By Kathryn Eshelman, M.D., MPH, VP, Medical Informatics, Inovalon
LinkedIn: Kathryn Eshelman, M.D., MPH
LinkedIn: Inovalon
Unlike Medicare Advantage, risk adjustment in Medicaid is a zero-sum game.
Medicaid is managed at the state level with fixed budgets, and the slice of the pie your health plan receives depends on the effectiveness of its risk adjustment program. Many in the healthcare industry expect Medicaid budget cuts – particularly reductions Medicaid expansion – to be on the horizon, as reducing government spending remains a top priority.
If budget cuts to Medicaid do occur, risk adjustment professionals need to be prepared, and now is the time to start evaluating risk adjustment programs and vendors.
Here’s what you need to do to ensure your risk adjustment programs are built for what comes next.
Why is Medicaid expansion funding on the chopping block?
There are lofty goals around cutting government spending, and lawmakers are proposing measures that would affect Medicaid expansion. While Medicaid is primarily managed at the state level, the federal government supports Medicaid expansion through the Affordable Care Act (ACA).
Medicaid enrollment grew significantly after the passage of the ACA in 2010, which expanded coverage to include childless adults earning slightly more than the poverty threshold. To date, 40 states and Washington, D.C., have adopted Medicaid expansion. According to government figures, 71 million Americans get their health insurance from Medicaid.
If federal funding levels for Medicaid are reduced, many individuals who receive coverage through Medicaid expansion will lose their eligibility. Ten states have “trigger laws” in place that would terminate expansion coverage if federal funding were reduced, typically if the federal matching rate (FMAP) drops below 90%. These states include:
- Arizona
- Arkansas
- Illinois
- Indiana
- Montana
- New Hampshire
- North Carolina
- Utah
- Virginia
Idaho, Iowa, and New Mexico also have trigger laws, but would require the states to take steps to mitigate the increased costs if federal funding for Medicaid expansion were reduced.
How would Medicaid budget cuts affect health plans?
If federal funding levels for Medicaid expansion were reduced, risk adjustment programs for health plans would experience a significant shock. As many enrollees lose their eligibility, plans would face an adverse selection of sicker members for risk adjustment.
Now is the time for your health plan to prepare and build a robust risk adjustment program. Without one, your plan’s risk scores may fail to accurately reflect the population’s underlying disease burden — putting your plan’s economic viability at risk.
What your health plan needs to do
As the purse strings tighten for Medicaid spending, take time to reassess your risk adjustment programs to ensure that members’ risk burdens are being properly documented.
Many states rely solely on prospective risk adjustment to predict future Medicaid costs based on current health status and risk factors, rather than analyzing past claims data to determine healthcare costs in payments with retrospective risk adjustment.
That’s where advanced analytics come in. By surfacing hidden risks and helping care teams reach out to members with chronic conditions, they can intervene earlier, support better health management, and improve long-term outcomes.
Additionally, your health plan should evaluate its risk vendors to ensure they understand the nuances of reporting risk adjustment data for the specific state(s) in which you operate and can adapt to the ever-changing regulatory landscape.
This article was originally published on the Inovalon blog and is republished here with permission.