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Fall Medicaid Outlook: Key Events to Watch

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Medicaid will continue to experience considerable changes at the state and federal levels, both in terms of beneficiary demographics and the payer landscape. Stakeholders should consider how upcoming elections, policy proposals, and COVID-19 will impact benefits and payer dynamics.

As 2020 continues to be a disruptive year for virtually all aspects of policy, changes to Medicaid are no exception. The heightened focus on vulnerable individuals in light of the pandemic and the increase in Medicaid enrollment have highlighted the need to transform and support the Medicaid program, all while combating budget shortfalls. COVID-19, state responses, changes to managed care, and the elections are shaping both the state and federal Medicaid policy agendas:

  • Medicaid Drug Benefit Shift: In the past year, several states have shifted control of the Medicaid pharmacy benefit away from managed care organization (MCO) management toward more state control through pharmacy benefit carveouts or the implementation of unified preferred drug lists (PDLs). New York and California, 2 of the largest Medicaid programs in the country, will both carve out the pharmacy benefit beginning in 2021. In October, Michigan will transition to a unified PDL. Similarly, Ohio and Kentucky are each in the process of procuring a single pharmacy benefit manager to serve their fee-for-service (FFS) programs and all MCOs. The increase in state oversight of the pharmacy benefit allows states to closely control PDL development, strengthen rebate negotiations, and potentially reduce benefit spending due to state-imposed guardrails.
  • Fall MCO Request for Proposals (RFPs): Despite major disruptions to state Medicaid programs due to COVID-19, several states are continuing to evaluate and transform their care delivery through MCOs. States may implement changes ranging from a transition from FFS to managed care (Washington, DC;; Oklahoma) to issuing RFPs focused on addressing health inequities (California). The attention on social determinants of health and budget constraints give stakeholders the opportunity to proactively engage with states on how managed care should be implemented and structured. MCOs may offer suggestions to mitigate the budget pressures that states are facing, especially when those pressures may negatively impact plans.
  • Enrollment Increases and Budget Shortfalls Caused by the Pandemic: According to the Center for Medicare and Medicaid Services data, Medicaid and Children’s Health Insurance Program enrollment increased by 2.7% from March to May 2020, with some states showing growth as high as 6.8%. Avalere projects further growth in Medicaid, expecting enrollment increases to continue. Additional costs due to enrollment increases have been alleviated through a temporary 6.2% increase to federal medical assistance percentage, but the funding increase will expire in the same quarter the public health emergency ends. As of September 14, no further agreement has been reached on Medicaid-related assistance. The November elections will influence whether Congress provides further aid to state Medicaid programs. Monitoring federal aid efforts and enrollment changes will be key as states continue to respond to COVID-19.
  • The Shifting Dynamics and Priorities of the 2020 Elections: Public awareness of healthcare issues like the funding of public programs covering COVID-19 treatment and testing and increased hospital costs has become even more salient as the pandemic shapes the 2020 elections. In addition to the presidential race, several toss-up races will decide the majority in the Senate (e.g., Colorado, Georgia, Iowa, Maine, Montana, North Carolina), potentially changing the power dynamic in both the Executive Branch and Congress. While the current administration is likely to continue to place restrictions on the Medicaid program (e.g., work requirements, block grants), former Vice President Biden has proposed incentivizing Medicaid expansion for states, automatically enrolling eligible beneficiaries, and providing a public option for individuals in non-expansion states who are not eligible for public coverage. Measures incentivizing expansion and implementing automatic enrollment may result in more Medicaid enrollment in some states. Regardless of the election outcome, the increased focus on individuals disproportionately impacted by the pandemic and the structure of funding for safety net programs is likely to be a central policy topic in 2021 and beyond, giving industry leaders the opportunity to drive these changes.

How Avalere Can Help

A shifting environment of rapidly changing enrollment numbers, election outcomes, and Medicaid program dynamics gives stakeholders the opportunity to proactively assist state and federal lawmakers to shape policy. Avalere’s expertise and analytical capabilities can assist both strategic planning for the various scenarios that can occur in a fluctuating environment and interpret and analyze the impact that proposed policies may have.

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