Gov. John Bel Edwards signed an executive order Jan. 19, 2016, to make Louisiana the 32nd state to adopt Medicaid expansion under the Affordable Care Act. Montana’s Medicaid expansion became effective Jan. 1, and South Dakota, Virginia and Wyoming are including Medicaid expansion in upcoming state budget proposals.

This is reflective of a growing trend of so-called “red” states that are nevertheless adopting provisions of the Affordable Care Act that subsidize healthcare costs for new groups of citizens who cannot afford commercial or exchange insurance products and do not qualify for Medicare. To sweeten the pot, the Obama administration announced its 2017 budget proposal will include a legislative proposal to provide any state that expands Medicaid coverage under the Affordable Care Act with the same three years of full federal funding that states that expanded their Medicaid programs in 2014 enjoyed.

A number of states outsource the administration of its Medicaid programs to large managed care companies. These managed care companies sometimes utilize a network-based approach that includes an anchor healthcare institution that brings with it a substantial number of Medicaid service providers, whether as employees or contractors, or through a network participation arrangement. States that are new adopters of Medicaid expansion and those states that are considering joining their ranks will be investigating similar strategies in seeking budget savings, political cover or both.

Pediatric hospitals, with their high concentration of Medicaid patients, are well-positioned to partner with managed care companies to be awarded contracts with states to administer current and expanded Medicaid programs. Husch Blackwell has worked with a number of pediatric hospitals in exploring and establishing these types of arrangements. Moreover, the provider networks these pediatric hospitals create for Medicaid managed care purposes can set the stage for similar networks to work with commercial payors to enhance the patient experience of care, improve population health and reduce per capita cost of healthcare that can involve more beneficial payor contracts for the network providers.