States Respond to COVID-19 Challenges but Also Take Advantage of New Opportunities to Address Long-Standing Issues: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2021 and 2022

Key Priorities and Challenges in FY 2022 and Beyond and Conclusion

Many state Medicaid officials remain focused on their state’s response to the COVID-19 pandemic, including efforts to increase the vaccination rate of Medicaid enrollees. At the same time, officials are looking ahead and beginning to prepare for the “unwinding” of the various public health emergency (PHE) emergency measures and the resumption of Medicaid eligibility redeterminations once the PHE ends. Despite the upheaval caused by the pandemic, states also continue to advance non-emergency priority initiatives and to maintain efficient and effective program operations. State officials cited a wide variety of state-lead innovations designed to improve quality, access, health outcomes, operational efficiency, and accountability.

The COVID-19 pandemic has challenged state Medicaid agencies, providers, and enrollees in a variety of ways. As they continue to focus on pandemic response, states are also looking ahead to the post-PHE transition: about a quarter of responding states identified the unwinding of PHE emergency measures, especially the need to complete eligibility redeterminations within federally prescribed timelines, as a major challenge. An equal number of states anticipate future budget concerns, including those related to the expiration of enhanced federal funding associated with the end of the PHE, especially if caseloads remain high. Additionally, many states commented on COVID-19-related administrative staffing and provider workforce concerns including hiring and retention challenges, high workloads, and fatigue and burnout. States also commented on the ongoing negative impacts of the pandemic on enrollee health and wellbeing, especially the exacerbation of behavioral health needs. Several states also reported the need to increase enrollee COVID-19 vaccination rates as a challenge.

Several states identified lessons learned from the pandemic as opportunities, including for improved relationships with providers and expanded access for enrollees. Several states noted that increased communications related to emergency response had strengthened their relationships with providers and other community stakeholders. States also reported that the evaluation of PHE-related utilization data, including telehealth utilization, could inform efforts to sustain and expand access post-pandemic. Most states implemented or expanded programs to address social determinants of health during the pandemic, and many cited plans to continue focusing on initiatives in this area post-PHE. A number of states also highlighted the enhanced health and community-based services (HCBS) funding made available by the American Rescue Plan Act as an opportunity. States must use this time-limited funding to enhance, expand, or strengthen Medicaid HCBS, and were required to submit an initial spending plan for approval by CMS by mid-July 2021 (as this survey was in the field).¹

Many responding states reported that promoting health equity was a top priority, especially after the pandemic highlighted and exacerbated many health disparities. A number of these states described building a health equity focus more broadly into Medicaid program and policy development, with initiatives to address disparities reported across numerous programmatic areas including payment reforms, managed care requirements, benefit expansions, and programs to address social determinants of health. States also reported incorporating health equity initiatives into waivers or waiver renewals, expanding staff training on being anti-racist, and upgrading systems to enable them to capture and report race and ethnicity data.

States continue to focus on non-emergency initiatives as well, especially efforts to better align payment with quality, improve health outcomes, and implement information technology (IT) systems. Consistent with state survey responses over the past several years, nearly half of responding states reported that delivery system and payment reforms remain a key priority. States are pursuing these goals in a variety of ways including through reimbursement methodology reforms, creation of Health Homes and other medical home programs, and managed care contract changes focused on value-based payment initiatives and social determinants of health. Additionally, more than one-third of responding states reported prioritizing behavioral health initiatives, often related to promoting integrated care or improving behavioral health care access. Nearly one-third of responding states reported prioritizing IT systems projects, including Medicaid Management Information Systems (MMIS) procurements, eligibility system upgrades and replacements, implementation of health information exchanges (HIEs), and a focus on data analytics. These types of IT initiatives may underpin other program objectives related to delivery system reform and value-based purchasing, quality improvement, provider and managed care organization (MCO) monitoring, and cost control strategies.

Conclusion

States completed this survey in mid-summer of 2021, following increased vaccination rates and declining COVID-19 cases but just prior to a new wave of COVID-19 infections, hospitalizations, and deaths driven by the highly contagious Delta variant. At that time, states continued to focus on ongoing pandemic-related challenges for agencies, providers, and enrollees, but were also looking ahead to prepare for challenges associated with the unwinding of the PHE. State officials also pointed to lessons learned during the pandemic that may provide opportunities to strengthen relationships with providers, develop new relationships with other community stakeholders, and improve enrollee access and outcomes during and beyond the PHE transition period. States identified ongoing efforts to advance delivery system reforms and to address health disparities and social determinants of health as areas of promise to build on in the future. Looking ahead, uncertainty remains regarding the future course of the pandemic and what kind of “new normal” states can expect in terms of service provision and demand. In addition, as part of budget reconciliation, Congress is currently considering additional Medicaid policies building on earlier legislation to expand coverage and increase HCBS funding, which could have further implications for the direction of Medicaid policy in the years ahead. Finally, states may pursue and CMS under the Biden administration may promote Section 1115 demonstration waivers to help improve social determinants of health and advance health equity.²