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States with Medicaid expansion destined for mixed results

May 27, 2014
by Brian Albright
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States seek creative alternatives to cover low-income populations

Medicaid remains the principal source of funding for public mental health services, so the expansion of Medicaid under the Affordable Care Act (ACA) is generally expected to provide much-needed resources in states that have moved forward.

"Based on the data I've seen, you can expect that about 40 percent of the people in the Medicaid expansion population have a behavioral healthcare condition," says Ron Manderscheid, executive director of the National Association of County Behavioral Health and Developmental Disability Directors (NACBHDD). "If you take 40 percent of the billions of dollars coming into the system via expansion over the next 10 years, there is going to be a huge infusion into behavioral healthcare compared to where it is right now."

How expansion will affect mental health and substance abuse treatment budgets will vary by state, since benefit packages are not uniform. In Kentucky, for example, Medicaid expansion was used as an opportunity to cover substance abuse benefits for the first time, and other states have come up with their own variations.

"Most states took a traditional Medicaid program and expanded it en masse to the newly eligible," says Kathleen Nolan, director of state policy and programs at the National Association of Medicaid Directors. "Others have created different benefit packages for expansion. Anybody looking at the expansion population has seen an increased frequency or likelihood of severe, persistent mental illness and other problems. That was recognized from the beginning."

Providers will see immense change within the states that have moved forward with expansion.

"Providers have to make sure that patients are enrolled in Medicaid, which is a big learning curve,” says Mohini Venkatesh, vice president, practice improvement, National Council for Behavioral Health. “This is a population that has never had health insurance, and now they have to fill out paperwork and understand the culture of insurance, as well as accessing care and prevention. That takes time."

While the impact of mandatory coverage, Medicaid expansion, and parity should theoretically provide a payer source for nearly all patients, it’s not quite so simple.  Medicaid expansion is voluntary for states, and the ongoing effects of the IMD Exclusion have left many low-income consumers out in the cold. They likely will continue to lack coverage for mental health and substance abuse treatment.

"[Health reform] may be a boon to some states, but it's also going to require change," Nolan says. "It's not just funding from another source. That's very clearly apparent the discussion about the IMD Exclusion remaining in place. What does that mean for the systems of care that might fall into that bucket? It may be there are new coverage resources for these individuals, but there will be a lot of complex adaptations that are going to need to happen over the coming years to serve people well and not create interruptions in care during the transition."

Expansion vs. Non-Expansion States

According to a report from the National Association of State Mental Health Program Directors (NASMHPD), among the uninsured, an estimated 13.4 million people with behavioral health conditions would be newly eligible for coverage under either Medicaid or state insurance exchange plans. If all 50 states expanded Medicaid, they would see budget gains of more than $300 billion through 2023, primarily through the reworking of budget responsibility between the states and the federal government.

According to NASMHPD, expansion states will gain through:

  •  increased federal match ($66 billion);
  •  moving adults covered under state waivers and special categories to Medicaid or the exchanges ($69 billion);
  •  reduced uncompensated care costs ($85 billion);
  •  shifting the cost of treating those with behavioral health disorders into Medicaid ($40 billion); and
  •  improving coordination of care and services ($34 billion over 10 years), among other benefits.

After taking into the account the roughly $73 billion in implementation costs, states could see a net budget gain of $304 billion between 2014 and 2023.

In contrast, states that opt out of Medicaid expansion will face challenges in meeting the needs of lower and moderate-income populations with high-cost chronic diseases, and will also miss out on substantial federal support. Safety net providers will see increases in uncompensated care for the growing uninsured population, coupled with reductions in federal financial support for treating those same patients.

"That's a huge amount of money being left on the table," Manderscheid says. "If you don't do Medicaid expansion, then that state's money will drain away to support activities in other states."

Alternative Approaches

Medicaid expansion has become a political football as the mid-term elections draw nearer, but a few states have staked out compromise positions that allow for expansion while shifting some Medicaid recipients to private insurance options. The federal government must approve state waivers to modify low-income coverage designs.

In Arkansas, a Medicaid alternative is part of its exchange marketplace of insurance options. "If you are newly eligible in Arkansas and don't have massively complex health problems, you wind up on the health exchange, and Medicaid will provide some wraparound services and help with cost sharing," Nolan says.

In what Manderscheid calls the "Iowa Compromise," Republican governor Terry Branstad and Democrats in the state senate developed a modified expansion plan with private insurance options and incentives to participate in a prevention and wellness program, among other modifications.