State Expenditures

State Expenditures © Allen C. Goodman, 2008

Do we raise all of this ourselves? • No • Lots of it involves federal pass-through funds. • Two of the largest are Medicaid and corrections – we’ll discuss Medicaid more in a moment.

Ballard’s Conclusions and Commentary • If incarceration rate in Michigan were similar to that in neighboring states, we’d spend about $500 M less per year. • Fastest growing category is corrections. • From 1982-2002 it  from 13,000 to 49,000 • AG: Potentially major savings

Michigan Prison System

Medicaid Overview Medicaid, referring to Title XIX of the Social Security Act, is a federal-state matching entitlement program that pays for medical assistance for certain vulnerable and needy individuals and families with low incomes and resources. This program is the largest source of funding for medical and health-related services for America’s poorest people. In 2003, it provided health care assistance to more than 41 million persons. In 2003 the cost was approximately $223 billion dollars.

Comes from the states Within broad national guidelines established by federal statutes, regulations and policies, each state: (1) establishes its own eligibility standards; (2) determines the type, amount, duration, and scope of services; (3) sets the rate of payment for services; and (4) administers its own program. Medicaid policies for eligibility, services, and payment vary considerably even among similar-sized and/or adjacent states. Thus, a person who is eligible for Medicaid in one state might not be eligible in another state; and the services provided by one state may differ. So, what we get here reflects, in part, our preferences! What Michigan Pays For Click here

Medicaid Eligibility Medicaid does not provide medical assistance for all poor persons. Even under the broadest provisions of the federal statute, it does not provide health care services even for very poor persons unless they are in one of the designated groups. Low income is only one test for Medicaid eligibility for those within these groups; their resources also are tested against threshold levels (as determined by each state within federal guidelines). States generally have broad discretion in determining which groups their Medicaid programs will cover and the financial criteria for Medicaid eligibility. To be eligible for federal funds, however, all states must provide Medicaid coverage for certain individuals who receive federally assisted income-maintenance payments, as well as for related groups not receiving cash payments.

Payment for Medicaid Services States may impose nominal deductibles, coinsurance, or copayments on some Medicaid recipients for certain services, but certain Medicaid recipients, including pregnant women and children under age 18, are excluded from cost sharing. All Medicaid recipients must be exempt from copayments for emergency services and family planning services. Medicaid is a cost-sharing partnership between the federal government and the states. The federal government pays a share of the medical assistance expenditures under each state’s Medicaid program. That share, known as the Federal Medical Assistance Percentage (FMAP) is determined annually by a formula that compares the state’s average per capita income level with the national income average. States with higher per capita income levels are reimbursed smaller shares of their costs.

FMAP Formula • For California, there is a 50% match so if California does 50 cents, Feds match with 50 cents and California is paying 50/100 or 50%. It’s a 1:1 match. • For Michigan, we have 57% match so if Michigan does 50 cents, Feds match with 57 cents and Michigan is paying 50/107 or about 46% of each dollar spent on Medicaid. • The higher the FMAP the smaller the state percentage match. • Highest match in 2006 was Mississippi, with 77%  50/127, or less than 40%.

We’ve seen this before … All else Also, for state to spend more, they must get more $, presumably by raising taxes. • Medicaid provides matching funds. • BUT federal mandates of program  they cannot simply substitute Federal $ for State $. A** A* A*** • In particular, Medicaid has provided universal health insurance for children under age 18, whether states wanted it or not. • Probably a good thing. H* H** Hmandated Health for poor

Medicaid Summary Medicaid was initially formulated as a medical care extension of federally-funded programs proving cash income assistance for the poor, with an emphasis on dependent children and their mothers, the disabled, and the elderly. Most Medicaid recipients require relatively small average expenditures per person each year. The data for 2002 indicate that Medicaid payments for services for children (who constitute about 49% of all Medicaid recipients) averaged only $1,470 per child. Long term care is an increasingly utilized provision as the population ages. In 2002, over 40% of the total cost of nursing facility or home health services care for persons in the U.S. is paid for by Medicaid. The 2002 data show that Medicaid payments for nursing facilities showed $39.3 billion for more than 1.8 million recipients of these services, an average expenditure of more than $22,245. For home health services there were $3.9 billion for over 1.1 million beneficiaries, an average of $3,685.

The Medicaid — Medicare Relationship The Medicare and Medicaid programs work jointly for many beneficiaries. Medicare beneficiaries who have low incomes and limited resources may also receive help from the Medicaid program. For those eligible for full Medicaid coverage, the Medicare health care coverage is supplemented by services that are available under their state’s Medicaid program, according to eligibility category. These additional services may include, for example, nursing facility care beyond the 100 day limit covered by Medicare, prescription drugs, eyeglasses, and hearing aids. For persons enrolled in both programs, any services that are covered by Medicare are paid for by the Medicare program before any payments are made by the Medicaid program, since Medicaid is always “payer of last resort.”

The Medicaid — Medicare Relationship CMS estimates that Medicaid provided some supplemental health coverage for at least 6.5 million persons who were Medicare beneficiaries. Although they represent only 17% of the total Medicare enrollees, they accounted for 35% of the total Medicaid expenditures ($53 billion in FY 1995), including $10 billion for Medicare cost-sharing, $5 billion for other acute care services and prescription drugs, and $38 billion for long-term care.

“Take-up” and “Crowd-out” • What are the net impacts of social insurance program implementation? • Are people who are now insured, previously uninsured (take-up), or are the new programs simply crowding out other forms of insurance?

Impacts of improving coverage Target Population Increased Eligibility Improvement

Previously UNinsured Impacts of improving coverage Take-up Target Population Increased Eligibility Additional Coverage Improvement Crowd- out Previously Insured

Access Impacts of improving coverage Additional Utilization Additional Coverage

Access Incremental Program Costs Impacts of improving coverage CE =  Cost/  Utilization Cost- Effectiveness Additional Utilization Additional Coverage Better Health Outcomes

Economic Analysis Some value insurance more (D), some less (E). Health Insurance Vm Some may not even value it at all at current prices (C). Vl D E C Other Goods

Economic Analysis Suppose that the government introduces free public insurance with generosity M. Health Insurance Vm Some may take it who were not insured. Some may take it who were previously insured. Vl D M E Some may stay with previous insurance. C Other Goods

Impacts • Cutler and Gruber, who have studied a lot of medical programs, estimate that under Medicaid expansions, about ½ of increase in eligibility has been associated with a reduction in private insurance coverage (crowd-out), and about ½ with take-up.

Another Recent Example • In October 2008 Hawaii announced that it was dropping the only state universal child health care program in the country just seven months after it launched. Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families had dropped private coverage so their children would qualify for the subsidized plan. • The Keiki (child) Care program had sought to cover every child from birth to 18 years old who didn't have health insurance -- mostly immigrants and members of lower-income families. Estimates of those lacking health coverage ranged from 3,500 to 16,000 in a state of about 1.3 million people. All were eligible for the program. • The universal health care system was free except for copays of $7 per office visit. Governor Lingle had signed Keiki Care into law in 2007, but it and many other government services faced cuts as the state dealt with a projected $900 million general fund shortfall by 2011.

Employer Health Costs • Ballard talks some about the costs of health care. • We can show that these costs are fundamentally borne in the form of lower wages. • Problem in Michigan is not that health care costs are too high, but probably that wages are.

More BC & C • Community health expenditures are very large. • CB: They will continue to rise; maybe a program like the Massachusetts plan would work • AG: Don’t hold your breath • Welfare payments have fallen here w/o much in their place • CB: We need some other programs such as education, better transportation, help for those w/ MH and SA problems • AG: Agreed

State Expenditures