Upcoming Medicaid redeterminations could further complicate healthcare operating environments, as hospitals and payers continue to face pandemic-driven challenges nearly three years into COVID-19, according to a new report from Moody’s Investor Services.
Medicaid enrollment rose substantially through the pandemic, growing from 70.7 million members in February 2020 to 90.9 million in September 2022, according to the report. The growth in enrollment numbers was driven by policies that suspended state Medicaid eligibility checks during the COVID-19 pandemic and barred states from kicking members off their rolls.
The suspension of state eligibility checks benefited both hospitals and payers, with seven Moody’s-rated publicly-traded health insurers reporting large enrollment and EBITDA numbers driven largely by pause, according to the report.
However, Medicaid state redeterminations are currently scheduled to begin in April. About 15 million people are expected to lose coverage as a result over the next two years, according to the HHS.
While about seven million of those people are expected to gain coverage through the individual markets or employer-sponsored plans, eight million will not, and will likely become uninsured.
As a result, the redeterminations are likely to curb hospital revenue and enrollment growth for payers, according to the report. Health insurers’ earnings growth is expected to slide due to sluggish enrollment, while hospitals could see more self-pay patients and “higher bad debt” for facilities.
Commercial insurance enrollment is also likely to slow as corporate layoffs rise. That’s another factor likely to deal a blow to payers, Moody’s said.
Large payers have addressed redetermination concerns along with recent earnings results. On a Wednesday call with investors, Elevance CEO Gail Boudreaux said the payer will work with states to minimize potential coverage losses once redeterminations start again. Elevance has benefited from relaxed eligibility rules, and ended 2022 covering 47.5 million members.
Hospitals also face additional concerns this quarter, Moody’s said.
Staffing shortages remain a primary concern for facilities, though contract labor use has been declining in most markets, according to the report. However, labor expenses — which account for the bulk of hospital expenses — are likely to remain elevated as facilities face rising permanent labor costs.
Staffing and pay concerns among nurses have led to major strikes in the past year, including a recent three-day walkout among 7,000 nurses at two New York hospitals.
Greater union activity is likely to occur in some markets as labor dynamics continue playing out, the Moody’s report said.
Labor shortages have also hurt hospital volumes and are leading to longer lengths of stay as facilities struggle discharging patients to post-acute care settings.
Some hospitals have acquired or partnered with post-acute care facilities to enhance discharge processes, in line with an ongoing shift toward non-hospital care. That trend should continue disrupting hospital volumes, according to the report.