Medicaid Expansion, Insurance Exchanges Taxing State Health Agencies

Medicaid is set to expand next year, and state IT departments are grappling with pressing deadlines, new eligibility rules and millions of potential applicants as they ready systems to accommodate the changes.

The expansion of government health insurance program stems from the Affordable Care Act (ACA), which seeks to expand Medicaid coverage to more low-income Americans. The revised program will include people under age 65 with incomes below 133 percent of the federal poverty level (FPL). The Congressional Budget Office and the Joint Committee on Taxation estimate that ACA will boost enrollment in Medicaid and the Children’s Health Insurance Program by 13 million people over the next decade.

Medicaid is funded by federal and state governments, with each state administering its own program. States technology personnel are now prepping Medicaid systems for more enrollees and dealing with a new mechanism for determining Medicaid eligibility. The Modified Adjusted Gross Income (MAGI) methodology will provide a standard means test for all participating states. State eligibility determination systems will need to incorporate MAGI.

Related: Health Insurance Exchange Among Healthcare IT Trends for 2013

To top things off, states face a January 1, 2014 deadline for getting their systems in order. That’s when Medicaid expansion goes into effect. Some states, however, hope to have enrollment systems operational in October, so people can begin applying for the new program. That same month, open enrollment is also scheduled to begin for state-operated health benefits exchanges, another component of ACA. The exchanges provide health coverage options for small businesses and uninsured people who don’t qualify for Medicaid.

So Much to Do, So Little Time

In short, there’s a ton of IT activity — and, according to some observers, not enough time to get everything done.

“States don’t have sufficient time to meet the deadline and never did,” says Rick Howard, a research director covering the public sector for Gartner and former CIO of the Oregon Department of Human Services.

As a consequence, most states building exchanges now plan for a soft launch of their insurance marketplaces, Howard says. This means they’ll go live with scaled-back functionality and add capabilities over time.

“It may take another year or more of intense, iterative development before the exchanges, as well as new Medicaid/CHIP eligibility and enrollment systems, are stable and functioning with the rich set of capabilities needed to deliver a first-class consumer experience,” he says.

The impact of Medicaid expansion varies. Some states have opted out of expansion. The 2012 Supreme Court decision on ACA upheld most of the law and also, in effect, left participation in Medicaid expansion up to the states.

The Advisory Board Company, a research and consulting firm with a healthcare focus, reports that 28 states are moving toward Medicaid expansion. For those participating states, the workload differs in terms of projected enrollment.

States Tackling Medicaid Expansion, Insurance Exchanges Simultaneously

California anticipates an estimated 1.4 million new enrollees for Medi-Cal, the state’s Medicaid program. The California Healthcare Eligibility, Enrollment and Retention System (CalHEERS) is the umbrella project for the expansion. To develop the system, the state last year awarded Accenture a contract valued at about $183 million for the initial development and deployment phase and about $176 million for “continued development and initial operating costs.”

Related: Feds Look to Make Health Data More User-friendly to Tech Developers

States such as California are tackling Medicaid expansion and health benefits exchange projects in tandem. The two initiatives are closely tied: Since someone who qualifies for Medicaid can’t purchase insurance on an exchange, a state needs to first determine whether an individual qualifies for Medicaid. If the person does quality, he or she is directed to the government health program; if not, it’s to the state’s health benefits exchange. That coordination calls for the integration of Medicaid eligibility systems and exchanges.

California is pursuing integration in a CalHEERS subproject called the Health Exchange and Medi-Cal Interface/Integration (HEMI) project, notes Anthony Cava, a spokesman for the California Department of Health Care Services.

HEMI covers “the integration touch points” between the state eligibility system, called the Medicaid Eligibility Database System, and Covered California, the state insurance exchange. A status report from the California Health Benefit Exchange notes that CalHEERS is slated to launch Oct. 1 but adds that testing is a few weeks behind schedule.

Arizona, meanwhile, is replacing three legacy systems that support Medicaid, the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance to Needy Families (TANF), CHIP and local health programs. The state is deploying a new Web application that will support the insurance-affordability programs ACA requires.

Bobbie Wilbur, director of Social Interest Solutions, which is serving as the systems integrator working on the State of Arizona Eligibility and Enrollment System replacement project, said its scheduled Oct. 1 implementation will include expanded Medicaid determination.

While the state builds this application, it plans to tap the federal government for its insurance exchange. Arizona is among the states that will leverage a Federally Facilitated Marketplace instead of building its own exchange.

The way the project is unfolding, a person who thinks he or she might qualify for Medicaid, CHIP, SNAP, TANF or other local health programs submits an application to Arizona’s Web-based eligibility and enrollment system, known as Health-e-Arizona PLUS. A qualifying individual would be determined, hopefully in real-time, for one of these programs, Wilbur says.

If the person doesn’t pass the means test, his or her data would then be transferred to the Federally Facilitated Marketplace. Here an individual can be assessed for eligibility in the ACA’s insurance affordability programs, Wilbur explains.

Back East, West Virginia’s integrated eligibility solution, eRAPIDS, will interface with the state’s exchange, the latter running as a state-federal partnership. The interface lets West Virginia citizens “apply for expanded Medicaid through ‘no wrong door,'” notes Edward Dolly, deputy commissioner and state health information technology coordinator for the West Virginia Bureau for Medical Services.

An eRAPIDS system upgrade is also underway; Dolly says upgrades are required to allow state systems to determine financial eligibility for Medicaid based on MAGI.

More: 6 Innovations That Will Change Healthcare

Other states are also upgrading systems, eying the fall open enrollment target.

In Illinois, where about 342,000 are expected to enroll in expanded Medicaid, the state is developing its Application for Benefits Eligibility System. Kelly Jakubek, a spokeswoman for the Illinois Department of Healthcare and Family Services, said the online system is scheduled to launch Oct. 1, when consumers will be able to apply for Medicaid and other social services. She says the Illinois Health Insurance Marketplace, the state’s benefits exchange, will also have an online application system.

Finally, Colorado is upgrading its online application, called PEAK, to meet ACA and Medicaid expansion requirements, says Rachel Reiter, communications director with the Policy and Communications Office of the Colorado Department of Health Care Policy and Financing.

Reiter says application upgrades will be in place so Coloradans can begin applying for coverage beginning in October. The state plans to keep upgrading its platform over time to boost the user experience. For example, she says, by year’s end the state will add the option for clients to receive communications through an electronic inbox on the PEAK website, rather than the U.S. mail.

Medicaid, Insurance Exchange Work Proving to Be Complex Transition

States have little time left to prepare systems and must confront a number of issues as they pursue the October and January 2014 target dates.

Wilbur cited the shift to the MAGI methodology as one of the main challenges of Medicaid expansions. MAGI uses federal income tax data to make an eligibility determination; the traditional approach uses the current income of people who share financial resources.

Analysis: Big Data Surge From Federal Agencies Will Drive Health IT

While states must account for MAGI, they must still handle eligibility in the traditional way for other Medicaid groups such as disabled people, Wilbur says. “We have essentially added a new Medicaid program on top of what was already there,” she says. “It’s very complex. Medicaid agencies are scrambling to understand it.”

Integrating systems across different agencies presents another hurdle. Links between Medicaid systems and health insurance exchanges, for example, will often cross organizational boundaries. While Medicaid programs reside within health and human services departments, health insurance exchanges may operate as independent state agencies, nonprofit public entities or private/public partnerships distinct from state governments.

Howard cites the governance challenges posed by the massive requirements for integration and coordination of business process. “Effective governance is proving to be a major obstacle to service integration across agency boundaries,” he says.

The need to address technical and organizational obstacles on a tight deadline may cause some agencies to scale back expectations. Wilbur believes the best-case scenario for a number of states will be going live on Jan. 1 as opposed to Oct. 1.

Some states, she adds, may temporarily give up on building their own expanded Medicaid eligibility systems. Those will leverage the Federally Facilitated Marketplaces, which will include a system for determining Medicaid and CHIP eligibility. States may also use the federal government’s Data Services Hub, which connects to Internal Revenue Service and Social Security Administration data, to help verify an applicant’s eligibility information.

Security Matters: Insurance Company, Wellpoint, Fined $1.7m Over Data Exposure

Howard, however, says that those components—and many state exchanges — will still need work when day one arrives. “The confidence of federal and supportive state officials notwithstanding, it’s highly unlikely that most state exchanges, the federal marketplace or the federal data hub will be thoroughly tested and fully operational by the first day of open enrollment.”

Wilbur notes that it took two or three years to work the kinks out of Medicare Part D — and adds that Medicaid expansion is much more complicated.

“It’s hard for people to understand how complex these system builds are and…the amount of integration that’s needed to make this work,” Wilbur says. “[States] are modernizing how eligibility and enrollment gets done, and it’s not surprising people are running into issues and concerns.”