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5 challenges facing Medicaid

July 27, 2015
by Kaiser Health News
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By Phil Galewitz, Kaiser Health News

A “sleeper” provision when Congress created Medicare in 1965 to cover healthcare for seniors, Medicaid now provides coverage to nearly 1 in 4 Americans, at an annual cost of more than $500 billion. Today, it is the workhorse of the U.S. health system, covering nearly half of all births, one-third of children and two-thirds of people in nursing homes.

Enrollment has soared to more than 70 million people since 2014 when the Affordable Care Act began providing billions to states that chose to expand eligibility to low-income adults under age 65. Previously, the program mainly covered children, pregnant women and the disabled.

Unlike Medicare, which is mostly funded by the federal government (with beneficiaries paying some costs), Medicaid is a state-federal hybrid. States share in the cost, and within broad federal parameters, have flexibility to set benefits and eligibility rules.

Though it provides a vital safety net, Medicaid faces five big challenges to providing good care and control costs into the future:

  1. Controlling costs — Medicaid is one of the largest items in state budgets, although its beneficiaries lack political clout. Expenses typically soar during economic downturns as enrollment increases when people lose jobs and their health benefits. That puts states in a quandary because they struggle to keep up with higher costs as their tax revenues decline. Medicaid enrollment and costs grew markedly during the last recession and enrollment shot up further since 2014 as a result of the 2010 health law (although the federal government pays the full cost of newly eligible enrollees through 2016). States typically try to control costs by cutting payment rates to doctors and hospitals or reducing benefits—both of which can have negative effects on enrollees by making it harder to get care.
  1. Getting states to expand income eligibility under “Obamacare”— The Supreme Court’s 2012 ruling that states could decide whether to participate in the health law’s Medicaid expansion impaired Democrats’ efforts to expand eligibility nationwide. Twenty states, mostly in the South and interior West, have refused to participate, citing concerns about the program’s effectiveness and cost. As a result, more than 4 million people have been left without health insurance because they don’t make enough to qualify for federal subsidies to buy private coverage on the health law’s exchanges, even though they are ineligible for state Medicaid programs. Texas and Florida are the two largest states that declined to expand the program. President Barack Obama has accused state Republican leaders of playing politics, but few GOP leaders have budged.
  1. Better oversight of managed care – More than half of Medicaid enrollees now get care through private managed care companies, according to the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.) While the insurers tout their ability to offer budget predictability, questions remain about how well the companies improve quality and control costs.  In managed care, health plans are paid a set monthly rate to cover each enrollee’s medical needs. The Obama administration has recently proposed rules that would limit how much these plans may spend on administrative costs and set standards to ensure enrollees have adequate access to hospitals and doctors – similar to those for private plans. A recent report by the inspector general of the Department of Health and Human Services found widespread inaccuracies in Medicaid managed care plans’ provider directories. Half of the doctors listed in the directories were unavailable because providers were not at that location, were not in the plan’s network or were no longer taking new patients.
  1. Ensuring access to doctors and dentists — Studies show people enrolled in Medicaid can get primary and preventive care as easily as those with private coverage, but have a harder time finding specialists and dentists who are willing to treat them.  Nationally, the rate of doctors willing to see new Medicaid patients ranges widely, mostly because the payment rates vary significantly by state. A recent poll from the Kaiser Family Foundation found that low-income adults covered by Medicaid are somewhat more likely than those with other types of insurance to report access issues in the past 12 months. In a 2012 federal study, just 40 percent of New Jersey doctors accepted new Medicaid patients compared to 99 percent in Wyoming. While the federal government requires states to offer dental coverage for children, adult coverage is optional. Even when states offer adults coverage, patients often struggle to find dentists willing to see them because of low payment rates. In many places, community health centers have helped to meet the growing need for dental care, but patients can face long waits.
  1. Meeting growing demand for long term care–While Medicaid is often typecast as helping poor, inner-city families, it’s also the only safety net for millions of middle-class people who need long-term care at home or in nursing homes. More than 60 percent of nursing home residents rely on Medicaid for assistance.  With the aging of the population accelerating in the next two decades, the demand for long-term care is expected to soar. While states have made progress shifting enrollees from more costly nursing homes to long-term care services at home and in community settings, more needs to be done.

KHN’s coverage of aging and long term care issues is supported in part by a grant from The SCAN Foundation.

pgalewitz@kff.org | @philgalewitz

 Kaiser Health News (KHN) is a nonprofit national health policy news service

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