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MEDICAID EXPANSION BUDGET BACKGROUND January 2013

MEDICAID EXPANSION BUDGET BACKGROUND January 2013. Office of Administration Division of Budget and Planning. MEDICAID EXPANSION BUDGET BACKGROUND. Cost for new Medicaid eligibles Savings in state share for existing populations Additional revenue Summary of budget impact Provider payments.

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MEDICAID EXPANSION BUDGET BACKGROUND January 2013

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  1. MEDICAID EXPANSIONBUDGET BACKGROUNDJanuary 2013 Office of Administration Division of Budget and Planning

  2. MEDICAID EXPANSIONBUDGET BACKGROUND • Cost for new Medicaid eligibles • Savings in state share for existing populations • Additional revenue • Summary of budget impact • Provider payments

  3. MEDICAID EXPANSION COST

  4. COST -- STATE SHARE • No state cost for first three fiscal years (FY14-FY16) • State share then phases up to 10% - January 2017 – 5% (half year for FY 2017) - January 2018 – 6% - January 2019 – 7% - January 2020 – 10%

  5. COST -- NUMBER OF PEOPLE

  6. MEDICAID EXPANSION COST NUMBER OF PEOPLE 307,542 292,061 276,579 268,039 259,499

  7. COST PER PERSON • Cost per person developed by actuary • Added cost for wrap around for medically frail • Pay a commercial reimbursement rate • Savings from care management (multiple avenues) • Assumes maximum cost sharing (copays) allowed

  8. COST PER PERSON • Per Member/Per Month - $436 for parents - $583 for childless adults - $1,635 for medically frail • Trended forward at average of 4%

  9. COST -- SUMMARY $2,589 $2,488 $2,396 $2,256 $2.086 $1,955 $1,858 $908

  10. MEDICAID EXPANSION SAVINGS IN STATE SHARE

  11. SAVINGS – EXISTING POPULATIONS • Current Medicaid Populations under 138% FPL • Pregnant women – covered prior to pregnancy • Ticket to Work • Breast/Cervical Cancer • Spenddown • Women’s Health Services

  12. SAVINGS – EXISTING POPULATIONS • Current State Only Populations under 138% FPL • Blind Pension • Corrections • Dept of Mental Health Clients

  13. SAVINGS – EXISTING POPULATIONSGENERAL REVENUE (millions of $)

  14. MEDICAID EXPANSION ADDITIONAL REVENUE

  15. ADDITIONAL REVENUE • Key Assumptions – Income Tax • No multiplier assumed • Looked at increased federal revenue to providers • Discounted to portion typically used for salaries based on individual provider-type • Applied 4.5% income tax rate

  16. ADDITIONAL REVENUE • Key Assumptions – Sales Tax • No multiplier assumed • 19.2% of income spent on GR taxable goods • 6.9% of non-salary spent on GR taxable goods • Tax rate of 3% goes to GR

  17. ADDITIONAL REVENUE • Key Assumptions – High Risk Pool • High Risk Pool no longer necessary • Insurance companies help fund pool through assessments • Taken as credits against taxes owed • Typically do not take full credit in first year • Fully realized ($22M), with $1.5M savings from normal growth each year after that

  18. ADDITIONAL REVENUE$s in millions $61.8 $57.3 $53.5 $15.5

  19. MEDICAID EXPANSIONBUDGET SUMMARY

  20. MEDICAID EXPANSIONBUDGET SUMMARY • State costs for new eligibles $0 until FY 2017 • Full phase in of state share at 10% in FY 2021 • Savings for existing populations begin immediately • Additional revenue estimate conservative – no multiplier

  21. BUDGET SUMMARYCOST, SAVINGS & REVENUE

  22. PROVIDER PAYMENTS Hospital Reductions • Regardless of a state’s decision to expand Medicaid, payments to hospitals will be reduced. • Reductions will be to Disproportionate Share Hospital (DSH) payments. • Hospitals that serve a high percentage of Medicaid and/or other low income individuals qualify for DSH payments. • These payments are designed to help cover the cost of uncompensated care.

  23. HOSPITAL PAYMENT REDUCTIONS • Each state’s share of the DSH reduction is unknown. • HHS Secretary will determine methodology. • That methodology to consider: • Percentage of uninsured, • State’s use of DSH funds, and • State’s current DSH level (high DSH states, like Missouri, may face a larger cut).

  24. HOSPITAL PAYMENT REDUCTIONS • Cuts at the national level: • 5% for first three years (starts FFY2014) • 15% for next year • 50% thereafter • Missouri’s FY 2013 DSH payments: • $511 million hospitals • $207 million DMH hospitals

  25. PROVIDER PAYMENTSMEDICAID EXPANSION Estimated payments by provider type: • 49% ($900 million) professional services. • 13% ($240M) mental health • 11% ($200M) physician services • 9% ($160 M) in-home • 16% ($300M) other (DME, ambulance, ….) • 40% ($740 million) hospital services • 11% ($200 million) pharmacies

  26. CONCLUSION • Cuts to hospital payments will happen • If expand Medicaid, those reductions will be more than offset through increased provider payments • Expansion has a net positive impact on the budget • Other considerations - indirect budget implications: • Improved access to care • Better health outcomes • Improved job retention when healthy

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