182 percent ($18 billion) from 2012, according to a Truven Health Analytics report.

Myers said MHPA is developing policy suggestions to assist Congress on efforts to address long-term care spending. Those conversations will carry through the end of this year and into 2018, he said.

He also pointed out additional concerns about the quick approach of the debt ceiling, which needs congressional action by the end of September, and if efforts to address it will include entitlement reform. All of these worries are amplified by the fact that Medicaid is “counter-cyclical,” he added, meaning that the demand for Medicaid goes up during recessions while the funds to pay for it go down. When the next economic downturn rolls around, Medicaid will come into the spotlight again.

“Medicaid because of of its size ... and its growth means Congress and the administration need to address it,” Myers said. “It’s going to be a continual dialogue for the foreseeable future.”

Congressional Action

Congress faces pressure to act on health care, but Rye said Republican lawmakers are “stuck between a rock and a hard place.”

The ACA repeal-and-replace debate isn’t over yet, he warned, and will likely continue in September when Congress returns. Too many Republicans made getting rid of Obamacare a cornerstone of their campaign platforms to ignore it and could face backlash if they don’t make progress.

Rye sees at least one last major legislative push to try to get a bill over the finish line.

But Republican efforts to overhaul the Medicaid safety net under a health-care bill have proven less popular and will be a “tough political hurdle” in any last stand.

Still, Rye said the conversations have helped to lay the groundwork for managed care to pursue its policy priorities.

Drug Costs

MHPA will focus next on policy suggestions for reining in drug costs within Medicaid, including a proposal coming within the next few weeks from the managed care industry to overhaul the Medicaid drug rebate program, Myers said. The National Association of Medicaid Directors also has backed addressing high drug costs within Medicaid as a priority for improving the program.

Additionally, MHPA is looking at efforts to better integrate behavioral health care in the next year. Myers noted that about one in five Medicaid enrollees have a serious mental health or substance abuse problem, and a further estimated one in five have a similar issue but are undiagnosed.

Rye said if Medicaid’s funding is changed, it could boost demand for Medicaid managed care arrangements that would be business opportunities for managed care plans. States will be looking for managed care arrangements that offer more narrow networks and cut costs without hurting enrollment criteria or decreasing provider reimbursements, which is less popular. That will leave a void “for companies who specialize in trying to tie networks together and reduce cost. If they can demonstrate their value, I think they’re going to have very willing potential customers under that scenario, because these state Medicaid directors are going to be looking for help.”

But even if congressional efforts to put Medicaid on a diet fail in the long term, under current law states will still be expected to shoulder more of the responsibility over time for their Medicaid expansion enrollees, Rye noted.

“The monetary pressures are going to be there one way or another,” Rye said. “There’s an interest in anyone who can help provide [state officials] with a solution to making politically mean decisions,” he added.

To contact the reporter on this story: Victoria Pelham in Washington at

To contact the editor responsible for this story: Brian Broderick at

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