Will they, or won’t they? Possibility of Medicaid cuts complicates payer relations, reimbursement reform

WASHINGTON – Medicaid cuts aren’t a done deal in Congress, but the looming threat is already impacting the industry’s ability to make headway with reimbursement reform on a state-by-state basis. 

H.R. 1 or the “One Big Beautiful Bill Act,” which was passed by the House of Representatives on May 22, includes a provision requiring at least 80 hours of work or community service per month for Medicaid recipients. Proponents argue this will reduce spending by narrowing eligibility and enrollment. 

Medicaid cuts threaten state-level reimbursement reform 

AAHomecare’s board of directors, for example, has made it a priority to implement “rate refreshes” for Medicaid in states with lower reimbursement rates, a conversation that’s become “extremely hard” with the House bill’s nearly $800 billion cut to the program over 10 years, says Laura Williard, senior vice president of payer relations for the association. 

“The conversations have become more about saving what we have,” she said. “In states where we’re not already engaged, we’re holding off for now on talking about increases, but we’re still talking about how we create cost savings and are the least costly alternative. We’ve tried to monitor what’s going on and adjust our strategy on some of this.” 

States could respond with cost-cutting measures 

If the Senate passes similar Medicaid changes, there might be a “a flurry of activity” by the states, but even without it, states are increasingly looking at “creative ways” to save money in their programs, often at HME’s expense, Williard says. In Washington state, for example, the state legislature passed a budget that includes a preferred provider agreement for incontinence and urological supplies.  

“They continue to come back to the DME coffers,” she said. 

Medicaid funding still uncertain as Senate considers changes 

Medicaid cuts in Congress are “still a moving target,” says Melanie Ewald, vice president of payer relations and reimbursement for VGM & Associates. The Senate is expected to make changes to the House bill, so it’s hard to know what’s on and off the table, including cutting or reducing funding for expansion states, removing the 5% Federal Medical Assistance Percentage (FMAP) and reducing waiver programs. 

“Medicaid programs, in general, are at risk of becoming smaller, both in covered lives and potentially in coverage and reimbursement rates, and depending on the state, the reduction may have a disproportionate impact on the pediatric population,” she said. “I am fielding a lot of questions.” 

According to KFF, the five biggest sources of Medicaid savings in the House-passed reconciliation bill include: 

• Mandating that adults who are eligible for Medicaid through the ACA expansion meet work and reporting requirements ($344 billion) 
• Repealing the Biden Administration’s rule simplifying Medicaid eligibility and renewal processes ($167 billion) 
• Establishing a moratorium on new or increased provider taxes ($89 billion) 
• Revising the payment limit for state directed payments ($72 billion) 
• Increasing the frequency of eligibility redeterminations for the ACA expansion group ($64 billion)