The US healthcare “system” is headed towards a cliff, and when it hits the edge, Medicaid may well be the replacement.
Briefly:
- Managed Medicaid plans would be offered in every state
- people would sign up for the plan they want, with the option of enrolling in regular fee for service Medicaid
- funding would be from payroll taxes, individual service-based fees, and federal funds
- provider reimbursement would be pegged to Medicare for ALL payers, eliminating payer-shopping by providers and increasing Medicaid FFS reimbursement
The details…
There are two ways this would work – Medicaid for All (MFA) becomes the way all of us get coverage, or Medicare remains in place for elderly folks and Medicaid covers everyone else.
It’s entirely possible employers continue providing basic healthcare coverage, but really, do they want to? It’s expensive and a pain in the neck. Instead, employers will be able to offer supplemental insurance (similar to what happens in Canada, the UK, and other countries) as an employment benefit.
Today, Medicaid comes in two general flavors – “classic” and Managed Medicaid.
Classic is fee-for-service Medicaid, where members can go to any provider that accepts Medicaid. Providers are paid on a fee for service basis, at rates that vary greatly between states (states set reimbursement).
Managed Medicaid is an option in almost every state. The states contract with healthplans to provide integrated Medicare and Medicaid in what are called “dual eligible” programs (members are eligible for both Medicare and Medicaid).
The Managed Medicaid (MM) plans are paid on a capitated basis – that is, a flat fee per member. That fee is based on the health status and health risks of the members; the sicker the member is, the higher the capitation amount.
This arrangement incentivizes MM plans to figure out the optimal ways to keep members healthy and keep costs down – keep them out of the ER, avoid inpatient hospital stays, and encourage healthy behaviors. If costs come in under budget, the plans make money (usually a couple percent at most). If not, the plan loses money – not the taxpayer. (MFA will be based on Managed Medicaid)
(a detailed explanation is here.)
Today, states with these plans in place enroll members in different ways. Some randomly assign members to plans, others allow more assertive competition among the plans for members. I’d expect this to continue under Medicaid for All; existing enrollment processes would be expanded, systems upgraded, and communications refined to address the broader market. Every fall, MM plans would compete for members, enrolling them before the end of the calendar year.
Individual contributions to premiums would be income-based (as under ACA today); there could be low copays for certain services but paperwork for members would be almost non-existent. (All Medicaid members today have ID cards that enable electronic record sharing, billing, and claims submission.)
Funding would be a combination of service-based fees (copays and co-insurance), payroll taxes, federal funds, and perhaps general state funds.
Remember, as employers would no longer have to deliver health insurance, those dollars could be spent on higher wages, to offset payroll taxes, or for other purposes. Similarly, individual payments for premiums, high deductibles and the like would be eliminated, altho some of those “savings” would go to higher payroll taxes to cover Medicaid for All.
Provider reimbursement would be up to the MM plans negotiating with providers – who would remain independent (unless they are employed in a health system that is also a MM plan provider). However, FFS Medicaid reimbursement would be increased to mirror Medicare’s rates.
Why this is the future
US healthcare is not sustainable. Period.
Family health insurance premiums are nearing $20,000, the number one cause for bankruptcy is medical debt, Medicare and Medicaid are the largest chunks of the federal budget, and industrial competitiveness is hampered by healthcare costs which are double the average costs in other countries.
And, 74% of Americans are worried about losing their insurance.
So, we can either keep driving off the cliff, or take an alternate route. One that will be very rocky, cause a lot of headaches and heartache, disrupt businesses and families and providers, but one that sooner or later, we’ll have to choose.
What does this mean for you?
It’s not a matter of if, but when.
Note – happy to engage in fact-based, citation-supported conversation. “I heard this” and “everyone knows” arguments are not helpful.
Do you see workers comp remaining or disappearing in this model? Do you see TriCare remaining or disappearing in this model? I do not disagree with you but do want to understand your vision of how this might work for certain significant populations.
Hello again Patrick, and thanks for the question. I believe work comp will stay outside of this model; this will be covered in a later post.
Great question about TriCare and other specialty programs; my take is they will be subsumed under a MFA model, with funding from the current sources i.e. federal taxpayers.
It would be ideal for the organization with the requisite actuarial and risk management skills, benefit design expertise, proper alignment of incentives, top tier EHR/EMR technology, and many, many years of experience to step in. . . Kaiser Healthplan and Permanente Medical group. Not perfect, but the closest I know; and yes, I have been a West Coast member who has used the system for excellent family coverage. In a class by themselves.
Stryker – good to hear from you. I’m a huge KP fan, and wish it was here in upstate NY. Our son is a KP member, and loves it.
It is my understanding that physicians do not have to participate in Medicare or Medicaid if they choose not to. If that is true (again it is my understanding and may note be factual) If they are going to get paid less for services rendered (which you mentioned in a previous EM), why would they participate? What would be his or her incentive? If all physicians opted out there wouldn’t be any physicians to provide services for all. Confused. TY!
Hello John and thanks for the question. Indeed you are right, providers do NOT have to participate in either program.
However, for the vast majority, not participating would essentially mean they have no income. While some may work outside the system in concierge or extended benefits-funded plans, I’d hazard a guess that most will accept Medicare-level reimbursement. Most do today.
Hi Joe. What are your thoughts on which “M” model could be implemented with the least friction – a state-based Medicaid-for-all model or a federally based Medicare-for-all model?
It has been my experience working for a healthcare provider that the Managed Medicaid implementation process (in several surrounding states) has been clumsily and hurriedly implemented and has also been challenging for many providers (significant challenges with authorizations, claims, and timely payment). Do you think a federal-based Medicare model would have more or less friction to implement? My opinion is that a state-based Medicaid model would theoretically allow each state to make smarter and more flexible decisions with regard to how they want to implement certain programs/providers/populations that may be unique to their state. But at the same time, I would be nervous that those state-based managed care plans (who are mostly owned by a few parent companies) would not put in the energy to do 50 different rollouts effectively. I guess my questions is, which model is less likely to blow up and fail miserably upon implementation? Thanks!
-Brett
Brett – thanks for the very insightful question.
Managed Medicaid plans can do quite well – I have first hand experience with one. And they can be a disaster – at least I’ve read of some that were.
Point being that they are, in many ways, in early stages and thus we will see failures and successes. To my mind, that is an advantage of the state-based system. While there will be disruptions in the beginning, we will learn quickly and improvements will be made just as fast.
Also, if we kept the adequate funding in place for start up plans that existed in the ACA, there would be much more robust competition – which would be a very good thing.
Thoughtful presentation, Joe. I’d like to suggest a few tweaks though. I think one cornerstone of a future model is simplicity. So I don’t think that concurrently maintaining both Medicare and Medicaid. Is needed. One single payer plan should do the trick, and perhaps keeping the name Medicare might be wise given the perception that Medicaid is designed for the indigent. Good idea to have a classic version, and a capitated,managed care version that resembles Medicaid managed care plans and Medicare Advantage plans, and which could be administered by qualified insurers, health plans or health systems. So there would still be a public-private partnership choice for those who elect that option, which would resemble the ”sickness funds”in Germany. Health providers would elect to be all-in or all-out, I.e. not able to cherry-pick only the classic version while opting out of the managed care plans. As you point out, most providers would participate given that very few patients or providers could afford to be entirely outside the system. Of course covered medical benefits would need to be identically comprehensive in both models, including pharmacy.
Maybe someday we will work our way to a solution!