Inadequate State Payment Rates Put Medicaid Beneficiaries at Risk

Without rate adjustments, nonprofit health plans face "existential threat"

WASHINGTON, Oct. 4, 2024 /PRNewswire/ -- Managed Medicaid plans in more than a half dozen states are facing hundreds of millions of dollars in losses if states do not adjust payment rates to account for a sicker population with higher medical costs, according to the Alliance of Community Health Plans (ACHP). In a meeting late Thursday, ACHP urged the Biden Administration to use its statutory authority to review inadequate state capitation rates that jeopardize the nation's health care safety net.

"ACHP members from coast to coast have called the current capitation rates an 'existential threat' to their ability to continue providing quality care and coverage to the most vulnerable people in their communities," said ACHP President and CEO Ceci Connolly.

By relying on outdated, pandemic-era data, many states set Medicaid rates unrealistically low. The recent redetermination process of disenrolling 25 million beneficiaries from the program also resulted in a remaining sicker population in need of greater health care. In the meeting, health plan executives detailed huge financial shortfalls in states such as Michigan, Minnesota, New Mexico, Pennsylvania and Virginia. Some will be forced to spend down reserves to dangerous levels.

"While health plans recognize and accept a certain level of risk in developing annual rates with their state Medicaid partners, no one could have anticipated this perfect storm of disenrollments, high utilization, increased acuity and exorbitant pharmacy costs," Connolly said. "If rates are not adjusted to accurately reflect the current Medicaid population, some managed Medicaid plans may be forced to exit the market due to a lack of resources to care for their communities' most at-risk populations."

At the height of the pandemic, health care utilization was suppressed as Americans stayed home and skipped care. Utilization began to surge in late 2023, but the spike in care is not reflected in 2024 or 2025 Medicaid rates. In the meeting, ACHP and its member plans outlined several options available to states for addressing the enormous shortfalls.

"We are genuinely puzzled and dismayed that states have refused to update the rates to adequately care for their most vulnerable citizens, even when presented with concrete, compelling data," Connolly said. "We are grateful to the Administration for taking the time to investigate this dire situation." 

About ACHP   
The Alliance of Community Health Plans (ACHP) represents the nation's top-performing nonprofit health companies, which serve tens of millions of Americans across nearly 40 states and D.C. ACHP member plans collaborate with providers on high-quality coverage and care — leading the industry in practical reforms, including MA for Tomorrow, our vision for the future of Medicare Advantage.      

ACHP is the voice of a unique payer-provider partnership model advancing proven solutions that deliver better value for patients, employers and taxpayers. Contact us for case studies and data about member innovations and results.

SOURCE Alliance of Community Health Plans