Aug 20, 2020
In 2018, health care spending in the United States reached $3.6
trillion.¹ According to the Centers for Medicare and Medicaid Services (CMS),
health care spending is projected to grow at an average annual rate of 5.4%
between 2019 and 2028, reaching over $6 trillion in total spend by 2028.² Of
the over $3.6 trillion spent in 2018, Medicaid’s share was 16% or almost $600
billion.³ As a result, Medicaid accounts for one out of every six dollars spent
on health care while covering one in every five Americans (or approximately 72
million people). Prior to COVID-19, Medicaid enrollment was projected to remain
flat through 2020. However, Medicaid spending was slated to increase by about
4% to over $630 billion. This projected increase was due in part to rising drug
costs (in particular - specialty drugs), provider rate increases, and the
increasing costs associated with caring for the aging population and people
with disabilities (costs related to hospitals, nursing facilities, and
increased utilization of long-term services and supports).⁴ Currently, both
Medicaid enrollment and spending are increasing given both the high
unemployment rate that has left millions of Americans without access to
employer-sponsored health care coverage, and the additional resources required
to fight the pandemic. Given the enrollment and cost pressures that exist in
the Medicaid system (and that are being amplified by the public health
emergency), states are responding by using their granted autonomy to require
continuous adaptation by providers and Managed Care Organizations (MCOs), and
to drive increased alignment between the Medicaid and Medicare
systems. In this report, we detail the 10 specific actions that
states and the federal government are taking in response to these system pressures
and begin to outline just five of the trends that we see emerging from the
COVID-19 pandemic.
*The research and analysis for this paper was conducted
prior to the outbreak of the COVID-19 pandemic. Given the public health crisis,
the landscape of the entire U.S. health care system, and the entire economy, is
shifting. However, the health care policy and practice trends detailed here
remain, though they will shift or be amplified due to the pandemic.
Additionally, included are new trends that have emerged through the public
health emergency that may have long-term implications for state health care
agencies, managed care organizations, and the overall health care delivery
system.
Trend 1: Deregulation and Increasing State
Autonomy
Deregulation and increasing state autonomy have been prominent
policy goals of the current federal administration. Many states have pursued
various waiver authorities and considered policy levers available in the
Medicaid system that give them the flexibility to (re)structure their Medicaid
programs. Two examples of this trend are the consideration of alternative
federal funding mechanisms (e.g., Block Grants) and focus on eligibility
verification processes to ensure Medicaid rolls reflect those appropriately
eligible for the program. In January 2020, CMS released a State Medicaid
Director Letter detailing a new Block Grant option for states to pursue through
Section 1115 Demonstration Waivers. The Healthy Adult Opportunity (HAO) Waiver
targets individuals under age 65 that are not disabled or in need of long-term
services and supports (LTSS). States that pursue this option will have
significant new leeway in designing the benefit package and delivery system
supporting these enrollees, while likely tightening spending to meet their
allotted federal share. In 2019, several states instituted new Medicaid
eligibility systems or enhanced their eligibility verification and renewal
processes. These actions were instituted in part in response to a report from
CMS that identified several eligibility components that were driving payment
errors, including states not conducting annual redeterminations in a timely
manner.⁵ Some of the point-in-time redetermination actions taken by states did
result in enrollment decreases for both adults and children.
As of July 2020, 38 states (including the District of Columbia)
have adopted Medicaid Expansion.⁶ Several states are currently using ballot
initiatives to try to expand Medicaid while others are considering legislative
action in their states. Nebraska anticipates implementation of Medicaid
Expansion in October of this year following its approval in 2018 through a
voter-backed ballot initiative. As the number of states implementing Medicaid
Expansion continues to increase, so too does the number of states exploring
community engagement requirements (also referred to as “work requirements”). As
of July 2020, 10 states have sought and received waiver authority from CMS to
implement community engagement requirements (Arkansas, Arizona, Indiana,
Kentucky, Michigan, New Hampshire, Ohio, South Carolina, Utah, and Wisconsin).⁷
An additional nine states have Section 1115 Waivers pending that include
community engagement requirements (Alabama, Georgia, Idaho, Mississippi,
Montana, Nebraska, South Dakota, Tennessee, and Virginia).⁸ South Carolina, following
CMS waiver approval in mid-December, will be the first non-Expansion state to
require community engagement requirements for parents of children with incomes
under 100% of the Federal Poverty Level (FPL).⁹ While several states are
pursuing community engagement requirements, others are pulling back on their
efforts given the active court proceedings that are considering the authority
of the Department of Health and Human Services (HHS) to allow the
implementation of work requirements in Medicaid.
Trend 3: Variations on the Individual Exchange
A continuing trend from last year is state consideration of
Medicaid Buy-in or Public Option programs, which leverage Medicaid or other
affordable coverage options for individuals who are working and earn too much
to qualify for Medicaid, but have difficulty affording coverage on the
Individual Exchange. Two states leading this effort are Colorado and
Washington.
·
Colorado: The state’s 1332 waiver was approved, and
the state drafted a 2021 implementation framework for a Public Option insurance
product. It would require insurers that have a certain market share to offer a
state option through the Exchange.
·
Washington: Currently is the only state to have passed
Public Option legislation, which was signed by the Governor in May 2019. Plans
participating on the Exchange are required to offer at least one “standard”
plan at every level. Coverage is available to all Washington residents
regardless of income.
Trend 4: Using Procurement Levers
As state Medicaid agencies broaden the size, scope, and
complexity of their programs, they are leveraging the procurement process to
raise the bar on expectations for their MCO partners to meet. Examples of this
trend in action include:
·
States are increasingly
leveraging MCO contracts and the procurement process to require the deployment
of integrated care models and the delivery of comprehensive behavioral
health services.
·
State Medicaid
agencies are using Requests for Proposals (RFPs) to transition care coordination
services from MCOs to provider entities such as health homes,
Patient-Centered Medical Homes (PCMHs), or Accountable Care Organizations
(ACOs).
·
States are
increasingly showing signals – both explicitly and implicitly in RFPs – that
MCOs are expected to bring together disparate parts of the health delivery
system to improve the health and well-being of entire populations and
communities.
·
States are using the
Medicaid procurement process to require alignment of Medicaid and
Medicare, and to influence Medicare Advantage product offerings and program
designs.
Trend 5: Access to Care
·
States are pursuing both policy changes and procurement
initiatives to encourage the use of underutilized services and overcome
long-time barriers to access by changing the common definitions for who should
deliver which health care services, how those are delivered, and in what
locations. Additionally, not all populations in Medicaid have equitable access
to care (e.g., children, older adults, rural areas, individuals involved in the
criminal justice system) and states are looking at innovative strategies to
meet their particular needs to live a healthy life. As a result of these
trends, MCOs are being expected to leverage new technologies, work with new
providers, and cultivate relationships with community-based organizations.
·
With support from the federal government, alternative
sites of care that are more accessible and convenient for members,
cost effective, and promote improved outcomes are being considered and incentivized
by states. State Medicaid programs are also trying to maximize the capacity of
current providers to better meet the needs of their members. As a result, more
attention is UnitedHealthcare Community & State 2020 Emerging Trends in
Public Programs 5 turning to allied
health professionals, such as community health workers and peer specialists, who
can supplement clinical capacity and work at the intersection of health and
community. There is a renewed interest from CMS and state policymakers in
innovative solutions specific to rural areas, particularly in how care
is financed and designed to meet the unique needs of local communities.
Interest in the growth and sustainability of school-based health services has
increased in recent years as communities and state policymakers seek to improve
access to health care services for children and adolescents that are tailored
to their needs, particularly behavioral health services.10, 11 Prior to the COVID-19
pandemic, states had primarily established telehealth as a requisite
strategy for delivering services in underserved areas and maximizing provider
capacity when specialty care is scarce, particularly in rural communities. As a
result, states were modifying regulations to authorize Medicaid reimbursement
for a broader array of services, sites of service, and providers delivering
care via telehealth.12
·
There are more details in the COVID-19 emerging trends
section on how the focus on telehealth has evolved.
Trend 6: Delivery System Reform
·
Delivery system reform includes a variety of activities designed
to change the way care is delivered and to promote more efficient and effective
health care. These initiatives are often coupled with payment reforms designed
to incentivize quality. Over the last year, there have been a proliferation of
new delivery and payment models that are intended to improve the quality of
care delivered to patients and reduce unnecessary utilization.
·
At the federal level, the Center for Medicaid and Medicare
Innovation (CMMI) has continued to develop and evaluate new delivery system
reform models for different types of providers, patients, and populations. The
most recent models are: Direct Contracting models, the Integrated Care for Kids
(InCK) and Maternal Opioid Misuse (MOM) models, Primary Care First, and the Emergency Triage, Treat,
and Transport (ET3) models. At the state level, Medicaid
leaders continue to use their MCO contracts to hasten innovation and accelerate
payment reform. They
are increasingly requiring MCOs to use value-based payments (VBP) to address
health disparities, improve care delivery for individuals with complex care
needs (e.g. dual eligibles, individuals with social needs, and pregnant
women/new moms), build partnerships across the delivery system, and engage
providers in preparing to take on greater financial accountability for
populations.
Trend 7: Pharmaceuticals
·
Despite being an “optional” Medicaid benefit, pharmacy spend
continues to increase. According to the Medicaid and CHIP Payment and Access
Commission (MACPAC), Medicaid spent $64 billion in 2017 on outpatient
prescription drugs—a 48.15% increase in gross expenditures compared to 2014.13
·
With new blockbuster drugs coming online that have great
clinical potential and significant price tags, state Medicaid programs are
proactively identifying delivery and budget m
Trend 7: Pharmaceuticals
Despite being an “optional” Medicaid benefit, pharmacy spend
continues to increase. According to the Medicaid and CHIP Payment and Access
Commission (MACPAC), Medicaid spent $64 billion in 2017 on outpatient
prescription drugs—a 48.15% increase in gross expenditures compared to 2014.13
With new blockbuster drugs coming online that have great
clinical potential and significant price tags, state Medicaid programs are
proactively identifying delivery and budget models that control costs, increase
transparency, and support providers, all while ensuring access to needed
medications for members. Prevalent policy levers being used by states to
achieve these goals are:
·
Alternative
Payment Models (APM): Under these models,
a drug manufacturer’s reimbursement is tied to an agreed upon outcome, either
financial or health-based. Colorado, Michigan, and Oklahoma have all received
approval from CMS to use APMs to pay pharmaceutical drug manufacturers based on
outcomes.14
·
High
Cost Drug Management: As states determine
ways to manage the incredible costs of new “specialty” drugs, biologics, and
gene therapies, they are looking at partnerships with MCOs to manage these
high-cost medications within the pharmacy benefit. Management tools being
considered and utilized are risk sharing, risk pools, supplement or kick
payments, and medication-specific carve-out from the managed care benefit with
claims paid through fee-for-service Medicaid.
·
Pharmacy
Carve-Out: As states look for
ways to manage costs and increase transparency in pharmacy spend, an increasing
number are exploring removing or “carving-out” pharmacy as a covered benefit by
managed care. This trend is playing out in a variety of states—Florida, New
Jersey, New York, and Texas—though activity is different in each and timelines
vary. An additional state, Michigan, explored a pharmacy carve-out proposal but
ultimately pulled back from the effort and is moving forward with a single,
statewide Preferred Drug List.
·
Single,
Statewide Preferred Drug List (PDL): Supporters of a single, statewide PDL cite it as a budget tool
to maximize rebate dollars for the state, while providers are supportive due to
perceived administrative simplification. Prior to this year, there were 13
states that used MCOs to manage their Medicaid programs utilizing a single,
statewide PDL. As of the start of 2020, Arizona, Florida, Kansas, Louisiana,
Mississippi, Nebraska, North Carolina, Ohio, Pennsylvania, Texas, Virginia, and
Washington have a single, statewide PDL for all Medicaid MCOs, and Michigan is
looking to implement later in the year.15
·
Pass-Through
Pricing: State contracts and
RFPs are increasingly requiring the use of pass-through pricing (in lieu of
spread pricing) in order to create more transparency in the reimbursement
process. Under a pass-through model, payments for pharmacy claims are
completely “passed through” from the MCO to the pharmacy. The MCO then pays an
administrative fee to the Pharmacy Benefit Management (PBM) to support base
claims and manage activities. For MCOs and/or states that wish to add
additional supplemental services for consumers such as medication therapy
management, MCOs pay an additional fee to the PBM for these services.
Trend 8: Social Determinants of Health
·
Across the health care and human services spectrum,
organizations continue to research and explore ways to address the negative
impacts of social determinants of health (SDOH) that influence health and
well-being in order to improve health outcomes and lower costs. This continued
and widespread attention on the costs and impacts of SDOH is driving activities
among all health care stakeholders, including policymakers, payers, and
providers.
State Policy and Procurement Activities
·
States continue to look to MCOs for innovative solutions through
RFPs, contract requirements, or demonstration pilots that focus on the root
causes of poor health outcomes. Last year, over three-quarters of states with
managed care (35 states) leveraged their MCO contracts to advance at least one
strategy to address SDOH. Even in non-MCO states, there are efforts to address
SDOH through various initiatives.16
·
In many states, policymakers continue to promote
SDOH-related initiatives, including housing, education, and employment. In
2019, governors in 10 states released plans to reconfigure their cabinets to
better address the conditions that affect health, including proposals for
cross-agency and public-private collaborations to leverage state resources and
coordinate services more efficiently.17
Medicare Supplemental
Benefits
·
While states work to develop new mechanisms to identify and
address social determinants in their Medicaid programs, CMS and Congress have
moved to allow Medicare Advantage (MA) plans to provide additional supplemental
benefits that address health-related social factors. This new flexibility
allows for MA plans to include services and supports such as access to healthy
food and rides to non-medical locations as part of a benefit package. The
expanded supplemental benefits will increase access to functional and social
supports for MA consumers across the country, including Dual Special Needs Plan
(DSNP) enrollees.
Focus on Screening and Referral Platforms
·
States and CMS have developed screening tools to identify the
social and economic barriers of Medicaid members. At the same time, providers
have deployed their own screening tools to meet the immediate needs of their
consumers. One example is the PRAPARE (Protocol for Responding to and Assessing
Patient Assets, Risks, and Experiences) tool used by Federally Qualified Health
Centers (FQHCs). However, many of these efforts have been localized to a
specific clinic or provider system, with no standard screening questions and
only ad hoc referral protocols. Several states are exploring a statewide social
determinant screening and referral tool model, like the program launched by
North Carolina in 2018 (NCCare360). In addition, several MCOs have developed
partnerships directly with screening and referral tool platform vendors. Once a
screening has been conducted, and a SDOH barrier or concern has been
identified, states are now not only looking for providers and MCOs to connect
members and families to appropriate community-based providers to address the
SDOH issue, but also requiring MCOs to develop and/or use tools to support this
effort.18
Trend 9: Aligning Medicaid and Medicare
·
Many states and CMS are aggressively pursuing coordination,
integration, and alignment between Medicare and Medicaid to improve outcomes
and program spending on dual eligibles. Additionally, duals programs are
becoming progressively differentiated across each state as states bring local
and unique Medicaid elements into Medicare contracts serving duals. These
changes range from incremental requirements, such as reporting Medicare quality
and compliance information to states, to comprehensive alignment with states
eliminating DSNPs without Medicaid contracts, and/or pursuing the
Medicare-Medicaid Plan (MMP) program in favor of DSNP. CMS has stated that they
intend to continue increasing integration and alignment across Medicare and
Medicaid in the coming years.
Trend 10: Marketplace Evolution
·
Changing consumer needs and wants, advancing technology,
increasing investments by private equity, and a focus on increasing value and
cutting costs are the dynamics driving the competition and consolidation that
is now commonplace in the health care system. The need to diversify services
and approaches to care are increasing competition and lowering barriers to
entry. Whether through new entrants, adaptations made by traditional players,
or reimagined entities through mergers and acquisitions, the players in health
care, and specifically the Medicaid system, are rapidly changing. Mergers,
acquisitions, and newly formed partnerships are a regular occurrence in the
health
·
Changing consumer needs and wants, advancing technology,
increasing investments by private equity, and a focus on increasing value and
cutting costs are the dynamics driving the competition and consolidation that
is now commonplace in the health care system. The need to diversify services
and approaches to care are increasing competition and lowering barriers to
entry. Whether through new entrants, adaptations made by traditional players,
or reimagined entities through mergers and acquisitions, the players in health
care, and specifically the Medicaid system, are rapidly changing. Mergers,
acquisitions, and newly formed partnerships are a regular occurrence in the
health care space as of late and a trend that does not appear to be stalling.
Several factors are driving this trend, including declining reimbursement
rates, rising costs, evolving consumer needs, and an increasing need to stay
competitive. The ability for one entity to serve their consumers end-toend is a
critical factor in these efforts, both to be responsive to changing consumer
needs, and also to serve as a differentiating factor when competing for
business. Whether through traditional mergers and acquisitions (M&A),
vertical integration, or provider partnerships, these actions are meant to
drive scale, harness new capabilities, and serve as a response to the external
environment, and these policy and procurement actions are changing business
strategies and impacting business targets. Though these broad, system-altering
changes are occurring, there are also specific areas of focus where entities
are honing their capabilities and targeting their efforts to win business. The
value of primary care in addressing both cost and outcomes is increasing
efforts to provide access to this level of care.19
·
To be responsive to consumer needs, accessible and
flexible site of care options are being developed by both new and traditional
players.20
·
The development and incorporation of technology is rampant
across the health care system and there is rapid change occurring in this space
to further decrease barriers to access and care for consumers.21
COVID-19 Trends
Budget Declines and Medicaid Enrollment Increases
·
The public health emergency issued by Secretary Azar on January
31 (and subsequently extended in both April and July for an additional 90 days)
and the national emergency declared by President Trump on March 31 have had
significant impact on state and local budgets. Revenues from state and local
taxes plummeted at an unprecedented pace due to the restrictions states and
localities have had to place on businesses and residents. By one estimate,
states have seen a shortfall in their General Funds of between 30 and 40%.22
·
The unemployment rate also reached an all-time high as a result
in April. The high unemployment rate has negatively impacted state revenues as
well as led to an increase in Medicaid enrollment (ultimately increasing state
Medicaid budgets).
Destabilization of Health Care Delivery System
·
The COVID-19 pandemic dramatically impacted an array of health
care safety net providers (e.g. FQHCs, Rural Health Centers, Community Mental
Health Centers) due to the shift in utilization of health services that took
place among consumers and the resulting decline in revenue. Additionally, the
stability of acute system providers was impacted due to their historic reliance
on elective procedures for regular cash flow.
Rapid Reliance on Telehealth
·
Due to the stay-at-home/safe-at-home orders issued across the
country, the use of telehealth/telemedicine platforms was quickly embraced by
providers and consumers, as well as supported by policymakers. Both CMS and
states universally relaxed telehealth policy and payment restrictions.
Consumers pivoted to using both video and telephonic platforms in accessing
needed health care services, and providers and MCOs looked for ways to
integrate digital tools into their care offerings to help reduce the risk of
exposure and spread of COVID-19.
Increased Interest in Home-Based Care
·
Prior to COVID-19, there was an emerging trend around redefining
where health care services can be provided, and one’s home and neighborhood
were being considered as reimagined sites of service. Due in large part to the
inability to access care in hospitals or doctor’s offices, this trend has
accelerated with most health care now accessed and provided in the home.
Shift in Quality Focus
Historic measurements used to
assess the impact and quality of health care are now being reassessed for
value, and additional measures are being discussed to align with the needs and
changes that have emerged from the pandemic. There is a particular focus by
states on metrics related to COVID-19 testing and treatment. Additionally,
given the rise in telehealth use noted above, additional measures are being
considered that measure the efficacy of different digital modalities.
Conclusion
As noted, the first 10 trends
were identified prior to the outbreak of the COVID-19 pandemic. However, the
market pressures and political realities that were present prior to the
announcement of the public health emergency, and that resulted in those trends,
still exist. The additional COVID-19 pandemic specific trends are adding a
layer of complexity to an already complex system. Working with our public
system and provider partners, UnitedHealthcare is advancing initiatives that
are responsive to the policy and practice trends that existed prior to the
public health emergency and the priorities brought forth by the pandemic to
effectively and efficiently address the needs of those we collectively serve in
this moment and beyond.
Footnotes
2.
https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00094?journalCode=hlthaff&
3.
Ibid.
4.
http://files.kff.org/attachment/Report-A-View-from-the-States-Key-Medicaid-Policy-Changes
10.
https://www.sbh4all.org/wp-content/uploads/2019/05/2016-17-Census-Report-Final.pdf
12.
https://www.macpac.gov/publication/telehealth-in-medicaid/
13.
https://www.macpac.gov/wp-content/uploads/2019/02/Medicaid-Drug-Spending-Trends.pdf
16.
http://files.kff.org/attachment/Report-A-View-from-the-States-Key-Medicaid-Policy-Changes
18.
2019
Emerging Trends Report
20.
https://www.fiercehealthcare.com/practices/mgma19-7-predictions-for-what-lies-ahead-healthcare-2020
21.
https://www.cnbc.com/2018/09/08/amazon-and-apple-are-getting-into-medical-clinics-heres-why.html
22.
https://www.economy.com/getlocal?q=37F6F320-EF2A-4806-9AAB-EADE66FA0317&app=download
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