The Families First Coronavirus Response Act temporarily raised Medicaid’s federal matching percentage—FMAP—by 6.2% until the public health emergency ends, granting states some much-needed fiscal relief. But states can’t curb eligibility, disenroll beneficiaries or raise premiums if they want the additional federal money. They also must cover all COVID-19 testing and treatment costs and can’t force local governments to pay a higher share of the state’s nonfederal Medicaid spending.
“All states are … dealing with the uncertainty of the duration of the public health emergency,” said Robin Rudowitz, co-director of the program on Medicaid and the Uninsured at the not-for-profit Kaiser Family Foundation. That’s making it more difficult for states to budget.
States could trim benefits to lower their Medicaid spending, but that might create more problems than it solves. Medicaid programs must cover inpatient and outpatient hospital services, physician services, laboratory and X-ray services and home health services, among other benefits. They can also choose to cover medical expenses like prescription drugs or community-based, long-term care services. But experts said many of Medicaid’s so-called optional benefits are critical to peoples’ health.
States are “really left with the things you can cut that aren’t going to result in people dying in the street” like adult dental and podiatry, Salo said. “There really isn’t a whole lot of money there,” he said.
Industry insiders said states might lower Medicaid managed-care organization spending by renegotiating rates or adding risk corridors to capitalize on the recent drop in healthcare utilization, which has provided a short-term boost to commercial insurers. But that might be a fool’s errand. Utilization is already starting to rebound, and it could force states back to the negotiating table to prevent their Medicaid managed-care organizations from going bust.
States may even delay “the expansion of services that have been in the pipeline,” O’Malley said. In June, Tennessee killed its long-planned postpartum insurance expansion to save Medicaid dollars.
Colorado, Nevada and Wyoming have made large, across-the-board rate cuts to respond quickly to the fiscal devastation wrought by the COVID-19 pandemic, and Florida’s governor vetoed a proposed rate increase. But states could adopt more targeted cuts in the next year or two to ensure the rate reductions are efficient and lower the risk of harming beneficiaries’ access to care. Experts worry hospitals could eventually stop participating in the program if states squeeze reimbursement rates too much and force providers to accept massive financial losses when they care for Medicaid beneficiaries.
“While (Medicaid) rates are typically well below Medicare rates, there are some states and some benefits levels that will be closer to Medicare rates or even equivalent … those providers might be able to weather a cut a little better than some other providers,” Blanford said.
Some states are giving safety-net providers retainer payments to ensure they can keep their doors open during the emergency period. But it will become increasingly challenging for states to make those payments if their budgets continue to shrink and the enhanced FMAP disappears.
“Once (safety-net providers) close, they close for good,” Salo said.
In the meantime, many providers will reduce service lines or focus on more profitable ones “that attract a more lucrative payer mix, where there’s a higher share of commercial payers (than) Medicaid payers,” Manatt Health partner Anne Karl said. That could reduce access for beneficiaries too.
“We’re focusing on six service lines … to help turn around the hospital,” Van Houweling said. UMC is investing in cardiology, surgical services like orthopedics, urgent and primary care, its children’s hospital and oncology. Nevada’s only safety-net hospital is still committed to its core mission. It’s just trying to make the numbers work.
Experts said the least painful option for states, beneficiaries and providers would be more fiscal relief from Congress. The House passed the Health and Economic Recovery Omnibus Emergency Solutions—HEROES—Act in May, which would increase FMAP from 6.2% to 14%, but the Senate hasn’t taken it up. The National Governors Association in July asked Congress to boost the enhanced federal match to 12% until at least September 2021.
“Given the magnitude of both the public health and economic crises the nation continues to face, state and local governments need more support to provide health care services to individuals and families,” the association wrote.