Medicaid health plans grew from 72 million members in April 2019 to a peak of 94 million in April 2023, during the COVID-19 public health emergency (PHE) when routine eligibility checks were suspended for Medicaid beneficiaries, according to the Kaiser Family Foundation (KFF). As states worked through the Medicaid eligibility redetermination process following the end of the PHE, Medicaid enrollment had already declined to 83 million as of February 2024. As of May 2024, states had completed 76% of eligibility redeterminations, with 24% to come in the coming months, according to KFF.
For Medicaid plans that enjoyed a surge in business during the pandemic, this rapid decline in the market may be disheartening, and the large rapid shifts in the Medicaid risk pools will be challenging to manage to target profit margins in the near-term. However, the long-term fundamentals of managed Medicaid remain strong, with several potential growth vectors. We have identified five post-redetermination growth opportunities for managed Medicaid plans:
- Shepherd Eligible Members Through the Redetermination Process: According to KFF, 69% of initial Medicaid coverage denials during redeterminations were terminated for “procedural reasons” due to incorrect or incomplete information. Plans can help their beneficiaries maintain coverage through the redetermination coverage and improve member retention. For example, United Healthcare has a detailed FAQ guide that informs beneficiaries of Medicaid redeterminations and helps them figure out if they are still eligible for Medicaid or alternative coverage.
- Create "Catcher’s Mitts” To Capture Members in Marketplace/HIX and Employer Group Segments: For members that are truly no longer eligible for Medicaid due to increased incomes, HIX or employer group coverage may present alternative coverage options. Medicaid plans that play in those plan segments can create a better “catcher’s mitt” to maximize member retention in a different, potentially higher profitability line of business. For example, Anthem created an online tool that allows individuals to input their personal information to determine their eligibility for Medicaid or other options.
- Embrace Populations with Complex Needs: Beyond physical health coverage, more states are opening Medicaid behavioral health and long-term services and supports, or LTSS, contracts to managed care plans. Plans have an opportunity to bid for these contracts; while they represent populations with more complex needs, the revenue opportunity is stronger for plans that can build capabilities to care for these members. For example, North Carolina is shifting its behavioral health delivery system from fee-for-service to Tailored Plans, a managed care model. Tailored Plans will cover approximately 210,000 beneficiaries with a serious mental illness, a severe substance use disorder, an intellectual/developmental disability, or a traumatic brain injury. Moreover, new opportunities may exist in areas adjacent to Medicaid that plans could explore. For example, Texas is in the process of procuring Community-Based Care, a program that includes services for children in foster care. Some of these children could also be Medicaid beneficiaries, a potential synergy between their medical care and social / family needs.
- Lean into Duals and D-SNPs: In 2021, 12.9 million people were dually eligible for both Medicare and Medicaid, while in 2023, 5.2 million were in Dual Special Needs Plans (D-SNPs). Some D-SNPs require coordination between the Medicare Advantage (MA) plan and the managed Medicaid plan, but the products have generally been of greater interest to MA plans to date, given their higher revenue and margin profiles. However, the recent CMS 2025 MA Final Rule includes the goal of “increasing the percentage of dually eligible managed care enrollees who receive Medicare and Medicaid services from the same organization.”
In effect, this should drive MA plans to seek closer alignment with managed Medicaid plans in D-SNPs to enable better coordination between Medicaid and Medicare benefits for these individuals. This should be a boost to Medicaid plan growth, especially for those that also have MA plans in the same service areas. However, success will be contingent on developing appropriate care models to manage these medically and socially complex dual eligible populations. - Explore New Business Models: While not for everyone, Medicaid plans with best-in-class capabilities and access to capital could explore new business models to serve the needs of other Medicaid plans. For example, they could provide the core administrative platform and associated services, or targeted services like an innovative care model developed for a sub-segment of the Medicaid population (this could be especially attractive for provider-sponsored Medicaid plans with strong care model expertise). Per our analysis of available market data, while there are more than 100 Medicaid plans in the United States, only 13 cover more than 1 million lives. If we take size of the plan as a rough proxy for capabilities and access to capital, there may be an opportunity to build a business of serving smaller plans that could benefit from better capabilities at a lower cost, especially in non-competitive geographic markets.
These five growth opportunities are not exhaustive, and other opportunities exist for a better and more creatively run Medicaid plan. For example, expanding to new regions within a current state or to new states has been on the radar of plans with access to capabilities and capital. Also, plans need greater discipline in cost structure management to oversee the inherent volatility of the market as lives flow between Medicaid, HIX and employer group coverage. As volumes rise and fall, plans need to develop the analytic discipline to “variable-ize” their cost structures—so as not to fall too far behind or get too far ahead of what their cost structure should be, considering (sometimes rapidly) changing enrollments. Finally, ten states are yet to expand Medicaid. Legislative and/or political processes are underway in states to revisit that stance, which could further expand the market for Medicaid plans.
Medicaid plans provide a much-needed safety net for vulnerable sections of our society. They are the biggest payers of increasingly necessary services like long-term care. While Medicaid is always susceptible to state budget circumstances, and recent redeterminations have shrunk enrollment, broader societal and healthcare trends indicate that the future is bright for Medicaid health plans, especially those that embrace these five growth opportunities.
Acknowledgements: The author would like to thank Brian Ball, Webster Macomber, Max Timm, Dave Pasquale and Rahul Tanna for their insights, comments, and research on this topic.
