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You are here: Home / Anderson On Health Insurance / COVID-19, Medicaid block grants and other notes

COVID-19, Medicaid block grants and other notes

by David Anderson|  February 28, 20209:19 am| 8 Comments

This post is in: Anderson On Health Insurance, COVID-19, Healthcare

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COVID-19 is an excellent example of potential shock for Medicaid financing in a block grant context.

If there is a widespread community infections and plenty of people unexpectedly being admitted to hospitals for significant care, things could get expensive fast in an unanticipated manner.  Commercial insurers will pass most of the cost to reinsurers and the federal government will be able to readily absorb the Medicare and VA bumps.  However, Medicaid will likely be a significant payer in a plausibly bad scenario.  Legacy Medicaid eligibility categories will have states pay between a quarter and half the incremental costs while the feds pick up the rest.  Adults who are covered by Medicaid expansion will see their state pay a tenth and the feds the rest.

A few weeks ago, CMS released a letter to state Medicaid directors inviting them to ask for block grants for the adult, non-blind/aged/disabled population. Two flavors of block grants were available; the first was a total program block grant which would grow at CPI-M+.5 and the other flavor was a per-capita block grant which would grow at CPI-M.  The initial allocations for both flavors would be based on trended forward historical data.  Historical data, by its definition, does not contain new shock information.  A block grant for Medicaid transfers shock risk from being split between the feds and the states to entirely the states.  Expensive, external shocks would quickly deplete the federal funds and force the state to either find additional state funds or cut back services dramatically.  CMS has said that in an emergency, the block grant could be altered for special circumstances:

Special Circumstances Adjustment

Recognizing the dynamic health care landscape in which state Medicaid programs are operating, CMS will provide states with the opportunity to propose updates to an approved HAO demonstration to account for any changes to projected expenditures or enrollment in the current demonstration year due to unforeseen circumstances out of the state’s control, such as
a public health crisis or major economic event. Under such circumstances, states will have the opportunity to submit new information and relevant data, describe the circumstances and
proposed amendment, and renegotiate relevant STCs. The data provided by the state will be validated by the CMS Office of the Actuary in consultation with other appropriate federal
entities.

There is a lag and an uncertainty on the part of a state as to whether or not a public health crisis will have additional federal funding under a proposed Medicaid block grant. Under current rules, the new, unexpected claims are submitted to CMS and the funds show up in the normal course of business. The uncertainty would cast a pall on decisionmakers if block grants had already been elected. That uncertainty would be much higher in the world where Cassidy-Graham passed and big chunks of Medicaid were block granted as those changes would require Congressional action which, as we have seen in Puerto Rico which does operate a block granted Medicaid program, is not guaranteed to be quick nor sufficient.

Moving a little wider in the field, I think that states which have Medicaid expansion for the working poor will be in better shape than states that have not expanded Medicaid, all else being equal. The coffee shop worker or the home health aide still can’t afford to take pre-emptive time off but in Medicaid expansion states, they can afford to get checked out which helps with surveillance, isolation and treatment efforts.

Finally, John Graves of Vanderbilt raised one hell of an interesting and important point yesterday; timing of a potential crisis is not good.

The U.S. experience with a pandemic early in the calendar year will be uniquely challenging given that the vast majority of Americans have privately administered plans that (increasingly) rely on deductibles/cost-sharing as a fairly blunt utilization-management tool.

— John Graves (@johngraves9) February 26, 2020

A 1st Quarter crisis looks very different than a 4th Quarter crisis as the number and characteristics of folks who have no remaining cost sharing as a barrier to care looks very different in the Q1 instead of Q4.

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8Comments

  1. 1.

    Anya

    February 28, 2020 at 9:26 am

    For the first time since he took office, I am high key rooting for the vulgarian to be correct but it’s highly unlikely since the symptoms can be deceptive and mistaken for common cold. And considering our healthcare system, how many will seek medical help before it’s too late.

  2. 2.

    germy

    February 28, 2020 at 9:26 am

    Looking forward to facing a pandemic in a country where a key source of healthcare is GoFundMe.

    — Kashana (@kashanacauley) February 27, 2020

  3. 3.

    Immanentize

    February 28, 2020 at 9:28 am

    I’m in a high deductable PPO plan through my employer. But the employer, to get people into the plan, pays us 50% of that deductable up front. The problem I would anticipate with people in high deductible plans is that we will not seek treatment at all to save on out of pocket, hence increasing risk of transmittal.

  4. 4.

    daveNYC

    February 28, 2020 at 9:49 am

    Not having money to pay the deductible or whatever isn’t going to help, but I think that the general lack of sick days is going to be the bigger issue.

  5. 5.

    Feathers

    February 28, 2020 at 10:23 am

    This just really goes to show that health care should be a publicly provided good. At the least there should be a mechanism for the govt to be able to declare that insurance plans must offer COVID testing and treatment w/o copay and will be reimbursed at Medicare/Medicaid rates.

  6. 6.

    Martin

    February 28, 2020 at 10:49 am

    So, here’s my armchair predictions:

    1) California already has hundreds of cases, but the lack of testing is preventing us from recognizing it or acting on it.
    2) Our patient zero for community spread will turn out to be a HHS employee.
    3) Trump will blame CA for the outbreak.
    4) Until this outbreak reaches a state Trump needs for re-election, there will be no funding support. California will be on its own for a while. We’ll need CDPH to make the right calls while the CDC is kept on the sidelines.

  7. 7.

    David Anderson

    February 28, 2020 at 10:59 am

    California has a professional and  competent public health infrastructure with a state government that has cash and is not a political clusterfuck.  That ain’t a bad situation to be in.

  8. 8.

    Martin

    February 28, 2020 at 11:38 am

    @David Anderson: No, it’s not. But we also don’t track when people cross state lines. While I feel somewhat confident that the state is up to this, how rapidly will this spread because the Feds are completely out to lunch? Where does that leave states that can’t afford a public health infrastructure that rivals the federal one? CA has at least a dozen labs that can process tests that are better than anything in China, though not up to CDC Atlanta caliber. And with a few bucks thrown our way, I bet we could repurpose another dozen at least. Idaho can’t do that. Mississippi can’t do that. They are reliant on the feds here.

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