Is the Problem Too Many Kids in Medicaid Managed Care, or Too Many Poor Kids?

California advocates worry that having half its children in Medi-Cal will mean poor access to care. But the real issue may be the growing number of poor children nationwide and the overall effect on Medicaid.

Advocacy groups sounded the alarm this week in California: almost 50% of the state’s young people are now enrolled in Medi-Cal, the state’s Medicaid program that largely relies on managed care. The program’s rapid growth has raised concerns that there aren’t enough providers—or high enough reimbursements—to ensure access.

To be sure, California has heard complaints about access to managed care since enrollees starting using their coverage gained under the Affordable Care Act (ACA), and officials from Covered California, the state’s exchange, this year defended their ability to improve provider choice in 2015.

Kaiser Health News and California Health Line reported that about 5.2 million Californians up to age 20 years are now covered by Medi-Cal, a figure that has ballooned by 1 million due to Medicaid expansion and the decision to fold the state’s former healthcare program for poor children into Medi-Cal. The vast majority of these children are covered by managed care plans.

But California is not the only state expanding its use of managed care in Medicaid, and there’s a simple reason: the ranks of poor children are rising. Despite growing pains and transition issues with managed care, states are pursuing it to hold down Medicaid costs, and that will only continue with Medicaid expansion. If trends continue, California will not be the only state with half its children in Medicaid managed care.

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A report released January 16 from the Southern Education found that for the first time, 51% of students in pre-kindergarten through 12 grade in the 2012-2013 school year nationwide were eligible for the federal program that provides free and reduced-price lunches. For years, enrollment in the free lunch program has been used by social science researchers as a proxy for poverty.

A map of the distribution of this trend shows that the free lunch phenomenon is uneven, with California falling midway among states. States with the highest concentration of public school children taking free lunch include several in the Deep South, where officials have thus far chosen not to expand Medicaid—including Florida, Louisiana, Texas, Mississippi, Alabama, and Georgia.

Alabama Governor Robert Bentley has said he would consider expansion and has embarked on an aggressive plan of Medicaid managed care; the state found that even without expansion, publicity over the ACA caused many consumers who had been eligible for Medicaid but had never enrolled, to sign up. Suddenly, more than 20% of the state is enrolled.

States with high numbers of poor residents, including working poor families with children, must decide whether it makes more sense to expand Medicaid and grant access to preventive services, however this might strain managed care networks, or let these families in the “coverage gap” continue to show up in emergency rooms for primary care, which drains hospitals’ finances.

Florida has been sued over the size of Medicaid reimbursements, with advocates for the poor saying the small payments amount to a denial of care, and a federal judge recently agreed.

Meanwhile, this week the state’s House Speaker rebuffed a proposal from a coalition of hospital and business groups to expand Medicaid in the interest of helping the hospitals’ bottom lines and creating jobs.

California has often been at the leading edge of healthcare trends and may be so again. Independent research reported by Kaiser Health News indicates more than two-third of the state’s managed care plans ranked below national averages for Medicaid plans in ensuring children received vaccinations by age 2. Reimbursement rates are reportedly among the lowest in the country, although state officials told California Healthline there were no immediate plans to raise them.

Matt Salo, executive director of the National Association of Medicaid Directors, writing for The American Journal of Accountable Care in December 2014, predicted that continued expansion of Medicaid would depend on the willingness of the Obama Administration to be flexible with states and their desire to tailor the program to local needs. Salo predicted that Indiana would be a state to watch, and this week Indiana Gov Mike Pence announced plans to expand with the first-in-the-nation health savings account in Medicaid.

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