Republicans plan to use funding cuts and regulatory changes to dramatically shrink Medicaid.

This article was published on Monday, January 13, 2024 in KFF Health News.

By Phil Galewitz

Under President Joe Biden, enrollment in Medicaid hit a record high and the uninsured rate reached a record low.

Donald Trump's return to the White House — along with a GOP-controlled Senate and House of Representatives — is expected to change that.

Republicans in Washington say they plan to use funding cuts and regulatory changes to dramatically shrink Medicaid, the nearly $900-billion-a-year government health insurance program that, along with the related Children's Health Insurance Program, serves about 79 million mostly low-income or disabled Americans.

The proposals include rolling back the Affordable Care Act's expansion of Medicaid, which over the last 11 years added about 20 million low-income adults to its rolls. Trump has said he wants to drastically cut government spending, which may be necessary for Republicans to extend 2017 tax cuts that expire at the end of this year.

Trump made little mention of Medicaid during the 2024 campaign. The first Trump administration approved work requirements in several states, though only Arkansas implemented theirs before a federal judge said it violated the law. The first Trump administration also sought to block-grant funding to states.

House Budget Committee Chair Jodey Arrington (R-Texas) told KFF Health News that Medicaid and other federal entitlement programs need major changes to help cut the federal debt. "Without them, we will watch this country sadly enter into fiscal collapse."

Rep. Chip Roy (R-Texas), a member of the Budget Committee, said Congress needs to explore cutting federal spending on Medicaid.

"You need wholesale reform on the healthcare front, which can include undoing a lot of the damage being done by the ACA and Obamacare," Roy said. "Frankly, we could end up providing better service if we do it the right way."

Advocates for poor people fear GOP funding cuts will leave more Americans without insurance, making it harder for them to get care.

"Medicaid is an obvious target for huge cuts," said Joan Alker, executive director of Georgetown University's Center for Children and Families. "An existential fight about Medicaid's future likely lies ahead."

Medicaid, which turns 60 in July, is nearing the end of a disruptive period, after covid pandemic-era coverage protections expired in 2023 and all enrollees had to prove they still qualified. More than 25 million people lost coverage over the 18 months after the "unwinding" began, though it has not notably increased the number of people without insurance, according to the latest census data.

The unwinding's disruptions could pale in comparison to what happens in the next four years, said Matt Salo, former executive director and founder of the National Association of Medicaid Directors. "What we are going to see is an even bigger seismic shift in who Medicaid covers and how it operates," he said.

But Salo said any efforts to shrink the program will face pushback.

"A lot of powerful entities — state governments, managed-care organizations, long-term care providers, and everyone under the sun who wants to do well by doing good — wants to see Medicaid work efficiently and be adequately funded," he said. "And they will be highly motivated to push back on something they see as draconian cuts, because it could affect their business model."

The GOP is looking at several tactics to reduce the size of Medicaid:

• Shifting to block grants. Switching to annual block grants could lower federal funding for states to operate the program while giving states more discretion over how to spend the money. Currently, the government matches a certain percentage of state spending each year with no cap. Republican presidents since Ronald Reagan have sought to block-grant Medicaid with no success. Arrington said he favors ending the open-ended federal funding to states and replacing it with a set annual amount based on how many people each state has in the program.
• Cutting ACA Medicaid funding. The ACA provided financing to cover, through Medicaid, Americans with incomes up to 138% of the federal poverty level, or $20,783 for an individual last year. The federal government pays 90% of the cost for adults covered through the law's Medicaid expansion, which 40 states and Washington, D.C., have adopted. The GOP may try to lower that funding to the same match rate the feds pay states for everyone else in the program, which averages about 60%. "We should absolutely note that we are subsidizing the healthy, able-bodied Medicaid expansion population at a higher rate than we do the poorest and sickest among us, which was the original intent of the program," Arrington said. "That's not right."
• Lowering federal matching funds. Since Medicaid began, the federal match rate has been based on the relative wealth of a state's population, with poorer states receiving a higher rate and no state receiving less than a 50% match. Ten states get the base rate — all but two are Democratic-run states, including New York and California. The GOP may seek to cut the base rate to 40% or less.
• Adding work requirements. During the first Trump term, federal courts ruled that Medicaid law doesn't allow coverage to be conditioned on enrollees' working or seeking jobs. But the GOP may try again. "If we can get strict work requirements on able-bodied adults, that can be a huge cost savings by itself," Rep. Tom McClintock (R-Calif.) told KFF Health News. Because most Medicaid enrollees already work, go to school, or serve as caregivers, critics say such a requirement would simply add red tape to obtaining coverage, with little impact on employment.
• Placing enrollment hurdles. About 10 states offer some populations what's called continuous eligibility, whereby people stay enrolled for years without having to renew their coverage. That policy's been shown to prevent enrollees from falling out of the program for short periods because of hardships or paperwork problems, which can lead to surprise medical bills and debt. The Trump administration could seek to repeal waivers that allow states to grant multiyear continuous eligibility, which would require people in those states to reapply for coverage annually.

If the GOP's plans to shrink Medicaid are realized, Democrats and health experts say, low-income people forced to buy private insurance would face challenges paying monthly premiums and the large copayments and deductibles common to commercial plans that typically don't exist in Medicaid.

The Paragon Health Institute, a leading conservative think tank run by former Trump adviser Brian Blase, has issued reports saying the billions in extra money states took to expand Medicaid under the ACA has been a boon to private insurers that manage the program and relatively wealthier people it says shouldn't be enrolled.

Josh Archambault, a senior fellow with the conservative Cicero Institute, said he hopes the Trump administration holds states accountable for overpaying providers and enrolling people in Medicaid who are not eligible. Conservatives have cited CMS reports saying states improperly pay Medicaid providers billions of dollars a year, though the federal government notes that is mostly due to lack of documentation.

He said the GOP will look to scale back Medicaid to its "traditional" populations of children, pregnant women, and people with disabilities. "We need to rebalance the program that most people think is underperforming," he said. Most Americans, including large majorities of both Republicans and Democrats, view the program favorably, according to polls.

Phil Galewitz: pgalewitz@kff.org, @philgalewitz

It's not easy for hospitals and providers to select the best algorithms for their needs.

This article was published on Friday, January 10, 2025 in KFF Health News.

By Darius Tahir

Preparing cancer patients for difficult decisions is an oncologist's job. They don't always remember to do it, however. At the University of Pennsylvania Health System, doctors are nudged to talk about a patient's treatment and end-of-life preferences by an artificially intelligent algorithm that predicts the chances of death.

But it's far from being a set-it-and-forget-it tool. A routine tech checkup revealed the algorithm decayed during the covid-19 pandemic, getting 7 percentage points worse at predicting who would die, according to a 2022 study.

There were likely real-life impacts. Ravi Parikh, an Emory University oncologist who was the study's lead author, told KFF Health News the tool failed hundreds of times to prompt doctors to initiate that important discussion — possibly heading off unnecessary chemotherapy — with patients who needed it.

He believes several algorithms designed to enhance medical care weakened during the pandemic, not just the one at Penn Medicine. "Many institutions are not routinely monitoring the performance" of their products, Parikh said.

Algorithm glitches are one facet of a dilemma that computer scientists and doctors have long acknowledged but that is starting to puzzle hospital executives and researchers: Artificial intelligence systems require consistent monitoring and staffing to put in place and to keep them working well.

In essence: You need people, and more machines, to make sure the new tools don't mess up.

"Everybody thinks that AI will help us with our access and capacity and improve care and so on," said Nigam Shah, chief data scientist at Stanford healthcare. "All of that is nice and good, but if it increases the cost of care by 20%, is that viable?"

Government officials worry hospitals lack the resources to put these technologies through their paces. "I have looked far and wide," FDA Commissioner Robert Califf said at a recent agency panel on AI. "I do not believe there's a single health system, in the United States, that's capable of validating an AI algorithm that's put into place in a clinical care system."

AI is already widespread in healthcare. Algorithms are used to predict patients' risk of death or deterioration, to suggest diagnoses or triage patients, to record and summarize visits to save doctors work, and to approve insurance claims.

If tech evangelists are right, the technology will become ubiquitous — and profitable. The investment firm Bessemer Venture Partners has identified some 20 health-focused AI startups on track to make $10 million in revenue each in a year. The FDA has approved nearly a thousand artificially intelligent products.

Evaluating whether these products work is challenging. Evaluating whether they continue to work — or have developed the software equivalent of a blown gasket or leaky engine — is even trickier.

Take a recent study at Yale Medicine evaluating six "early warning systems," which alert clinicians when patients are likely to deteriorate rapidly. A supercomputer ran the data for several days, said Dana Edelson, a doctor at the University of Chicago and co-founder of a company that provided one algorithm for the study. The process was fruitful, showing huge differences in performance among the six products.

It's not easy for hospitals and providers to select the best algorithms for their needs. The average doctor doesn't have a supercomputer sitting around, and there is no Consumer Reports for AI.

"We have no standards," said Jesse Ehrenfeld, immediate past president of the American Medical Association. "There is nothing I can point you to today that is a standard around how you evaluate, monitor, look at the performance of a model of an algorithm, AI-enabled or not, when it's deployed."

Perhaps the most common AI product in doctors' offices is called ambient documentation, a tech-enabled assistant that listens to and summarizes patient visits. Last year, investors at Rock Health tracked $353 million flowing into these documentation companies. But, Ehrenfeld said, "There is no standard right now for comparing the output of these tools."

And that's a problem, when even small errors can be devastating. A team at Stanford University tried using large language models — the technology underlying popular AI tools like ChatGPT — to summarize patients' medical history. They compared the results with what a physician would write.

"Even in the best case, the models had a 35% error rate," said Stanford's Shah. In medicine, "when you're writing a summary and you forget one word, like ‘fever' — I mean, that's a problem, right?"

Sometimes the reasons algorithms fail are fairly logical. For example, changes to underlying data can erode their effectiveness, like when hospitals switch lab providers.

Sometimes, however, the pitfalls yawn open for no apparent reason.

Sandy Aronson, a tech executive at Mass General Brigham's personalized medicine program in Boston, said that when his team tested one application meant to help genetic counselors locate relevant literature about DNA variants, the product suffered "nondeterminism" — that is, when asked the same question multiple times in a short period, it gave different results.

Aronson is excited about the potential for large language models to summarize knowledge for overburdened genetic counselors, but "the technology needs to improve."

If metrics and standards are sparse and errors can crop up for strange reasons, what are institutions to do? Invest lots of resources. At Stanford, Shah said, it took eight to 10 months and 115 man-hours just to audit two models for fairness and reliability.

Experts interviewed by KFF Health News floated the idea of artificial intelligence monitoring artificial intelligence, with some (human) data whiz monitoring both. All acknowledged that would require organizations to spend even more money — a tough ask given the realities of hospital budgets and the limited supply of AI tech specialists.

"It's great to have a vision where we're melting icebergs in order to have a model monitoring their model," Shah said. "But is that really what I wanted? How many more people are we going to need?"

Darius Tahir: DariusT@kff.org, @dariustahir

These rules could be reversed after President-elect Donald Trump takes office Jan. 20.

This article was published on Tuesday, January 7, 2024 in KFF Health News.

By Noam N. Levey

The federal Consumer Financial Protection Bureau on Tuesday issued new regulations barring medical debts from American credit reports, enacting a major new consumer protection just days before President Joe Biden is set to leave office.

The rules ban credit agencies from including medical debts on consumers' credit reports and prohibit lenders from considering medical information in assessing borrowers.

These rules, which the federal watchdog agency proposed in June, could be reversed after President-elect Donald Trump takes office Jan. 20. But by finalizing the regulations now, the CFPB effectively dared the incoming Trump administration and its Republican allies in Congress to undue rules that are broadly popular and could help millions of people who are burdened by medical debt.

"People who get sick shouldn't have their financial future upended," CFPB Director Rohit Chopra said in announcing the new rules. "The CFPB's final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe."

The regulations fulfill a pledge by the Biden administration to address the scourge of health care debt, a problem that touches an estimated 100 million Americans, forcing many to make sacrifices such as limiting food, clothing, and other essentials.

Credit reporting, a threat that has been wielded by medical providers and debt collectors to get patients to pay their bills, is the most common collection tactic used by hospitals, a KFF Health News analysis found.

The impact can be devastating, especially for those with large health care debts.

There is growing evidence, for example, that credit scores depressed by medical debt can threaten people's access to housing and drive homelessness. People with low credit scores can also have trouble getting a loan or can be forced to borrow at higher interest rates.

That has prompted states including Colorado, New York, and California to enact legislation prohibiting medical debt from being included on residents' credit reports or factored into their credit scores. Still, many patients and consumer advocates have pushed for a national ban.

The CFPB has estimated that the new credit reporting rule will boost the credit scores of people with medical debt on their credit reports by an average of 20 points.

But the agency's efforts to restrict medical debt collections have drawn fierce pushback from the collections industry. And the new rules will almost certainly be challenged in court.

Congressional Republicans have frequently criticized the watchdog agency. Last year, then-chair of the House Financial Services Committee Patrick McHenry (R-N.C.) labeled the CFPB's medical debt proposal "regulatory overreach."

More recently, billionaire Elon Musk, whom Trump has tapped to co-lead his initiative to shrink government, called for the elimination of the watchdog agency. "Delete CFPB," Musk posted on the social platform X.

Noam N. Levey: nlevey@kff.org, @NoamLevey

Independent Health will make "guaranteed payments" of $34.5 million in installments from 2024 through 2028.

A western New York health insurance provider for seniors and the CEO of its medical analytics arm have agreed to pay a total of up to $100 million to settle Justice Department allegations of fraudulent billing for health conditions that were exaggerated or didn't exist.

Independent Health Association of Buffalo, which operates two Medicare Advantage plans, will pay up to $98 million. Betsy Gaffney, CEO of medical records review company DxID, will pay $2 million, according to the settlement agreement. Neither admitted wrongdoing.

"Today's result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement," Michael Granston, a DOJ deputy assistant attorney general, said in announcing the settlement on Dec. 20.

Frank Sava, a spokesperson for Independent Health, said in a statement: "The assertions by the DOJ are allegations only, and there has been no determination of liability. This settlement is not an admission of any wrongdoing; it instead allows us to avoid the further disruption, expense, and uncertainty of litigation in a matter that has lingered for over a decade."

Under the settlement, Independent Health will make "guaranteed payments" of $34.5 million in installments from 2024 through 2028. Whether it pays the maximum amount in the settlement will depend on the health plan's financial performance.

Michael Ronickher, an attorney for whistleblower Teresa Ross, called the settlement "historic," saying it was the largest payment yet by a health plan based solely on a whistleblower's fraud allegations. It also was one of the first to accuse a data mining firm of helping a health plan overcharge.

The settlement is the latest in a whirl of whistleblower actions alleging billing fraud by a Medicare Advantage insurer. Medicare Advantage plans are private health plans that cover more than 33 million members, making up over half of all people eligible for Medicare. They are expected to grow further under the incoming Trump administration.

But as Medicare Advantage has gained popularity, regulators at the federal Centers for Medicare & Medicaid Services have struggled to prevent health plans from exaggerating how sick patients are to boost their revenues.

Whistleblowers such as Ross, a former medical coding professional, have helped the government claw back hundreds of millions of dollars in overpayments tied to alleged coding abuses. Ross will receive at least $8.2 million, according to the Justice Department.

Ross said that CMS "created a bounty" for health plans that added medical diagnosis codes as they reviewed patients' charts — and whether those codes were accurate or not "didn't seem to bother some people."

"Billions of dollars are being paid out by CMS for diagnoses that don't exist," Ross told KFF Health News in an interview.

Data Mining

DOJ's civil complaint, filed in September 2021, was unusual in targeting a data analytics venture — and its top executive — for allegedly ginning up bogus payments.

DxID specialized in mining electronic medical records to capture new diagnoses for patients — pocketing up to 20% of the money it generated for the health plan, according to the suit, which said Independent Health used the firm from 2010 through 2017. DxID shut down in 2021.

Gaffney pitched its services to Medicare Advantage plans as "too attractive to pass up," according to the Justice Department complaint.

"There is no upfront fee, we don't get paid until you get paid and we work on a percentage of the actual proven recoveries," Gaffney said, according to the complaint. Timothy Hoover, an attorney for Gaffney, said in a statement that the settlement "is not an admission of any liability by Ms. Gaffney. The settlement simply resolves a dispute and provides closure to the parties."

'A Ton of Money'

CMS uses a complex formula that pays health plans higher rates for sicker patients and less for people in good health. Health plans must retain medical records that document all diagnoses they highlight for reimbursement.

Independent Health violated those rules by billing Medicare for a range of medical conditions that either were exaggerated or not supported by patient medical files, such as billing for treating chronic depression that had been resolved, according to the complaint. In one case, an 87-year-old man was coded as having "major depressive disorder" even though his medical records indicated the problem was "transient," according to the complaint.

DxID also cited chronic kidney disease or renal failure "in the absence of any documentation suggesting that a patient suffered from those conditions," according to the complaint. Past conditions, such as heart attacks, that required no current treatment, also were coded, according to the DOJ.

The suit alleges that Gaffney said renal failure diagnoses were "worth a ton of money to IH [Independent Health] and the majority of people (over) 70 have it at some level."

Ross filed the whistleblower case in 2012 against Group Health Cooperative in Seattle, one of the nation's oldest managed-care groups.

Ross, a former medical coding manager there, alleged that DxID submitted more than $30 million in disease claims — many of which were not valid — on behalf of Group Health for 2010 and 2011. For instance, Ross alleged that the plan billed for "major depression" in a patient described by his doctor as having an "amazingly sunny disposition."

Group Health, now known as the Kaiser Foundation Health Plan of Washington, denied wrongdoing. But it settled the civil case in November 2020 by agreeing to pay $6.3 million. The DOJ filed a second complaint in 2021, against Independent Health, which also used DxID's services.

Ross said she lost her job after her suit became public in 2019 and was unable to secure another one in the medical coding field.

"It was rough at times, but we got through it," she said. Ross, 60, said she is now "happily retired."

False Claims

Whistleblowers sue under the False Claims Act, a federal law dating to the Civil War that allows private citizens to expose fraud against the government and share in any recovery.

At least two dozen such suits, some dating to 2009, have targeted Medicare Advantage plans for overstating the severity of medical conditions, a practice known in the industry as "upcoding." Previous settlements from such suits have totaled more than $600 million.

The whistleblowers have played a key role in holding health insurers accountable.

While dozens of CMS audits have concluded that health plans overcharged the government, the agency has done little to recoup money for the U.S. Treasury.

In a surprise action in late January 2023, CMS announced that it would settle for a fraction of the estimated tens of millions of dollars in overpayments uncovered through its audits dating to 2011 and not impose major financial penalties on health plans until a round of audits for 2018 payments, which have yet to be done. Exactly how much plans will end up paying back is unclear.

"I think CMS should be doing more," said Max Voldman, an attorney who represents Ross.

Fred Schulte: fschulte@kff.org, @FredSchulte