Cost and Coverage Implications of the ACA Medicaid Expansion

1. Cost and Coverage Implications of the ACA Medicaid Expansion Robin Rudowitz, Associate Director Kaiser Commission on Medicaid and the Uninsured Kaiser Family Foundation Philadelphia, PA January 24, 2013

2. Medicaid has many roles in our health care system. Health Insurance Coverage 31 million children & 16 million adults in low-income families; 16 million elderly and persons with disabilities Assistance to Medicare Beneficiaries 9.4 million aged and disabled — 2% of Medicare beneficiaries Long-Term Care Assistance 1.6 million institutional residents; 2.8 million community-based residents MEDICAID Support for Health Care System and Safety-net 16% of national health spending; 40% of long-term care services State Capacity for Health Coverage Federal share can range from 50 - 83%; For FFY 2012, ranges from 50 - 74.2%

3. Expanding Medicaid is a key element in health reform. Universal Coverage Exchanges With Subsidies for Moderate Income Individuals Medicaid Coverage For Low-Income Individuals Individual Mandate Health Insurance Market Reforms Employer-Sponsored Coverage

4. The ACA builds on the current program foundation. Health Insurance Coverage for Certain Categories Minimum floor for Health Insurance Coverage to 133% FPL Additional Federal Financing for Coverage MEDICAID Shared Financing States and Federal Govt. Additional Options Long-Term Care / Coordination for Duals Support for Health Care System Assistance for Duals / Long-Term Care

5. Update eligibility systems and transition to MAGI Provide simple enrollment and renewal Web portals Online application and enrollment Secure data exchange Coordinate Medicaid with the Exchange No Wrong Door “Screen and Enroll” Seamless transitions Eligibility and enrollment redesign is a major part of health reform.

6. Almost every state is moving forward with plans to upgrade Medicaid eligibility systems. ME VT WA NH MT ND MN OR MA NY WI SD ID MI RI CT WY PA NJ IA NE OH DE IN IL NV MD CO UT WV DC VA CA KS MO KY NC TN SC OK AR AZ NM GA AL MS* LA TX FL AK HI Work Begun on Medicaid Eligibility System Upgrade (42 States) Approved or Submitted APD (6 states) No Approved or Submitted APD (3 states) NOTE: “APD” refers to an Expedited Advanced Planning Document. MS has begun work on upgrading its Medicaid eligibility systems without submitting an APD. SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2013.

7. The ACA would set a national eligibility floor for Medicaid. Medicaid/CHIP Eligibility Threshold, January 2013 Minimum Medicaid Eligibility under Health Reform - 138% FPL ($24,344 for a family of 3 in 2012) SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2013.

8. How did the Supreme Court decision affect Medicaid? • The decision left the Medicaid expansion for adults intact but limited the Secretary’s authority to enforce it. • States have financial incentive to comply with the expansion, but the penalty for non-compliance is limited to loss of Medicaid expansion funds. • Secretary may not withhold existing federal Medicaid funds if a state does not expand. • Secretary’s authority to withhold federal Medicaid funds if a state does not comply with other program requirements remains in place. • Other Medicaid provisions in the ACA remain in place regardless of whether states expand. • Enrollment simplifications/coordination with the Exchanges • New options for long-term care and care coordination • Primary care physician fee increase • Disproportionate Share Hospital payment reductions

9. Without the Medicaid expansion, many poor uninsured adults could be left out of coverage. 40.3 million Nonelderly Uninsured Adults 442,870 Nonelderly Uninsured Adults The FPL for a family of four in 2011 was $22,350. SOURCE: KCMU/Urban Institute analysis of merged 2010-2011 CPS.

10. There could be large gaps in coverage for poor parents in many states. 138% NOTE: Ten states (CT, IL, ME, MA, MN, NJ, NY, RI, VT, WI) &DC already offer coverage to parents at or above 133% FPL; under the ACA an income disregard of 5 percentage points will be applied to this limit increasing the effective income limit to 138% FPL. SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2013.

11. There could be even larger gaps in coverage for poor childless adults. Medicaid Coverage of Adults, January 2012 ME VT* WA NH MT ND MN OR* (closed) MA WI (closed) NY ID SD MI (closed) RI CT* WY PA NJ IA NE OH DE IN (closed) IL NV MD UT* (closed) WV VA CO DC* CA KS MO KY NC TN (closed) AZ (closed) SC OK AR NM (closed) GA AL MS LA TX AK FL HI* (closed) No or Limited Coverage (42 states) Medicaid Comparable Coverage (9 states, including DC) “Closed” denotes enrollment closed to new applicants SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2012 with state updates.

12. KCMU / Urban Institute analysis estimates the cost and coverage implications of the ACA Medicaid expansion. • Objectives: Estimate national and state-by-state effects of the Medicaid Expansion on: • Spending: federal and state Medicaid spending, state spending for uncompensated care and provider reimbursement, state fiscal effects relative to current general fund expenditures • Coverage: Changes in Medicaid and changes in the uninsured • Methods: Analysis largely uses the Urban Institute Health Insurance Policy Simulation Model (HIPSM) • Participation rates and cost per person are model results based on estimates of individual behavior and characteristics • ACA FMAP Rates Applied: standard FMAP for new participation of current eligibles, enhanced ACA rates for new eligibles, higher CHIP FMAP • Model incorporates savings for some states that can obtain higher match rates for currently covered populations (expansion states and limited benefit Waiver states)

13. Several sources of savings to states cannot be estimated with 50-state data. • Transition of adults with incomes above 138% of the federal poverty line (FPL) from Medicaid to exchange coverage • Transition of certain adult coverage categories below 138% FPL from regular match Medicaid to new eligibles, with higher federal matching payments (i.e. breast and cervical cancer programs) • Savings on non-Medicaid health care (e.g., state mental health) for the uninsuredwho newly qualify for Medicaid • Additional state revenue that results from, e.g., the effect of new federal expenditures on the state economy

14. The federal government will fund the vast majority of the costs of the ACA Medicaid expansion. Total National Medicaid Spending 2013-2022: $7,368 Billion Total PA Medicaid Spending 2013-2022: $347.1 Billion Note: Individual components may not sum to totals due to rounding. Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

15. Pennsylvania can draw down more than $13 for every $1 under the expansion. 2013-2022 $ in billions: Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

16. Some states will see savings from implementing the ACA Medicaid expansion, other states will experience some increase in state costs. Incremental Impact of Medicaid Expansion on State Medicaid Spending ME VT WA NH MT ND MN OR MA NY WI ID SD MI RI CT WY PA NJ IA NE OH DE IN IL NV MD UT WV VA CO DC CA KS MO KY NC TN SC OK AR NM AZ GA AL MS LA TX FL AK HI -11% to 0% (10 states) >0% to 2% (12 states, including DC) US Total: 0.3% PA: 2.1% 2013-2022 >2% to 4% (17 states) >4% to 7% (12 states) Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

17. The incremental costs of implementing the ACA Medicaid expansion are mitigated by reduced state spending on uncompensated care. 2013-2022: $ in millions: Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

18. Implementing the ACA Medicaid expansion will bring increased payments to hospitals. NOTE: AZ is not included because analysis includes only FFS payments (and AZ has no FFS).Includes federal and state spending. Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

19. If all states implemented the ACA Medicaid expansion, an estimated 21.3 million would enroll by 2022. Enrollment in millions: Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

20. If Pennsylvania implemented the ACA Medicaid expansion, an estimated 719,000 would enroll by 2022. Enrollment in thousands: Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

21. The uninsured could be cut by more than 50% in 26 states if all states implement the Medicaid expansion. ME VT WA NH MT ND MN OR MA NY WI ID SD MI RI CT WY PA NJ IA NE OH DE IN IL NV MD UT WV VA CO DC CA KS MO KY NC TN AZ SC OK AR NM GA AL MS LA TX FL AK HI 17-40% (10 states, including DC) US Total Reduction in Uninsured: 48% PA: 52% 41-50% (15 states) 50-55% (15 states) >55% (11 states) Note: Includes effects of the Medicaid expansion and other provisions in the ACA. Source: Urban Institute estimates prepared for the Kaiser Commission on Medicaid and the Uninsured, October 2012.

22. Faces of the Medicaid Expansion:What it Feels Like to be Uninsured Note: The size of the words are representative of the frequency with which focus group participants used the words to describe their feelings.

23. State decisions to expand will have significant impacts on individuals’ health and well-being. “When I'm sitting on the side of the bed at 3:00 in the morning… [the prescription] says take two every six hours for pain, but I don’t have enough… I'm crying and it’s hurting, but I'm trying to make it stretch until the next time. “ Roosevelt, uninsured man, Houston. “It’s not fun living in fear…you fear that you will get sick and that you can’t do anything about it…because you’re not covered and you don’t have options….” Christine, uninsured woman, Cincinnati. “I would want [health insurance] because of the prevention factor…then I would definitely go and get my mammogram, my Pap smear…” Valerie, uninsured woman, Tampa.

24. Summary • Medicaid is the foundation for coverage for low-income adults under the ACA. Without the Medicaid expansion, there will be large gaps in coverage and many adults will remain uninsured. • Being uninsured has significant impacts on individuals health and well-being. • The federal government will fund the vast majority of the increased Medicaid costs related to the ACA Medicaid expansion and gains in Medicaid coverage would substantially reduce the number of uninsured. • Due to other provisions in the ACA, states will face increased enrollment and spending even if they do not implement the Medicaid expansion. • State costs related to implementing the Medicaid expansion would be mitigated by savings tied to reduced spending for uncompensated care and programs for indigent populations. New federal funding could also result in increased state economic gains.