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Federal Medicaid Matching Rates Have Remained Stable, New Study Shows

Some state policymakers opposed to health reform’s Medicaid expansion continue to argue that the federal government will likely renege on its commitment to permanently pick up nearly all of the cost.  Some assert that Congress frequently changes the formula that determines what share of states’ Medicaid costs the federal government will cover (also known as the FMAP).  As we noted in February, that’s false, and a new report from the Urban Institute concurs.

The report finds that policymakers have only cut the FMAP once, in 1981, when President Reagan and Congress enacted a temporary cut.  The most recent FMAP changes were temporary increases to give states fiscal relief during the past two economic downturns.

States are headed down divergent paths based on whether they have expanded Medicaid.  The 27 states (including the District of Columbia, see map) that have taken up the Medicaid expansion are experiencing large gains in health coverage.  As a result, hospitals are providing much less uncompensated care than just a year ago.

Unfounded concerns of a future drop in the federal matching are no reason for the remaining states to stay on the sidelines and miss out on the many benefits of expansion.

14

08 2014

GAO Medicaid Data Show Per Capita Caps Would Lead to Disparate, Harmful Funding Cuts

We’ve previously warned that proposals to change the formula for federal Medicaid funding for states to a fixed dollar amount per Medicaid beneficiary — known as a “per capita cap” — would mean cuts in federal funding for all states.  The change would hit some states particularly hard due to substantial differences in per-beneficiary spending and how fast such costs grow over time.  A recent Government Accountability Office (GAO) analysis backs up our warning.

GAO’s analysis shows that states vary widely in how much they spend per beneficiary, consistent with our own analysis and that of the Kaiser Family Foundation.  GAO estimated average spending in 2008 for each state for different groups of beneficiaries — a child, a person with a disability, a senior, and a non-disabled, non-elderly adult — using federal expenditure and enrollment data.  As one would expect, overall, on average, Medicaid spending on people with disabilities and on seniors was significantly greater than spending on other adults and on children.

But spending on these enrollment groups varied considerably among states.  For example, Medicaid spending per child beneficiary was $5,877 in Vermont and $1,702 in California.  And average Medicaid spending per senior beneficiary was $28,564 in Montana and $9,882 in Alabama.

House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Senate Finance Committee Ranking Member Orrin Hatch (R-UT), who requested the GAO analysis, responded to the findings by reiterating their proposal to establish a per capita cap, under which the federal government would no longer cover a fixed share of each state’s overall Medicaid costs but instead would limit each state to a fixed dollar amount per beneficiary.

Rep. Upton and Sen. Hatch previously argued that a per capita cap would “normalize” Medicaid spending across states, implying that states with higher-than-average spending per beneficiary have inflated costs.  In reality, states with relatively low Medicaid spending per beneficiary would likely fare disproportionately worse than higher-spending states under such a cap, because they would receive relatively less funding due to federal funding formulas that are typically based on current spending per beneficiary.

GAO tried to identify the factors driving this spending variation.  It concluded that while some factors were within the states’ control, such as optional benefits offered and optional eligibility levels, many significant factors were clearly not, including geographic variation in health care wages, differing enrollee service needs, and demographic differences among states such as the percentage of enrollees who are seniors.  In other words, just as overall health care spending and utilization among the states vary, so does Medicaid spending per beneficiary.  As a result, nothing in GAO’s report indicates that states with higher spending per beneficiary were somehow “overspending” relative to those with lower spending per beneficiary.

GAO’s findings don’t justify proposals to alter Medicaid’s financing structure.  They do, however, emphasize that while all states would face cuts in federal funding under proposals like a per capita cap, some states would disproportionately face larger ones.

30

07 2014

Medicaid Expansion Decisions Leading States Down Divergent Paths

As a growing number of reports increasingly make clear, a state’s decision whether to expand Medicaid as part of health reform has real-life effects on its residents and its businesses.  In the 26 states and the District of Columbia that have expanded Medicaid (see map), the positive benefits are already playing out.  Here’s some of the latest information:

  • Hospitals are providing less uncompensated care.  In Arizona, hospitals reported that the Medicaid expansion is the chief reason for a 30 percent decline in the amount of uncompensated care they have provided so far this year, compared with a year ago.  The Colorado Hospital Association found a similar decline in charity care through April when it surveyed hospitals in 15 states that have expanded Medicaid and 15 that have not.
  • Medicaid expansion is driving large gains in health coverage.  A survey conducted by the Urban Institute finds that while the uninsurance rate is dropping across the country, states that have expanded Medicaid have seen a drop in the percentage of non-elderly adults who are uninsured by more than one-third — a 37.7 decline — while the uninsured rate fell by only 9 percent among states that haven’t expanded.  A survey from the Commonwealth Fund found a similar trend.

States can opt in to the Medicaid expansion at any time, allowing them to extend coverage to millions with the federal government picking up all of the cost of the expansion through 2016 (and nearly all of the cost in the years after), as we have written.  New Hampshire recently started accepting applications for its expansion, with coverage first available on August 15.

But states that refuse to expand leave a coverage gap, where people below the federal poverty line have income too high for Medicaid under prior eligibility rules but too low to qualify for federal subsidies to purchase coverage through the marketplaces.  This means we’re likely to see more stories as in Tennessee where, due to the coverage gap, a couple separated so the wife’s income would be low enough to maintain her Medicaid coverage.

16

07 2014

Lower Recidivism: Yet Another Good Reason for States to Expand Medicaid

Some opponents of health reform’s Medicaid expansion have cited an estimate that 35 percent of adults newly eligible for Medicaid have been involved in the criminal justice system in the past year.  This figure is highly inflated.

In reality, only about 17 percent of newly eligible adults who enroll in Medicaid will have been in jail or prison.  But even though they will make up about one-sixth rather than one-third of new Medicaid enrollees, their number is significant — and connecting these low-income adults to the health care system can help them avoid returning to jail or prison, as we explain in a new paper.

On any given day, about 750,000 people are in jail; about 75 percent of them for nonviolent offenses.  As many as 90 percent of people in jail are uninsured.  This figure isn’t surprising; until health reform’s coverage expansions took effect this year, there was no pathway to health coverage for poor and low-income adults who weren’t parents living with their minor children, pregnant women, seniors, or people with disabilities.  Not many people with prison or jail stays fall into these categories.

Health reform opened up Medicaid eligibility for all adults with incomes below 138 percent of the poverty line.  So far, 26 states and the District of Columbia have decided to expand coverage.  In addition, adults who aren’t eligible for Medicaid or employer coverage and have incomes between 100 and 400 percent of the poverty line can qualify for premium tax credits to help them afford private coverage through the new health insurance marketplaces.  Roughly half of people leaving jail can qualify for coverage through Medicaid or the marketplaces.  (This figure takes into account that about half of the states have adopted the Medicaid expansion and half have not.)

A number of states and counties are working to connect people released from jail to health coverage for the first time, with a particular focus on people with mental illness and substance-use disorders, given the prevalence of these conditions in this population and the role of these conditions in increasing criminal activity.

States considering whether to expand Medicaid should consider the growing evidence that connecting the jail-involved population to treatment for mental illness and substance abuse can lower the rate at which they return to jail or prison.

For example, a study of a Michigan program to help recently released prisoners obtain community-based health care and social services found that it cut recidivism by more than half, from 46 percent to 21.8 percent.  Similarly, a study that the Justice Department funded in Florida and Washington found that “in both states, 16 percent fewer jail detainees with serious mental illnesses who had Medicaid benefits at the time of their release returned to jail the following year, compared to similar detainees who did not have Medicaid.”

Click here to read the full paper.

25

06 2014

Medicaid Primary Care Payment Rate Bump Is Worth Extending

An increase in Medicaid primary care payment rates that was included in health reform is scheduled to expire at the end of this year.  But with the need for cost-effective Medicaid primary care rising across the country, the current physician rates should be maintained — and expanded to additional providers — as the Obama Administration and a group of hospitals and doctors have recommended.

Medicaid enrollment has risen by 6 million since October, according to the Centers for Medicare and Medicaid Services, and total enrollment now tops 65 million.  With increased enrollment comes increased need for providers, particularly those providing primary care.  Connecting patients to primary care makes it more likely that they will receive the preventive care and other services to remain healthy and makes it less likely that they will later have to visit the emergency room.

Health reform required states to pay for primary care services at the Medicare rate, which is typically higher than the Medicaid rate, for 2013 and 2014; the federal government picked up 100 percent of the cost of the increase over the state’s regular Medicaid rate for those years.  In boosting physicians’ rates, policymakers intended to increase the number of primary care providers participating in Medicaid in order to ensure access to primary care for Medicaid beneficiaries — both those newly eligible and those who were eligible before 2014.  In Connecticut, the number of primary care providers enrolled in Medicaid has more than doubled since January 2012 and state officials are pushing for an extension of the temporary increase.

Twenty-one organizations representing physicians and hospitals recently wrote to Senate and House leaders to promote a two-year extension of the current payment rate.  The group also asked that policymakers extend the enhanced Medicaid rate to physicians practicing obstetrics and gynecology if their practices provide significant amounts of primary care.  The President’s budget included a one-year extension of the primary care rate increase that would also extend the enhanced rate to include physician assistants and nurse practitioners who provide primary care services.  Both the expansions of the payment increase to additional providers and an extension of the rate increase for at least another year deserve support.

19

06 2014