States can officially restart the Medicaid redetermination process, and enrollment will return to pre-COVID-19 pandemic levels or settle even higher than those levels in 28 states even as federal funding for the program shrinks, according to an analysis by Moody’s Investors Service.
Moody’s prediction comes as states begin losing the 6.2% extra funding allotted for Medicaid to meet the needs of a growing number of unemployed at the beginning of the pandemic. The federal medical assistance percentage funding will be phased out, a process that started on April 1 and will continue for the next three quarters until Dec. 31, 2023.
“Higher enrollment will weigh on states’ fiscal 2024 budgets, a credit negative, though the intensity will vary among states,” Moody’s researchers wrote. “While the number of enrollees plays a key role, the types of benefits offered, costs to administer plans, the demographic mix of enrollees and healthcare inflation all affect state Medicaid spending.”
Approximately 72% of the over 85 million Medicaid enrollees are covered by managed Medicaid plans, according to the Kaiser Family Foundation.
Dean Ungar, a Moody’s vice president and senior credit officer, told Fierce Healthcare that managed Medicaid will continue to be the way states oversee the program.
“Over a number of years—many years—there’s been an increasing movement towards more and more managed care,” said Ungar. “The reason for that is the outcomes are better. The costs are more controlled when these individuals are in the managed program. You have an insurance company trying to keep track of people, making sure they go to the doctor and making sure they take their medication. They do the kinds of things to help reduce costs.”
However, Ungar added that “there’s no magic bullet” and that Medicaid’s “a costly program no matter how you look at it.”
Denise Rappmund, a vice president and senior analyst at Moody’s and one of the authors of the research paper, told Fierce Healthcare that COVID-19 helped convince some states that hadn’t expanded Medicaid programs under the Affordable Care Act to do so.
“The ones we highlighted in the research paper expanded sometime just before the pandemic or during the pandemic. It looks as though North Carolina will be the newest one to expand," Rappmund said.
Ungar warned, though, that Medicaid managed care plans will need to diversify their insurance offerings.
“You could see a lot of the loss in Medicaid made up in the individual market or in commercial insurance.” In addition, those individuals might sign up for and ACA plan. “I think on a net basis, though, there will be an increasing number of uninsured people,” said Ungar.
Rappmund said that the bottom line is that many states will have a bit higher Medicaid enrollment than they did pre-pandemic. “At the same time, they’re losing that additional federal money through the course of the year when Moody’s projecting some economic slowdown in the second half of 2023. That will be a challenge for them.”
The redetermination process might also get messy.
According to a blog post on the website of the National Association of Medicaid Directors (NAMD), a not-for-profit organization representing state Medicaid agencies, the herculean task of trying to determine Medicaid eligibility as federal dollars dwindle will involve being on the lookout for con artists.
“The scammers and bad actors have seized on this as a way to make a quick buck off of unsuspecting Medicaid members,” the blogger states.
This problem was first noticed in Wyoming, according to the blog post, where individuals would call Medicaid recipients—some of who are long-term recipients—and demand that the person pay $500 or they’ll lose their benefits.
“Given the complexity of the unwinding effort for every state and the challenges and confusion already present in this effort for Medicaid members, it is critical that accurate information be pushed out and amplified,” the NAMD blogger wrote. “Medicaid agencies can’t counter disinformation and fraud alone. They will need support from the myriad stakeholders who share state Medicaid’s interest in the health and wellbeing of the members they serve.”