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Medicaid Fastest-Growing Managed Health Care Segment

States refusing ACA Medicaid expansion will still see growth

The Medicaid expansion taking place in 25 states and the District of Columbia through the Affordable Care Act (ACA) and special waivers is creating substantial new business for managed care companies, according to health care analyst Decision Resources Group. But the ACA is driving up enrollment in nonexpansion states, too, as low-income people shopping the ACA’s health insurance exchanges learn to their surprise that they or their children are Medicaid-eligible.

The fastest-growing segment of the health care industry, Medicaid is set to expand by 6 million to 8 million members in 2014. Managed care organizations (MCOs) benefit from the increases as more states contract with them to hold down costs.

Those are among key findings in Decision Resources’ 2014 Medicaid Analyzer report, Opportunity, Growth Follow ACA Expansion. Other elements include:

  • High-acuity populations: States are expanding MCO contracts to cover more high-acuity populations, including those in long-term care; the aged, blind, and disabled; the mentally ill; and others with high medical and pharmacy utilization.
  • Medicaid expansion funds: States such as Arkansas have won special approval to use Medicaid expansion funds to cover their expansion population through exchange plans. Those plans typically have a lower prescription benefit and less access to prescription drugs than in Medicaid.
  • Medicaid pharmacy benefit: Medicaid MCOs are handling more of the Medicaid pharmacy benefit than ever: 58% of Medicaid members have their pharmacy benefits managed by MCOs as of July 2013.
  • Medicaid MCOs: The flurry of 2012–2013 merger and acquisition activity among Medicaid MCOs has given the top five national Medicaid MCOs a 37% share of the managed Medicaid market as of July 2013. That concentration will grow through 2014.

Medicaid’s patient mix will change significantly in the expansion states, where Medicaid will effectively become an income-based health care safety net. While Medicaid previously has been chiefly for needy children, their low-income parents, and the disabled. expansion will broaden the patient mix to take in nonparents and those with incomes below 133% of the federal poverty level (in the expansion states).

“As Medicaid MCOs take on more high-acuity Medicaid patients, the key to profit will lie in managing their care and keeping them out of expensive institutional settings,” says Decision Resources Group Principal Analyst Paula Wade.

Source: Decision Resources Group; March 31, 2014.

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