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 KPMG Expert Weighs in on Federal Medicaid, Medicare Priorities

Ash Shehata, a partner in the Global Healthcare Center of Excellence practice for KPMG, says health care providers in general, and long term and post-acute care operators in particular, should be aware of the continued focus by the Trump administration on giving states more leeway in setting Medicaid policy.
In an interview with Provider, Shehata says there is a definite movement afoot by the Centers for Medicare & Medicaid Services (CMS) to loosen constraints on states when determining how to manage Medicaid.
An example of this trend is apparent with the recent news that CMS may actually be urging states to file waivers to allow for the block granting of state Medicaid funds.
That issue came to light when Alaska Gov. Mike Dunleavy (R) made public a letter to President Trump in which the governor stated his commitment to file for a Section 1115 waiver to block grant Medicaid funds. Without commenting on the Dunleavy letter, or the legal ramifications of CMS granting a waiver for block grants, Shehata says there is much happening in the general area of more state control of the shared state-federal program.
“CMS seems to be helping states reconsider their investment in Medicaid,” he says. “CMS has also been giving states more flexibility so they can consider their total costs and for implementing better systems and controls. This has given states the ability to contract with third parties like Medicaid risk programs [managed care] that we are seeing throughout the country.”
As skilled nursing and other related providers know, Medicaid managed care is a growth industry and one that is expected to expand in the future. Shehata notes that many states are using the current time, when the economy is running well, to assess how they want to allocate Medicaid funds and whether to privatize parts of the program.
“Now that the states seem to be getting little healthier balance sheets the question is how can they make the proper investments in their Medicaid programs,” he says.
States have focused these assessments in three areas, Shehata says. One is “obviously to modernize their core systems to be able to administer and manage” better. Second, he says, is for states to work with private insurers under managed care or value-based contracting, and third, there is a renewed emphasis in statehouses to look at the total cost of care for Medicaid recipients from one end of the care continuum to the other.
“Medicaid tends to carry the burden for a lot states in caring for seniors so there is a real appetite to look at continuity of care from the inpatient to the outpatient and all settings,” he adds.
On Medicare, Shehata says Medicare Advantage (MA) continues to be a “bright light” for the insurance industry. Just about every Blue Cross Blue Shield plan is active now in the space, joining the larger commercial carriers in seeking to gain a foothold in attracting seniors to their plans.
As more seniors buy MA plans, there is some concern about the risk pool being fragmented in a way in which traditional Medicare has the more complex cases and MA the healthier seniors, Shehata says.
“A couple of things are going to happen. Obviously, the risk pool for Medicare [traditional] is becoming more and more complicated to care for,” he says. The interesting trajectory of this MA-Medicare split is that when hospitalizations increase, beneficiaries usually flip back to traditional Medicare.
“So, what I think you will see is that [traditional] Medicare will almost become a very high risk pool of seniors further funded by the government, with a focus on end-of-life care, coordination of care, management of hospice, and MA will be more about health and wellness,” Shehata says.
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