Medicaid Headwinds and Adjusting Your Sails

While it sounds like there are potentially "new" changes coming as the federal government transitions to new leadership, the strategy is and always has been the same; diversify. It's very possible there are changes to the Medicaid program; be it the funding structure, eligibility requirements, or program integrity. However, regardless of if any or all of some combination of these changes are enacted, we will have to adjust our strategic plans and diversify our approach, which is not new.

If the funding structure is installed, there could potentially be fixed funding amounts per each enrollee which would lead to program modifications. For those of us that have operated in the Mental Health or Addiction space, we have a general position that Medicaid beneficiaries come with a certain set of challenges related to administrative burden and social determinants of health. Weather it's the scrutiny on medical necessity criteria, obstacles identifying a sound aftercare plan or the recidivism due to non-compliance, there are always going to be additional variables when serving this patient profile.

Eligibility requirements could substantially change what beneficiaries must do to retain their coverage. If this is pursued (again), history shows that it is likely to cause to increase in loss of coverage which will certainly lead to challenges for providers to manage their care.

The issues around integrity related to the Medicaid program are a bit more complicated where the Department of Government Efficiency (DOGE) and the Treasury Department are at odds via a federal court injunction as we have a classic collision of the executive branch and legal constraints over who has authority. If we read the tea leaves, Robert F. Kennedy being appointed as the Secretary of Health and Human Services will likely indicate some funding changes in Medicaid as he takes a general position to reduce federal spending and in cutting "entitlement programs" (programs that guarantee benefits for those that meet certain criteria) like Medicaid.

Assuming that any or all of the above happen to some degree or another, the outcome is generally the same, reductions in coverage or increased challenges serving the underserved. As such, as we think about our strategic plans through 2025 and beyond, the same strategy holds true before having this information, we must diversify. An insulated plan of any sort must be malleable and dynamic. Whether that includes wrap-around services, adding additional service lines/verticals or diversifying payer mix strategies, a provider should deploy a combination of the above in order to survive and prepare for whatever changes may be coming.

Some instinctual adjustments would be to expand service lines. Think of the American Society of Addiction Medicine (ASAM) levels. If you are operating an ASAM Level 1.0 (Outpatient) program, adding Level 2.1 (IOP) has incremental additional costs but almost double the increase in revenue. Additionally, if you have Level 2.1, adding Level 1.0 can either be a loss leader and keeps your patients/clients better longer or can add additional revenue. A phrase I like to think about is, "you can't stop the waves but you can learn to surf" as it rings true here where the modifications in funding for entitlement programs will be forever changing, and we must change with it to stay competitive.