Katie is the Director of Health Policy at ML Strategies in the firm’s DC office. She primarily provides advice and guidance on issues relating to Medicaid, Medicare, and dually eligible beneficiaries.

In a February 24th blog post, we described Medicaid block grants and per capita caps in terms of A x B = C to demonstrate how those payment policies work.  ‘A’ is the amount a state is paid per beneficiary, ‘B’ is the number of beneficiaries in a given state, and ‘C’ is the total state payment from the federal government.  We have since been asked by numerous providers to describe the nuts and bolts of how a per capita cap, the current Medicaid financing structure in the proposed American Health Care Act, would work.  For the Medicaid provider, the nuts and bolts of how they are paid would change very little while the amount they are paid might change a lot.  Continue Reading Provider Payments Under a Medicaid Per Capita Cap

On March 6, House Republicans revealed The American Health Care Act. It is their plan to repeal and replace the Affordable Care Act. The bill changes the structure of Medicaid financing from the Federal Medical Assistance Percentages (FMAP) system, in which states and the federal government each pay a percentage of Medicaid funding, to a per capita system.

Under current law, states get paid by the federal government for their Medicaid programs based on the amount of services they provide.  As we stated in a previous post, that has created an incentive for states to use supplemental payment streams to maximize per service revenue.  Under a per capita cap, states will be paid based on population.  They get paid for every person on their Medicaid rolls regardless of the amount of services the individuals use.  Therefore, states will now have an incentive to maximize their rolls.

This creates what we will call “The Walking Dead problem.” Continue Reading The Walking Dead in Medicaid

money_388130419Currently, state Medicaid programs have flexibility in developing payment policies, including utilizing supplemental payments and non-federal supplemental payment mechanisms. Supplemental payments pay providers above what they receive for an individual service through Medicaid provider rates.  Supplemental payments include disproportionate share hospital (DSH) and upper payment limit (UPL) payments and are a critical funding source for many safety net providers. States can fund the non-federal share of these payments through intergovernmental transfers, provider taxes, and certified public expenditures.

However, there is limited transparency and data available on supplemental payments. As a result, states can use these funding structures to increase their total federal Medicaid match. The total percentage of federal funding for each state’s Medicaid program is often referred to as the effective Federal Medical Assistance Percentage (FMAP). However, due to data limitations on supplemental payments, we do not know what any state’s effective FMAP actually is.

The American Health Care Act is the House Republican bill to repeal and replace the Affordable Care Act. Its details became available March 6th. This bill changes the structure of Medicaid supplemental payments, with the exception of DSH payments. States’ reaction to the bill will tell us more about Medicaid supplemental payments than we’ve ever known, and whether the financing system in the proposed bill will provide equivalent federal funding. Continue Reading Medicaid Supplemental Payments under The American Health Care Act

Medicaid expansion in the Affordable Care Act (ACA) required coverage of individuals with incomes from 0% of the federal poverty level (FPL) through 133% of the FPL.  The requirement to cover this group was overturned in NFIB v. Sebelius.  As a result, it is now up to states to determine whether they will offer Medicaid coverage to these individuals.  This new category of eligible Medicaid beneficiaries is often referred to as childless adults.

A number of Republicans, both governors and those in Congress, have taken to using the term “able-bodied” to refer to this group.  If you are able-boded, the theory goes, the Medicaid program should reasonably expect you to work. As a result, some Medicaid expansion and Medicaid reform proposals have included work requirements as an eligibility criteria for Medicaid. We can expect this topic to continue to be raised as we get deeper into ACA reform. Continue Reading Who Are the Medicaid Able-Bodied?

In the coming weeks, it is highly likely that House Republicans will come forward with Medicaid financing reform proposals, such as block grant or a per capita cap proposal, or some combination of both. How should these proposals be evaluated? The best way to understand these proposals is through the equation A x B = C.  A is spending per person, B is the number of people, and C is total spending.  This equation helps explain the difference between per capita cap proposals and block grant proposals.  Essentially, A x B is per capita caps, while C is block grants. Both per capita caps and blocks grants have been touted by Republicans as mechanisms to rein in costs of the Medicaid program. However, the devil is in the details. Republicans will need to not only address these details head on in their Medicaid financing reform proposals, but also understand how these details will affect beneficiaries, states, and providers.

Continue Reading Medicaid Financing Reform: Per Capita Caps vs. Block Grants

Health care services cost money.  Often times, a lot of money.  This fundamental truism captures the challenge facing Congressional Republicans as they consider coverage of low income populations as part of their so-called Repeal and Replace effort.

The Medicaid program covers more people than Medicare but spends less on health care services (MACPAC 2016a, MedPAC and MACPAC 2017). Additionally, Medicaid pays substantially less for health care services than private sector insurance plans (MACPAC 2016a). Recent growth in Medicaid spending is primarily due to growth in enrollment (MACPAC 2016b).  State Medicaid programs depend on the altruism of the medical profession to provide health care services at a lower rate, which can be below cost.  This leads to Medicaid beneficiaries often having less access than those covered by private insurance because financial pressures limit the ability of some providers to take Medicaid beneficiaries.

Republicans in Congress are contemplating moving coverage for the “able bodied” from Medicaid to private insurance.  There are many questions to be answered before such a policy change could be implemented, but the threshold question is simple: how could such a policy proposal not cost more than current law?

Medicaid beneficiaries have limited ability to pay for services.  An individual with an income of $15,800 is currently Medicaid eligible.  Assuming that the policy does not increase financial expectations from the beneficiary, it does not seem possible that Congressional Republicans could write a policy that moves coverage of Medicaid beneficiaries into subsidized private insurance coverage without spending more money. This leads us to the real question for Congressional Republicans: what would they have to do to ensure that this change would not result in spending more money?

Demography remains a constant pressure on payments to stakeholders.  While stakeholders might look at movement away from Medicaid to private insurance coverage for any population as positive, there is a very high probability that any shift from Medicaid to private insurance coverage will come with strings to limit provider payments.