The Future of the Medicaid Program

Published: 4/24/23

ACP has long supported the Medicaid program as vital in the effort to ensure that this nation’s most vulnerable populations have access to health coverage.  ACP’s advocacy has focused on protecting the Medicaid program, encouraging states to expand their programs, and opposing efforts by federal and state lawmakers to undermine the program’s efficacy by cutting or capping program funding or by imposing mandatory work requirements, premiums and cost-sharing for vulnerable individuals, and benefit cuts.

Background

Medicaid is the United States’ largest health insurance program. This safety net program provides health coverage to more than 85 million Americans, including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities.  Most Medicaid recipients do not have access to the private health insurance system, with children and seniors, combined, comprising the majority of program enrollment.  Federal law mandates that state Medicaid programs cover certain populations (e.g. low-income children), certain benefits, and applies limits on cost sharing among many other things.

The program is funded jointly by states and the federal government, and both the federal government and states are responsible for ensuring that Medicaid is fiscally sustainable over time and effective in meeting the needs of the people it serves. Medicaid accounts for a sizeable portion of both federal and state budgets. As a result, lawmakers are constantly looking for innovative ways to reduce costs.

Since the implementation of the Affordable Care Act (ACA) – which expanded Medicaid coverage to nonelderly adults with income up to 138 percent of the Federal Poverty Level (FPL) overall enrollment in Medicaid has increased.  After a challenge to the ACA’s original expansion provision, states have the option to expand their Medicaid program. States that have expanded their Medicaid programs have received additional federal funding to support increased enrollment, through a federal match of at least 90 percent of the cost of coverage for the expansion population, while states that have not expanded their Medicaid programs have not had their federal funding reduced.

At the outset of the COVID-19 pandemic, Congress provided enhanced federal funding for state Medicaid programs with the requirement that states maintain continuous enrollment for all beneficiaries through the period of the public health emergency.  As of April 1, 2023, states are no longer required to maintain continuous enrollment; and, the Centers for Medicare and Medicaid Services (CMS) has compiled information on disenrollment timelines across the states.  The U.S. Department of Health and Human Services has projected that approximately 15 million people will lose enrollment in either Medicaid or the Children’s Health Insurance Program (CHIP), with estimates that nearly 7 million of those expected to lose coverage will still be eligible for Medicaid or CHIP but will be disenrolled due to administrative churn.

Federal Activity

Efforts to reduce the federal cost of Medicaid have led to proposals to restrict funding for Medicaid or transition the program to a block grant or per-capita cap. Generally, a per-capita block grant system would provide a fixed amount of federal funding per enrollee which would vary based on enrollee category (aged/blind/disabled enrollees would receive a larger amount than healthy childless adults).  This approach would allow enrollment to grow with demand but increases the risk of funding shortfalls if the per-enrollee amount is insufficient to cover care, payment, or is tied to a growth rate that is less than the cost of health care.  A block grant system would eliminate the existing federal-state financing structure and give state Medicaid programs a fixed amount of federal money each year to fund coverage, clinician payment and administration.  Under such a scenario, funding would be more predictable for federal and state governments, but the amount of federal funding provided to a state could be insufficient and would not grow with the rate of health spending.

Some states have used the federal 1115 waiver process to incorporate mandates, such as requiring enrollees to work, pay premiums, and limiting the time they can receive benefits, as conditions for participant eligibility in their Medicaid programs. In January 2021, President Biden issued an Executive Order on Strengthening Medicaid and the Affordable Care Act authorizing the examination of “demonstrations and waivers, as well as demonstration and waiver policies, that may reduce coverage under or otherwise undermine Medicaid or the ACA.” The Biden Administration also notified states with approved work requirements that it was preliminarily disapproving work requirements due to the COVID – 19 public health emergency and because the requirements were not likely to promote the objectives of Medicaid. In February 2021, ACP submitted a joint letter to then Health and Human Services Secretary-Designate Becerra urging him to rescind approval for waivers that reduce coverage, such as work and community engagement requirements; that include high premiums and cost sharing on beneficiaries; or that seek to eliminate or pare back retroactive coverage, non-emergency medical transportation, and other crucial benefits.

President Biden has called for expanded eligibility and coverage within Medicaid. In March 2021, Biden signed into law the American Rescue Plan Act, which included incentives for states to expand Medicaid by temporarily increasing the state’s base Federal Medicaid Assistance Percentage by five percentage points for two years for states that newly expand Medicaid and allowed states (for five years) to extend Medicaid postpartum coverage from 60 days to 12 months, beginning April 1, 2022.  ACP has advocated for Congress to make 12-month postpartum coverage permanent. In addition, although the COVID-19 public health emergency has now ended, Medicaid will cover COVID-19 vaccinations and treatment without cost-sharing through September 30, 2024. After that, most ACIP-recommended vaccines will be covered. Coverage and cost-sharing for COVID-19 treatments will vary by state.

Medicaid typically reimburses at a lower rate than Medicare or commercial insurance, with Medicaid fee-for-service payments for physician services nearly 30 percent below the Medicare payment rate in 2019, with an even greater differential for primary care services. The pay disparity can exacerbate existing health inequities, and ACP has written in support of the Kids Access to Primary Care Act (H.R. 952) to ensure that Medicaid payments for primary care services are raised at least to Medicare payment levels.  The Medicaid and CHIP Payment and Access Commission has found that higher Medicaid payments are associated with physicians accepting Medicaid patients at higher rates, increasing access to care for patients.  Additionally, CMS in January 2023 announced updated guidance on direct reimbursement for specialty consults, which may help increase access to specialty care, especially in rural and other underserved areas.

State Activity

Since the enactment of the ACA in 2010, 41 states (including the District of Columbia) have chosen to implement the ACA’s Medicaid expansion, providing health insurance to more than 21 million  newly eligible Americans.

Additionally, approximately two-thirds of states have implemented continuous coverage for children in Medicaid and/or CHIP, which allows enrolled children to maintain coverage for a year-long period despite monthly fluctuations in family income which may otherwise cause gaps in coverage.

Most states have utilized waivers under Section 1115 of the Social Security Act, which allows states to waive certain requirements, in order to expand eligibility, test delivery systems reforms, and establish managed care organizations, or make other reforms.  ACP’s position paper entitled, Medicaid Expansion: Premium Assistance and Other Options includes a number of recommendations on how waivers should be constructed.  For initial 1115 waiver submissions and extensions of existing waivers, states are mandated to have a public notice and comment period of at least 30 days.  Once the state has submitted the application to the federal government and it has been deemed to be complete, a 30-day federal public comment period begins.  

CMS has recently approved waivers from states that reflect a new framework to address social drivers of health and related issues, with over 20 states seeking approval to use Medicaid funds to address the social needs of enrollees.  While there is some variation between the specific policies states are testing, the new framework generally enhances flexibility to use Medicaid funds for services aimed at food, housing, and other health-related needs. 

If you have questions regarding a waiver in your state, please contact ACP National through the Advocacy Assistance Request Form.

References

• Understanding and Addressing Disparities and Discrimination Affecting Health and Health Care of Persons and Populations at Highest Risk (2021)
• CMS Medicaid webpage
• December 2022 Medicaid and CHIP Enrollment Data
• Medicaid Provisions in the American Rescue Plan Act
• Medicaid Expansion: Premium Assistance and Other Options
• Status of State Medicaid Expansion Decisions: An Interactive Map