The Centers for Medicare and Medicaid Services (CMS) has answered some questions about how Arkansas’s creative plan to expand Medicaid under the Affordable Care Act (ACA). The plan, which Gov. Mike Beebe put forward, would use federal Medicaid expansion money to give premium subsidies for Medicaid beneficiaries to enroll in Qualified Health Plans (QHP) on the Health Insurance Exchanges (HIX). Arkansas officials believe the plan will reduce its administrative burden for Medicaid, reduce churning between Medicaid and QHPs, and provide better consumer access to provider networks. The CMS guidance said it might offer some, though not many, three-year waivers for states who want to follow Arkansas’s lead.
But many important details of the plan remain unclear. A big one is the question of whether QHPs can be as affordable as traditional Medicaid coverage. Having more people enroll in exchange health plans is likely to bring down the cost of those plans. But the Medicaid provider reimbursement rates are far below what private health plans pay providers, with Medicaid usually paying at least 40 percent less. Even with many more enrollees, QHPs are likely to be more expensive than traditional Medicaid and Medicaid managed care.
I came up with an idea for how states such as Arkansas can use CMS’s actuarial value calculator for QHPs to keep Exchange-based Medicaid costs in line with traditional Medicaid and Medicaid health plans. Read that post here: A way to lower premiums under Arkansas Medicaid Expansion Plan.
Many More Issues for Medicaid Expansion Through HIX:
Affordability is not the only unresolved issue for this new approach to the ACA Medicaid expansion. A recent Milliman brief does an excellent job at going through some of the additional considerations for the Arkansas Medicaid plan. Other states are considering whether to follow Arkansas’s lead, such as Tennessee and Ohio, which makes resolving these issues all the more important.
Medical Loss Ratio: Plans in the exchanges are required to have medical loss ratios of 80 percent or more, meaning they must spend 80 percent of premiums on clinical services and quality improvement. That might be an issue for some Medicaid health plans interested in serving Medicaid beneficiaries on the exchanges, though the average medical loss ratio for Medicaid health plans in 2011 was about 85 percent.
Demand for Services: The Medicaid expansion, HIX, and ACA requirement for most people to purchase health insurance will drive up the demand for services from hospitals, physicians, pharmacies, and other providers. It is possible, given the increased demand and the tight supply of providers, that providers will no longer want to accept Medicaid’s lower reimbursement rates, which is yet another reason why the affordability issue is complicated.
Reinsurance, Risk Corridors, Risk Sharing: There are three ACA risk adjustment programs to transfer money from health plans with relatively healthy enrollees to ones with relatively unhealthy and expensive enrollees. The risk adjustment programs are intended to counterbalance the ACA’s restrictions on charging higher premiums for groups of people who tend to be more expensive to cover, such as women and older people. Under an Arkansas-style plan, it is unclear whether plans with Medicaid beneficiaries would be part of the ACA’s risk adjustment programs. Medicaid beneficiaries tend to have higher morbidity, and therefore are more expensive, compared to private health plan enrollees. So including them in the risk programs could drive up costs for everyone.
Medicaid Drug Rebate Program: Federal mandatory rebates and state supplemental rebates result in substantially lower Medicaid costs for prescription drugs. Today, these large rebates apply to Medicaid drug utilization, whether through fee-for-service or Medicaid health plans. Will QHPs be able to access these deep rebates for drug utilization by their Medicaid members? If not, this would add an additional cost compared to traditional Medicaid managed care.
To read the full brief, see here.