Paying for Cures — Medicaid’s Next Financing Test

In this episode of The 80 Million Podcast, Manatt Health Senior Managing Director and 80 Million Editor Patti Boozang speaks with Professor of the Practice at Princeton University’s School of Public and International Affairs and State Health and Value Strategies Director Heather Howard and Manatt Health Partner Allison Orris about what H.R. 1 implementation looks like on the ground as states build against a moving target and work to minimize avoidable coverage losses. Authors: Heather Howard and Allison Orris Editors: Patti Boozang and Amanda Eisenberg tl;dr * Last year’s reconciliation law made unprecedented cuts to Medicaid that will shape the program and our health care ecosystem for years to come. States are building against a moving target even as their implementation efforts are well underway — such as stripping Medicaid coverage from certain lawfully present immigrants as required by H.R. 1 and operationalizing work reporting requirements, more frequent eligibility redeterminations and limits on retroactive eligibility that take effect in January 2027. * States are adapting their systems and policies to major, late-breaking policy changes in the administration’s work reporting requirements rule. At the same time, they are making critical policy and budget decisions as federal rules governing Section 1115 demonstrations, provider taxes, and state-directed payments continue to evolve ahead of key implementation deadlines. * Coverage losses are a major part of the story. Rising uncompensated care and financing changes made by H.R. 1 will also put pressure on Medicaid agencies, providers and state budgets in ways that will be broadly felt beyond people enrolled in Medicaid. * This next year will generate critical evidence. Hard data could take longer but providers will soon see evidence of rising coverage losses and uncompensated care. Other early indicators — most especially enrollees’ experiences navigating new systems — can help policymakers understand how implementation is working in practice. The 80 Million Impact H.R. 1’s Medicaid changes are arriving in waves, but states are already feeling the cumulative pressure as they prepare to implement various provisions of the law and consider how they will respond to the fallout from rising uninsurance, uncompensated care and budgetary constraints. The law cut nearly $1 trillion in federal Medicaid funding over the next decade, making major structural changes to significant parts of how the program operates. Although some of its biggest provisions do not take effect until 2027 or later — and federal guidance on some provisions is still pending — states have been working to implement these changes at record speed because of tight timelines and high stakes for their enrollees. Getting ready to implement the new Medicaid work reporting requirement in states that expanded Medicaid has garnered significant attention over the last year. There are other near-term changes that states have also been preparing for by updating eligibility systems, communicating with enrollees and providers, and by forecasting how changes will impact their budgets. Beginning Oct. 1, federal Medicaid funding was eliminated for certain categories of lawfully present immigrants. The effects could extend beyond the individuals who lose eligibility. Confusion about the new rules, coupled with new public charge rules, may discourage eligible family members, including children, from enrolling or staying covered. At the same time, the federal matching rate to help Medicaid expansion states cover the cost of emergency Medicaid services for some immigrants who are not eligible for Medicaid was reduced. More changes will arrive in January. In addition to work reporting requirements, Medicaid expansion adults will move from annual to twice-yearly eligibility redeterminations, creating two opportunities each year for eligible people to lose coverage because of paperwork problems or other administrative issues. Retro

The Affordable Care Act (ACA) fundamentally changed American health care — expanding coverage, establishing consumer protections that are now broadly expected, and helping cement the idea that access to health care is a basic human need rather than a privilege tied to health status, gender or income.

Americans are rapidly aging, which is accelerating the demand for the long-term services and supports (LTSS) necessary to their care, as well as the care of a diverse range of children and adults with disabilities. Medicaid is the primary payer for LTSS. Since the early 1980s, that coverage has included home and community-based services (HCBS), which have proven better for health, less expensive and what most people prefer over institutional care. HCBS now make up almost two-thirds of long-term services and support spending, double the rate in 2001.

The scale of federal retrenchment is no longer theoretical. In Massachusetts alone, the state is bracing for an estimated $3.5 billion annual loss in federal Medicaid funding once H.R. 1 is fully implemented, against a total Medicaid budget of over $20 billion. Even with aggressive mitigation, the state could still see about 300,000 residents lose coverage.

The evidence that addressing social needs like food and transportation improves health outcomes and reduces Medicaid costs is no longer theoretical. We’ve seen recent data from two efforts: North Carolina’s Healthy Opportunities Pilots (HOP) generated $164 in savings per member per month, according to a new, multiyear evaluation of 31,000 Medicaid enrollees by the Sheps Center at University of North Carolina. The Centers for Medicare & Medicaid Services (CMS) Accountable Health Communities model showed 3%–4% reductions in total cost of care through screening and navigation alone.