Why Medicaid Needs To Be Part Of Your Payor Mix

Despite the recent expiration of pandemic-era funding Medicaid remains an essential source of long term growth for behavioral health platforms.?

Headline Headwinds

On the face of it current headlines regarding Medicaid sound rather alarming. Contracting budgets, falling enrollment, challenging reimbursements rates: in other words, tough sledding ahead for many programs seeking to treat some of the most vulnerable and underserved populations in our communities. And that’s to say nothing of the hardships faced by families and individuals directly impacted by this sudden change in public health financing.

But the great unwinding of the extraordinary public health measures - including increased Medicaid funding - taken during the COVID pandemic was bound to happen. By some estimates upwards of 15 million people could wind up losing their current Medicaid coverage. Rates of uninsured are likely to rise as well from an all time low in 2022 of 8% nationwide for US residents of all ages, per an August 2022 report by the US Department of Health and Human Services.

Some will find marketplace alternatives, but many more will fall into the dreaded “coverage gap”: incomes too low to afford coverage on the private market (or without recourse to employer-sponsored coverage) and too high to qualify for Medicaid, especially in states who have not expand coverage under the auspices of the Affordable Care Act of 2010 (ACA), aka Obamacare.?

So where will future growth in Medicaid revenues come from? What’s the bullish case for participating in Medicaid as a provider? While the current contraction is certainly part of the story, Medicaid’s longer term prospects need to be put into proper context.?

Short Term Pain, Long Term Gain

Despite the current headwinds Medicaid is poised to continue to grow enrollment, even in states that have to date resisted expansion. Why? The answer is quite simple: need.

That is, the ongoing need to address the consequences - to patients and providers alike - of millions of uninsured and under-insured residents. This problem was only further highlighted during the pandemic. In a healthcare delivery system dominated by private providers and insurers, the problem of so many people unable to afford treatment was (and is) not simply a public health issue, but a gigantic business problem as well.

As of January 2024 only 10 states have opted not to expand Medicaid enrollment under the terms offered by the ACA. In December of 2023 North Carolina became the latest state to embrace the benefits of fewer uninsured residents. Recent news reports suggest Georgia, Alabama and Mississippi, after much political wrangling, are considering the same. This is not dissimilar to the trajectory when Medicaid was first created, in 1965; it took until 1982 for all states to sign up (Arizona was the last to do so). It stands to reason that eventually all states will also participate in Medicaid expansion, at least in some form, if for no other reason than it has clearly demonstrated the ability to address the problem of uninsured residents.?

Unsurprisingly, along with needed expansion comes increased healthcare spending. Lots of it. According to CMS.gov total national healthcare expenditure (NHE) grew 4.1% to $4.5 trillion in 2022. But Medicaid spending grew 9.6% to $805.7 billion in 2022, or 18 percent of total NHE, nearly twice the rate of overall spending growth (Medicare spending, by contrast, grew a more modest 5.9%, though at 21% it makes up a greater share of total NHE).

With nearly 20 cents of every healthcare dollar spent, and growing rapidly, Medicaid represents a business opportunity that healthcare platforms in competitive markets can hardly afford to ignore.??

And increased spending is only part of the story. A recent WSJ op-ed notwithstanding, federal and state data clearly show that Medicaid expansion decreases the rate of uninsured leading to better treatment access, better outcomes (compared to no care at all), and greater demand for healthcare services on the part of patients who can actually afford them.

Our Experience

Kartini Clinic for Children and Families, in Portland, Oregon, operates a partial hospitalization program for pediatric eating disorders. We are contracted with all of major Medicaid plans in Oregon and Washington, though it took nearly a decade of persistence to secure a contract. While by no means an easy task, it was easily among the best strategic decisions we’ve ever made, both for our patients and for our business.?

From a standing start in 2015, we have grown our Medicaid business to approximately 30% of total revenue (34% by CPT volume). Rates, while on average 10-15% lower than prevailing commercial ones, are competitive when taking into account improved length of stay and patient volume. Crucially, once contracted, clinical collaboration with our Medicaid partners is by and large much better than with our private payors. For example, Medicaid plans strive to provide language and transport services for their members. Try that with a commercial payor! And a perspective grounded in public health means Medicaid plans give providers the opportunity to treat to an appropriate clinical outcome, not to some commercial payor’s algorithmic “standard of care.” Most importantly perhaps, our providers no longer have to worry that they won’t be able to help certain patients and families, and our business office doesn’t have the thankless task of turning away potential patients because of benefit issues (in our experience, a significant morale issue in the ‘bad old days’ prior to ACA reforms).

And these are only some of the important - often intangible and overlooked - clinical and operational benefits of working with Medicaid plans.

Top Line Is The Bottom Line

With a demonstrated ability to achieve a ‘triple win’ of improved access, better outcomes and demand growth, why are some providers still reluctant to add Medicaid to their payor mix?

As mentioned, reimbursement rates are often cited as a barrier, and these can indeed be challenging, especially in an outpatient setting. Administrative burdens, particularly in early stages of contract implementation, can also discourage some treatment programs from participating in Medicaid networks. Claims processing does not always go smoothly.?

But these are issues, in our experience, that providers face with commercial payors as well.?

Medicaid participation is clearly not without its challenges. But along with these challenges come significant opportunities to grow top line revenue. Apart from the opportunity to add insured patients, there are also important clinical, operational, and public health reasons for taking part in Medicaid networks. Bottom line: in today’s competitive healthcare landscape, if you don’t embrace Medicaid's growth opportunity, your competition surely will. ?