The Medicaid program has recently faced historic upheaval, including the pandemic and policies stemming from it that forced states to arduously recheck the eligibility of tens of millions of beneficiaries starting last spring.
Now, state leaders overseeing the safety-net program are concerned about the “new normal” coming out of that unwinding process — especially given this year’s presidential election between two candidates with vastly different views on federal healthcare programs.
The loss of more generous federal funding as healthcare costs continue to rise is also expected to place more stress on states in the 2025 fiscal year, according to the annual survey of state Medicaid directors by health policy research group KFF.
States expect national Medicaid enrollment to fall about 4% in 2025, continuing a larger enrollment slide this year because of unwinding. At the same time, states’ Medicaid spending is expected to rise 7%, the survey found.
Lower state revenue collections and other macroeconomic uncertainties will make it more difficult for states to invest in behavioral health and long-term services, or pay providers more, according to the survey. Efforts to address social determinants of health, or implement value-based initiatives, could also fall by the wayside.
This election is also driving significant uncertainty. The Republican nominee, former President Donald Trump, has yet to provide specific details on his plan for Medicaid. However, while in office Trump made rolling back Medicaid a key prong of his healthcare agenda, including approving controversial work requirements in red states. If elected, Trump is expected to move to reduce Medicaid financing and restrict eligibility.
Meanwhile, Democrat nominee Vice President Kamala Harris has expressed support for strengthening Medicaid, including by expanding access to the coverage.
During the COVID-19 pandemic, Medicaid swelled to the largest insurance program in the country. Enrollment has dropped since its zenith, but Medicaid still covers about 73 million individuals, or about one in five Americans. The program accounts for almost one-fifth of all U.S. health spending.
Medicaid caseloads dropped this year as enrollees left the program amid unwinding. However, many states reported a “notable” increase in per-enrollee costs, according to the survey, as members that remained on Medicaid are more likely to have greater health needs.
Along with creating a financial challenge for states, the trend has also been a stressor for private insurers that contract with state governments to manage the care of their Medicaid beneficiaries. State payment rates haven’t kept pace with rising medical costs from sicker patients, leaving insurers on the hook for a greater portion of payments.
Payers have assured investors that the headwind is temporary, as they’ve worked with state partners to boost payments off-cycle. However, it appears to have bled into the third quarter, according to payers that have reported results.
Still, a majority of states are working to correct the mismatch between rates and acuity. About two-thirds of managed care states that responded to the survey asked the CMS for approval for a rate amendment, the KFF survey found.
The KFF surveyed Medicaid directors in all 50 states and Washington, D.C. over the summer for its report.
