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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

How Can Medicaid Succeed After Absorbing Millions of New Enrollees?

The term “Obamacare,” once derisive, has now been embraced by the President, and the Affordable Care Act (ACA) is likely to be an important issue in the upcoming election. Since the Supreme Court ruling surprised nearly everyone and struck down some provisions related to the Medicaid expansion, several Republican governors have vowed to reject the expansion in their states, and debate about the value of Medicaid has intensified.

Mark D. Smith, JD

The question of Medicaid’s effect on the health of Americans actually has been resolved by recent studies—resolved, that is, for anyone willing to read them (see here and here). These studies in Oregon indicate that Medicaid can improve people’s health, financial circumstances, and general well-being and that it may actually save lives.

But can Medicaid still succeed in a post-ACA world after absorbing millions of new enrollees? Can Medicaid rely on its existing networks of clinicians and institutions—despite evidence that many enrollees have more difficulty than other insured individuals in getting an appointment when they need one?

The ACA provides support for innovative models of care, such as accountable care organizations, based on the belief that longitudinal, population-based primary care will keep people healthier and, when they do need care, provide it at a lower cost. This is an important and positive development. But a look at the organizations that have been held up as models of “high-performing” systems—organizations that I admire, such as Kaiser Permanente, Geisinger, the Mayo Clinic, and Health Care Partners—reveals a troubling reality: most of these forward-thinking organizations do not now care for many patients who have Medicaid coverage and seemingly have no plans to do so in the near future.

The vast majority of Americans who are newly covered because of the Medicaid expansion and exchange-base subsidies will come with relatively low reimbursement rates attached. Who will care for them?

On a panel at a recent conference in Washington, DC, sponsored by the journal Health Affairs, I asked a distinguished group of experts about this conundrum. All but 1 of them essentially said that the low-cost clinicians and institutions who have historically taken care of the poor—the “safety net”—would continue to serve them.

That approach raised 2 questions for me.

First: will those who have historically served as the health care safety net have the capacity to care for an influx of some 12 million Medicaid patients and many millions more who obtain coverage through subsidized health insurance exchanges and state-run Basic Health Programs?

And second: why are many so quick to excuse high-performing systems from the responsibility of providing care that low-income individuals can afford? Paul Ginsburg, PhD, president of the Center for Studying Health System Change, rightly said that those who offer low-cost health care survive only because of special reimbursement provisions, such as cost-based payments for Federally Qualified Health Centers and Disproportionate Share Hospital payments for public hospitals that serve a high percentage of uninsured, low-income patients. Some of these provisions will be eliminated or reduced under health reform, and others will come under increasing pressure. So even the clinicians, centers, and organizations that have been able to care for these populations at current rates may not be able to continue to do so in the new world.

Under health reform, the federal government will temporarily boost Medicaid payment rates in 2013 and 2014 for primary care physicians who serve Medicaid patients, to bring primary care service fees up to the level of those paid by Medicare. But there is no such plan to pay Medicare rates to specialists for Medicaid-covered procedures, such as colonoscopies or heart surgeries or the wide array of other interventions that require referrals. It is also not clear, state budgets being what they are, whether states will continue to support such increases. In California, for example, the annual price tag would be more than $700 million. Of course, it is better for patients to receive primary care than no care at all, and good primary care can avoid some later expenses associated with untreated conditions and lack of coordination. But more access to primary care physicians will not immediately lead to lower costs. In fact, there is every reason to believe that it will increase costs in the short-term.

What about the health insurance exchanges? Many enrollees will face substantial out-of-pocket costs in the form of high deductibles and copayments. In fact, many people with moderate incomes, those at the upper end of the subsidy-eligible population, will have sticker shock when they see that the most affordable “bronze” plans will have annual deductibles and co-insurance in the range of $2500 and 30%, respectively. For them, exchange-based coverage will essentially mean catastrophic coverage. Nonetheless, compared with being uninsured, catastrophic coverage is a very good thing, preventing individuals and families from being driven into bankruptcy. But the affordability of noncatastrophic, common, routine care will still be a pressing issue, even for many people with insurance.

Certainly the safety-net system that is in place will not soon become the kind of system imagined in the ACA. Safety-net clinics are funded to provide outpatient primary care and dental services only. They typically are not responsible for imaging studies, specialist diagnostic procedures, surgery, intensive care, inpatient care, or home care—that is, where the big costs (and the big cost savings) are. Clinics do great work under difficult circumstances, and many are expanding their repertoire. But while some are making great strides towards becoming “medical homes,” others still largely provide drop-in, episodic care. The true concept of “accountable care”—an organization taking longitudinal clinical and financial responsibility for all of the care needed by a defined population—is a long way from being a reality for the system that most newly insured individuals might seek out for care. To make matters worse, an increasing number of private physicians (including many physicians of color) who have historically cared for the majority of Medicaid patients have concluded, not surprisingly, that they can no longer continue to do so because of the punitive rates paid to those who do not have Federally Qualified Health Center Medicaid status.

So it seems that health care is in a position in which high-performing innovators step back from the problem of caring for the neediest people, while traditional safety-net institutions rely on a fee-for-service arrangement and special reimbursement rates that cannot and will not last.

This leaves 3 potential courses of action:

  1. Readjust the budgets and priorities of state and federal governments to pay substantially more for Medicaid so that its enrollees will be more attractive to high-performing systems.

  2. Readjust the budgets and priorities of current safety-net clinicians and facilities to enable them to develop the substantial financial, human, and physical capital and operational sophistication necessary to provide comprehensive longitudinal care.

  3. Readjust everyone’s income expectations and ratchet up the sense of urgency to help transform systems—even high-performing systems—into high-performing affordable ones.

We’ll need to do 1, 2, or all 3 of the above—and soon.

About the author: Mark D. Smith, MD, MBA, has been president and chief executive officer of the California HealthCare Foundation since its formation in 1996. CHCF is an independent philanthropy with assets of more than $700 million, headquartered in Oakland, California, and dedicated to improving the health of the people of California.