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Lessons From Early Medicaid Expansions Under The Affordable Care Act



June 14th, 2013

The Affordable Care Act (ACA) will dramatically expand Medicaid in a number of states starting in January 2014. In this month’s issue of Health Affairs, new research from DeLeire and colleagues on Wisconsin’s 2009 BadgerCare expansion and from Price and Eibner on predicted cost and coverage impacts of the Medicaid expansion provides insights on the implications of state decision-making about whether to expand the program.

Since 2010, six states have already expanded Medicaid to cover some or all of the low-income adults targeted for coverage under health reform. To provide additional information on the impacts of such expansions, we undertook an in-depth exploration of the experiences of these states – California, Connecticut, the District of Columbia, Minnesota, New Jersey, and Washington – through qualitative interviews with 11 high-ranking Medicaid officials across all six states. In analyzing these interviews, we identified several key policy lessons that help elucidate the opportunities and challenges of expanding Medicaid under the ACA.  Below are some of our preliminary findings.

Lesson #1: All the early ACA Medicaid expansions occurred in states with pre-existing state or local insurance programs for low-income adults.

The changes in Medicaid eligibility in these six states (including Washington, DC) all built upon pre-existing state- or locally-funded health insurance programs for the poor. In all cases, state officials described the early expansion as, in part, a way to capitalize on the availability of federal funding to subsidize coverage states had already been paying for with state or local funds. Despite the fact that these expansions built on pre-existing programs, four states — California, Connecticut, the District of Columbia, and Minnesota — expanded insurance to a significant number of new individuals who had not previously received public coverage, and in general, Medicaid provided a more generous set of benefits than the pre-existing programs.

Many states will face similar circumstances in 2014: according to the Kaiser Family Foundation, as of 2012, 14 other states provided insurance to low-income adults that fell short of comprehensive Medicaid coverage, and 6 provided Medicaid to some adults below 133 percent of the poverty level. Thus, like the six early-expander states, many others in 2014 will also be building upon previous state expansions as well as extending coverage to new enrollees.

Lesson #2: Expansion-related predictions are challenging.

Another theme with particular relevance for the 2014 expansion was that enrollment and cost estimates proved challenging, often diverging significantly from the actual outcome. While some states did quite well in their projections, several states underestimated costs and/or enrollment significantly. In one state, nearly twice as many new Medicaid beneficiaries enrolled compared to projections. The resulting budget pressure in the state led legislators to consider cutting back the expansion. Another state reported underestimating capitation rates to managed care plans, requiring a significant adjustment after the first year.

Looking ahead to 2014, these experiences should be a note of caution regarding the uncertainties associated with projecting enrollment and costs associated with Medicaid expansions.  How will the predictions for 2014 compare to these early expanders’ experiences? On the one hand, the Medicaid expansions in these states built upon pre-existing programs, suggesting that their ability to make accurate projections should have been greater than will be the case for many states under the ACA. However, it is also possible that these more narrowly-targeted expansions received less attention and/or resources for making accurate projections than the broad-based expansion that will be implemented under the ACA in 2014.

Lesson #3: Barriers to coverage and access remain after expanding eligibility.

While state Medicaid officials agreed that access to care had improved for both new Medicaid enrollees and for those transferred from less generous pre-existing programs, they also reported that many barriers to care remained. First, several early expander states had difficulties enrolling very low-income adults and keeping them enrolled, in part because some of these adults experience transient housing and other unstable social circumstances. Several officials said that culturally and linguistically competent outreach conducted through community-based providers was an important means of overcoming these challenges.

Even after enrollment, some beneficiaries reportedly encountered challenges in obtaining care. Care coordination in fee-for-service Medicaid was an area of concern, and several officials also lamented the shortage of providers in rural areas — though they pointed out that this is neither a new problem nor one caused by the Medicaid expansion. While access barriers may be ameliorated by the Affordable Care Act’s increase in primary care payment rates in Medicaid for 2013-2014, the state Medicaid officials we interviewed were fairly skeptical that the temporary pay increase would significantly increase provider participation in Medicaid.

Lesson #4: Behavioral health is a critical need for this population.

Most of the officials we interviewed commented that the expansion population had a greater-than-expected use of behavioral health services, including substance abuse treatment. We identified two primary implications of this: First, it offers the possibility of major improvement in care for a population that has traditionally had difficulty obtaining needed services. Second, states will likely need to improve the availability and quality of mental health services, which requires both additional provider capacity and better care coordination for patients with complex behavioral health needs.

However, it is important to take these comments in context. Several officials noted that this trend of unexpectedly high behavioral health needs is unlikely to be as pronounced in the 2014 expansion to 133 percent of the federal poverty level, because the early expansions targeted much lower-income individuals, who have higher rates of substance abuse and severe mental illness than adults with incomes closer to or above the poverty level.  Moreover, it is possible that Medicaid take-up was lower under these early expansions without the added benefit of the individual mandate and public relations efforts that will occur in 2014, and therefore the early expansions disproportionately drew in individuals who were in poor health.

Lesson #5: While the early expansions required significant administrative effort, these states — like all states — still face major implementation challenges for 2014.

Despite their experiences over the past two years, most Medicaid officials in early expansion states felt that they were still not fully prepared for the administrative challenges of the 2014 expansion. Nonetheless, there were some lessons to be learned from the bumps in the road they experienced during the implementation. Administrative challenges in the early expansion included the need to hire more staff (which was not always possible, given budget constraints), the sometimes arduous transfer of beneficiaries from pre-existing programs to Medicaid, and the high volume of new applications. One state official reported that the lack of sufficient staff capacity to handle new applications contributed to a lawsuit. Another state had to print out and manually transfer beneficiary information from the state’s pre-existing insurance eligibility system to Medicaid.

Most officials voiced the opinion that two primary challenges for 2014 are similar in states with or without early expansions: coordinating with the new insurance exchanges and converting their eligibility systems to the Modified Adjusted Gross Income standard required by the ACA.

Lesson #6: The so-called ‘Woodwork Effect’ was not apparent in these early expansions, but it would be premature to rule it out even in states that choose not to expand in 2014.

Most state officials said they had not seen evidence that their early eligibility expansions had resulted in significant increases in enrollment among previously-eligible groups. Nevertheless, most officials predicted that the ACA’s individual mandate, media coverage, streamlined application process, and availability of Exchange subsidies will bring previously-eligible but uninsured people into the program. In this often-voiced view, eligibility expansions are not the issue driving the woodwork effect. Instead, it is these other factors that will occur in 2014 regardless of whether a state chooses to expand Medicaid to 133 percent of the federal poverty level, meaning that all states should plan for increased Medicaid enrollment in 2014 whether or not they participate in the expansion.

Lesson #7: Political context matters a great deal in implementing a Medicaid expansion.

Officials described the support for Medicaid expansion among key stakeholders as nearly universal, though the intensity of support varied. Hospitals, consumer advocates, and community health centers were most vocal and “extremely supportive” of the goals of expanding coverage and bringing federal dollars into the states to do so. Doctors, insurers, and the business community were described as more “lukewarm” but still in favor. More generally, these states all have governors — five Democrats, one Republican — who have declared their support for the 2014 Medicaid expansion, and have what one Medicaid director called a very “pro-coverage” culture.

This culture in government, among stakeholders, and public opinion can, as one official described, grease the wheels and enable programs to more easily overcome implementation challenges along the way. Actively incorporating stakeholders at each step during the implementation process and keeping them apprised of impending changes or new challenges can be critical to maintaining support over time.

Conclusion

The experiences of the six “early expander” states under the Affordable Care Act provide a range of potentially valuable lessons for policymakers to consider as the 2014 Medicaid expansion approaches. Though these six states are distinct in many ways from other states, aspects of the lessons that emerged from interviews with these officials have potential implications for other state policymakers, whether or not they choose to expand Medicaid in 2014, and whether or not they have pre-existing state or local coverage programs.

Overall, the lessons of the six early expansion states show the promise of significant gains in coverage and access to care for populations in need, but also offer cautionary notes on the administrative challenges, significant cost and enrollment uncertainty, and remaining barriers to care that policymakers will need to take on over the coming years of immense change in the Medicaid program.

Note: This blog post represents preliminary findings from a project supported by the National Institute of Health Care Management Foundation and a career development award for Dr. Sommers from the Agency for Healthcare Research and Quality.

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