Federal Affairs Update

1. Federal Affairs Update Molina Policy & Government Advocacy Summit Ken Preede Director, Federal Affairs

2. Joint Select Committee on Deficit Reduction • 12 Member “Super Committee” • Equal Representation from each political party and branch of Congress • Democratic Co-Chair: Senator Patty Murray (D-WA) • Republican Co-Chair: Representative Jeb Hensarling (R-TX) • Required to trim at least $1.2 trillion from federal budget • Committee Required to report legislation by November 23, 2011 • Bill required to pass both House and Senate by December 23, 2011 • Bill given special status in House and Senate • No Amendments • Filibuster-proof simple majority vote in Senate

3. Democratic Members Senator Patty Murray (WA) Senator Max Baucus (MT) Senator John Kerry (MA) Representative Chris Van Hollen (MD) Representative Xavier Becerra (CA) Representative James Clyburn (SC)

4. Republican Members Senator Jon Kyl (AZ) Senator Rob Portman (OH) Senator Pat Toomey (PA) Representative Jeb Hensarling (TX) Representative Dave Camp (MI) Representative Fred Upton (MI)

6. Joint Select Committee on Deficit Reduction • If no Committee consensus or bill fails to pass either House or Senate, a series of automatic cuts (called sequestration) to Defense, discretionary and Medicare spending would go into effect by 2013. • For Parts A and B, the applicable cut determined by OMB would apply to each individual service ordered during the applicable year • For Parts C and D, the applicable cut determined by OMB would apply to each monthly contractual payment during the applicable year • Maximum cut to Medicare spending is 2% • No Automatic Cut to Medicaid funding • Approval of a balanced budget amendment to the U.S. Constitution would allow the debt limit to be increased without enactment of a second round of budget savings.

7. Three Scenarios • Scenario One: Gridlock • No plan developed by the Super Committee or plan fails to pass BOTH the House and the Senate or the plan passes both the House and Senate but is VETOED by the President • Outcome: Sequestration for $1.2 Trillion with Medicaid OFF THE TABLE

8. Three Scenarios • Scenario Two: Full Plan to cut at least $1.2 Trillion • Super Committee develops plan and it passes both Houses of Congress and is signed by the President • Medicaid and Medicare ON THE TABLE and likely included in the plan

9. Three Scenarios • Scenario Three: Partial Plan • Super Committee develops plan and it passes both Houses of Congress and is signed by the President – but doesn’t reach $1.2 Trillion target • Medicaid and Medicare ON THE TABLE and likely included in the plan • Sequestration to make up the difference (Medicaid OFF THE TABLE)

10. What’s at stake? • Medicaid Funding • FMAP “blended rates” • Block grants • Maintenance of Effort • Dual-eligible integration • Mandatory Medicaid HMO enrollment? Opt out?

11. What’s at stake? • Medicare Funding • Fee-for-service provider cuts (hospitals, nursing homes, home health care) • Medicare Advantage cuts • Change in age eligibility? • Cost-sharing?

12. What’s at stake? • Revenue • Tax Reform? • Rate Reduction coupled with closing loopholes and eliminating deductions • Molina tax issue

13. Projected Savings from Sequester$1.2 Trillion in Total Savings

14. PPACA Health Plan Excise Tax

15. PPACA Health Plan Excise Tax • Takes effect in 2014 with $8 billion in collected excise taxes • 2015 and 2016: $11.3 billion • 2017: $13.9 billion • 2018 and beyond: $14.3+ billion • Based on market-share of total U.S. eligible premiums collected • Self-insured plans and certain non-profit plans exempted from the excise tax

16. PPACA Health Plan Excise Tax • Marwood Group Study • Commissioned by Molina and Amerigroup in Summer of 2011 • Independent analysis of impact of tax on Federal and State Medicaid expenditures • Advocacy tool for future lobbying efforts to repeal the tax

17. Marwood Study • Key Finding • Total excise tax of $10.5 billion on Medicaid health plan premium revenue • State Medicaid expenditures between 2014 and 2019 up to $4.1 billion • Federal Medicaid expenditures between 2014 and 2019 up to $6.4 billion

18. Marwood Study Likely Flow of Medicaid Managed Care Tax $100 Assessment Actuarial Soundness FMAP $100 $61 $100 (?) Federal Treasury will spend $61 out of $100 in tax revenue collected from Medicaid Managed Care Organizations - with states paying the additional $39.

19. Marwood Study Actuarial Soundness $100 (?) Key Step: The link between increased cost and state’s ability to pay a truly actuarially sound rate beginning in 2014

20. Marwood Study The expected 2014 growth in Medicaid exacerbates the problem for both State and Federal spending (16+ Million newly eligible beneficiaries)

21. Marwood Study • Be careful what you wish for… • Currently ABD expenditures account for 75-80% of all Medicaid spending with very little penetration in Medicaid managed care • Medicaid’s share of premiums would likely increase due to more lives and the potential for higher premium rates associated with the ABD population

22. Marwood Study Just when you thought it couldn’t get any worse… 59% of the growth in private, commercial health insurance enrollment could be through self-insured plans – EXEMPT from the tax

23. Marwood Study • Solution • Maintain the size of the tax assessment but exempt Medicaid revenue as taxable • Federal net savings: $6.4 billion • State net savings: $4.1 billion

24. Marwood Study • Pros • Levels the playing field for Medicaid MCOs regardless of tax status • Provides savings for Federal budget in a deficit-conscious environment • Provides savings for State Medicaid budgets

25. Marwood Study • Cons • Levels the playing field for Medicaid MCOs regardless of tax status • Shifts more tax burden to other insurers not exempt from the tax (i.e. commercial) – resulting in an increase in premiums for consumers • Alerts federal and state lawmakers that Medicaid MCOs are not responsible for the tax which may result in future legislative/regulatory action

26. Don’t tax you Don’t tax meTax that man behind the tree U.S. Senator Russell B. Long

27. Medicaidand CHIP Payment and Access Commission (MACPAC) • Established under CHIPRA of 2009 • Tasked with reviewing state and federal Medicaid and CHIP access and payment policies • Make recommendations on issues affecting Medicaid and CHIP populations

28. Medicaidand CHIP Payment and Access Commission (MACPAC) • 7 public meetings held • In June, released report: “The Evolution of Managed Care in Medicaid” but it contained no recommendations • We anticipate additional reports and policy recommendations in the upcoming year. www.macpac.gov