Medicaid Spending, Enrollment Exceed Projections Due To COVID-19

States are facing higher Medicaid spending and higher enrollment than expected in 2020 due to the coronavirus, and that impact could continue into the following year, a Kaiser Family Foundation (KFF) survey found.

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KFF and Health Management Associates (HMA) conducted a survey of Medicaid directors in all 50 states and the District of Columbia and received responses from 38 states. Not all states had data ready for review at the time of the survey.

Thirty-four of the states had both projected May 2020 enrollment data, as well as the actual enrollment data, which allowed the KFF researchers to compare the two trends.

Going into 2020, the economy was sound, and states were expecting flat enrollment with less than one percent overall expected enrollment growth. Medicaid spending was projected to increase 6.2 percent in total and 5.7 percent on average per state, the survey stated.

However, the coronavirus has turned the recent strong employment upside down, leading to significant migration from employer-sponsored health plans to Medicaid.

Thirty-two out of 34 states with both key enrollment data sets expected their state Medicaid enrollment to continue to grow in 2020 and soar even higher in 2021.

Higher enrollment has two causes, according to the survey participants: the negative economic environment and the maintenance of eligibility standards.

There are five maintenance of eligibility standards that Medicaid programs must apply. States must:

• Maintain standards for eligibility equally severe as those in place on January 1, 2020
• Maintain Medicaid premiums with certain exceptions and reimburse those with higher premiums charged after January 1, 2020
• Cover coronavirus testing and treatment
• Not exceed political subdivision contributions requirements, as spelled out on March 1, 2020
• Provide continuous coverage starting with those enrolled in Medicaid on March 18, 2020

Because states must offer continuous coverage, individuals will not be dis-enrolled at the end of each month. Furthermore, even after eligibility redeterminations start up again, many will likely still be unemployed and within the eligible income range.

States are also finding that spending is rising higher than anticipated due to the coronavirus. Eighteen of 32 participants who had projection data found that 2020 spending growth would exceed their projections from before the pandemic.

And although states expect to see some cost savings lower care utilization, they anticipate protocol to increase care access and boost provider reimbursement would elevate spending and offset low utilization impacts.

States with lower spending projections attribute it to the halting of non-urgent and elective services. However, for states whose Medicaid relies on managed care organizations, utilization will not affect costs. Instead, enrollment will boost healthcare spending.

Twenty-nine out of 30 participants project 2021 Medicaid spending rates to exceed 2020 rates. One respondent state went a step further and projected that coronavirus would continue to impact Medicaid spending after 2021.

Forty percent of the states expect to have a deficit at the end of 2020. The federal medical assistance percentage (FMAP) boost has helped some states sidestep this reality. However, others foresee potential reductions in state funding toward Medicaid as a result of decreased state revenue.

For 2021 budgets, the outlook is grim. Seventeen of 19 states with a budget projection for 2021 said that they would almost certainly or likely have a deficit.

The KFF survey pointed out that the uncertainties coronavirus poses will cause significant problems for states that have to establish their budgets for the impending fiscal year which, for many states, begins in less than two months.

Medicaid spend was expected to rise in 2020, according to a separate 2019 Kaiser Family Foundation survey. Flat Medicaid enrollment and a strong economy were not going to be enough to offset prescription drug costs, provider rates, and a large older demographic, states indicated. However, coronavirus has upset those expectations and, in many ways, disrupted the possibility of foreseeing the future.

In addition to the Families First Coronavirus Response Act and FMAP, waivers have played a critical role in enabling Medicaid to respond to the crisis. CMS waivers have allowed states to dismiss or suspend co-payments and premiums, extending renewal response deadlines and lessening other eligibility restrictions, and increasing telehealth usage.