Medicaid is failing people leaving prison, and we’re all paying the price

The transition from incarceration to freedom can be a life-or-death turning point, especially for those with substance use disorder (SUD). Incarcerated individuals often lose access to Medicaid coverage while imprisoned, creating gaps in care upon their release—which can be especially harmful for people with SUD. These individuals face significant risks post-incarceration, including heightened rates of overdose, suicide, and recidivism. Gaps in care for people with SUD may not only hinder rehabilitation but also escalate public costs by overloading law enforcement with repeat offenses, congesting court systems with recurring cases, and straining correctional facilities with higher incarceration rates.

Addressing Medicaid’s shortcomings isn’t just about fiscally responsible solutions that make sense for everyone; it’s about empowering individuals to jumpstart their reentry to society in a productive way. When substance-addicted persons leave incarceration, they frequently relapse without care, leading to substantially higher public costs related to overdose or even reincarceration. These outcomes don’t just disempower individuals—they place unnecessary strain on public resources. Medicaid systems can achieve better cost control and generate better health outcomes by providing addiction treatment to these individuals during the period of their transition back into society.

The Reentry Act, first introduced in July 2021 by Sen. Tammy Baldwin (D-Wisc.), presents a potential solution by seeking to expand Medicaid coverage to incarcerated individuals beginning 30 days before their release.

A coalition of over 65 different organizations is calling for the passage of the Reentry Act and the Due Process Continuity of Care Act to address critical gaps in healthcare access for incarcerated individuals with substance use disorders (SUD). However, the success of this proposal depends not only on ensuring incarcerated people with SUD have access to health insurance coverage upon their release but also that this coverage coincides with access to actual healthcare. Addressing the latter requires more than extending Medicaid eligibility; it also requires addressing structural challenges within Medicaid that discourage healthcare providers like drug treatment programs from accepting Medicaid patients. These interconnected issues discourage providers from participating in Medicaid, ultimately restricting access to life-saving treatment for those who need it most.

Economics of Medicaid and structural challenges

Making Medicaid coverage available to incarcerated people upon release may boost access to care, but broader reforms are needed to ensure that care is adequate and affordable. To illustrate one problem, cost-shifting occurs when providers compensate for Medicaid’s low reimbursement rates or treat uninsured patients by inflating prices for privately insured individuals. This practice drives up premiums for private insurance holders, increases out-of-pocket expenses, and creates financial strain for employers offering health benefits. Over time, these rising costs can make healthcare less affordable for a broader population, exacerbate inequities, and place additional pressure on the overall healthcare system to control spending.  

The involvement of an increasing number of intermediaries—such as managed care entities and administrative contractors—extracting profits without delivering direct care leads to significant inefficiencies in the healthcare system. These inefficiencies lead to higher administrative costs, diverting resources from patient care and inflating overall expenses for individuals and the healthcare system. The system becomes bloated with redundant processes and slower decision-making as administrative layers multiply. This makes it harder for people to get the care they need and leaves less money for programs that provide direct help. Consequently, the system struggles to operate effectively and deliver timely, cost-efficient care to those who need it most. 

These dynamics are compounded by the lack of transparent pricing, which prevents consumers from making informed decisions and understanding the true cost of services. As a result, providers have less competition, keeping prices high. Instead of relying solely on expanding insurance coverage, focusing on structural reforms that reduce administrative waste and establish clear price signals is essential to addressing these systemic issues. 

Diminished provider participation and access gaps

One major factor influencing the availability of care and services for Medicaid patients is whether providers are willing to accept Medicaid. State Medicaid programs often try to control costs by paying doctors and healthcare providers a lower rate than the cost of their services. But, while limiting provider compensation rates reduces short-term expenditures, it simultaneously diminishes providers’ willingness to accept Medicaid. Medicaid reimbursement rates often fall far below those provided by private insurers or Medicare, which provides federally funded insurance for people over 65. In 2016, primary care providers who accepted Medicaid patients were reimbursed at only 72% of Medicare rates on average, with some states paying as low as 38%. 

These low reimbursement rates make participation in Medicaid financially untenable for many providers, who are forced to absorb the difference between the cost of care they provide and the rate at which they are paid. Consequently, nearly half of all SUD treatment programs in the U.S. do not accept Medicaid, which means that even though Medicaid covers substance use treatment on paper, many people still cannot get the care they need. Simultaneously, expanding Medicaid eligibility increases demand for services, creating a mismatch where coverage and demand for services grow, but access to care covered by Medicaid shrinks. For incarcerated individuals with SUD, this mismatch between coverage and care access exacerbates an already precarious situation, making it even more essential to focus Medicaid reforms on this high-risk group. By prioritizing reimbursement rates that incentivize provider participation, these systemic resource gaps can begin to close. 

Medicaid expansion and financial strains

The financial strain on states from Medicaid expansion has further complicated matters. Under the Affordable Care Act, passed in 2010, states could extend Medicaid coverage to those previously ineligible, including able-bodied adults without children or those earning just above the poverty line. Though this was initially supported with increased federal funding, that funding has been gradually phased out, leaving states to cover the mounting obligations resulting from the expanded Medicaid population. 

Many states turned to managed care models to control these costs and required prior authorizations. Managed care organizations act as middlemen between patients and providers to arrange and coordinate Medicaid recipient care. While helpful in capping expenditures, they add administrative complexity that can delay care and dissuade provider participation. Similarly, prior authorization requirements—which require patients to gain approval from their insurance provider before receiving certain treatments or medicines—can exacerbate access barriers by delaying critical interventions and placing additional strain on an already thin provider workforce. This can be especially detrimental to time-sensitive treatments for people with SUD, such as access to medications that prevent relapse. like buprenorphine.

To further control the cost of Medicaid expansion, many states have reduced their direct funding for substance use disorder (SUD) services. Between 2010 and 2019, state-funded SUD budgets in Medicaid expansion states were cut by an average of $9.95 million, even as demand for these services grew. This underfunding often forces individuals to rely on costly emergency departments or fall back into patterns of homelessness and incarceration, all of which place a significant financial burden on state systems and ultimately undermine long-term cost savings. By ensuring that sustained funding prioritizes vulnerable groups like prisoners with SUD, states can alleviate these financial strains while effectively addressing the root causes of high costs.

Prioritizing vulnerable populations: Incarcerated individuals

While extending Medicaid coverage to incarcerated individuals before release would be a first step in addressing gaps in care, Medicaid reform is more effective when targeted directly at those incarcerated individuals with SUD—a population at the highest risk of adverse outcomes and where the return on investment is clearest. The weeks following release from incarceration are particularly hazardous; individuals with SUDs are 12 times more likely than the general population to die from overdose or suicide during this period. Without access to care, many fall back into substance use, homelessness, and criminal behavior, perpetuating cycles that burden taxpayers through repeated interaction with healthcare and criminal justice systems. By prioritizing Medicaid coverage for SUD treatment both before and immediately after release from incarceration, these trajectories can be altered, reducing fatalities, lowering recidivism, and cutting state spending on avoidable high-cost interventions.

Solutions for effective Medicaid reform for those with SUD 

To support this targeted approach, Medicaid must make systemic adjustments that guarantee practical access to care. Increasing reimbursement rates for evidence-based SUD services would allow more providers to participate in the program sustainably. Making the process for getting doctors and treatment centers approved faster and easier would increase providers’ willingness to join the program, giving patients more options for care. Additionally, eliminating prior authorization requirements for critical treatments, particularly medications critical for recovery maintenance, such as buprenorphine, would ensure timely interventions when they are needed most. These reforms align with evidence from states that have removed administrative hurdles, showing increased treatment rates and lower overdose deaths.

In recent history, policymakers’ focus on Medicaid has often centered on expanding enrollment, with less attention given to addressing the systemic barriers that prevent access to care. But, increasing the demand within an already overburdened system does little to enhance the availability or affordability of care and treatment. A more prudent strategy would instead prioritize Medicaid resources for populations at the highest risk, delivering measurable benefits by targeting adverse outcomes like overdoses, hospitalizations, and reincarceration. Empowering these individuals with the tools to start building their autonomy back will ensure that public spending is used in the way it was meant to be used. The Reentry Act provides a good starting point to address critical gaps in care for incarcerated individuals with SUD by allowing for a foundation from which individuals can build.  

Health care costs can’t be fixed in the long term until market forces are re-introduced into the sector. However, focusing Medicaid resources in a cost-effective way, with targeted reforms like the Reentry Act, could achieve better outcomes and empower individuals to rebuild productive, independent lives. Now is the time to pivot from ineffective broad policies toward evidence-based reforms, creating more targeted and impactful solutions.

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Source: https://reason.org/commentary/medicaid-is-failing-people-leaving-prison-and-were-all-paying-the-price/