States may tap hospitals to help pay for Medicaid expansion in 2017

Policymakers in Medicaid expansion states likely will try to wring some cash from hospitals starting in 2017 when the federal government no longer pays the full tab for the coverage expansion, experts say.

Higher-than-expected enrollment means expansion states will be on the hook for hundreds of millions more than they anticipated when they took advantage of the Affordable Care Act’s Medicaid expansion to adults earning up to 138% of the federal poverty level. For instance, in Oregon, 386,000 people enrolled in Medicaid in 2014, up from a pre-expansion estimate of 222,700.

Under the ACA, the federal government picks up the full cost for newly eligible adults through 2016. After that, the match gradually drops to 90% by 2020. In 2013, Oregon estimated its tab for Medicaid expansion would be $262 million between 2017 and 2019. It now expects the cost will be $369 million during that period, said Stephanie Tripp, a spokeswoman for the Oregon Health Authority, the state’s Medicaid agency.

Earlier this month, the CMS issued a report noting that the ACA’s Medicaid expansion pushed enrollment higher than anticipated and that the projected costs for that coverage had gone up as well. But experts have noted that Medicaid expansion reduces state costs in other ways, and also boosts jobs and states’ economies.

“What you’re seeing now is that state budget people are saying, ‘We’re ending up with more people in the system than we initially thought, and we have to think about how we’re going to finance this,’ ” said Joy Wilson, health policy director for the National Conference of State Legislatures.

Any arrangement to have a state’s hospitals pay assessments to help fund the Medicaid expansion would have to be approved by each state’s legislature. One option is to have hospitals contribute through a system of assessment fees already collected by many states. Since the 1980s, provider assessments have generated billions of dollars to help states boost the matching funds they receive from the federal government. In 2015, 38 states had such levies in place, according to the Kaiser Family Foundation.

With the clock ticking down on the 100% federal match for the Medicaid expansion population, Arizona, Colorado, Indiana and Ohio have established policies to impose assessments on their hospitals to cover the state share of the expansion costs.

Hospitals in non-expansion states such as Louisiana, Tennessee and Utah have said they would be willing to contribute if their states accepted Medicaid expansion. The Utah Hospital Association said, however, that it would only agree if all provider groups are assessed.

It’s not clear if policymakers in all of the 29 states that have expanded Medicaid will ask hospitals to contribute toward the expansion.

But in California, where the state Medi-Cal program pays some of the lowest rates in the country, the California Hospital Association said its members are not interested in paying an additional assessment.

“We have no plans to offer to pick up the expansion costs of the Medi-Cal program once the 100% federal match for the newly eligible begins to drop,” said Jan Emerson-Shea, spokeswoman for the California Hospital Association.

“California already has one of the lowest Medicaid reimbursement rates in the nation. We are advocating for the state to increase its reimbursement rates to hospitals, doctors and other providers,” she said.

California has enrolled nearly 2.3 million people so far, nearly three times more than the 800,000 the state had anticipated, said H.D. Palmer, spokesman for the state’s Department of Finance.

Hospital associations in Illinois, Maryland, Nevada, New Mexico and North Dakota say the assessment issue hasn’t yet been broached by state officials or their members.

Kathleen Shure, senior vice president at the Greater New York Hospital Association, said it shouldn’t be necessary for the state Medicaid program to assess hospitals, because New York receives an enhanced match from the CMS for childless adults with incomes under 100% of the poverty level.

States wouldn’t need hospital industry consent to introduce or increase assessments as long as it was done in compliance with federal law, said Michael Miller, policy director for Community Catalyst, a not-forprofit that works to expand health coverage under the ACA.

Federal rules allow states to impose assessments on hospitals up to 6% of patient revenue.

This federal cap means that not all states will be able to assess hospitals to cover Medicaid expansion costs because some may already be assessing hospitals at the maximum level, Wilson said.

“What you’re seeing now is that state budget people are saying, ‘We’re ending up with more people in the system than we initially thought, and we have to think about how we’re going to finance this.’ ”

Joy Wilson Health policy director National Conference of State Legislatures