The Lynx Group

Bracing for Change in Healthcare Coverage with Medicaid Expansion: What This Means for Cancer Care Delivery

September 2013, Vol 4, No 7

Hollywood, FL—As part of the Affordable Care Act (ACA), Medicaid expansion necessitates that states soon come to grips with massive change in healthcare coverage. Matthew E. Brow, Vice President, Public Policy and Reimbursement Strategy, McKesson Specialty Health and the US Oncology Network, updated attendees at the Third Annual Conference of the Association for Value-Based Cancer Care on progress in this area.

The ACA was designed against a framework that was principally dominated by large group insurance mostly accessed through employers or unions. This accounted for 50% of the market, whereas government coverage (ie, Medicare, Medicaid) comprised 30%, individual insurance accounted for just 5%, and the 45 million uninsured Americans comprised the remaining 20%.

According to Mr Brow, the ACA mainly attempts to accomplish 2 simple things in a 2-part process—create a new federal regulatory body responsible for everything that occurs in the health insurance space, and obtain the funds to expand coverage to at least 30 million additional Americans.

The first 15 million newly insured persons would be covered under a streamlined Medicaid program open to anyone with income up to 133% of the federal poverty level (pending state expansion decisions). The second 15 million persons would be covered under a reformed commercial market for individuals and small groups. This would include the creation of a new federal subsidy program for families with up to $120,000 of household income, supplying money for these individuals to buy private health insurance through state- or federal-based exchanges that will serve as marketplaces for the purchase of insurance.

“In a nutshell, ACA involves a regulatory regime and coverage expansion. Everything else is kind of extraneous but tangential to the core goals of the ACA,” Mr Brow said.

Medicaid Expansion

Medicaid spending is a huge part of the US gross domestic product already, and this will likely increase unless a different approach is adopted.

Currently, “managed Medicaid” is largely how coverage through Medi­caid is delivered. Nearly 75% of beneficiaries are in managed care plans that are largely served by private insurers. These insurers receive a premium payment from the government for managing the plan, paying providers, and creating a network.

This trend is expected to grow. Even states that are pushing back on the Medicaid expansion are sometimes agreeing to the expansion if they can move their patients into managed Medicaid plans.

Figure 1
Figure 1: State Cuts to Medicaid Programs in 2011 or 2012.
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At the same time, states are restricting what they are willing to spend on their Medicaid beneficiaries (Figure 1). “Every state, except for North Dakota, in the last 2 years, has seen some sort of provider payment cut in Medicaid” to reign in one of their biggest expenses, Mr Brow noted.

However, most states are not restricting eligibility for Medicaid. “They are allowing more people onto the rolls, and then trying to ratchet down how much they spend on these things,” he observed.

States face very difficult long-term choices. Some would have to expand their populations under Medicaid by ≥50% to meet the requirements under the ACA expansion, and each state takes its own approach to eligibility.

Although states are pushing back in a variety of ways, the Obama Administration expects that most states will eventually adopt the Medicaid expansion and pull in the federal money to finance it. The administration will point out, Mr Brow added, that when Medicaid was created along with Medicare in the 1960s as part of the “Great Society,” not all states jumped on board right away, though eventually all did.

Figure 2
Figure 2: States Split on Participation in Medicaid Expansion, by January 29, 2013.
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Although currently only approximately 50% of the states are participating in or leaning toward participating in Medicaid expansion (Figure 2), the expectation is that over several years, even many recalcitrant states will come on board, Mr Brow said.

Regarding state-run exchanges, Mr Brow indicated that most states have said they will not build their own exchanges but will rely on the federal government exchange. Some states, however, are expressing more resistance and intend to block the government’s exchanges for their citizens.

Implications for Oncology

Having even a minimum level of coverage will be a positive change for many patients with cancer, Mr Brow emphasized, but the way healthcare is provided will represent a “massive shift” away from the traditional mode of delivery. “Coverage that is subsidized by the government but managed by a private plan will be different,” he predicted.

In employer-based health plans, the goal is for the patients-employees to “feel good about their benefits, and therefore feel more tied to the organization they work for as a result,” Mr Brow said.

The employer and payer aim to keep a large group of employees satisfied, and to do so they continue to spend more dollars on benefits, such as allowing patients to seek care at expensive academic centers. The employers “are paying for stability and are not really trying to lower costs significantly,” he noted.

“What’s significantly different about plans that are composed of people who don’t know each other and select a plan on a website is that they cannot aggregate together and drive changes to their plans. If they are dissatisfied, their option is to choose another plan in the next enrollment period,” Mr Brow said.

Under the exchange model, the incentives for the plan and the individual purchaser are quite different, as is the consumer’s ability to move change in this environment. This offers greater flexibility for payers in determining how to provide the services they have agreed to provide to the patient and to their members. It is acceptable, therefore, for payers to eliminate the highest-cost providers in the marketplace, as long as they can provide value-based care in that same marketplace.

“What this provides to oncologists—particularly community oncologists and maybe cost conscious community hospitals—is the opportunity to compete on price in a market where this typically does not happen,” Mr Brow commented. “If you can drive volume and drive exclusivity, and prove quality and value at the same time—that’s where the real opportunity is in this space.”

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