States stew over ex­pan­sion, though study says feds to pay for al­most all of it

... but states wor­ried about ex­pan­sion, how to pay

Modern Healthcare - - Editorial - Melanie Evans

As­tate-by-state es­ti­mate show­ing that the fed­eral govern­ment is likely to pay for most of the Med­i­caid costs ex­pected un­der the re­form law may of­fer only some con­so­la­tion as cash-strapped states and providers grap­ple with more im­me­di­ate bud­get con­straints and the safety net in­surer’s up­com­ing ex­pan­sion.

The fed­eral govern­ment would bear roughly 93% to 95% of the costs for Med­i­caid dur­ing the ex­pan­sion through 2019, ac­cord­ing to new re­search by the Kaiser Com­mis­sion on Med­i­caid and the Unin­sured, which re­leased the fig­ures May 26.

The biggest gains in cov­er­age and fed­eral spend­ing will go to states with low Med­i­caid cov­er­age of adults, the study said. Mean­while, states with more ex­ten­sive cov­er­age—Hawaii, Maine, Mas­sachusetts and Ver­mont— could see state spend­ing drop as fed­eral spend­ing rises af­ter 2014, depend­ing on how many newly el­i­gi­ble seek cov­er­age.

States pay none of the cost of newly el­i­gi­ble en­rollees through 2016 un­der re­form pro­vi­sions. Fed­eral fi­nanc­ing for those en­rollees will grad­u­ally drop to 90% in 2020, where it will re­main. That amounts to an es­ti­mated $443.5 bil­lion to $532 bil­lion dur­ing the six years. De­spite the lop­sided fi­nanc­ing and the sig­nif­i­cant in­crease in cov­er­age, states nonethe­less have con­cerns about how to pay for ex­pan­sion, meet in­creased de­mand, and how em­ploy­ers and the unin­sured will re­spond to sub­si­dized care avail­able un­der re­form through Med­i­caid and pri­vate in­surance ex­changes, said Alan Weil, ex­ec­u­tive di­rec­tor of the Na­tional Academy for State Health Pol­icy. He was speak­ing at the Washington con­fer­ence where the es­ti­mates were re­leased.

“And much of the dif­fer­ence in per­spec­tives in state re­sponse to the Med­i­caid ex­pan­sion has to do (with) whether they’re fo­cus­ing on what they’re go­ing to get, which is a lot more than they have to put in, or whether or not they feel they can af­ford the small, rel­a­tively small, amount that they’ll have to put in,” Weil said.

In Min­nesota, the ques­tion of whether to ex­pand Med­i­caid and en­roll­ment ahead of 2014 stands to be­come a cam­paign is­sue in Novem­ber’s gu­ber­na­to­rial elec­tion, said Lawrence Massa, pres­i­dent and CEO of the Min­nesota Hos­pi­tal As­so­ci­a­tion. The trade group lob­bied un­suc­cess­fully for the state to take ad­van­tage of a re­form pro­vi­sion that al­lows for ex­panded Med­i­caid el­i­gi­bil­ity by then.

More gen­er­ous fed­eral fi­nanc­ing for the newly en­rolled would not take ef­fect un­til 2014, but hos­pi­tals would re­ceive more re­im­burse­ment than oth­er­wise af­ter Min­nesota sig­nif­i­cantly cut spend­ing for wholly state-sub­si­dized in­surance for adults with­out chil­dren with in­comes be­low 75% of fed­eral poverty guide­lines (about $8,100 for an in­di­vid­ual), Massa said. Un­til 2014, the fed­eral govern­ment would con­tinue to fi­nance 50% of the state’s Med­i­caid spend­ing, which is the his­tor­i­cal rate.

Out­go­ing Gov. Tim Paw­lenty ve­toed a bill

to adopt Med­i­caid ex­pan­sion ahead of sched­ule, but agreed to a com­pro­mise that gives the gover­nor author­ity to do so through Jan. 15, 2011. Massa said early Med­i­caid ex­pan­sion would add $188 mil­lion to Min­nesota’s bud­get over three years but would yield $1.4 bil­lion in fed­eral fund­ing.

Mike Har­risthal, vice pres­i­dent for pub­lic pol­icy and strat­egy for Hen­nepin County Med­i­cal Cen­ter, Minneapolis, said the 465-bed hos­pi­tal would fare bet­ter un­der Med­i­caid than state spend­ing for low-in­come adults with­out chil­dren, which was slashed to $129 mil­lion per year, in­clud­ing a $30 mil­lion un­com­pen­sated-care pool, from $381 mil­lion.

The Hen­nepin County hos­pi­tal, one of four providers that agreed to man­age care for such pa­tients, stands to lose $96 mil­lion on the group; pre­vi­ously the hos­pi­tal lost $5 mil­lion. “We were los­ing money be­fore,” he said. “We’re now go­ing to be los­ing a ton of money.”

Even as pol­icy ex­perts touted the Kaiser Com­mis­sion fig­ures as among the first to es­ti­mate the cost to each state of Med­i­caid’s ex­pan­sion, set to be­gin in 2014, they ac­knowl­edged cost-es­ti­mat­ing dif­fi­cul­ties.

The ac­cel­er­ated Med­i­caid ex­pan­sion be­ing de­bated in Min­nesota was not in­cluded in the anal­y­sis. Nor, im­por­tantly, were es­ti­mates of how ex­panded in­surance would re­duce costs of state un­com­pen­sated-care sub­si­dies, said John Holahan, di­rec­tor of the health pol­icy cen­ter at the Ur­ban In­sti­tute and one of two re­searchers who au­thored the study. “The in­creases in state spend­ing are pretty small com­pared to the in­crease in cov­er­age and rel­a­tive to what states would have spent if there had been no re­form,” Holahan said.

Holahan said that state and lo­cal gov­ern­ments in 2008 spent $17.2 bil­lion to sub­si­dize un­com­pen­sated care, cit­ing prior re­search. He es­ti­mated such sub­si­dies could be curbed by $70 bil­lion to $80 bil­lion be­tween 2014 and 2019 by health re­form pro­vi­sions that in­crease in­surance cov­er­age. That fig­ure, which he de­scribed as a rough es­ti­mate in an in­ter­view, off­sets states’ pro­jected in­creased Med­i­caid costs, Holahan said.

Those costs to­tal $21.1 bil­lion dur­ing the same six-year pe­riod, an in­crease of 1.4% over what states would have spent with­out re­form, ac­cord­ing to the more con­ser­va­tive of two pro­jec­tions the re­searchers de­vel­oped.

Un­der that es­ti­mate, the fed­eral govern­ment would foot 95.4% of the cost should 57% of unin­sured and newly el­i­gi­ble adults en­roll for Med­i­caid once rules change.

The sec­ond es­ti­mate, re­sult­ing in the 93% fig­ure, as­sumes three-quar­ters of unin­sured and newly el­i­gi­ble en­rollees will seek Med­i­caid cov­er­age, plus states would see more de­mand from those who qual­i­fied be­fore re­form. State spend­ing would climb by 2.9%, or $43 bil­lion, as Med­i­caid rolls ex­pand by 39%.

Weil: States have con­cerns about meet­ing ex­pan­sion.

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