Outlook 2014: Hospital leaders will keep pushing GOP-led states to expand Medicaid in 2014

Hospitals and other healthcare stakeholders will be closely watching how many of the 23 holdout states, if any, decide to expand Medicaid eligibility in 2014. Extending Medicaid to adults with incomes up to 138% of the federal poverty level is one of the most important and politically contentious mechanisms for expanding insurance coverage under the Patient Protection and Affordable Care Act.

In addition, policymakers and patient-care advocates will be scrutinizing the continuing rollout of Medicaid managed care, which increasingly covers elderly and disabled beneficiaries who previously were not included. Part of that expansion grows out of a federal initiative mandated by the ACA to coordinate benefits and services for the 9 million low-income and disabled Americans who are eligible for both Medicaid and Medicare.

Policymakers will strive to keep federal and state Medicaid spending under control this year even as millions of newly eligible Americans enter the program. Medicaid spending growth per capita has remained relatively low over the past few years. Experts say states not expanding Medicaid might change their minds because studies show they will face higher Medicaid cost growth than expanding states. That grows out of the fact that the federal government is picking up the full cost for the expansion population from 2014 to 2016, tapering to 90% of the cost in later years. Meanwhile, non-expansion states may still see Medicaid enrollment growth as millions of people who previously were eligible for Medicaid coverage step forward to sign up, but the feds will not pick up the full tab for those added beneficiaries.

It's also possible that congressional Republicans will again bring forward their controversial proposal to convert Medicaid into a capped block grant program rather than an entitlement. House Budget Committee Chairman Rep. Paul Ryan (R-Wis.) previously has championed that approach. But it's unlikely to gain support this year from congressional Democrats or the president.

On Medicaid expansion, hospital leaders will continue lobbying Republican governors and lawmakers to convince them that the expansion is good for the state economy, healthcare providers, and low-income patients. They desperately want the expansion to reduce the financial burden of uncompensated care. It's predicted that state GOP leaders will be more likely to approve Medicaid expansion after the 2014 elections.

Some Republican governors are likely to follow the example of Arkansas and propose conservative alternatives for expanding coverage to low-income adults up to 138% of poverty, such as using federal Medicaid dollars to help them buy private coverage on the state insurance exchanges and requiring them to pay a share of the premium.

Pennsylvania Gov. Tom Corbett, previously a strong opponent of Medicaid expansion, plans to submit a private-plan waiver request to the CMS this year requiring beneficiaries to participate in job search or training activities and meet healthy lifestyle goals. Other states to watch that have Republican governors or GOP-controlled legislative bodies are New Hampshire, North Carolina, Tennessee, Utah and Virginia.

But Kathleen Gifford, managing principal at consulting firm Health Management Associates, cautioned that Medicaid cost-sharing requirements may prove counterproductive if they cause people to drop coverage or forgo treatment.

Experts say the coming year will shed more light on concerns about quality of care and cost savings in Medicaid managed-care plans. Beneficiaries with serious chronic conditions and disabilities will be entering the program in larger numbers, and patient advocates will be watching warily to see how they make the transition.

Gary Jacobs, managing director for health industries at PricewaterhouseCoopers, said his firm is receiving more requests than before from insurers eyeing the Medicaid managed-care market. “These are programs where you can't play around,” he said. “You have to be very good to survive. Otherwise, you run the risk of losing a lot of money or not serving the beneficiaries to the level they are used to being served.”

Follow Virgil Dickson on Twitter: @MHVDickson