Experts Explain What’s Next for Medicaid After ‘Great Unwinding’

Experts Explain What’s Next for Medicaid After ‘Great Unwinding’

Academy Medicaid Committee leadership and members joined with outside experts to break down the future of Medicaid as states plan to reinitiate Medicaid redeterminations for the first time since the start of the COVID-19 public health emergency (PHE).

As part of a webinar sponsored by the Academy, speakers noted that some states may begin to disenroll ineligible Medicaid members as soon as April.

Matthew Buettgens, Ph.D., a senior fellow with the Urban Institute’s Health Policy Center noted that it expects that the 91 million Americans currently on Medicaid or the Children’s Health Insurance Program (CHIP) will shrink by 18 million due to the end of the federal government’s continuous coverage requirement on March 31. “The number of uninsured people is at a record low,” Buettgens said. “Will that reverse afterwards?”

Key Webinar Highlights

  • Some 18 million people are expected to be disenrolled by states as part of the Medicaid redetermination process.
  • The majority of those people are projected to end up on employer-sponsored health plans.
  • Medicaid is likely to regress to near pre-COVID membership levels, barring changes in eligibility policies.
  • Per-enrollee Medicaid costs will rise as those who are less well remain in the program.
  • Heavier Medicaid churn, slowed during the pandemic, is expected to return.

Buettgens explained that all but 3.8 million of those who will no longer qualify for Medicaid will access health insurance through other means, according to the Urban Institute. About 3.2 million children are expected to sign up with CHIP, but the biggest amount—about 9.5 million—will end up on employer-sponsored health plans (some of whom may already be dually enrolled in Medicaid and employer coverage). Another 1 million are expected to get insurance through the health exchange using tax credits.

By the time the 14-month unwinding of the continuous coverage requirement is completed by states, the program is likely to revert to close to its pre-COVID size, Buettgens said. However, it is possible that the mandating of 12-month Medicaid eligibility for children beginning in 2024 as well as various policies implemented in select states could increase the numbers covered.

The uncertainty around future enrollee numbers in Medicaid and CHIP could create a funding issue for states, said Sterling Felsted, an Academy Medicaid Committee member.

“It is important for decision-makers as well as actuaries of course to recognize the impact of fluctuating membership has had and will continue to have on the average cost or acuity,” he said. “Basically, if decision-makers or people who are looking at budgets think that getting rid of 10% of the [Medicaid] population is going to result in a 10% cut to their budget, they are going to be fairly surprised.”

To illustrate the point, he pointed to the temperature of bathwater as a metaphor. He said Medicaid’s ever-changing enrollment can be compared to water entering and leaving a bathtub. The average cost for program participants can be compared to the temperature of the bathwater. For many on Medicaid, they tend to seek coverage when they have a health need. Thus, new members cost more than existing members. Felsted stated it is like hot water entering the tub.

Once needs are addressed, member costs over the long haul tend to decline, just like bathwater will cool over time. He added that when people leave the program, it is often lower-acuity members who do so, thus removing colder water from the tub.

“For the acuity of a population covered by a plan to remain consistent, these upward and downward pressures on acuity must balance out,” Felsted said. “Now during the pandemic, the mandate for continuous eligibility put a stopper in the tub. On average, the ones who have stayed on have lower-than-average needs.”

Because of that, he added, the bathwater has cooled. But that will end when many of those enrollees are dropped from the program. States should expect “a noticeable spike in acuity.” The average cost per Medicaid enrollee is going to rise, he said, and states need to budget accordingly.

For now, patience is a virtue, said Academy Medicaid Committee member Steven Wander. States are on different timelines when it comes to reconsidering program membership going forward and when people will become disenrolled. Heavier Medicaid churn is likely.

“If you are using data for a period during the [COVID-19 PHE]—where there was very low churn—to set rates for a period after the unwinding—when you are back to a regular level of churn—there will typically need to be some adjustments to those rates,” Wander said.

The webinar recording and slides are available free of charge to all Academy members. To access them, log in to your member profile.

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