State of the State Mid-Year 2023: Unwinding of the health care system

Editor’s note: The State of the State series provides reports twice a year on Arkansas’ key economic sectors. The series publishes stories to begin a year and stories in July/August to provide a broad mid-year update on the state’s economy. Link here for the State of the State page and previous stories.

While the COVID-19 pandemic is considered by the federal government to be over, its effects on the health care system remain. In many ways, the state of the state’s health care might best be described as “unwinding.”

That’s especially the case with Medicaid, where “unwinding” is the word often used to describe what is happening. Throughout the pandemic, states halted their typical redetermination process because the federal government provided them extra money if didn’t cut their rolls. As a result, Arkansas’ Medicaid population increased by 230,000.

That changed in April, the month that states could resume redeterminations. Under state law, Arkansas has six months to complete its process.

June was typical of the unwinding’s first three months. That month, 77,468 individuals were removed from the rolls either as part of the regular redetermination process or because of the unwinding. Of those who lost coverage, 20,666 were children covered by the state’s ARKids A program. Another 29,243 individuals were covered through the state’s ARHOME program, which uses Medicaid funds to purchase private health insurance. Of those whose cases were closed, half, or 38,945, were removed because they failed to return their renewal form.

The situation is not as bad as it may sound. The Department of Human Services has said that some people are not returning the form because they know they are no longer eligible. Medicaid recipients who lose coverage but are still eligible can reapply and be covered retroactively. Their medical provider can quickly note that they have lost coverage and can take steps to help them obtain coverage and ensure they are paid for their services.

But Dr. Joe Thompson, president and CEO of the Arkansas Center for Health Improvement (ACHI), said the redetermination process still can lead to disruptions. Some people who have lost coverage won’t be eligible for Medicaid and may not easily slide into the insurance market in order to gain coverage.

Doctors and hospitals have been preparing for the resumption of the redetermination process and also reacting to it. Many physician offices proactively reached out to their Medicaid customers to encourage them to re-enroll, said David Wroten, executive vice president of the Arkansas Medical Society, which represents doctors. Bo Ryall, president and CEO of the Arkansas Hospital Association, said hospitals often don’t see their patients as frequently as other providers, so they have been working with them as they arrive.

The pandemic has had other effects on Arkansas’ health care system. Wroten said physicians struggled because they stopped doing elective surgeries and because patients were fearful of coming to their office, but most practices have recovered. Ryall said hospitals have lowered their expenses, and volumes have increased.

“So things are better, but they’re not pre-pandemic levels,” Ryall said.

More generally, Ryall estimated that about six of the AHA’s 104 member providers are really struggling. A few are looking to become Rural Emergency Hospitals, a designation that provides extra Medicare funding but means they can’t provide inpatient services. Hospitals are cutting services to rural areas. Less than 40 now perform expensive, legally perilous labor and delivery services.

Wroten said medical practices are contending with a host of challenges, including administrative issues dealing with carriers, prior authorizations, and inadequate reimbursements.

“The cost of practicing and running a clinic has gone up alarmingly over the last few years – probably in some cases 20% to 30% easily,” he said. “And of course reimbursements have not kept up. In fact, they’ve been fairly flat during that period of time.”

Ryall said hospitals likewise are dealing with reimbursement issues. They haven’t seen increases from Medicaid and have seen only 2% increases from Medicare, and they are negotiating with insurance companies. Supplies are more expensive, and labor costs have risen. Hospitals have reduced their dependence on expensive traveling nurses by incentivizing their nurses to stay, recruiting nurses and strengthening the labor pipeline. They also have reduced services.

“Hospitals have done their part in reducing their expenses,” he said. “Now we need some help from the insurers and government payers to increase reimbursement levels.”

ACHI’s Thompson predicted that the high costs of health care have reached the point where the country will have a cost conversation soon. There was some protection from costs during the pandemic because the federal government was pouring so much money into the system, but not now.

“We continue to spend more than any other developed country on health care, and yet we don’t have any indicator that we can say we get better quality care than any other country,” he said.

Aside from the health care industry is the state of Arkansans’ health, which clearly isn’t good. Arkansas has the nation’s worst maternal health mortality rate and its third highest infant mortality rate. Thompson said more than half of all Arkansans have a chronic health issue, with much of it stemming from root causes like obesity, tobacco use and the lack of available healthy food.

“A lot of this is environmental. Some of it is habitual,” he said. “All of that does lead to these conditions that are going to bankrupt us if we don’t start paying attention.”

The pandemic led to increased anxiety, mild depression, and social disruption where broken connections haven’t been reconnected, Thompson said. Social media further isolates its users. Those mental health issues are manifesting in a variety of ways, including gun violence, substance abuse, and the opioid epidemic.

“We’re losing family members and community members from health issues because of a number of chronic issues, a number of systemic issues, and I think the pandemic only made those things worse,” he said.