by Stephen Reid
Managing Partner, Pharmspective

20 states and the District of Columbia are sure bets to expand Medicaid. With the remaining states withholding commitments at this point, odds are that on January 1, 2014 the nation will divide into two fundamentally different healthcare systems.

(1) States that expand Medicaid will absorb large numbers of younger and minority patients into their healthcare systems. These states will also have greater stability in hospital capacity as uncompensated costs will pose a less heavy burden on hospitals. These states could also encounter the risk of "Medicaid shoppers" as Americans begin to consciously base their decisions on where to live according to eligibility for healthcare benefits.

(2) States that do not expand Medicaid will have a wealthier insured patient population that may pose inherently less risk but also suffer from the burden of high uncompensated costs from uninsured patients. These states will see additional financial pressure on their hospitals from reduced DSH payments and even higher premiums for insurance than states that do expand Medicaid.

This regionalization of healthcare will mean that the United States will look a lot more like Europe within its own borders as different eligibility criteria push residents into different healthcare models. In states that do not expand Medicaid, the role of Federally-Qualified Health Centers will be critical and movement of patients in and out of different healthcare insurance models will accelerate as employment status changes. In states that do expand Medicaid, a critical choice between providing the Medicaid benefit through the current Medicaid system or using these dollars to provide coverage through State Exchanges looms. At stake with this decision is the continuity of care that is important to insuring that different reimbursement and coverage policies don't disadvantage patients whose eligibility changes because of income.

Lost in all of this is fundamental absence of payment reform and accountability. At the heart of the cost explosion in healthcare has been a Fee-for-Service model without consequences. The good news is that several states have begun to wrap their thinking around applying ACO-type structures to the State Exchange and Medicaid models that are emerging. This shift could create the type of payment reform necessary to bend the cost curve. And it will also force suppliers of drugs, medical devices, and medical equipment to rethink how they are adding value to justify what they receive in compensation for their products and services.

We will have two very different healthcare systems in the United States beginning on January 1, 2014. We will be a nation divided by Medicaid and with it will come two very different healthcare systems that may or may not have a centralized hub that patients can look to for healthcare. The question on the table right now is if Health Exchanges and Federally Qualified Health Centers can offer a better solution for patients who are the outliers in our current system of private insurance, Medicaid, and Medicare. These entities are well positioned to bridge critical gaps in care and connect the working poor and uninsured to coverage. However, states need to make choices that appropriately empower these entities-based on their Medicaid decisions.

Hopefully, the states can at least get this part right.

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