States May Tighten Medicaid Rates Amid Pandemic

by Leslie Small

Despite growing, bipartisan calls for more federal Medicaid funding to stem states' budget shortfalls, such a provision is absent from Senate Republicans' latest COVID-19 relief bill. And while that omission hints at the next big health care battle in Congress, experts say that another Medicaid funding conflict is bubbling up at the state level — over how much to pay managed care plans.

Already, there are troubling signs for Medicaid managed care organizations. Nevada's legislature recently passed a fiscal year (FY) 2021 budget — effective starting July 1, 2020 — that cuts Medicaid provider rates by 6%, a move expected to save the state $52.9 million. The news of Nevada's Medicaid cuts comes on the heels of Michigan's decision earlier this summer to cut the rates it pays to 13 MCOs by nearly 3.3%, according to Credit Suisse analyst A.J. Rice.

"Nevada, I think, is on the cusp of what lots of states are going to do, which is to try and cram down statistically significant percentage rate cuts in their Medicaid program," says Jeff Myers, senior vice president of reimbursement strategy and market access at Catalyst Health Care Consulting. "I know from working with other companies that there are several states, particularly in the South and Midwest, that have really started their contract negotiations very aggressively with where they want rates to be," he adds.

State revenue collections rise and fall with economic conditions, and with unemployment projected to remain high due to the pandemic-sparked recession, "states are expected to face budget shortfalls that total $555 billion over three years," Aviva Aron-Dine, vice president for health policy at the Center for Budget and Policy Priorities, said during a recent webinar.

During Anthem, Inc.'s second-quarter earnings call on July 29, executives faced multiple questions about how the insurer is handling Medicaid rate negotiations with states. "In light of everything that's going on right now, you can imagine there's quite a lot of fluidity in the conversations we’re having with our state partners," Felicia Norwood, executive vice president and president of Anthem’s government business division, said in response to one analyst query.

She also pointed out that "roughly 15 of our states today have risk corridors…in place that effectively already limit managed care profitability within certain defined ranges, and we are in discussions with other states that also considering these kinds of mechanisms."

From Health Plan Weekly