UnitedHealth Group Identifies $366 Billion in Potential Federal and State Savings by Modernizing Medicaid as it Faces Unprecedented Expansion

  • New report estimates each state’s extra costs and numbers of people to be covered by Medicaid expansion
  • Shows how states can improve access to care for underserved communities, help offset budget pressures
WASHINGTON, D.C. — 

States and the federal government can save an estimated $366 billion over the next decade by modernizing Medicaid, according to a new report by UnitedHealth Group’s (NYSE: UNH) Center for Health Reform & Modernization. States’ share of these potential savings is estimated at $149 billion, which can help offset states’ budget pressures.

A portion of these savings could also be reinvested in primary care, resulting in better access to high-quality care for newly covered populations and underserved communities.

“Successful implementation of national health reform depends critically on Medicaid, yet state governments and primary care services are already under pressure. The good news is that there is a practical road map that would enable many states to realize significant savings while ensuring that underserved populations can readily access much better quality care,” said Simon Stevens, executive vice president, UnitedHealth Group, and chairman of the UnitedHealth Center for Health Reform & Modernization.

Medicaid already is the nation’s primary source of health care coverage for low-income children and families. In the newly enacted national health reforms, Medicaid is one of the two main building blocks for expanding U.S. health care coverage. Medicaid is estimated to grow by 16 million people, and the report shows that 10 states may see increases in their Medicaid rolls of more than 50 percent. (Click here for more information on the impact of the legislation on states, and their Medicaid savings opportunities.) 

The expansion of Medicaid is estimated to cost more than $430 billion from 2011 to 2019. Significant ongoing costs will be borne by the states, for which Medicaid is already the second-largest budget item, while most of the initial costs will be funded by the federal government.

The report shows how states can expand access to higher-quality, well-managed health care, increase funding for primary care physicians to help ease the shortage of doctors, and realize significant savings if proven approaches already adopted in some states are deployed more widely across the Medicaid program. These best practices focus on three categories:

  • Broader use of coordinated care techniques to improve access to high-quality care for both existing and expansion populations of Medicaid-eligible Americans, with projected savings of $93 billion ($36 billion of which would accrue to states).
  • Greater use of managed care to support people with long-term care needs, with projected savings of $140 billion ($60 billion of which would accrue to states). Examples include targeted home- and community-based care programs to support people in living longer in their own homes, and better coordination between Medicaid and Medicare.
  • Modernizing Medicaid’s administrative and transactional processes, with projected savings of $133 billion (with $53 billion accruing to states). Examples include applying new health IT systems, including Medicaid in-state health information exchanges, encouraging electronic claims submission; and validating claims prior to payment. 

These methods are detailed in the report titled, “Coverage for Consumers, Savings for States: Options for Modernizing Medicaid.” The report draws on states’ track records of successful “real-world” innovation over two decades, and the data and experience of programs offered through UnitedHealth Group’s AmeriChoice business, which is the nation’s largest Medicaid managed care company.

Pennsylvania Governor Edward Rendell said: “As federal reforms are enacted, millions of additional beneficiaries will receive care through Medicaid. This report highlights actions states can take to ensure that future Medicaid spending is sustainable while protecting our most vulnerable citizens.  Pennsylvania has implemented many innovative managed care programs to safeguard Medicaid at a time when many states are cutting services.  Truly modernizing Medicaid will require a strong commitment to such new ideas. The approaches highlighted in the Center's report are a good place to begin the discussion about the vital need to protect and preserve Medicaid for the next generation.”

Ensuring Sufficient Physicians Are Available to Treat New Medicaid Enrollees

Ensuring primary care availability for the new Medicaid patients is a major concern for states and physicians. According to a new national survey of primary care physicians commissioned for the report, 67 percent of primary care physicians think that new Medicaid patients will struggle to find a suitable primary care doctor, absent other policy reforms. 

However, the same survey finds that – alongside other policy reforms – states could increase the number of primary care physicians treating Medicaid patients by permanently raising reimbursements to at least match those of Medicare. The federal government has agreed to fund such an increase, but only on a temporary basis in 2013 and 2014.

The report argues that actively managing the health care of Medicaid enrollees and then recycling some of those savings to strengthen primary care is a better solution to states’ Medicaid budget pressures than continuing to artificially depress Medicaid provider reimbursements, which in turn affects Medicaid beneficiaries’ ability to find a primary care doctor.

“People who are eligible for Medicaid need access to top quality health care, so it is vital that the opportunity is taken to strengthen primary and community care services,” said Stevens. “Many states are taking important steps in this direction, which now need to be built upon across the country.”

UnitedHealth Center for Health Reform & Modernization
The Center serves as the focal point for UnitedHealth Group’s work on health care modernization and national health reform. The Center assesses and develops innovative policies and practical solutions for the health care challenges facing the nation.

For more information about the Center and to view the full report, go to: www.unitedhealthgroup.com/reform

About UnitedHealth Group
UnitedHealth Group is a diversified health and well-being company dedicated to making health care work better. Headquartered in Minneapolis, Minn., UnitedHealth Group offers a broad spectrum of products and services through six operating businesses: UnitedHealthcare, Ovations, AmeriChoice, OptumHealth, Ingenix, and Prescription Solutions. Through its family of businesses, UnitedHealth Group serves 70 million individuals nationwide. 

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UnitedHealth Group Identifies $366 Billion in Potential Federal and State Savings by Modernizing Medicaid as it Faces Unprecedented Expansion