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Quick Take: Medicaid: 3 Key Issues to Watch in 2013

2013 will be a historic year for Medicaid with the implementation of major provisions to expand coverage and streamline enrollment in the Affordable Care Act (ACA) less than a year away, a surge in activity around care delivery reforms that seek to improve care and potentially reduce costs, and the unfolding of fiscal developments at the state and federal level. Today, Medicaid provides health and long-term care coverage to more than 60 million low-income children, adults, people with disabilities and the elderly. As a major payer of services, Medicaid also provides essential funding to safety‐net providers including hospitals and health centers that provide care to underserved communities and many of the nation’s uninsured. The Medicaid program is also the single largest source of coverage for nursing home and community-based long-term care. Medicaid is administered by states within broad federal rules and financed jointly by states and the federal government.

This brief provides a quick look at the 3 key issues that will shape the program over the next year.

1. The Affordable Care Act (ACA)

Under the ACA, Medicaid eligibility will expand in 2014 to reach millions more poor Americans – mostly, uninsured adults. The ACA will expand Medicaid’s role as a foundation for coverage for most low-income people and as the foundation of a new system of broader health coverage.

Medicaid Coverage Expansion. The ACA expands Medicaid to a national eligibility floor of 138% of the federal poverty level (FPL). The Supreme Court upheld the ACA but limited the federal government’s ability to enforce the Medicaid expansion to low-income adults, effectively making implementation of the Medicaid expansion a state choice. Many governors are making this decision in the context of their proposed state budgets for FY 2014 and state legislatures will act in the spring. For states that move forward, the federal government will fund the vast majority of the costs of the expansion, the number of uninsured will decline and states could see savings related to reductions in uncompensated care costs, shifting other state costs to Medicaid or due to broader economic effects. States that do not move forward with the Medicaid expansion could see large gaps in coverage because individuals with incomes below 100% FPL generally cannot receive subsidies to purchase coverage in the newly established health insurance exchanges and will not gain any new affordable coverage options.

Streamlined Enrollment Systems. Headed into 2013, states are continuing to press forward to develop high-performing eligibility and enrollment systems. During 2012, final regulations were released that outline new requirements for web-based, paperless, real-time eligibility and enrollment processes that will need to be in place by October 1, 2013 for existing and new coverage options beginning in 2014. For many states this will be a huge transformation from their current systems, so it is likely that there will be a transition period and continued improvements beyond the initial implementation of new systems. States also will need to shift to a uniform income eligibility standard (Modified Adjusted Gross Income or MAGI) for most coverage groups and coordinate closely with exchanges in implementing these processes to establish a “no wrong door” enrollment approach, so that, regardless of a person’s point of entry (i.e., an exchange or state Medicaid agency), eligibility is determined for all insurance affordability programs. States must meet these new requirements regardless of whether they expand Medicaid.

What to Watch:

  • How many states will implement the Medicaid expansion?
  • What will these decisions mean for coverage and costs?
  • What progress will states make in transforming enrollment systems over the next year?
  • How will new eligibility and enrollment systems be coordinated with enrollment and applications for coverage in the new health insurance exchanges?

2. Delivery System Reforms

For years, Medicaid programs across the country have been leaders in implementing delivery system reforms to coordinate care, improve outcomes and reduce costs. States are continuing to move forward with an array of delivery system and payment reforms in 2013. Along with delivery system reforms, an increase in primary care physician fees was designed to help improved access to care.

Managed Care and Care Coordination. Over the 2012 to 2013 period, a total of 40 states are adopting new managed care policies primarily by expanding managed care into new geographic areas or by adding eligibility groups. Some states like New York and Texas are implementing major expansions of managed care. Improvement in health plan performance, health care quality, and outcomes are key objectives of Medicaid managed care. Beyond managed care, states are implementing a range of initiatives to coordinate and integrate care beyond traditional managed care. These initiatives are focused on improving care for populations with chronic and complex conditions, aligning payment incentives with performance goals, and building in accountability for high quality care. Nearly all states reported that they have new care coordination efforts underway including health home initiatives, patient-centered medical homes, Accountable Care Organizations, and initiatives to coordinate physical and behavioral health or to coordinate long-term care and acute care services. These changes in care delivery may also be utilized in expanding Medicaid under the ACA.

Initiatives for Dual Eligible Beneficiaries and Long-Term Care. The Medicare-Medicaid Coordination Office (MMCO) and the Center for Medicare and Medicaid Innovation, created under the ACA, are working with states to develop new approaches to improve care for dual eligible beneficiaries. Nearly half of all states are working with MMCO on financial alignment demonstration proposals and additional states are developing alternative initiatives for duals. To date, the Centers for Medicare and Medicaid Services (CMS) finalized memoranda of understanding (MOUs) with Massachusetts, Washington and Ohio to implement demonstrations to integrate care and align financing for people who are dually eligible for Medicare and Medicaid. These three year demonstrations are authorized under Section 1115A of the Social Security Act, which allows the Health and Human Services Secretary to “test innovative payment and service delivery models to reduce program expenditures under” Medicare and Medicaid “while preserving or enhancing the quality of care furnished” to beneficiaries. States are also implementing managed long-term care models and are continuing to shift the delivery of long-term services and supports from institutional care to home and community based care.

Primary Care Physician Fee Increase. Low Medicaid physician fees, physician participation and access have been perennial concerns in Medicaid. To help shore up and enhance physician participation in Medicaid, the health reform law requires states to raise their Medicaid fees to at least Medicare levels, for family physicians, internists, and pediatricians for many primary care services in both fee-for-service and managed care settings. The primary care fee increase, which applies in 2013 and 2014, is fully federally funded up to the difference between a state’s Medicaid fees in effect on July 1, 2009 and Medicare fees in 2013 and 2014. A recent survey indicates that on average, Medicaid physician fees for primary care services will rise by 73% in 2013, but the magnitude of the increase will vary by state.

What to Watch:

  • How will managed care and other care coordination initiatives continue to develop?
  • What service delivery models will be used to cover Medicaid expansion populations?
  • What consumer protections will be put into place as part of the new models?
  • Will these initiatives improve care and save money?
  • How many more states will implement initiatives for dual eligible beneficiaries and how will these changes affect care and costs?
  • How will the primary care fee increase affect participation of providers in Medicaid and access to care?

3. State and Federal Fiscal Realities

State Fiscal Issues. States are continuing to recover from the recent recession as the fiscal outlook for states has started to improve. After experiencing the largest collapse in state tax revenues on record during the most recent recession, state tax revenues have grown for eleven consecutive quarters, but remain weak. In line with improvements in the economy, Medicaid spending and enrollment growth has slowed putting less pressure on overall state budgets. While states remain focused on cost containment, improvements in the economy allow for strategic investments. It is within this context that states will be making broader Medicaid policy changes, advancing efforts to reform delivery systems and making decisions about the ACA Medicaid expansion. Most states start their state fiscal year on July 1, so these decisions will occur throughout the spring.

Federal Deficit Reduction Efforts. Implementation of the automatic spending cuts that were scheduled to go into effect in January 2013 (the sequester) was delayed two months, but there is on-going debate about alternatives that will reduce the federal deficit. Medicaid is exempt from the sequester; however, cuts could be part of an alternate deficit reduction package. Proposals to reduce Medicaid spending have varied in tremendously in size and scope ranging from a block grant that could substantially reduce federal funds for Medicaid and fundamentally change the financing and entitlement structure of the program to more targeted program changes. While the Administration has proposed some Medicaid cuts in the past, White House officials have recently indicated that they no longer support cuts to Medicaid as states are making decisions about how to move forward on the ACA Medicaid expansion. A recent survey shows that the public continues to express a general sense of urgency about addressing the nation’s budget deficit, but most Americans resist changes to entitlement programs. The four areas where most Americans say they would not be willing to see any reductions include public education, Medicare, Social Security and Medicaid. Widespread partisan differences exist on where to cut spending with Republicans more likely than Democrats to be willing to cut spending in nearly every area, except national defense.

What to Watch:

  • What Medicaid policy changes will be included in state budgets for state fiscal year 2014?
  • Will the automatic federal spending cuts go into effect?
  • How will these changes affect state budgets?
  • If the sequester is avoided, what alternate federal deficit reductions will be put into place and what will be the effect on Medicaid and state budgets?

For More Information See the Following Kaiser Family Foundation Resources:

Getting into Gear for 2014: Briefing, Survey Examine 2013 Data From 50-State Survey of Medicaid and CHIP Eligibility and Enrollment Policies, January 2013. http://www.kff.org/event/getting-into-gear-for-2014-briefing-survey-examine-2013-data-from-50-state-survey-of-medicaid-and-chip-eligibility-and-enrollment-policies/

Medicaid Today; Preparing for Tomorrow A Look at State Medicaid Program Spending, Enrollment and Policy Trends Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2012 and 2013. October, 2012. http://www.kff.org/report/medicaid-today-preparing-for-tomorrow-a-look/, Fact Sheet: http://www.kff.org/fact-sheet/state-fiscal-conditions-and-medicaid-program-changes/

Medicaid Home and Community-Based Service Programs: 2009 Data Update. December, 2012. http://www.kff.org/report/medicaid-home-and-community-based-service-programs/

How Much Will Medicaid Physician Fees for Primary Care Rise in 2013? Evidence from a 2012 Survey of Medicaid Physician Fees. December 2012. http://www.kff.org/issue-brief/how-much-will-medicaid-physician-fees-for/

Explaining the State Integrated Care and Financial Alignment Demonstrations for Dual Eligible Beneficiaries, October 2012. http://www.kff.org/issue-brief/explaining-the-state-integrated-care-and-financial/

The Public’s Policy Agenda for the 113th Congress, January 2013. http://www.kff.org/poll-finding/the-publics-policy-agenda-for-the-113th-congress/