The federal government has proposed new rules for private healthcare insurers that have Medicaid and children’s health plans for the first time in over a decade. The proposed rules would cover healthcare plans for millions of people across the United States and calls for insurers to provide a report of what portion of money they’re paid by the government is actually going towards health benefits and is recommending that states take that into account when setting their rates.
Medicaid and CHIP cover more than 70 million people in the United States, and 12.6 million people were added last year alone from the expansion of the Affordable Care Act. The Medicaid program is state-run, but it is overseen in part by the federal government and the Centers for Medicare and Medicaid Services. Private Medicaid plans operate in 39 states across the country and cover more than half of all Medicaid beneficiaries.
California has the largest number of members enrolled in the Medicaid program, followed by New York and Florida. In 2012, states were allowed to opt out of expanding their Medicaid program and 21 states decided not to increase their eligibility. The federal government is currently paying for the full cost of expansion through 2016 and ninety percent of the cost thereafter.
The last time that major changes were proposed for the Medicaid system was back in 2003, well before significant expansions were made to the program. Since then, the Medicaid program that covers the low income, the elderly, and the CHIP program for children has all expanded exponentially. The main reason for this expansion is the introduction of the Affordable Care Act, but managed-care firms have also expanded their care of beneficiaries.
Proposed Medicaid Rules
The proposed new rules for the Medicaid program call for managed Medicaid plans to report what is called a “medical loss ratio.” Using this ratio, the state governments could set the rates that they pay plans. According to the new rules, insurers should be using about 85% of the premiums that they take on benefits. It is intended to cap the amount that insurers can spend on administrative costs.
Additional rules were proposed that include rules for private plans that provide long-term care for the elderly and disabled. This is also important given the large, and growing, number of elderly beneficiaries of the Medicaid system.
Blowback from the Industry
Not everyone is happy about the proposed rules for Medicaid plans and the medical loss ratio. One industry group leader criticized the new rules, saying that having one medical loss ratio for all states does not make sense because some states already have medical spending levels built into their contract plans.
Another trade group called the new rules “arbitrary” and claims that it could undermine other critical services that are not healthcare. The group named some critical services as transportation to and from appointments as well as social services for these Medicaid beneficiaries.