The Trump administration is proposing to alter how it funds a portion of the nation's insurance program for low-income Americans, raising questions about how some private insurers will fare given they provide coverage to a significant portion of Medicaid beneficiaries.
Almost every state — to some degree — has subcontracted with Medicaid managed care organizations such as Centene and UnitedHealthcare to have them provide coverage to eligible residents. More than two-thirds of the nation's more than 70 million Medicaid members receive some or all of their care from Medicaid managed care organizations, according to the Kaiser Family Foundation.
The Trump administration wants to give states the option to cap the federal funding they receive to care for some of the poor adults in the program, mainly those who became eligible for coverage under the Affordable Care Act. In exchange for agreeing to a cap, or what some refer to as a block grant, states will have more administrative flexibility.
Placing a ceiling on spending may be enticing for state leaders who worry about healthcare costs taking up a greater portion of their budgets. However, critics warn that capping the federal allotment leaves them financially exposed to all costs above the cap.
Even with a potential clamp on future federal funds, analysts said the demonstration does not pose major headwinds for Medicaid managed care companies, noting the arrangement is optional and only applies to a subset of the overall Medicaid population.
And any such risk is a distant worry, they say.
"There are a lot of questions out there still. It's a long way off if it ever happens at all," Bradley Ellis, senior director of North American insurance ratings for Fitch Ratings, told Healthcare Dive.
Centene, Anthem and UnitedHealthcare have a significant footprint in the Medicaid managed care space. Together, they cover more than 21 million Medicaid beneficiaries across the country. The government sector, both Medicare and Medicaid, are viewed as big growth areas for insurers.
Analysts with Cantor Fitzgerald said they maintain a positive view on the manged care sector following the block grant news last week. "It remains to be seen if/when/how many states will opt into the initiative," the analysts said in a recent note. "We continue to view Medicaid as a compelling growth area."
The nation's health insurance lobby didn't take a position on the measure, but stressed the importance of having flexibility in the program and the need to cover everyone.
"We support offering state policymakers flexibility to design their Medicaid programs to best meet the needs of their citizens. At the same time, funding mechanisms for Medicaid should not undermine Americans' access to the care they need and deserve," America's Health Insurance Plans said in a statement Friday.
Even if states were interested in implementing the policy, legal experts told Healthcare Dive the demonstration is unlikely to get off the ground — as a fight in the courts is all but certain.
"It is blatantly illegal," Sidney Watson, a health law expert at St. Louis University, told Healthcare Dive.
CMS does not have the authority to change the funding mechanism of the program, he said. Plus, this proposal runs into the same legal problems as CMS' Medicaid work requirements, which have been blocked by the courts, because it does not further the objective of the program to provide medical assistance to low-income citizens, he argued.