Medicaid Budget Cuts Test Risk Adjustment Program Readiness

Unlike Medicare Advantage, risk adjustment in Medicaid is a zero-sum game.

Medicaid is managed at the state level with fixed budgets, and the slice of the pie your health plan receives depends on the effectiveness of its risk adjustment program. Many in the healthcare industry expect Medicaid budget cuts – particularly reductions Medicaid expansion – to be on the horizon, as reducing government spending remains a top priority.

If budget cuts to Medicaid do occur, risk adjustment professionals need to be prepared, and now is the time to start evaluating risk adjustment programs and vendors.

Here’s what you need to do to ensure your risk adjustment programs are built for what comes next.

Why is Medicaid expansion funding on the chopping block? 

There are lofty goals around cutting government spending, and lawmakers are proposing measures that would affect Medicaid expansion. While Medicaid is primarily managed at the state level, the federal government supports Medicaid expansion through the Affordable Care Act (ACA).

Medicaid enrollment grew significantly after the passage of the ACA in 2010, which expanded coverage to include childless adults earning slightly more than the poverty threshold. To date, 40 states and Washington, D.C., have adopted Medicaid expansion. According to government figures, 71 million Americans get their health insurance from Medicaid.

If federal funding levels for Medicaid are reduced, many individuals who receive coverage through Medicaid expansion will lose their eligibility. Ten states have “trigger laws” in place that would terminate expansion coverage if federal funding were reduced, typically if the federal matching rate (FMAP) drops below 90%. These states include:

• Arizona
• Arkansas
• Illinois
• Indiana
• Montana
• New Hampshire
• North Carolina
• Utah
• Virginia

Idaho, Iowa, and New Mexico also have trigger laws, but would require the states to take steps to mitigate the increased costs if federal funding for Medicaid expansion were reduced.

How would Medicaid budget cuts affect health plans? 

If federal funding levels for Medicaid expansion were reduced, risk adjustment programs for health plans would experience a significant shock. As many enrollees lose their eligibility, plans would face an adverse selection of sicker members for risk adjustment.

Now is the time for your health plan to prepare and build a robust risk adjustment program. Without one, your plan’s risk scores may fail to accurately reflect the population’s underlying disease burden — putting your plan’s economic viability at risk.

What your health plan needs to do 

As the purse strings tighten for Medicaid spending, take time to reassess your risk adjustment programs to ensure that members’ risk burdens are being properly documented.

Many states rely solely on prospective risk adjustment to predict future Medicaid costs based on current health status and risk factors, rather than analyzing past claims data to determine healthcare costs in payments with retrospective risk adjustment.

That’s where advanced analytics come in. By surfacing hidden risks and helping care teams reach out to members with chronic conditions, they can intervene earlier, support better health management, and improve long-term outcomes.

Additionally, your health plan should evaluate its risk vendors to ensure they understand the nuances of reporting risk adjustment data for the specific state(s) in which you operate and can adapt to the ever-changing regulatory landscape.

How Inovalon can help 

As risk adjustment programs become increasingly complex with each passing year, it remains a constant challenge to ensure that your health plan can accurately capture the risk burden of its populations. Traditional tools leave risk teams guessing where to focus efforts, which can cost time, resources, and reimbursement.

Inovalon’s Converged solution suite delivers clear, member-centric data analytics to help your health plans measure, manage, and improve healthcare outcomes, economics, and quality of care.

• Converged Risk™ helps your plan take charge of its risk adjustment programs while leaving audit worries in the rear-view mirror
• Converged Outreach™ helps you ensure the right member gets the right interaction at the right time
• Converged Patient Assessment™ helps your providers improve risk score accuracy without disrupting their day-to-day workflow

Don’t be unprepared when the next shift happens in healthcare. Meet with our experts now to discover how leading Medicaid plans are staying ahead of the curve.

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