Medicaid and CHIP are catching uncovered kids, the ACA helps

Due to high rates of Medicaid and Children’s Health Insurance Program (CHIP) coverage for young children, only 3.3 percent of children ages three and younger were uninsured in 2016. Coverage of both young children (age three and younger) and their parents increased under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) in 2014 and 2015—a trend that continued in 2016. According to an Urban Institute report, young children and their families continued to rely on Medicaid and CHIP in 2016, with 48.5 percent of young children covered by Medicaid or CHIP. In comparison, only 42 percent of older children were covered by the programs.

Trends. Nearly half of young children and one-fifth of the parents of young children were covered by Medicaid and CHIP in 2015 as well. The high incidence of Medicaid and CHIP coverage is partly due to higher incidence of family characteristics among parents of younger children, including lower incomes, younger parents, and mixed immigration status.

Variance. Despite high overall levels of coverage, the prevalence of health insurance coverage for young children and their families continued to vary across state lines. Uninsurance rates were below 2 percent in 12 states but above 8 percent in three states—Alaska, Wyoming, and North Dakota. Additionally, the expansion of state Medicaid programs under the ACA continues to be a significant source of variation in state uninsurance levels for the parents of young children. For example, an estimated 8.7 percent of parents of young children in expansion states were uninsured in 2016, whereas 18 percent of parents of young children were uninsured in nonexpansion states.

MACPAC suggests Congress authorize states to mandate managed care

Congress should amend Section 1932(a)(2) of the Social Security Act (SSA) to allow states to require all beneficiaries to enroll in Medicaid managed care programs under state plan authority, without a waiver, according to the Medicaid and CHIP Payment and Access Commission (MACPAC).

Other recommendations

During its January session, MACPAC approved the managed care recommendation, which will be added to the commission’s draft March 2018 report to Congress alongside two December 2017 recommendations that Congress (1) extend Section 1915(b) waiver approvals from two to five years; and (2) revise Section 1915(c) waivers to waive freedom of choice and allow selective contracting.

Concerns

Other concerns raised by MACPAC in December 2017 included: (1) whether the managed care recommendation should include long-term services and supports; (2) the adequacy of protections for vulnerable beneficiaries under state plan authority; and (3) that the recommendation to allow mandatory managed care enrollment requires oversight of states and plans to ensure beneficiary needs are met.

CHIP and DSHs face difficult financial roads without quick congressional move

Without congressional action, authorization for the Children’s Health Insurance Program will end on September 30, 2017, with the end of fiscal year (FY) 2017. Cuts to disproportionate share hospital (DSH) payments are also scheduled to take effect on October 1, 2017. If the authorization lapses and the cuts take effect, states will face budget shortages in their attempts to keep the CHIP program solvent and DSHs, which already operate on tight budgets, will be exposed to greater financial strain. A number of other health care related provisions are also slated to lapse on September 30, 2017, if Congress does not act, according to a Congressional Research Service (CSR) report.

Action

On September 28, 2017, the Energy and Commerce Committee announced that it would markup a bill to extend funding to the CHIP program. On the same day, members of Congress authored a letter to House Speaker Paul Ryan (R-Wis) and Democratic Leader Nancy Pelosi (D-Calif) expressing concerns regarding the impact of the DSH cuts and calling for congressional action.

DSH cuts

Stakeholders have made ongoing attempts to procure action from Congress to delay the DSH cuts. On September 18, nine hospital organizations urged lawmakers to further delay the start of Medicaid DSH cuts authorized by Section 2551 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) (see Hospital organizations again advocate for delay of Medicaid DSH reductions, September 19, 2017). The cuts would have gone into effect in 2014 but legislation delayed the reduction. The reduced payments were designed to account for decreases in uncompensated care, yet, DSHs warn that planned increases in coverage rates under the ACA have not been realized, exposing providers to unfair payment reductions.

CHIP

Although the impact of a delay in CHIP reauthorization will differ from state to state, a Kaiser Family Foundation analysis revealed that “states would face budget pressures, children would lose coverage, and implementation of program changes could result in increased costs and administrative burden for states” if Congress does not reauthorize the CHIP program by the end of FY 2017 (see States face budget shortages if Congress doesn’t extend CHIP funding, September 11, 2017).

Study finds weak results for outcomes-based drug contracts

There is no evidence that outcomes-based pharmaceutical contracts lead to less spending or higher quality health care, according to a study conducted by the Commonwealth Fund. The limited impact of outcomes-based reimbursement may be due to the fact that the reimbursement model is only used for a small subset of drugs which offers limited metrics to evaluate the model’s effectiveness. The Commonwealth Fund suggested that voluntary testing and more rigorous evaluation could lead to better understanding of outcomes-based pharmaceutical reimbursement.

Outcomes-based

Following the trend towards value-based reimbursement in health care, some pharmaceutical manufacturers and private payers have made a push towards an outcomes-based pricing model in the prescription drug market. Outcomes-based models attach rebates and discounts to the health care outcomes observed in the patients who receive certain drugs. The purported goal of such arrangements is to improve the value of pharmaceutical-based care by paying more for drugs that work and less for drugs that do not. The reimbursement model appeals to manufacturers and payers as a means to increase the scope of formularies and coverage while reducing prices.

Restrictions

The outcomes-based model is limited by the fact that the model cannot apply to pharmaceuticals that do not have reliable outcomes measurements. Additionally, the outcomes measurements that do exist typically rely on claims data and exclude significant clinical outcomes. In other words, the outcomes-based contracts may not lead to optimized value because the actionable outcomes are limited to those that can be measured. Thus, while outcomes-based pharmaceutical reimbursement has the potential to increase the value of pharmaceutical treatments, greater evaluation of the model’s effectiveness and implementation is necessary to determine its true benefit.