Turkey, Stuffing and Medicaid
Turkey, Stuffing and Medicaid (11/25/22)
Overview
Over Thanksgiving, I reflected on the many changes in healthcare and realized Medicaid was a major theme across large payors since Covid-19 debuted on US shores. With an estimate of 346 million covered lives in the United States, Medicaid has ballooned to close to 90 million covered lives with the Federal Government instituting a Public Health Emergency. Redetermination in 2023 is on the minds of many state officials and large insurance companies. Medicaid currently represents almost 26% of the insured population in the US, and it has added an estimated 19 million members in the past three years.
The Current State of Medicaid
This growth is important as many states have moved from the traditional Fee-For-Service medicaid to Managed Medicaid as it provides a more predictable expense line item for state budgets. As of this publication, 41 out of 50 US states had transitioned to Managed Medicaid with an estimated 17 million of the 90 million covered lives being Fee-For-Service. This means that nearly 82% of the medicaid lives in the US have been moved to a managed care organization which is similar to the privatization we are seeing in Medicare. It has been slow for the federal government to unwind the expanded Medicaid program given the current setup, which could lead to the loss of health insurance for 15-17 million people. This is particularly concerning given the disparities we are seeing in care across income levels in the United States. Companies like Centene and Anthem have grown their Managed Medicaid lines of business over the past 3 years and are preparing for the unwinding of this program with new government subsidy programs.
Themes to look for in 2023
The Medicaid redeterminations of each state will be key in 2023 as many of these families will be forced to find alternative health insurance. Many insurers are looking for government subsidies from the Inflation Reduction Act of 2022 to move healthcare coverage into the Affordable Care Act (ACA)/Marketplace plans in 2023. The IRA signed into law by President Biden is set to be in place until 2026 and provides zero premiums to low income families entering the exchanges. For this reason, we are reading about quite a few large health plans expanding their ACA/Marketplace offerings in more counties which provide medicaid products. This will be a line of insurance business to watch in 2023 along with some pharmacy benefit changes as well.
Medicaid Pharmacy Benefits being Carved Out
This has been a hot topic in 2021 and 2022 as many states want to start realizing savings related to prescription drugs they are providing to medicaid beneficiaries. Historically, each state managed care organization would contract with a separate PBM to administer pharmacy benefits to the members. In addition, each Fee-For-Service state run medicaid would choose their own PBM. This set-up was not ideal as the buying power of each state was not centralized and would not lead to advantageous pricing that could be realized from the collective group. Many states like California, Missouri, North Dakota, Tennessee, Wisconsin and West Virginia (Ohio and New York joining) are hiring one single PBM (Gainwell, MagellanRx, etc.) to be a third party that will manage the pharmacy benefit for all Fee-For-Service and Managed Medicaid plans within a state. This is great as it creates one formulary across all of the plans but also centralizes the buying power of each state for rebates or pricing. I expect to see this trend continue in 2023 with many states reporting better than expected results.
Above is an overview of the current Medicaid landscape in the US as we look for a dynamic 2023 in this line of business. I love healthcare finance so always feel free to reach out to me with any questions or input on LinkedIn at https://www.dhirubhai.net/in/jeffreydelverne/