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Beyond Byline: Medicaid Redefinition

Alex Kacik: As of June, at least 1.5 million Medicaid beneficiaries in 25 states have dropped out of Medicaid. States are eliminating Medicaid after millions of people remained on it during the COVID-19 pandemic, even though their incomes should have excluded them from the program.

Some make too much money to qualify, while others get bogged down in administrative woes related to outdated contact information or other procedural hurdles. How do changes to Medicaid coverage affect healthcare providers, insurers, and patients?

OPINION: Medicaid Redefinition Threats New Public Health Crisis

Welcome to Beyond the Byline, which provides a behind-the-scenes look at our report. I’m Alex Kacik, senior operations reporter, and I’m joined by financial reporter Caroline Hudson and modern health insurance reporter Nona Tepper. Thank you for coming, Caroline.

Caroline Hudson: Thank you for having me.


Nona, thank you for coming.

Nona Tepper: Thank you for having me.


Well, Carolina, Nona. You have been following this issue since the end of the public health emergency. The latest figures we have come from the KFF show that 1.5 million Medicaid beneficiaries lost their coverage, but that’s just the beginning. As many as 15 million people could lose their insurance. Caroline, what does this mean for the health system?

HUDSON: Well, of course, that essentially means less reimbursement for the health system and fewer affected patients unless they resolve any administrative issues or find other payers to cover. More rural small businesses with a higher proportion of Medicaid patients will be disproportionately affected. I believe, as part of the KFF data, I read that South Carolina actually had the highest number of decisions, and I believe the vast majority of them were related to administrative issues.

But no matter where the health system is located, it will only add uncertainty to the bottom line of any system at a time when they are already being challenged in the current macroeconomic environment.

So I think it’s also important to note that these systems are not adequately prepared to deal with the financial impact of the re-decision. It’s hard to tell just how many patients will be off the list and what problems are looming. The health systems that I’ve talked to, they’re doing their best to prepare for this and work with their revenue cycle, but they don’t yet understand the full extent of the problem. So they’re preparing for something they don’t know.

Tepper: I agree, this is definitely one of the biggest swings this year, or at least one of them, especially for insurance companies, especially Molina and Centene. Since Molina isn’t diversified and they’re primarily a Medicaid insurer, they’ll be affected, but they say they’re ready to ride out the storm. They projected that about 400,000 Medicaid enrollees would no longer be eligible for this form of coverage, which equates to about half the number of people who were covered during the public health emergency. But anyone who signs up to the Molina swap program during that period is a gain, they said, and they actually raised their financial forecast for the year after the first quarter. It seems they feel good.

Another insurer to watch is Centene. They are the largest Medicaid and exchange insurance company. Because of this, they have the greatest opportunity. If they were able to transfer some Medicaid members who were no longer eligible for coverage or unfortunately lost coverage due to administrative issues, they could see a huge gain in exchange enrollment. As a result, the company said they are working with states and have received lists to identify those most at risk of losing coverage during this period. They also said they had created an internal data tool to identify those most at risk of losing their Medicaid coverage.

But large commercial insurers have a place here too. UnitedHealth, Elevance and others with a lot of job-based coverage could see real gains during this time, as employer and individual plans typically generate higher profit margins for insurers.

So, as Caroline said, the stakes are very high and insurers are investing heavily in consumer outreach to try to keep them on Medicaid or transition them to exchange coverage, but they don’t have good precedent here. I think the data I’ve seen shows that only 5% of people who lose Medicaid coverage actually transition to an exchange program, so their work must be done for them.

Most people still don’t know this process is going on. In some cases, the states didn’t make the process any easier. People are still losing coverage because they haven’t notified the state of their updated address, income or other information. I think I saw the KFF saying that almost 3 out of 4 canceled beneficiaries lost coverage due to procedural issues. Alex, what does this mean?

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Kacik: Yeah, to your point about some states making it harder, I’ve heard that some states have automated the process and others have made it more onerous. So that means that sometimes they’re giving autofill components to beneficiaries who want to re-enroll, but those de-enrollments happen for procedural reasons, which means there’s some sort of administrative hurdle. Perhaps the individual did not complete the update process, or the country’s contact information is outdated. Those who lost coverage for procedural reasons may still be eligible. Many of them were also children, KFF data showed. This is something to remember.

We hear from the health system that they are working closely with state agencies to ensure contact information and other data is up to date, but this is a major undertaking and there are many at stake. One of the reasons health systems are investing heavily in these marketing campaigns and outreach to Medicaid beneficiaries is to protect their 340B status.

Two of Essentia Health’s hospitals (a rural healthcare provider located in Minnesota with more than a dozen hospitals but spread across the Midwest, St. Joseph’s Hospital in Brainerd, Minnesota, and a hospital in Fargo, North Dakota) are operating near the threshold capacity needed to qualify for their 340B drug discounts. Hospitals can buy medicines at discounts of up to 50% or so if they earmark certain costs for low-income and poor patients. Essentia said it would lose about $15 million in profits if the two hospitals lost their eligibility. So I also recently reached out to them about Marshfield’s proposed merger, but they say that the two hospitals are still at risk and that they are doing everything they can to ensure that as many Medicaid beneficiaries as possible rejoin.

Caroline, for helping us understand the broader financial picture of the health system. You mentioned some of these macroeconomic pressures. Why is it important for hospitals to maintain these drug discounts in the face of higher labor costs and other financial pressures?

HUDSON: Well, I think right now, in the current economic environment, especially with inflation, the health system and the hospitals really need all the help they can get to the bottom line. I’d say having the 340B rebate is an important way to help offset some of the other added expenses — costs associated with wages and benefits, supplies, purchasing services, etc. At this point they were all promoted. The 340B is just another tool for them to realign profits and offset some of the other expenses they now have to pay.

I recently reviewed the first quarter earnings and it sounds like the health system doesn’t really expect spending to level off anytime soon, especially labor spending. I think things are improving. They are moving in the right direction, but in terms of solutions, not so much, it will take months, if not years.

One bit of positive news though, Kaufman Hall Consulting, they release a National Hospital Rapid Report every month, they survey over 1,300 US hospitals. Their report this month actually suggests that operating margins are starting to turn positive as we move into the second half of 2023. It’s still around, I think, at a median of 0.3%, so barely positive. To be clear, that doesn’t mean hospitals are no longer struggling, especially smaller hospitals and rural areas, especially those that can still benefit greatly from the 340B discount.

Nona, I’m curious. What role do health insurance brokers play in ensuring Medicaid beneficiaries maintain coverage?

Tepper: Insurance brokers are God’s work, Caroline. They are free for consumer use. They spend hours listening to people’s medical needs, their favorite hospitals, and use that information to help people sign up for the best coverage. While they are free for consumers to use, they are paid for by insurance companies. So you know, you could say they’re biased. It definitely depends on the broker. And they may also be easier to arrange than federally funded navigators, especially after President Donald Trump cut funding for the navigator program.

RELATED: How Connecticut Brokers Academy is Addressing Health Disparities

However, I think I saw HHS triple Navigator funding during this time, so I think that will help re-flesh the program. It’s one way HHS is trying to minimize insured losses during this time.

Alex, what other things has the agency tried to prevent the spike in uninsured rates during Medicaid redefinement, and what is your overall outlook?

Kacik: On June 12, HHS said it would allow managed care plans to help beneficiaries enroll by filling out some information, our regulatory reporter Vikki Turner reported. Renewal forms and allow state Medicaid agencies to suspend and administratively terminate for one month in order to provide more outreach to individuals.

This touches on this difference and how some states handle the re-enrollment process. Pharmacies and community-based organizations will be allowed to help those who lose their insurance, but whether there is a procedural issue or people are kicked out of the program for making too much money. Now, millions of people could still lose their insurance.

This has major implications not only for healthcare providers and insurance companies, but also for health equity. Once people lose insurance, they are less likely to seek care, and a significant portion of Medicaid beneficiaries live in underserved areas. So this will widen the gap in life expectancy that we see between rich and poor areas. For example, we in Chicago, there is a huge gap between life expectancy in the Loop and life expectancy living in the Garfield Park area on the west side. As I said, some states may automate the enrollment process to make it easier, while others make it more cumbersome, which will lead to some geographic variance in Medicaid enrollment.

So for now this will be the case across states. You know, we’ve got to keep a close eye on how we understand how populations and individual communities are affected.

Thank you for coming to Carolina Nona.

HUDSON: Thank you for having us.

Tepper: Thank you for having us.


Okay. Thank you all for listening. You can subscribe to Beyond the Byline on Spotify, Apple Podcasts, or wherever you choose to listen. You can support the reporting of Caroline, Nona, myself and our team of reporters by subscribing to Modern Healthcare and following us on Twitter and LinkedIn. thank you for your support.



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