Medicaid Expansion Fact Sheet

Medicaid Expansion – Fact Sheet

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (ACA). Among its many provisions, the ACA expands Medicaid, the joint federal and state program that provides health coverage for certain low-income individuals and families. In a June 28, 2012, decision, the U.S. Supreme Court upheld much of the ACA, but struck down a requirement that states expand their Medicaid program or face financial penalties. The Medicaid expansion will now be optional for the states. States can begin to opt in January 2014. The Missouri General Assembly is expected to consider the expansion when it convenes in January 2013.

An Overview of Medicaid

President Lyndon Baines Johnson signed Medicare and Medicaid into law on July 30, 1965 in Independence, Missouri in a ceremony attended by former President Harry Truman, who had first sought to enact a federal health program in 1945. This joint federal-state program offers health coverage for low-income people of specific populations, including children up to age 19, parents, pregnant women, disabled individuals, seniors age 65 and older, blind individuals and certain Medicare recipients. For more on Medicaid eligibility visit the Missouri Foundation for Health website and their report Missouri Medicaid Basics.

Medicaid is voluntary for states, but if a state chooses to participate it must follow certain federal rules. At present all 50 states participate. Within broad national guidelines states have discretion in determining income guidelines and the scope of services provided. However, certain services must be provided, such as inpatient hospital services and outpatient services. Family planning, including contraceptives, is covered, as is prenatal care for pregnant women. Abortion is prohibited except to save the life of the mother or in cases of rape or incest.

Much of the funding comes from the federal government. The federal match – federal medical assistance percentage (FMAP) – varies from state to state; it is based on a state’s average per capita income, relative to the national average. For fiscal year 2013 Missouri’s FMAP is 61.37 percent. (See State Health Facts.) The expansion enacted as part of ACA offers a much more generous federal match (more on the expansion below).

Nationally, about 55 million Americans participate in Medicaid at a cost to the federal government in fiscal year 2011 of $251 billion. Another $24 billion is allocated for payments to hospitals that treat a “disproportionate share” of modest-income patients, the Vaccines for Children program and administrative expenses. According to the Congressional Budget Office (CBO), by 2011 gross federal spending on Medicaid equaled 1.8 percent of the gross domestic product (GDP). For a careful look at the fiscal impact of Medicaid, see Chapter 3 of the CBO’s report “The 2012 Long-Term Budget Outlook.”

As of July, 2012, in Missouri 884,710 people were enrolled in Medicaid expansion, known as Mo HealthNet in Missouri (Department of Social Services caseload counter). Of this number, 498,872 were children. Although the federal government covers much of the cost, Medicaid still requires a large expenditure of state funds. In fiscal year 2012 out of a state general revenue (GR) fund of about $8 billion, over $1.7 billion was dedicated to funding Medicaid, representing 22% of GR. Over another $1 billion was dedicated to Medicaid from non-GR sources, such as a provider tax on hospitals. The MCC obtained its information from Mo HealthNet, the state administrator of Medicaid. Other useful sources for information include the Center for Medicare and Medicaid Services (CMS), which is the federal administrator of Medicaid, and the Kaiser Commission on Medicaid and the Uninsured.

Medicaid Expansion – Federal Perspective

States can opt into expanded Medicaid beginning in January 2014. The expanded program broadens the population eligible to participate to include all non-elderly, non-disabled individuals with incomes up to 133% of the federal poverty level (FPL). A mother with two children, for example, will qualify with an annual income at or below $25,390, based on the 2012 federal poverty guidelines. A study by the CBO estimates 7 million Americans will participate in expanded Medicaid in 2014, rising to 11 million in 2022. (See table 1, page 18)

Normally, Medicaid involves a combination of federal and state funding. However, for the expanded program, the federal government will cover 100 percent of the costs for the first three years. In 2017 the federal share scales back to 95 percent and then steps down each year until 2020 when the permanent federal match will become 90 percent. In 2014 the expanded Medicaid is estimated to cost the federal government $26 billion with the cost rising to $99 billion in 2022, according to the CBO study cited earlier. (See table 4, page 21)

The Medicaid expansion is only one component of the ACA coverage of the uninsured, which also includes the creation of new health insurance exchanges where lower-income individuals and families can receive subsidies to buy health insurance from private companies participating in the exchanges. The subsidies are primarily intended to assist people whose income, though modest, exceeds Medicaid eligibility guidelines.

Repeal of the ACA is under active consideration in Congress. By repealing the Medicaid expansion but nothing else in ACA the federal government could avoid spending $642 billion for the time period 2013-2022 (see Table 4, page 21 of the CBO study). However, repeal of the entire ACA would increase the federal deficit by $109 billion over the period 2013-2022, according to a July 24, 2012 letter the CBO sent to Speaker John Boehner. This occurs because the ACA raises revenue – penalty payments by the uninsured and employers; an excise tax on high-premium insurance plans; an excise tax on manufacturers of certain medical devices; and annual fees to be paid by health insurance providers and importers of branded drugs – which would be lost if the ACA were repealed.

Medicaid Expansion – Missouri Perspective

As Missouri considers whether to expand Medicaid (Mo HealthNet), the state budget remains tight with tough decisions facing legislators on many competing priorities from public schools to roads and highways. It was a state budget shortfall in 2005 that led the Missouri General Assembly to cut Medicaid benefits for over 100,000 residents, which increased the number of uninsured Missourians and added to the uncompensated care hospitals had to provide. (See Missouri’s 2005 Medicaid Cuts: How Did They Affect Enrollees and Providers?) The 2005 Medicaid cuts added to an already large population of uninsured. Using census data from 2010 and 2011, the Kaiser Family Foundation reports an uninsured population in Missouri of 853,300, representing 14% of the state’s population.

Opting into the Medicaid expansion would allow Missouri to offer health coverage for many of these uninsured individuals, including custodial parents who at present only qualify if their income is at or below 18% of the federal poverty level (FPL), one of lowest eligibility levels in the nation. At present, a mother with two children only qualifies with an annual income up to $3,504. Under the Medicaid expansion, that same mom would qualify with an annual income up to $25,390 (133% of the FPL). Another dramatic change would involve childless (non-elderly, non-disabled) adults, who presently do not qualify for Medicaid but under the expansion could obtain Medicaid with an income up to 133% of the FPL. Mo HealthNet has estimated that if Missouri opts into the expansion 255,000 Missourians could enroll in the program.

Although the federal government would pick up the tab for most of this expansion, the state of Missouri would bear some of the cost. Mo HealthNet projects that in fiscal year 2017, the first year the state has to share in the cost, the state would pay about $50 million. By fiscal year 2020, when Missouri is paying its full share (10% of the cost), the state would pay about $189 million. By fiscal year 2022 the cost rises to about $242 million. (Mo HealthNet made these projections in 2010 after enactment of the ACA; an updated estimate is expected next year). Numbers don’t mean much, however, unless put into perspective; while the expansion would require the state to spend something under $300 million annually, that money would allow Missouri to draw down over $2 billion annually in federal dollars to provide health care to low-income citizens.

The ACA reduces federal payments hospitals receive for serving large numbers of low-income patients. Losing the disproportionate share hospital (DSH) payments won’t be as much of a problem if Missouri opts to expand their Medicaid program because more of those coming to hospitals will have health coverage through Medicaid and Medicaid will reimburse the hospitals. But if a state refuses to participate in the Medicaid expansion the hospitals will be taking on more uncompensated care. Concerns are being raised that unless Missouri opts into the Medicaid expansion hospitals could close, especially in rural areas.

In light of Missouri’s recent budget woes, state legislators are expected to be cautious in embracing the Medicaid expansion. However, loss of the DSH payments and the specter of potential hospitals closings may cause some to reconsider their initial opposition. Also, if most other states opt into the expansion, legislators may decide they do not want to pay for a Medicaid expansion (through its citizens’ taxes) that benefits other states but not Missouri.

What About A Partial Expansion of Medicaid?

 Many questions remain unanswered regarding the Medicaid expansion, including whether states will be given the option to implement a partial expansion. In Missouri, for example, custodial parents only qualify under the present program if their income is at or less than 18% of the FPL. What if Missouri, instead of expanding to 133% FPL, wants to expand to, say, 100% FPL? Will the federal government agree to fund this partial expansion?

The question takes on added urgency when one considers that most of those with incomes below 100% FPL are not eligible for subsidies to buy insurance through the newly created health exchanges. If Missouri refuses to opt into a full expansion and the federal government refuses to allow states to implement a partial expansion, thousands of very low-income people will be denied access to any health coverage. The irony of this situation will be that many people with incomes above the FPL will qualify for exchange subsidies while those below will not nor will they be eligible for Medicaid.



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