Editor’s Note: John Petraborg is the client industry executive of HP Health and Human Services.

“This country cannot be strong if its people are sick and poor.”

This quote is attributed to President Teddy Roosevelt during his 1912 candidacy when advocating for universal health coverage for Americans. During the past century, several presidents — including Harry Truman, Richard Nixon and Bill Clinton — pushed for comprehensive health reform but failed. But history was made in March 2010 when Congress passed the U.S. Patient Protection & Affordable Care Act and the Health Care and Education Reconciliation Act, which were both signed by President Barack Obama.

Unlike past legislation enacted by Congress, the Affordable Care Act will touch the lives of virtually every single American regardless of age or economic status. The new federally enacted reform is projected to cost $940 billion over 10 years and add millions of people to public and private insurance programs. Medicaid agencies will be at the heart of making health reform a success.

Medicaid has always been categorical in nature — meaning that to qualify for coverage a person had to fit into a specific category, such as being a low-income child, pregnant or a disabled adult. This will change markedly with the implementation of health reform, broadly expanding Medicaid to virtually all Americans whose income is below 133 percent of the poverty level. Thus, health reform will affect many groups that aren’t now able to obtain or maintain coverage.

Who Will be Impacted?

Low-income adults without dependent children and who have incomes up to 133 percent of the poverty level are the largest portion of the estimated 16 million to 20 million new Medicaid enrollees under reform. To help states pay for the influx of new Medicaid enrollees, the Affordable Care Act provides 100 percent federal funding for newly eligible individuals in 2014, 2015 and 2016. A 5 percent state match requirement begins in 2017. This will phase to a 10 percent state match in 2019 and thereafter. 

Low-income families that don’t qualify for Medicaid will be eligible for subsidies to purchase insurance within newly established state-run health insurance exchanges. The subsidy will be on a sliding scale based on income — up to a maximum of 400 percent of the federal government’s definition of the poverty line.

Another group significantly affected by the bill is young adults, who will immediately have the option to remain on their parents’ health insurance until they turn 26 years old — three years longer than allowed today. Young adults will also be required to have insurance — something a number of them may have forgone in the past.

How Much Will it Cost?

The impact of the Affordable Care Act on the nation’s state-administered Medicaid programs — and on states’ private-sector vendors — is far-reaching, labor-intensive and costly. Looking at the big picture, there are two significant changes that will affect the Medicaid program. The first will be the sheer volume of newly eligible Medicaid enrollees and the ancillary impacts of that volume on eligibility processes and systems, health-care delivery networks, costs and budgets. The second change will be the establishment of health insurance exchanges, with the requirement for extensive interoperability between the exchanges and determination of Medicaid eligibility.

A number of states understandably have expressed concerns about the permanent financial obligations on state budgets, especially after the 100 percent federal share to cover the expansion begins to phase out after 2016. To cite one example, California projects an annual spike in Medicaid costs of between $2 billion and $3 billion starting in 2018, as reported by the San Francisco Chronicle last year.

And there’s another “added cost” provision that has the attention and concern of all states. Beginning in 2013 and continuing through 2014, states are required to increase the Medicaid fees for primary care physicians to an amount equal to what Medicare pays. For these two years, the increase is fully covered by federal funds, but the problem for state budgeters is what happens in 2015. Most states currently pay between 60 and 80 percent of the Medicare rate.

Eligibility Determination Systems

States are incentivized under the Affordable Care Act to demonstrate new Medicaid payment methodologies. The additional 16 million to 20 million people who will qualify for Medicaid starting in 2014 will severely strain Medicaid agencies and systems. There also will be many people eligible for Medicaid who previously never applied for the program but are motivated by the mandate to get coverage. Beyond that group, we can reasonably expect that millions more will apply — even if found to be ineligible — when seeking to comply with the mandate.

Although many states have moved to modernize their Medicaid management information systems (MMIS) in recent years, eligibility systems and the process of determining coverage eligibility both have lagged behind. The old model of face-to-face interviews with a caseworker won’t work under reform; the current delivery system simply cannot handle the crush of Medicaid applicants.

The impact on legacy eligibility systems that have existed for decades will also be severe. The legacy systems will need to be significantly modernized to support new eligibility categories, standardized eligibility policies for income and resources, and streamlined verification processes. Essentially states will need to rethink how the application process flows, with an emphasis on self-services and minimal worker intervention.

John Petraborg  | 

John Petraborg is the client industry executive of HP Health and Human Services