Next for Medicaid Overhaul: Cost Sharing, Work Requirements

By Victoria Pelham

The future of the Medicaid program is likely to involve smaller-scale tweaks to states’ programs, such as work requirements for enrollees and more cost-sharing.

The safety-net insurance that covers 74 million people will likely see continued scrutiny, even though Obamacare repeal has stalled, sources told Bloomberg BNA. The changes to Medicaid are expected to be driven instead largely by state waivers. This comes after House GOP leaders pulled from consideration the American Health Care Act and the $880 billion it would have slashed from Medicaid through federal spending caps and a scaling back of the expansion.

What might not be at stake this time around? “One of the key lessons from last week is Medicaid expansion funding is baked into state budgets and has become a critical source of coverage; it’s clearly one of the issues that blew up the health debate,” Jocelyn Guyer, a managing director with Manatt Health, told Bloomberg BNA March 27.

Changes from here on out “certainly will be more evolutionary than revolutionary,” Jerry Vitti, president and CEO of Healthcare Financial Inc., told Bloomberg BNA March 27. “My expectation is that we’ll put aside these draconian measures and that the Medicaid program will go more towards … the Indiana model,” he said.Vitti’s firm works to help connect low-income beneficiaries with disability benefits.

‘Primary Vehicle.’

The Hoosier state chose in 2015 to grow Medicaid coverage to include families living up to 138 percent of the poverty level. It now covers about 400,000 people. But the highly contentious and first-of-its-kind Healthy Indiana Plan 2.0 did so by including many unique and more restrictive features—features that some patient advocates see as complicated obstacles to care with little return from the average consumer.

For example, beneficiaries pay into their own Health Savings Accounts, must contribute with premiums and copayments, are locked out of eligibility for six months for failing to do so, receive coverage based on tiered eligibility groups and are offered incentives for healthy lifestyle choices. Proponents of HIP 2.0 say these measures encourage enrollees to take greater personal responsibility for their care.

With Seema Verma, the waiver’s architect, now in charge of approving waiver requests as administrator of the Centers for Medicare & Medicaid Services, and Brian Neale, another driver of Indiana’s Medicaid expansion, said to be next in line to head up Medicaid and CHIP operations, Medicaid programs around the country could begin to echo Indiana, experts believe, even without federal legislation.

The Section 1115 demonstrations will likely become the “primary vehicle” for Republican administration ideas, Guyer said, and will be greeted with a far different response than they experienced from the Obama administration. Medicaid leaders in the previous administration opted continually to reject work-requirement provisions.

These work requirements were incorporated into the GOP’s failed repeal-and-replace proposal.

Guyer expects the heightened, impassioned debates over Medicaid in recent months to be channeled into quick, growing action on the waiver side, with decisions taking weeks, not months, for “notable” changes.

Vitti said the decision to scrap the Affordable Care Act repeal bill averted a “disastrous” gutting of the Medicaid safety net, especially for disabled patients. However, the “free market-like” initiatives still at play put a target on able-bodied and childless adults and would jeopardize the program as it currently exists, he said.

“That’s problematic because so many of the childless adults have pent-up health needs, and there’s a lot of underlying psychiatric and substance abuse issues intertwined with that subset of the Medicaid membership,” he said. “They’re very costly both from a health expenditure point of view, but also if you don’t get folks treatment, you’re asking jails and prisons to be the mental health entity and treatment center.”

He added that market-oriented overhauls to Medicaid will mean more churn for the Medicaid rolls with enrollees going on and off the health plans and benefits. That makes it difficult for firms like Vitti’s or Medicaid agencies to continue offering case management services, which keep vulnerable patients healthy and out of emergency rooms.

A homeless patient who has a substance abuse disorder, for example, will likely struggle more with filling out paperwork than “maybe a mom in a more stable family environment,” Vitti said.

Shifting Focus to States

Governors actively attempted to steer the federal health-care reform debate, ahead of the AHCA.

On March 16, the governors of Ohio, Michigan, Nevada and Arkansas—all Republicans—told Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Paul Ryan (R-Wis.) in a letter that they supported efforts to revamp Medicaid. But they disapproved of the AHCA, instead proposing their own plan that included elements such as cost sharing and CHIP-like block grant coverage of the expansion population.

"[The AHCA] provides almost no new flexibility for states, does not ensure the resources necessary to make sure no one is left out, and shifts significant new costs to states,” the governors wrote, adding their ideas would address “issues of equity for expansion and non-expansion states.”

“We stand ready to work with you to develop a proposal that is both fiscally sound and provides affordable coverage for our most vulnerable citizens,” the state leaders said at the time.

Instead, the GOP pushed forward full steam ahead with the American Health Care Act, which ultimately did not reach a vote.

Guyer, with Manatt Health, noted that lawmakers did check in with governors, but the final product “didn’t really reflect their priorities” and “clearly didn’t match what they felt their constituents needed and wanted.”

“Next time around, they might be more closely involved in designing proposals and options; if anything they’ll want to play a stronger role,” she said.

And because they’re on the ground, they likely will know better what will work politically, especially given the pivot to waivers as a focus.

Some of the discrepancy in the last debate boiled down to expansion, she noted, given that both Republican- and Democratic-led states (31 of them and the District of Columbia) chose to expand their Medicaid programs under the Affordable Care Act.

The stalled AHCA conversation revealed that a complete return to bare-bones, temporary stopgap coverage for children, pregnant women and disabled people, as some projected under a Trump administration, won’t happen, she said.

“Its role now is broader, and … they’ve really come to value that coverage,” Guyer said.

“It’s now central to what states do including all the work they’re trying to do on the opioid epidemic and mental health issues,” she said. “It’s too important to unravel at this point.”

Moving Ahead

The latest battle means the legislative focus will likely take a back seat for now, analysts expect.

Medicaid financing changes such as block grants or per-enrollee ceilings, which have been considered by the GOP for decades as a possible push for sustainability, can’t come under waivers. But the ideas will likely simmer under the surface only to re-emerge in future conversations, possibly as part of a Children’s Health Insurance Program financing bill expected later this year or part of tax reform.

Vitti noted that, given the large amount of dollars in Medicaid and an aging baby boomer population, costs will continue to climb.

The Congressional Budget Office projects federal Medicaid spending, already on the rise, to grow from $334 billion in fiscal year 2015 to $624 billion by 2026, sharpening GOP concerns of the program’s long-term viability.

“This will be an ongoing process to try to change the financial equation in some way just because the dollars are so compelling,” he said. “In many ways, the conversation’s about following the dollars.”

Hemi Tewarson, program director for the National Governors Association’s health division, told Bloomberg BNA March 28 that a newly launched Governors’ Bipartisan Health Reform Learning Network (announced on March 21) will continue to work over the next 12 to 18 months on state priorities, goals and analytics with changes they would like to make to both Medicaid programs and health insurance markets. There are currently 14 states in the network: seven led by Democrats and seven by Republicans.

In future, if there is another health reform conversation, they’d like to be “part of the fabric,” Tewarson said. But in the meantime, the states will likely be looking at improvements in areas like health outcomes, quality and cost.

And they’ll be doing so more through administrative action. “Frankly, that will be a lever that can be pulled more quickly,” she said.

Administrative flexibility could lend “potential … or partial solutions.”

“Time will only tell about other budgetary considerations,” she said.

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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