As states tweak Medicaid programs, enrollment increases fall far short of job losses

• Medicaid enrollments increased by 2.3 million since the start of the pandemic, while unemployment reached more than 13 million.
• States are scrambling to fund their Medicaid programs and seeking federal help.
• Changes are planned to improve Medicaid programs after the pandemic.

Medicaid enrollments have lagged far behind job losses during the COVID-19 pandemic. But even the smaller-than-expected increase has left states scrambling for funding.

Although the national employment picture has improved since the depths of the pandemic-related state lockdowns in late spring and early summer, 13.6 million remained unemployed as of August, according to the latest report of the U.S. Bureau of Labor Statistics. But enrollment in Medicaid, which is designed to provide healthcare coverage for those in dire financial situations, had increased by only 2.3 million as of May, according to a Kaiser Family Foundation report.

The 3.2% national increase in Medicaid enrollment obscured wide variations among states. For instance, citing July data, state healthcare executives identified enrollment increases of:

• 15.5% in Utah (compared with July 2019)
• 10% in Virginia (since the start of the pandemic)
• 1% in California (compared with July 2019)

All three states expanded Medicaid eligibility under the Affordable Care Act (ACA) to all legal residents with incomes below 138% of the federal poverty level.

“Surprisingly enough … we have not seen the impacts of the COVID response on our enrollment numbers,” said René Mollow, deputy director of healthcare benefits and eligibility for the California Department of Health Care Services, about the state’s enrollment increase of roughly 100,000.

Mollow said a Medicaid enrollment surge may follow “several months behind” the recession, which started in the spring.

Another 230,000 California residents had signed up for coverage through the ACA marketplace since March 20, according to a Covered California release.

But those increases are far less than the 7 million California workers who filed first-time claims for unemployment benefits during the roughly four-month period that ended on July 25, as reported by the U.S. Department of Labor.

In interviews, some hospitals and health systems have reported seeing increases in Medicaid and uninsured patients in recent months, but such changes have varied by organization and across the country.

Medicaid programs tackle a budget crunch

A common concern among Medicaid programs has been state budget shortfalls stemming from declining tax revenue during the pandemic-fueled recession.

In Virginia, Medicaid consumes 25% of the general-fund budget. That does not include the state’s share of the cost of its ACA eligibility expansion, which is covered by a provider tax.

“The Medicaid program often gets put on the chopping block during economic downturns,” said Joe Flores, deputy secretary of finance in Virginia’s Office of the Governor. Historically, cuts have resulted in reduced eligibility, trimmed benefits and provider rate decreases.

The state was considering $200 million in cuts before the federal government agreed to increase its share of Medicaid funding as part of COVID-19 relief efforts. However, Flores said during the recent meeting of the National Academy for State Health Policy that federal assistance will be needed beyond the pandemic. That’s because the state expects the 2020 enrollment increase to last for “years.”

The enhanced federal funding was used in California to ensure the state met federal maintenance of effort requirements — which mandate that states maintain full pre-pandemic eligibility — and to fund costly COVID-19 treatments and offer some new services. For instance, California created a nurse hotline to assess residents’ symptoms and refer them to providers that could care for them and enroll them using presumptive eligibility, said Mollow.

The state’s Medicaid program also started to make “retainer payments” to certain providers at which patient caseloads sharply dropped due to the state’s stay-at-home orders or to patient fears.

Innovations by the Utah Medicaid program included the establishment of nursing home facilities for individuals who tested positive for COVID-19. Those facilities served as more advanced settings for COVID-19 patients who were transferred from other nursing homes and as sites to which hospitals could discharge stabilized COVID-19 patients, said Emma Chacon, director of financing operations for Utah’s Medicaid program.

Medicaid managed care plans draw scrutiny

The finances of Medicaid health plans also are drawing the attention of planners. More than 40 states pay these plans $265 billion annually, comprising more than 80% of total Medicaid spending. Those per-enrollee payments continued this year even as utilization sharply declined at the height of the pandemic.

“While less care is being provided in our communities and providers are teetering on the edge in some instances, it’s interesting to note — and some of us have — that Medicaid managed care organizations have boosted their profits in the short run,” Flores of Virginia said. “This hasn’t gone unnoticed in the governors’ offices, and the budgeteers are watching too.”

Most of Utah’s 366,000 enrollees are covered by Medicaid plans, which reported a 3.9% decrease in managed care utilization, amounting to $27 million. Chacon said Medicaid officials had expected the pandemic to cut utilization by much more.

In California, 10 million enrollees are covered by managed care plans, which have not yet provided the state with data on how utilization changed during the pandemic.

Potential future changes to Medicaid programs

California is urging the federal government to continue pandemic-related flexibilities, such as broadened use of telehealth.

Utah also found that expanded use of telehealth, especially phone-based services, was a “boon” to mental healthcare for Medicaid enrollees in the state, which has relatively large swaths of rural and frontier areas, Chacon said.

Future Medicaid efforts in the state will include a push to increase child immunizations, which fell sharply, and distribute flu shots.

California is developing messaging to get Medicaid enrollees to seek needed preventive care. Patient volumes in the fee-for-service portion of the program remain below pre-pandemic levels, Mollow said.

Hospitals in Utah have accommodated the number of COVID-19 patients to date but warned Medicaid officials that the combination of new cases and flu cases this winter may exceed their capacity, Chacon said.

In California, where nursing home populations were hit hard by the pandemic, the Medicaid program is looking to decrease nursing home placements in favor of more home- and community-based services, Mollow said.

Most important, said Flores, is for the federal government to increase its additional Medicaid funding from 6.2% to the 11% boost it provided for 21 months during the last recession.

“If we want to get out of this and recover, we need those resources,” Flores said.