Syrtis Solutions sends out a monthly Medicaid news summary to help you stay up-to-date. The monthly summary concentrates on developments, research, and legislation that pertains to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's important Medicaid news.
Throughout the COVID-19 pandemic, Medicaid enrollment surged because of federal measures that required states to maintain coverage for individuals, regardless of whether they gained other insurance. This policy, implemented in March 2020, lasted three years and added over 23.3 million people to the Medicaid program, pushing the total number of beneficiaries to 95 million at its peak. Private insurers managing Medicaid plans greatly benefited from this influx, as roughly 75% of Medicaid enrollees were under their care. That being said, with the end of the public health emergency, states have started removing individuals from Medicaid, resulting in more than 20 million people being disenrolled over the past year.
This decline in members has resulted in a significant decrease in revenue for insurers. While the reduction in revenue was expected, the greater concern for insurers has been the shift in the demographic of remaining enrollees. As healthier individuals left Medicaid roles, those who remained tended to have higher healthcare costs. This unexpected trend has put pressure on insurers' earnings, with companies like Centene, Elevance, and UnitedHealth experiencing increased Medicaid expenses this year.
In some cases, many disenrolled individuals had other coverage, including employer-sponsored plans, but were still being counted as Medicaid members. Some were even unaware of their continued Medicaid enrollment during the pandemic, further inflating the numbers of people who weren't utilizing Medicaid services, yet still generating payments for insurers. This dynamic created a windfall for insurance companies, who were receiving funds from states for program members who didn't access care.
The effect of these changes is being felt in the stock market. For example, Elevance's shares dropped when the company forecasted higher Medicaid costs in the latter half of the year. Molina, however, experienced a positive trading response after reporting earnings that offset Medicaid-related pressures with other financial gains.
Medicaid businesses already operate on thin profit margins, and higher utilization rates exacerbate their financial challenges. Though insurers are working to secure better rates from states to account for rising costs, the process is slow because of the decentralized nature of Medicaid, where each state establishes rates individually. Although eventual rate adjustments are anticipated to reduce some of the pressure, the road ahead for Medicaid insurers remains uncertain and challenging as they navigate this transitional Medicaid enrollment period. In order to conserve program resources, insurers must look to innovative ways to increase efficiency and reduce costs.
In the last few years, California has steadily expanded Medi-Cal eligibility, beginning with undocumented children. This was followed by expansions to include undocumented young adults, older adults, and, as of January 2024, all remaining adults who meet the income criteria.
Medi-Cal's massive expansion has made it the largest single expenditure in California's state budget, with total costs projected to approach $160 billion this fiscal year. This includes $98 billion in federal funds, $36 billion from the state General Fund, and $25 billion from other sources, including local governments and provider taxes such as the Managed Care Organization (MCO) Tax. The MCO tax was increased in both 2023 and 2024, with some of the revenue intended to raise payment rates for Medi-Cal providers to enhance access to care-- an ongoing priority for healthcare stakeholders. However, concerns about the state budget have put this plan in jeopardy. In November, voters will decide whether the revenue from the MCO tax should be committed to increasing provider rates or if more of it should be used to balance the state budget.
Medi-Cal has been at the forefront of Medicaid expansion, and research indicates that this growth has resulted in better insurance coverage, improved health outcomes, and a reduction in poverty. As the program continues to be a lifeline for millions, preserving and responsibly managing its resources is necessary. One effective approach is for plans administering the program to make use of modern technology solutions to enhance the coordination of care, improving efficiency and reducing costs. By maintaining and strengthening this vital program, California can continue to provide critical healthcare services to its most vulnerable residents.
Syrtis Solutions delivers a monthly Medicaid news summary to help you stay informed. The monthly summary highlights developments, research, and legislation that relates to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's significant Medicaid developments.
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Proposition 35 comes amid recent expansions to California's Medicaid program, Medi-Cal. Lawmakers have expanded Medi-Cal eligibility to include individuals who meet income requirements despite immigration status. Despite this expansion, many healthcare providers and advocacy groups claim that reimbursement rates under Medi-Cal are inadequate to cover the cost of care. Proposition 35 aims to address this funding shortfall.
Proposition 35 seeks to clearly define the allocation of MCO tax revenue. It limits California lawmakers' power to redirect these funds for other purposes, requiring a supermajority—three-quarters of the members—from both the state Assembly and Senate to make any changes to the measure in the future.
The proposition also proposes creating a new advisory committee for the Department of Health Care Services. This committee would include people from various sectors of the healthcare industry, such as physicians, hospitals, clinics, labor unions, and other healthcare stakeholders, to steer the allocation of tax revenue.
In the short term, Proposition 35 mandates that the tax revenue be allocated as initially planned before Governor Newsom's proposed reallocations. This includes:
The Coalition to Protect Access to Care, a group comprising various healthcare organizations and associations, along with the California Democratic Party and the California Republican Party, have endorsed the measure. As of now, no organized opposition committees have been identified.
Additionally, significant financial contributions have been made to support Proposition 35, largely from healthcare industry groups:
Syrtis Solutions delivers a monthly Medicaid news roundup to help you stay up-to-date. The monthly roundup focuses on developments, analysis, and legislation that pertains to Medicaid program integrity, cost avoidance, coordination of benefits, third party liability, improper payments, fraud, waste, and abuse. Below is a list of last month's important Medicaid developments.
Payment integrity programs are developed to provide correct claims processing, adherence to contractual rates, and compliance with payment rules. These efforts are essential for maintaining the financial stability of healthcare systems and making certain that patients receive appropriate care. That being said, they can produce friction between payers and providers, originating from disputes over claim denials, decreased reimbursements, and the administrative burden associated with claims adjudication.
Providers are under considerable pressure, with inflation at 3.3% driving up hospital costs. Additionally, cuts to Medicare physician payment rates are making it more and more challenging for physicians to maintain their practices, adding to a rise in hospital-employed physicians, now at 77.6%, a 25.8% increase from a decade ago.
Compounding these challenges, 7% of physicians have left the workforce, mainly from internal medicine and family practice. Healthcare organizations must find ways to compensate for these shortages, with increased billing on claims being one potential method to recoup costs. Unfortunately, this can increase tensions between payers and providers.
As payment integrity becomes more important due to rising healthcare spending and complex billing processes, it must focus on reducing provider abrasion to improve billing practices and relationships between health plans and providers.
Improving communication around claim denials and payment policies is one primary method to reduce provider abrasion. Readily available policies can reduce the chances of surprises by helping providers know what to expect when processing claims.
The next important strategy is communication coupled with the human element. While the role of artificial intelligence (AI) in healthcare is a hot topic at the moment, it will take some time for technology to fully comprehend the complexity of medicine and coding. Codes and rules are constantly changing and being added. Payment integrity requires human expertise and interactions to effectively address provider abrasion. AI is unable to explain complex payment integrity decisions like clinicians with extensive coding knowledge and coders with deep clinical knowledge.
Another effective approach is tailoring payment integrity solutions to meet the unique needs of various providers and patient populations. Sometimes, a payer might allow claims from a specific provider offering advanced treatment considered investigational that might not be allowed from another provider. It's important for payer organizations to handle such situations in a custom manner.
One more vital component of payment integrity programs is the adoption of modern technology solutions that utilize accurate and usable eligibility data in coordinating benefits. When Medicaid payers do not have access to clean eligibility data, it can lead to abrasion at the pharmacy for program beneficiaries and lead to improper payments. Accurate eligibility data significantly helps to properly adjudicate claims, saves valuable program resources, and, most importantly, ensures that members receive the care and medications they need.
Clear communication, human expertise, and customized solutions are key to enhancing the relationship between healthcare providers and payer organizations. The adoption of modern technology solutions and clean, actionable data is another key tool for reducing abrasion and honing payment integrity. As the healthcare industry evolves, these strategies and data solutions will ensure efficient payment integrity efforts, ultimately leading to better patient outcomes.
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