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Meeting the Challenge of Medicaid Expansion

  • States need a clear understanding of the expanded Medicaid population, especially low-income childless adults about which there is limited information for analysis.
  • Studies show that compared to low-income parents, poor childless adults are likely to have more health care needs.
  • Understanding the significance of including health care needs and associated cost of low-income childless adults, UnitedHealthcare has begun planning to best serve the expanded Medicaid population.

Understanding the need is critical for success

For states to plan ahead and be ready to serve the expanded Medicaid population, they must have a clear understanding of exactly who this population is and what their projected needs are likely to be. However, available data relating specifically to low-income childless adults is limited, because this population has not typically had health insurance and so their service use has not been systematically tracked.

In theory, it may seem logical to compare childless adults with other non-disabled adults who are currently covered by Medicaid or already enrolled in government-sponsored health care programs like Temporary Assistance for Needy Families (TANF) or Children's Health Insurance Programs. But, in practice, this is not the best basis for comparison because the majority of these people are relatively healthy parents of young children.

Key differences are highlighted in the Center on Budget and Policy Priorities (CBPP) study, which was based on national data from the U.S. Census Bureau's 2009 Current Population Survey and the 2007 Medical Expenditure Panel Survey (MEPS). The results showed that, compared to low-income parents, poor childless adults are likely to have significantly higher health care needs, to be in poorer physical health, and to have a higher incidence of serious chronic health conditions, as well as mental illness and substance abuse issues. The study also estimated that 35 percent of poor childless adults are likely to have been uninsured for at least a year, which indicates that this population may exhibit a high pent-up need to address pre-existing conditions that have gone undiagnosed and untreated.

Lessons learned from selected states
Additional insight can be gained from states that have already included low-income childless adults in their state-funded programs. These experiences provide valuable information regarding the specific characteristics, projected health care needs and associated costs of caring for new Medicaid enrollees. Recognizing this, UnitedHealthcare participated the 2010 study by the Center for Health Care Strategies (CHCS), which analyzed actual utilization and health care costs in 10 such states. Documenting the experiences of these expansion states represents an important data point in our planning efforts, but the reader should be careful in extrapolating these results since enrollment policies vary across states.

To summarize the combined findings of Arizona, Indiana, Oregon, Pennsylvania and New York, per-member, per-month health care costs for childless adults appear likely to be 1.5 to 2 times as high as for parents enrolled in TANF programs. In Oregon, childless adults were twice as likely to visit emergency rooms, twice as likely to need inpatient admission, and required as many as three times the number of mental health and substance abuse related visits. In Indiana, they incurred twice the costs for prescription drugs. While specific experiences varied from state to state, in each state, childless adults at the lower end of the poverty level had disproportionately high health care costs. In fact, in one state, the cost of care for those who were below 78 percent of FPL was nearly four times higher than for childless adults who were between 78 and 100 percent of FPL.

Both the CBPP and the CHCS studies provide a strong indication that a significant number of new Medicaid enrollees will have multiple comorbidities and require higher than average service utilization. As part of our readiness activities, UnitedHealthcare has already begun critical planning based on the research presented above.

The expansion of Medicaid will have a profound effect on our nation's health care system. The dramatic and rapid increase in enrollment will include a large population of low-income childless adults who are likely to be relatively high-need, high-cost beneficiaries. As a result, there are important issues—including estimating ongoing enrollment, establishing rates and delivering care—that states will need to consider if they are to effectively meet the demand and ensure a successful transition to expanded Medicaid in 2014 and beyond.

Those with the highest need are likely to enroll first
Although the expanded Medicaid population will ultimately include a mix of healthy and chronically ill individuals (indeed, some research studies have suggested that a large number of younger males are in the uninsured pool), certain factors increase the likelihood that those who enroll first will also be those with relatively high health care needs and costs. Hospitals, emergency rooms, clinics, and other providers who currently serve low-income adults without dependent children are likely to encourage these patients to sign up right away. Retroactive eligibility, which enables hospitals and emergency rooms to obtain reimbursement for services provided to Medicaid enrollees for up to three months prior, provides an added incentive to enroll people who are in critical need of care. And states that currently provide health care services to low-income childless adults will presumably transfer these beneficiaries to Medicaid.

Conversely, healthy low-income adults may not feel any urgency to enroll immediately as they have no pressing health conditions compelling them to do so. In addition, the proposed tax penalties would only apply to those with incomes approaching the FPL qualifying cutoff, and at a maximum of just $951 for 2014, this penalty may not provide sufficient incentive. Therefore, it will be important for states to develop effective outreach strategies to encourage healthy individuals to enroll and help aggregate costs by balancing the risk pool.

Predicting costs and improving efficiency
Based on our analysis of the experiences of states that already serve childless adults, studies suggest that the average cost of care for new Medicaid enrollees is likely to be higher than for adults in TANF programs but lower than for those in the Supplementary Security Income and disabled populations. This conclusion is consistent with the opinion of PricewaterhouseCoopers, Oregon's long-time Medicaid actuary and a consultant to Wisconsin on its BadgerCare Plus Core Plan for adults with no dependent children. The company estimated that, if benefit packages were comparable, the costs for low-income childless adults would be approximately halfway between those of non-disabled and disabled adults.2

Although this projection would seem to be a prudent starting point for estimating costs, managed care organizations (MCOs) will play a crucial role in helping states succeed in keeping actual costs in line. Initially, the federal government will cover 100 percent of the cost of caring for Medicaid enrollees. However, the experience of MCOs in serving complex populations, and having a proven ability to improve efficiency, will become increasingly important—especially after 2017, when states start sharing the expense.

New enrollees require a new clinical model
Research suggests that besides suffering multiple chronic health conditions, a significant proportion of childless adults may also be struggling with mental illness and substance abuse, as well as a wide variety of lifestyle challenges ranging from housing, employment and transportation to interactions with the criminal justice system. All these issues will need to be taken into account and addressed when developing effective care management strategies for this population.

Integrating physical and behavioral health care services, as UnitedHealthcare does in the Tennessee Medicaid Managed Care program, represents an example of the strategies that states and health plans may want to consider.

Ensuring adequate network capacity to provide care
Another critical issue will be to ensure that MCOs' provider networks can offer sufficient capacity to support the needs of the expanded Medicaid population. The requirement that Medicaid rates for primary care providers (PCPs) be increased to match Medicare in 2013 will help expand the infrastructure prior to the 2014 launch.

The need for planning to provide adequate access to care applies not only to PCPs but also to specialty care services, given the likely high prevalence of mental illness and substance abuse among low-income childless adults.

Seamless coverage for continuous care
Providing consistent and continuous care will be essential to help Medicaid beneficiaries better manage their illnesses, improve health outcomes and reduce ongoing costs. However, for many new enrollees—especially those at the higher level of the income qualification spectrum—the need for Medicaid may only be temporary. Changes in employment status, income and family circumstances will likely create a significant churn rate as people transition back and forth between Medicaid and private insurance plans. UnitedHealthcare is actively working to develop product offerings and solutions that will address this need.

Although the exact requirements governing the "benchmark benefits" for Medicaid have yet to be finalized, the relationship between the benefits offered by Medicaid and those offered by health plans on the newly formed health benefit exchanges will be an important consideration to help maintain continuity of care. Including health plans that serve both Medicaid and commercial populations in the exchanges could facilitate seamless coverage for those leaving and returning to Medicaid and thus avoid any disruption in service.

Next steps
There is no doubt that the expansion of Medicaid is an enormous undertaking. Given the volume, characteristics and specific needs of the expanded Medicaid population, it will require careful planning to: 1 design appropriate benefit packages and delivery systems; 2 allocate sufficient resources and set adequate rates; 3 develop effective outreach and enrollment strategies; and 4 ensure adequate network capacity to facilitate access to care.

However, as big as the challenge may be, so too is the potential reward in providing universal coverage and access to quality health care for the vast majority of uninsured Americans.

As we move toward 2014, UnitedHealthcare is eager to work with states to assess their specific needs and develop strategies to support the successful implementation of Medicaid expansion.

Within the scope of this article, it is only possible to provide an introduction to the challenges and potential solutions associated with the expansion of Medicaid. For more detailed analysis, please access the studies referenced using the links below.

  1. 2010 CHCS Study: Covering Low-Income Childless Adults in Medicaid: Experiences from Selected States
  2. Center on Budget and Policy Priorities (CBPP) study
  3. The penalty rises to $325 in 2015 and $695 in 2016, but with a ceiling of 2 percent of taxable income in 2015 and 2.5 percent in 2016.
  4. J. Verdier, of Mathematica Policy Research, Inc., telephone conversation with S. Hunt, of PricewaterhouseCoopers, LLC, May 5, 2010.