Michigan's Approach to Medicaid Expansion and Reform — NEJM

 

Five core principles are evident in Michigan's approach to expanding and reforming Medicaid under the ACA. First, the state must achieve sufficient savings to offset its contributions for the Medicaid expansion when federal funding drops from 100% to 95% in 2017 and to 90% in 2021. Medicaid coverage of some state-financed health services, including mental health and prison health programs, is expected to result in approximately $200 million in savings for the state budget in 2014. If the state's costs are not offset by such savings, Michigan will withdraw from the Medicaid expansion in 2017 or later years. But current projections indicate that the state's cumulative savings should cover the additional costs through 2027.5

Second, Michigan will introduce financial incentives for new Medicaid enrollees to control their use of health care services and to maintain healthy behaviors. For 150,000 new enrollees with incomes between 100% and 133% of the federal poverty level, cost sharing amounting to as much as 5% of their annual income (approximately $580 to $775 for a single adult) is slated to begin 6 months after Medicaid enrollment. After 48 months of Medicaid coverage, cost sharing for these new enrollees will increase to 7% of their annual income, or they can choose to enroll in subsidized private insurance offered through the state's health insurance exchange. A system resembling health savings accounts will be created for individuals or their employers to deposit funds to cover copayments for health care services. Cost sharing can be reduced to 2% of annual income for new enrollees who demonstrate that they engage in healthy behaviors.

Third, the state will enroll newly eligible adults in private health plans rather than in traditional fee-for-service Medicaid. Health plans will be eligible for financial bonuses for effectively managing enrollee cost sharing required by the state and for achieving cost and quality targets. Health plans will also be directed to implement value-based insurance design by varying cost sharing according to the clinical value of services provided.

Fourth, Michigan's new law addresses health care delivery by requiring that new enrollees have access to primary care and preventive services. New enrollees will also be offered the opportunity to complete advance directives for end-of-life care when they enroll in Medicaid — part of a broader state initiative to encourage residents to express their preferences regarding end-of-life care.

Fifth, Michigan's new Medicaid law enhances the state's capacity to monitor the costs and quality of health care. The Department of Community Health, which oversees the Medicaid program, will assess opportunities for improving the Medicaid program and make Medicaid data available to outside vendors that can help participating health plans to pursue innovations in the program. The Department of Insurance and Financial Services will evaluate the effect of the Medicaid expansion on private insurance premiums in the state; some reduction in these premiums is anticipated.3,5 A new Health Care Cost and Quality Advisory Committee will be created to promote greater transparency with respect to the costs and quality of care.

Michigan's Approach to Medicaid Expansion and Reform — NEJM

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