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Medicaid as Health Insurer: What’s Next?


Born as an afterthought to Medicare five decades ago, Medicaid has evolved from an adjunct to state welfare programs to the nation’s largest health insurer. The occasion of Medicaid’s 50th birthday is a fitting time to consider that evolution, not to reminisce, but to help chart the path forward. Medicaid is a complex program with a complex history, and understanding its role in the U.S. health system is essential to ensuring that it is performing at optimal levels for its beneficiaries, as well as for states, taxpayers, and the myriad health care providers, health plans, and others touched by the program. In a four-part series supported by The Commonwealth Fund, Cindy Mann and Deborah Bachrach of Manatt Health Solutions examine Medicaid’s evolution and consider its role in the new coverage paradigm established by the Affordable Care Act (ACA).

First post: Medicaid as Health Insurer: Evolution and Implications

Second post: Medicaid as Health Insurer: New Eligibility and Enrollment Rules and Practices for a Revamped Program

Third post: Medicaid as Health Insurer: Balancing State and Federal Responsibilities

The changes to Medicaid that have taken hold over the past five years through a combination of federal legislation and regulation, states’ actions, and market forces are unprecedented. They include: broad-based eligibility expansions in 29 states and the District of Columbia; a complete revamping of the rules and processes for determining eligibility for most Medicaid enrollees; a new streamlined, data-driven application process married to marketplaces; and in almost all states, significant delivery and payment reforms.

With new roles come new responsibilities and challenges. Four key, and closely related, areas of focus lie ahead.

First, states that have not yet expanded Medicaid must address the resulting hole in the coverage continuum. Without coverage, people don’t get the care they need at the right time, the right place, or at all. And by not expanding Medicaid, states and health care providers are missing out on the substantial economic benefits that other states and providers have begun to realize. Not expanding Medicaid also handicaps health care delivery and payment reform efforts. There is no “one way” to expand Medicaid. Regardless of how it is done, Medicaid expansion is an essential component of the coverage continuum and the foundation of health care reform.

Second, Medicaid must continue to make progress as a strategic, value-based purchaser of coverage and services. The tools to do so are there, informed by the experimentation and learning going on around the country in, for example, integrating behavioral and physical health; reducing preventable hospitalizations and emergency department visits; supporting (in the most appropriate and least restrictive setting) individuals who need long-term services and supports; ensuring effective systems of care for children with complex medical needs; coordinating care with and for people with chronic illnesses and disabilities; and holding health systems—often acting in partnership with social services and community-based supports—accountable not only to cure the sick but to help people in the communities stay or become healthy. This is hard work, and in many cases it will require major restructuring of how states finance their programs as well as how they manage and pay for care, with equally significant restructuring for health plans and providers.

Third, Medicaid needs to be a strong partner—and, in some cases, a leader—in the broader systemwide efforts to improve health and health care and lower costs. At the outset, as discussed in our earlier blogs, Medicaid’s first job is to modernize and rationalize its own delivery system and payment policies so that alignment across payers is even possible. Because it is often the dominant payer, Medicaid can have tremendous leverage with respect to services for children, pregnant women, and people with chronic illnesses or disabilities. For these populations and these areas of care, Medicaid can shape practices and markets in ways that drive improvements in care, health, and cost.

At the same time, Medicaid should seek to advance marketwide delivery system and payment reforms. The unique circumstances of Medicaid’s enrollees, most notably their very low incomes, mean that to do its job well Medicaid must sometimes attend to its business in unique ways. Still, coordinating with other insurers and payers on delivery system and payment reforms should be the general rule, not the exception.

Fourth, the IT infrastructure enabling the gains in coverage and improvements in consumer experience achieved to date needs to be completed in some states and at the federal level, and kept current with new technologies and efficiencies. Prior to the ACA, state Medicaid enrollment systems had become woefully out of date (as discussed in our second blog). We can’t let that happen again, and with ongoing enhanced federal financing coupled with accountable standards for such systems, improvements are likely to continue. Along with enabling electronic verification of personal information and integrating with the insurance marketplaces’ data, Medicaid’s IT infrastructure also must produce the medical encounter, cost, and quality data states and the public need to ensure that the program is operating effectively and efficiently. It’s not flashy stuff, but it is vital to all the rest.

As all of this occurs, it will be essential to stay focused on Medicaid’s mission to ensure access to quality and affordable care for the lowest-income Americans, people with disabilities, and the elderly. It also will be important to consider Medicaid’s role and responsibilities, not as a public assistance program or an afterthought in the health care system, but as one of the most important health insurance programs in the nation.

Publication Details



C. Mann and D. Bachrach, "Medicaid as Health Insurer: What’s Next?," The Commonwealth Fund Blog, August 2015.