The COVID-19 pandemic has placed enormous strain on the U.S. economy. Feeling the brunt of the impact are states, who are responsible for balancing their own budgets and whose dollars fund many of the nation’s essential services — among them, education, public safety and healthcare.
As we are still in the midst of the pandemic, it is too early to ascertain the full budgetary impact of COVID-19-driven revenue shortfalls. However, the National Association of State Budget Officers (NASBO) reported that in April 2020, year-over-year tax collections fell by at least 50% for many states, noting that personal income tax and sales tax account for approximately 75% of states’ general fund revenue.
As profound as the impact has been thus far, NASBO predicts, “The worst is likely still to come for state tax revenues, as enhanced unemployment benefits expire, as more Americans restrict their spending, and the full economic impacts of the pandemic are felt.”
Edging Toward a Budget Crisis
At the same time states are losing tax revenue, expenditures are increasing at similarly unprecedented rates, as Americans come to rely on state-funded services more than ever. A recent analysis from the Urban Institute estimates that between April and December 2020, more than 10 million people will have lost employer-sponsored insurance due to the pandemic. Many newly uninsured have, and will continue to turn to the safety net, driving a massive increase in Medicaid enrollment, which states worry they may not have the funds to support.
States face an incredibly difficult balancing act: trim budgets (by as much as 15 to 20%, according to NASBO), while protecting Medicaid as a safety net when Americans need it most. Because Medicaid comprises such a large percentage of state budgets, states may face pressure to cut healthcare programs, services and benefits, which would all but certainly be detrimental to public health during a public health crisis.
Amid widespread uncertainty, one thing that is clear is the pressing need for sustainable solutions to mitigate the economic impact of the pandemic on states and their vulnerable residents. Programmatic improvements, including efforts to contain healthcare costs and better manage population health, should be the starting point in an attempt to stave off more draconian measures, such as cutting enrollment or benefits.
With significant experience containing costs in healthcare, HMS offers several strategies to strengthen the healthcare safety net amid the current health crisis and beyond. Key areas of focus include:
- Modernizing Medicaid third-party liability programs. Better protecting Medicaid as the payer of last resort by strengthening policies and operations, harnessing advancements, garnering efficiencies and increasing savings and recoveries.
- Thoughtfully restarting and enhancing program integrity. Maintaining and improving controls to protect the sustainability of the Medicaid program during a high-risk period for fraud, waste and abuse, while mitigating the burden of these activities on front-line providers.
- Increasing patient engagement and consumerism. Connecting healthcare consumers with vital information and resources to drive measurable improvements in quality, cost and outcomes.
These topics provide the basis for a larger industry and government-level discussion on protecting the fiscal integrity of the nation’s critical healthcare infrastructure. Additionally, many of these tactics can be implemented at a solution level, affording states the opportunity to realize immediate value.
Series: Post COVID-19 Cost Containment Strategies & Recommendations
The key to combatting COVID-19 lies in cross-sector collaboration and knowledge sharing; so too does addressing the pandemic’s wide-ranging impact on state economies. In a series of blog posts, white papers, webinars and other media, HMS will be delving into a number of strategies and policy recommendations for healthcare cost containment during and after COVID-19. As part of this initiative, we will be bringing together stakeholders from all areas of industry and government to help states and healthcare organizations navigate this unprecedented territory.