ACA Medicaid Expansion: State Implementation Issues & Update

Joy Johnson Wilson, Health Policy DirectorNational Conference of State Legislatures

2012 Montana Healthcare Forum ConferenceHelena, Montana

November 28, 2012

Medicaid Historic Snapshoto 1965 – Medicaid law was enacted

• Medicaid is an individual entitlement program for low-income individuals as specified in the law (and as the law is amended)

o 1996 – Personal Responsibility and Work Opportunity Act• Changed the Aid to Families with Dependent Children (AFDC)

to the Temporary Assistance for Needy Families (TANF), a block grant to states

• Participation in AFDC provided categorical eligibility for Medicaid, this connection does not apply to TANF

Medicaid Historic Snapshot cont.o 1997 – Balanced Budget Act of 1997

• State Children’s Health Insurance Program (SCHIP) enacted• Block grant to states to cover children with income up to 200%

of the federal poverty level (FPL)o 2009 - Children’s Health Insurance Program Reauthorization

Act (CHIPRA)• Changed name of the program from State Children’s Health

Insurance Program (SCHIP) to Children’s Health Insurance Program (CHIP)

• Reauthorized program through September 30, 2013

Medicaid Historic Snapshot cont.o 2010 – Patient Protection and Affordable Care Act

• Mandatory Medicaid Expansion• CHIP became a grant condition for Medicaid participation• Extends CHIP authorization extended through September 30, 2015• Maintenance of Effort (MOE)

o Medicaid until 2014 and CHIP until 2019o 2012 - U.S. Supreme Court Decision (June 28, 2012), National

Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al.• Made a PORTION of the Medicaid expansion OPTIONAL

ACA Key Medicaid Eligibility Provisionso Establishes standard minimum eligibility level at 133% of FPL and

applies a 5% income disregard which sets the actual minimum eligibility level at 138% of FPL• Eliminates the use of other income disregards• Eliminates assets test

o Adds new mandatory eligibility categories• Able-bodied, single, childless adults under age 65; parents; and

former foster care children under age 26 years of ageo Changes the methodology for determining income-eligibility to

Modified Adjusted Gross Income (MAGI), effective July 1, 2013o Provides Enhanced Federal Match for “New Medicaid Eligibles”

Enhanced Match/New Eligibleso Enhanced Federal Match (FMAP) Schedule

• 2014 – 2016 - 100% (3 years); • 2017 – 95%; • 2018 – 94%• 2019 – 93% • 2020 and thereafter – 90%

o Definition of Newly Eligible – Non-elderly, non-pregnant individual with family income below 133% of FPL who were as of December 1, 2009: (1) a child as defined by the state; (2) not eligible for full Medicaid benefits, Medicaid benchmark benefits or benchmark equivalent coverage; or (3) eligible, but not enrolled, due to a capped waiver or were on a waiting list on the date of enactment

What is MAGI?

o Modified Adjusted Gross Income – An individual’s (or couple’s) total income plus tax exempt interest and foreign-earned income, which is excluded from the calculation of adjusted gross income (AGI)

o MAGI Exceptions – Groups eligible for Medicaid through other federal programs (e.g. foster care, Supplemental Security Income (SSI), Medicare Savings Programs)

o Application of MAGI – The change to MAGI will not apply to Medicaid beneficiaries who were enrolled in Medicaid on January 1, 2014 until the later of March 31, 2014 or their next redetermination date.

Medicaid Expansion Post SCOTUS Decisiono SCOTUS Game-Changer Decision

• No penalty……No deadline ….States can go in and out of the expansion at will

• If a state decides not to implement the Medicaid expansion, what happens?

o Individuals with income above 100% of FPL are eligible to enroll in the state’s health insurance exchange

o Individuals with income below 100% of FPL are not eligible for Medicaid and are not eligible to enroll in the state’s exchange

o These individuals will not be subject to the non-coverage penalty provided for under the ACA individual mandate provisions (affordability or hardship exemption)

Medicaid Important Element of ACA Financingo Coverage provisions work in concert:

• Individual Mandate (almost everybody is required to obtain coverage)• American Health Insurance Exchange

o Individual Market – premium and cost-sharing subsidies to individuals with income between 133% FPL – 400% FPL

o Small Business Opportunity Program (SHOP) – tax credits to small businesses

• Large Employers “Employer Responsibility Provisions” encourage large employers to continue to provide coverage at a reasonable cost. Assesses a penalty if an employer has employees participating in the health insurance exchange because their premiums were more than 9.5 % of the employee’s income and the employee was not eligible for Medicaid

• Medicaid Expansion (cost estimates based on mandatory expansion)

Medicaid Expansion Post SCOTUS Decision

o Potential Impacts if a State Opts Not to Adopt the Expansion• Could add more low-income and potentially less healthy

people into the exchanges, resulting in higher overall premiums and higher subsidy costs

• Large employers may be more vulnerable to the “Employer Responsibility” penalty

• Continued uncompensated care costs for hospitals• May spread reinsurance subsidies (fixed amount) over a larger

population• Difficult Road to Universal Coverage

The Fiscal Cliff…….

Deficit Reduction/Medicaid Reformo Looming fiscal cliff hangs over all Medicaid decisions….o Key Issues:

• Deficit Reduction Proposals that Impact MedicaidoReductions in Provider Taxes and other financing optionsoDisproportionate Share Hospital (DHS) ReductionsoBlended Matching Rate (Medicaid, CHIP)oMedicaid Block Grants/Caps/Other Major Reforms

• Reductions in Federal Discretionary Health Programs/Other Programs

• Recession/Economic Downturn

Other Uncertaintieso Continued court challenges to various ACA provisionso Congressional attempts to end/reduce funding for various provisions of the

ACAo So many moving parts……so little time……o While the picture regarding exchanges is coming into focus (state-based,

Partnership or Federally-facilitated), the Medicaid expansion picture is hazyo Will states receive expanded options with respect to the Medicaid

expansion or will it be all or nothing????• Phase-in expansion • Waivers• Other options

Medicaid Expansion

KEY ELEMENTS OF AN IMPACT ANALYSIS

RWJ TOP SIX FACTORS TO CONSIDER

o Cost of Newly Eligibleso Cost of Current Eligibles, Not Enrolledo Administrative Costso Savings from Transitioning Current Medicaid Populations to

Newly Eligible Groupo Savings from Reducing Support from State Programs to Assist the

Uninsuredo Other Revenue Gains/Savings & the Multiplier Effect

Source: Medicaid Expansion: Framing and Planning a Financial Analysis, Issue Brief, September 2012. Prepared by: Manatt Health Solutions, Center for Health Care Strategies (CHCS), and State Health Access Data Assistance Center (SHADAC) for the State Health Reform Assistance Network a Robert Wood Johnson Foundation Program.

Cost of Newly Eligibleso Total Cost (Apply FMAP for each year 2014-2020)

• Total Number of Newly Eligibles• Take Up Rate (Percentage)• Newly Eligibles Who Enroll• Per Member Per Year Cost

o Who Are the Newly Eligibles?• Are they currently receiving care? Are you paying for their care?• Do they have behavior health or substance abuse issues?• Do they have a chronic condition?• Are they incarcerated?

Cost of Individuals Eligible, Not Enrolled

o Total Costs (Apply FMAP for each year 2014-2020)• Total Number of Individuals Eligible, Not Enrolled (“Woodwork effect”)• Take Up Rate (Percentage)• Currently Eligible Who Enroll• Per Member/Per Year Costs

o Who are the Currently, Not Enrolled Individuals?• Young Invincibles• Not so Young Invincibles• Healthy people• Transients• Others???

Administrative Costso The enhanced FMAP applies to benefits, not program

administration HOWEVER…….o The ACA does provide for enhanced administrative

match (90% federal/10% state) for Medicaid systems development activities related to eligibility

o There will not be a charge to receive information from the federal hub

o All states will have to coordinate with the federal government on a variety of eligibility-related activities

Transition Savingso Examples of Possible Medicaid Cost Reductions as Individuals

Transition into the Exchange• Adults Enrolled Through Waivers• Disease-Specific Coverage• Family Planning Services• Medically-Needy Spend-Down• Special State and/or local programs

Savings from Reducing State Programso What are you paying for now that you could substantially reduce if

the Medicaid expansion is adopted?o Would it enable you to repurpose some assets?o Examples:

• State-Only Funded Coverage Programs• Uncompensated Care Pools/Funds• State Behavioral Health/Substance –Use Spending• State Public Health Spending• State Spending for Inpatient Hospital Care for Prisoners• Other Special State/Local Programs

Other Revenue Gains/Savings & the Multiplier Effect

o Revenue Examples……• Provider Taxes/Assessments• Insurer Taxes/Assessments• General Business Taxes• Other Tax Impacts

o Multiplier Effect• Very “Fluffy” part of the financial assessment• Speculative, but real• It is easier to estimate costs than to estimate future revenue attributable to:

(1) growth in employment the healthcare sector; (2) potentially a growing workforce due to improved health status; and similar hard to measure effects

State Response to Medicaid Expansiono Dive In – Water’s Great!

Only a few states (California, Connecticut, Massachusetts, Maryland, Oregon, Rhode Island and Vermont) have taken the dive and many of them had substantially expanded their Medicaid programs prior to the enactment of the ACA.

State Response to Medicaid Expansiono Just Wetting My Feet –

Most states are studying their options, weighing costs and benefits and seeking the counsel of a variety of experts.

State Response to Medicaid Expansion What’s So Great about

the Water? I Like the Feel of Sand on My Feet! – A few states (Alabama, Georgia, Louisiana, Mississippi, Oklahoma, South Carolina, Texas and Virginia) are planted firmly on the beach for now

Joy Johnson Wilson

Health Policy Director, NCSLJoy.Wilson@ncsl.org