Alex Kacik: At least 1.5 million Medicaid beneficiaries across 25 states have been disenrolled from the Medicaid program as of June. States are taking people off Medicaid after millions remain covered through the COVID-19 pandemic even when their income should have excluded them from the program.
Some make too much money to be eligible while others are getting caught up in the administrative Limbo related to outdated contact information or other procedural hurdles. How are the changes in Medicaid coverage affecting healthcare providers, insurers and patients?
Opinion: Medicaid redeterminations raise threat of new public health crisis
Welcome to Beyond the Byline, which offers a behind-the-scenes look into our reporting. My name is Alex Kacik, senior operations reporter and I’m joined by finance reporter Caroline Hudson and Nona Tepper, Modern Healthcare’s insurance reporter. Thanks for coming on, Caroline.
Caroline Hudson: Thank you for having me.
Kacik: And Nona, thanks for coming on.
Nona Tepper: Thanks for having me.
Kacik: All right, Carolina, Nona. You’ve been following this since the end of the public health emergency. The latest data we have is from KFF showing that 1.5 million Medicaid beneficiaries have lost coverage, but it’s just a start. Up to 15 million may lose coverage. Caroline, what does this mean for health systems?
Hudson: Sure, well, this essentially means less reimbursement for health systems, and less those patients affected unless they iron out any administrative issues or find other payer coverage. More rural smaller operations with a higher percentage of Medicaid patients will be disproportionately affected. I believe, as part of the KFF data, I read that South Carolina actually had the highest number of determinations, and I believe the vast majority of those were related to administrative issues.
But no matter where the health system is located, it just adds uncertainty to any system’s bottom line, and that comes at a time when they’re already challenged in the current macroeconomic environment.
So I think it’s also important to note that the systems can’t adequately prepare for the financial impact here of redeterminations. It’s hard to tell at this point, the extent of how many patients will be dropping off the list and issue that’s looming. The health systems I speak with, they’re trying their best to prepare for that and working with their revenue cycle, but it’s an issue that they don’t know the full breadth of it yet. So they’re preparing for something they don’t know.
Tepper: I agree, this is definitely one of the most, the biggest swing factor this year, or at least one of them for insurers, Molina and Centene, particularly. Because Molina is not diversified and they’re primarily a Medicaid insurer, they will be impacted, but they say they’re ready to weather the storm. They expect about 400,000 of their Medicaid enrollees to no longer qualify for this form of coverage, which would represent about like half the people who gained coverage during the public health emergency. But they said anyone who signs up for a Molina exchange plan during this time is a gain, and they actually increased their financial projections for the year after the first quarter. So it appears they’re feeling pretty good.
Another insurer to watch, I would say is Centene. They are the largest Medicaid and exchange insurer. And because of that, they hold the greatest opportunity. If they can transition some of their Medicaid members who no longer qualify for coverage or unfortunately lose coverage because of administrative issues, they could see big gains in exchange enrollment. So the company says they’re working with states and that they’ve received lists to identify those who are most likely to lose coverage during this time. And they also said they’ve created an internal data tool to identify those who are most at risk of losing Medicaid insurance.
But the big commercial insurers also have a stake here. Because employer and individual plans generally generate higher profit margins for insurers, UnitedHealth, Elevance and others with large job-based coverage could see actually a gain during this time.
So as Caroline said, the stakes are very high and insurers are investing big in consumer outreach to either try and retain them in Medicaid plans or transition them to exchange coverage, but they don’t have a great precedent here. I think I’ve seen data that says only 5% of those who lose Medicaid coverage actually transition to an exchange plan so their work is certainly cut out for them.
The majority of people are still unaware of this process is going on. In some instances, states aren’t making the process any easier. People are still losing coverage because they have not notified the state of their updated address, income or other information. I think I saw that KFF said that almost three out of four beneficiaries who have been disenrolled lost coverage because of procedural issues. Alex, what does that mean?
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Kacik: Yeah, and to your point about some states making it harder, I’ve heard anecdotally that some states have automated the process while others make it more onerous. So this means that sometimes they’ll have like an autofill component to beneficiaries that are looking to re-enroll, but these disenrollments are happening for procedural reasons means there’s some sort of administrative hang-up. Maybe the individual did not complete the renewal process or the state has outdated contact information. Those who have lost coverage due to procedural reasons may still otherwise be eligible. And the KFF data shows that a lot of them are children, too. That’s something to keep in mind.
We have heard from health systems that are working closely with state agencies to make sure contact information and other data is up to date, but it is a major undertaking and there’s a lot at stake here. One of the reasons that health systems have been investing heavily in these marketing campaigns and outreach to Medicaid beneficiaries is to protect their 340B status.
Two of Essentia Health’s hospitals—a rural provider with like a dozen or so hospitals based in Minnesota but spread throughout the Midwest, St. Joseph’s in Brainerd, Minnesota, and one in Fargo, North Dakota—operate near the required threshold for their 340B drug discount eligibility. Hospitals can buy discounted drugs of up to like 50% if a certain amount of their expenses are dedicated to low-income and indigent patients. Essentia said if those two hospitals lose eligibility, about $15 million would be shaved off their bottom line. So I checked in with them recently to check in on the Marshfield proposed merger too, but they were saying that those two hospitals are still at risk, and they’re doing whatever they can to make sure as many Medicaid beneficiaries re-enroll.
So Caroline, help us understand health systems’ broader financial picture. You mentioned some of these macroeconomic pressures. Why is it important for hospitals to maintain those drug discounts as they grapple with higher labor expenses and other financial pressures?
Hudson: Well, I think right now, in the current economic environment, especially with inflation, health systems and hospitals really need all the help they can get as far as the bottom line. Having those 340B discounts, I would say, is an important way that they can help offset some of those other elevated expenses—costs associated with wages and benefits, supplies, purchase services, you name it. They are all elevated at this point. 340B is just another tool in that arsenal for them to readjust their bottom lines and offset some of the other things that they’re having to pay for right now.
I recently did a round-up on first-quarter earnings, and it sounded like health systems don’t really expect expenses to level out anytime soon, especially labor. I think things are improving. They’re moving in the right direction, but as far as resolution, not so much, that’s going to take months, maybe years.
One little bit of positive news, though, Kaufman Hall, a consulting firm, they each month release a National Hospital flash report, they survey more than 1,300 U.S. hospitals. The report that they put out this month actually showed that operating margins are starting to turn positive as we move into the second half of 2023. It’s still right around, I believe, the median was a .3% margin, so barely positive. Just to be clear, that does not mean that hospitals are not still struggling, especially the smaller ones and rural areas and those especially can still greatly benefit from the 340 be discounts.
Nona, I’m curious. What role the health insurance brokers are playing in trying to ensure that Medicaid beneficiaries maintain coverage?
Tepper: Insurance brokers do God’s work, Caroline. They’re free for consumers to use. And they spend hours listening to people’s medical needs, the hospitals they like to go to, and they use that information to help sign people up for the best coverage. While they’re free for consumers to use, they are paid by insurance companies. So you know, you could argue that they’re biased. It’ll definitely depend on the broker. And they may also be easier to schedule with than federally funded navigators, particularly after President Donald Trump cut funding for the navigators program.
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I think I saw that HHS has since tripled funding for navigators during this time, though, so I think that’ll help repopulate the program. It’s one way that HHS has tried to minimize coverage loss during this time.
Alex, what are some other ways the agency has tried to prevent the uninsured rate from skyrocketing during Medicaid redeterminations and what’s your general outlook?
Kacik: On June 12, as reported by our regulations reporter Vikki Turner, HHS said it will allow managed care plans to assist beneficiaries with enrollment by filling out some of the renewal forms and enable state Medicaid agencies to pause and administrative termination for one month to allow for more outreach to individuals.
This gets to that disparity and how some states are handling the re-enrollment process. Pharmacies and community-based organizations will be allowed to assist those who lost coverage, but whether there are procedural issues, or folks get kicked off the program because they make too much money. Now, millions will still likely lose coverage.
This not only has major implications for providers and insurers, but health equity too. Once people lose coverage, they’re less likely to seek care and a significant proportion of Medicaid beneficiaries live in underserved areas. So this will widen the gaps we see in life expectancy between those who live in affluent areas versus impoverished neighborhoods. For instance, we’re in Chicago, and there’s a huge gap between life expectancy in the Loop versus those who live in the Garfield Park area on the west side. Some states may make, as I said, the enrollment process easier through automation, while other states make more it more cumbersome to enroll that will result in some geographic variation in Medicaid enrollment.
So it will be a state-by-state case at this point. And you know, we’ll have to watch closely to see how you know the populations and various communities are affected.
Thanks for coming on Carolina Nona.
Hudson: Thank you for having us.
Tepper: Thanks for having us.
Kacik: All right. And thank you all for listening. You can subscribe to Beyond the Byline on Spotify, Apple podcasts or wherever you choose to listen. You can support the reporting of Caroline, Nona, myself and our team of reporters by subscribing to Modern Healthcare and giving us a follow on Twitter and LinkedIn. Thank you for your support.
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