Who has the most to lose from capping Medicaid spending?
In yesterday’s blog, we talked about some of the recent proposals by Congress to impose a block grant or per capita cap on federal Medicaid spending. We also wrote about the disastrous impact it would have on state budgets and ability to provide affordable health coverage for families. Today, we are going to take a deeper look at who has the most to lose under a capped system.
As a quick refresher, if Congress votes to cap the federal government’s contribution to states’ Medicaid programs through either a block grant or per capita cap, states will then have to take up a greater share of their Medicaid costs as health care costs increase, to the tune of over $560 billion over the next decade. In turn, states would likely face significant budgetary pressure to begin cutting Medicaid services, critical to millions of families across the country.
Impact on the State Budget
As Montana sees diminishing contributions from the federal government, our state will have to pick up an increasingly larger share of costs. This could put a significant strain on the state’s budget, making it likely that at some point the state will have to reduce benefits. As the state’s share of Medicaid costs grows, Montana would be faced with difficult decisions to limit Medicaid costs moving forward, including: (i) cuts to the level of benefits under Medicaid; (ii) cuts to the number of Montanans enrolled in Medicaid; and/or (iii) cuts to Medicaid payments made to doctors, hospitals and other providers. All of these options will hurt Montana families trying to access Medicaid coverage.
Cuts to benefits
Medicaid currently provides more benefits than private insurance, and does so at a significantly lower cost for beneficiaries. While proponents of block grants tout the “flexibility” that states will have, the flexibility essentially means that states will be able to cut important services. For example, to save costs, states may cut a pediatric benefit known as Early Periodic Screening, Diagnostic, and Treatment (EPSDT) that assesses the health and development of children and covers the services they need. Covering fewer services is a shortsighted move that would reduce the overall health and well being of thousands of Montanans and potentially lead to much larger statewide health care costs down the road.
Cuts to enrollees
Montana would most likely have to cut the number of people it enrolls through Medicaid, including some of the most vulnerable recipients.
Those most at risk of losing coverage would be the over 70,000 Montanans who have gained affordable coverage through the Montana HELP Act, the state’s Medicaid expansion program. Congressional House legislation could effectively end Medicaid expansion, by eliminating the current 90% federal match after 2019. The Health and Economic Livelihood Partnership (HELP) Act, designed with bipartisan support, has expanded health care to over 70,000 Montanans, who now risk losing that coverage.
Montana currently provides Medicaid to pregnant women with incomes up to 150 percent of the federal poverty level (FPL), even though federal law only requires coverage up to 138 percent. As costs rise, Montana may be forced to drop coverage for pregnant women with incomes above the federal minimum.
Cuts to payments for doctors, nurses, health care clinics, and hospitals
Spending caps could also mean that Montana would have to reduce the payments it sends to providers. The Urban Institute has estimated that block grants could cause states to reduce reimbursements, which are already lower than what private insurance pays, to providers by more than 30 percent. In turn, this could cause a decrease in the number of providers willing to accept Medicaid payment for services. For rural Montanans, fewer providers could drastically reduce their ability to access affordable health care.
Block granting Medicaid or implementing per capita spending caps would wreak havoc in Montana and reduce our ability to provide comprehensive, affordable health care coverage to people in need. Capping Medicaid spending does nothing to improve health care, but rather only limits Montana’s options and flexibility.
This week, House Republicans are aiming to begin marking up the repeal of ACA. House leaders have announced a plan that would drastically alter states’ Medicaid programs by putting a cap on the federal contribution for Medicaid. This change could significantly reduce access to health care for tens of thousands of Montanans. Nationally, these changes could result in cutting federal Medicaid support by over $560 billion over the next decade.
There are two ways that the federal government can cap spending – Medicaid block grants and per capita caps. Both of these measures would limit the amount of money the federal government sends to states for Medicaid, while increasing cost for state governments.
These two options are structured differently, but have similar long-term results.
How does Medicaid spending work now? Currently, Montana receives a fixed share of its Medicaid costs from the federal government. On average, a state receives about 64 percent of this cost. (Under Medicaid expansion, which has helped over 70,000 Montanans get access to health coverage, the federal share is even higher, a minimum of 90%.) In the past, if a state spends more on Medicaid one year, say due to a bad flu season, the federal government would send more money, keeping the percentage the same.
Under a block grant, states would receive a fixed amount of federal funds for Medicaid. Anything above that amount, the state would be responsible for paying. Under a block grant, Congress eliminates the set federal matching rates, and instead, the states will receive a total fixed amount of funds to run their Medicaid programs.
Per Capita Cap
A per capita cap is similar, but instead of setting a dollar limit for the entire Medicaid program, it would cap the amount of spending per beneficiary. If a beneficiary’s health needs exceeds that capped amount, the state would be responsible for the entire amount of those costs. The per capita cap would likely be set using current per-beneficiary spending and grow only slightly over time using an inflationary adjustment (but highly unlikely to keep pace with rising health care costs).
So why are spending caps so dangerous?
On a federal level, block grants and per capita caps are designed to do the same thing: create savings for the federal government in the long run, primarily by passing the cost along to the states. They achieve this by setting a cap below what the federal government is projected to spend, and then increase that cost each year only slightly, at or less than the rate of inflation. As noted above, health care costs have grown faster than inflation. The cost of Montana’s Medicaid program would increase over time, but the federal contribution would not. After a few years, the federal government would be contributing a much smaller percentage than it is now, leaving Montana holding the bag.
We have historical evidence of how disastrous block granting can be for social safety net programs critical to low-income families. The most direct example of block granting is the federal Temporary Assistance for Needy Families (TANF) program, which Congress implemented in 1996 to replace the Aid to Families with Dependent Children (AFDC). Because federal support was capped, the TANF program in Montana now serves about 13 of every 100 families experiencing poverty in the state. Before TANF, AFDC served 63 of 100 Montana families living in poverty.
Why would health care costs increase?
Historically, health care costs have increased faster than inflation. Although the rate at which they have increased has slowed down, lawmakers cannot be sure if this slowdown is permanent or temporary, especially while they make other changes to the Affordable Care Act.
Montana also has a rapidly aging population, and the health care costs for older adults is significantly more expensive than it is for younger adults. By 2030, Montana is expected to be the fifth oldest state in the nation, and many older Montanans are served through the Medicaid program.
Last, with new diseases and new treatments, per-beneficiary costs could increase. For example, if researchers discover a new treatment for cancer, people’s lives could be saved but costs could increase. Similarly, if there is an outbreak of a new disease – such as Zika, or an epidemic similar to HIV/AIDS in the 1980s – per-person treatment costs could increase.
So what happens?
If the amount of money the federal government sends is capped, the state would have to either spend more of its own money, or reduce the amount of health care it provides. This could leave thousands of Montanans without access to affordable health care.
Tomorrow, we will talk about who has the most to lose from putting a cap on Medicaid spending.
In the coming weeks, Congressional House members could begin committee work on the effort to repeal the Affordable Care Act (ACA). MBPC released a report last month on the detrimental impact of repeal on those who risk losing insurance coverage, including the over 71,000 Montanans who have gained coverage through Medicaid expansion. Montana is experiencing record levels of Montanans with insurance, but that could change quickly as families lose access to Medicaid and adequate subsidies to pay for insurance through the exchanges. A more recent report from the Urban Institute describes the impact of repeal on Montana’s hospitals and medical providers. This report assumes partial repeal similar to that passed by Congress in 2016 (and vetoed by President Obama), which included the elimination of Medicaid expansion, the individual and employer mandates, and Marketplace subsidies.
We don’t yet have full details on what exactly the House will take up this week, but Urban report provides a glimpse at how repeal of ACA could impact hospitals and providers across the state. If Congress does choose to eliminate these aspects of the ACA, Montana providers could face nearly one billion dollars less of health care spending in 2019, putting additional pressure on uncompensated care costs and those with insurance.
|Estimated total Health Care Spending in Montana for 2019 (in millions)|
|ACA||ACA Repealed through Reconciliation||Difference|
|Total Health Care Spending||5,636||4,664||-972|
When fewer people have health insurance, health care spending decreases because people either forego care or are unable to pay in full. Statewide, health care providers stand to lose $972 million in 2019 with the loss of Medicaid expansion, the individual mandate, and existing health care subsidies.
From 2019-2028, these costs would add up. If the ACA were kept in place, Montana insurers would spend an estimated $71.3 billion on health care over this time period. But if the ACA is repealed without an adequate replacement plan included, this spending could decrease by $13.6 billion.
If someone is unable to forego medical care without insurance, and are unable to pay out of pocket, hospitals and other providers are left to pick up the tab. In 2019, uncompensated care would rise by $481 million across the state. Between 2019-2028, this figure would rise to over $5 billion.
Someone must pay for uncompensated care, meaning hospitals and other providers shift the cost to private insurance companies. This “cost-shift” forces insurance companies to raise their premiums, passing the burden along to those with insurance.
Reduction in health care spending would also result in the loss of jobs across the state. In 2019, Montana could lose up to 8,000 jobs, according to the Commonwealth Fund. Three thousand of these jobs would be in the health care sector.
Repeal of the ACA could have dramatic effects for Montana’s economy, from rising health care costs to lost jobs. For more information about the effects of repeal, be sure to read MBPC’s latest report: 142,000 Montanans Face Uncertainty of Health Coverage with Threat of ACA Repeal.
This week, Congressional House Republicans are aiming to move forward with a bill to repeal the Affordable Care Act (ACA), putting the health care of tens of thousands of Montanans at risk. Exactly what the bill will look like is still unclear, but as we get more details, we will be sure to share our initial analysis of the impact on Montana families and the broader economy. With thousands of Montanans depending on provisions of the ACA – including 71,000 who have received insurance through Medicaid expansion and another 58,000 who access insurance through the exchange – repeal of the ACA could have devastating impacts on access to health care, jobs, and the economy.
Last month, MBPC released a report highlighting the repeal of ACA could put coverage for 142,000 Montanans in danger. Before the law was passed, a staggering one in five Montanans did not have health care coverage. Now, that number is down to only one in 14. Repeal could cause an even higher rate in the uninsured, as uncertainty in the marketplace causes insurers to raise their prices.
Those at greatest risk of losing their insurance are people who gained coverage when the Montana state legislature decided to expand Medicaid with bipartisan support. The Health and Economic Livelihood Plan (HELP) was the first of its kind in the country, and today over 71,000 Montanans have accessed affordable health coverage, including:
- 38,832 women
- 60,988 people living below the poverty level
- 9,916 American Indians
- 17,130 people between 50-64 years old
The HELP plan has also provided thousands of preventative care services to patients, including:
- 19,491 cancer screenings
- 7,137 diabetes screenings
- 26,581 dental services
- 7,419 preventative wellness exams
- 5,409 vaccines
Repealing Medicaid expansion could also significantly hurt Montana’s economy, as it has increased the demand for health care services and therefore increased the need for health care jobs for doctors, nurses, laboratory technicians, and other medical services staff. In just one year, Medicaid expansion has brought in $284 million in federal funds to health care services to Montanans.
This week on the blog we will be looking into the ways that repeal of the ACA could impact Montanans. Please be sure to follow along as we explore how repeal effects children, hospitals, American Indians, and people who used the federal exchange to find affordable insurance.
Contemporary American Indian health concerns have been the topic of a four-part newspaper series by Billings Gazette journalist Jayme Fraser. The articles shed light on the decades-long issue of health disparities that are largely grounded in the inability of the Indian Health Service to meet the health care needs of American Indians. They also review various efforts to improve Indian health currently being undertaken by tribes, individual tribal health/IHS facility administrators, and public and private entities, particularly through nationwide healthcare reforms made available through the Affordable Care Act.
One of those measures encouraged states to expand the income eligibility requirements for Medicaid, which the Montana legislature did in 2015. After that, people earning less than 138 percent of the federal poverty level could enroll in Medicaid. This extended critical health care coverage to an estimated 19,547 American Indians in Montana.
Between November 2, 2015, when enrollment began, and September 1, 2016, the number of newly eligible American Indians who enrolled in Medicaid stands at 6,737, or 30 percent of the total number eligible. American Indian enrollment steadily increases each month, though the rate at which they are enrolling is beginning to slow slightly, demonstrating the need for a more concerted outreach and enrollment effort.
Our latest report details some of the ways outreach and enrollment workers can maximize their success in Indian Country. It is paramount that those engaged in coverage enrollment efforts understand the intricacies of how American Indians access health care. For example, knowing that American Indians have historically tended not to have health insurance, relying instead on the Indian Health Service, helps explain why American Indians may be less inclined to explore other coverage options.
Likewise, having an understanding of the historical and contemporary basis of IHS and being able to articulate the precise benefits of having Medicaid coverage are also necessary. It is also important to know the barriers the eligible demographic faces in accessing information and completing the enrollment process.
Besides supporting current outreach and enrollment efforts, the single most important thing the state can do to help the remaining eligible American Indians access the critical health care they need is to maintain the current eligibility requirements included in the HELP Act.
Today, the HELP Oversight Committee will meet for its quarterly meeting to review and discuss the implementation of Medicaid expansion in Montana. We’ll get an update on how many people have enrolled, the corresponding reduction in the uninsured rate, and the amount of federal dollars that have flowed into Montana communities for Medicaid provider payments to access affordable health care.
These numbers are impressive – well above initial projections. Tens of thousands of Montanans now have greater access to life-saving services, low or no-cost preventative care, and other health services. We will also hear from hospitals, providers, and others that are seeing the impact of improved access to health insurance.
It will be another year or two before we fully understand the scope of the economic benefits of Medicaid expansion here in Montana, but we can see from other states that the impacts are significant and far reaching. Dozens of studies have been conducted on the effects of expanding coverage, and the Kaiser Family Foundation has compiled a nice summary of that research. Here’s what they’ve found:
States that have expanded Medicaid have seen sharp declines in the number of uninsured adults. From 2012 to 2016, states that expanded Medicaid have experienced nearly 50 percent decline in the uninsured rate for non-elderly adults. This compares with a decline of non-expansion states of about 33 percent. (Because expansion states started at a lower rate, this difference in the decline really understates the effects of expansion, since non-expansion states simply had further room to drop.) States that expanded Medicaid through the federal waiver process, such as Arkansas, are seeing similar increases in coverage.
Individuals are better accessing health services. Some studies have shown that individuals are more likely to access care in expansion states, including finding a personal physician and being able to access needed medication. Additionally, expansion also appears to be having an impact on affordability of care: several studies have found that low-income families report less unmet health care needs because of financial reasons.
More work can be done to provide health insurance education to improve the kinds of services that families are accessing. The great news coming from expansion states is that low-incomes families are utilizing certain types of preventative care more, including dental visits, breast exams, and mammograms. And patients with chronic health conditions are better accessing regular care. However, some states have also seen increases in the use of hospital visits, thus emphasizing that enrollment and health insurance education go hand-in-hand.
Impact on health outcomes continues to be studied. More time is really needed to determine how Medicaid expansion impacts health outcomes; however, initial studies have shown at least some positive impact. For example, as the Kaiser report notes, a study of childless adults living below the poverty line showed that these individuals accessed greater health services resulting in “modest improvements in self-rated health and decreases in the number of work days missed due to poor health.” Similar results were found in a study of individuals who were homeless and accessing life-changing surgeries or treatment otherwise unavailable without insurance.
Economic benefits exceed expectations. States that have expanded Medicaid are experiencing considerable budgetary and economic benefits. The injection of billions of federal dollars into local economies has represented significant economic growth for these states, including growth in states’ gross domestic product (GDP), increased general fund revenue, and the creation of good paying jobs. Several state-specific studies show that these economic benefits will continue, even factoring in the required state match in the later years.
States across the country that have expanded Medicaid are experiencing significant savings as well as increased revenue, and as we heard from the Montana health agency this week, we can expect similar experiences here in Montana after the passage of the HELP Act. In case you missed it, MBPC released a new report this week, highlighting the successful enrollment levels in Medicaid – already, over 38,000 Montanans have enrolled– and detailing some effective strategies the state should consider in continuing its outreach to eligible Montanans.
The Department of Public Health and Human Services also announced this week that the State of Montana has already experienced $3 million in savings to the state general fund, and over $37 million in NEW federal dollars invested in communities across the state.
Based on other states’ experiences, Montana can expect continued good news as enrollment grows. A new study out this month shows that all expansion states should expect to see state budgetary savings and additional revenue.
As we’ve talked about before, the federal government pays 100% of the cost of expansion. That match will gradually scale down, but will never drop below 90%. This compares to a federal match of about 70% for the previously eligible Medicaid population. States have been able to “transfer” a portion of that previously eligible population into the new adult group covered at the higher federal match. For the individual, insurance won’t look any different (or in some cases, may be better!), but the state will see savings on what it has to spend on Medicaid. We’ve already seen this in Montana – with the state receiving the higher match for over 8,000 individuals previously covered by Medicaid. This translates to over $3 million in savings to the state general fund.
The report also details additional savings, through lower uncompensated care costs and less pressure on state resources for mental and behavioral health programs, public health programs, and health care services for prisoners. Because many of those who access these programs are now eligible for Medicaid, they can get preventative care and other services they need at lower cost to the state. We don’t yet have data for Montana, but the research shows that savings in other states have exceeded expectations.
Additionally, those new federal dollars into Montana communities have rippling effects all over the state. Even when the federal share scales down to a 90% matching rate, this is still a good deal for states, because these federal funds generate new economic activity that wouldn’t have happened otherwise. A simple comparison is when someone living outside of Montana visits and spends money in the state. Unlike a state resident choosing to spend a dollar in one area of the state economy versus another, our state economy reaps the benefits of that new out-of-state dollar. As the article points out, for every 90 cents in federal funds to pay for one dollar of new Medicaid spending, the state should expect $1.35 to $1.80 in state economic activity, supporting jobs and increasing tax revenues for state and local governments.
Over 38,000 Montanans are getting the health care coverage they need to stay healthy and to be active members of their communities. We’ve heard from many of these folks, who have told their stories about how getting the health services they need has made a real difference. And the fact that the state will see even greater economic benefits than anticipated is “icing on the cake”.
Without a doubt, the first three months of enrollment in new affordable health care coverage in Montana has been a true success. The state health agency announced yesterday that, as of March 15, over 38,000 Montanans have gained health insurance through Medicaid expansion. Our blog post earlier this week highlighted the majority of these newly enrolled individuals are living in poverty (many in deep poverty), many of whom have never been able to afford health insurance. The enrollment numbers are exceeding expectations, but it was also not surprising that the state experienced strong enrollment during the months that coincided with open enrollment for health insurance on the federal Marketplace.
It is important to note that the enrollment period for Medicaid is year-round, and the state and other partners must continue to look at ways to improve its outreach. Today, MBPC released its new report looking at some strategies that other states have utilized to expand outreach and enrollment. The report includes specific examples and lessons learned. These lessons come from a number of excellent research reports from the Kaiser Family Foundation, as well as, our direct conversations with individuals engaged in enrollment efforts in Colorado, Indiana, and Washington.
Here are some highlights:
- Outreach materials are most effective when the information speaks specifically to the personal benefits of having insurance and can be tailored to specific regions or demographics. For example, the state of Washington provided local navigators flexibility in modifying enrollment materials for different regions of the state.
- Continuous tracking and analysis of enrollment data by region and demographics can help the state better target outreach on an ongoing basis. For example, the Colorado Health Institute conducted a detailed analysis of uninsured levels based on zip code, allowing the state to better target outreach efforts. Colorado targeted rural areas through direct mail cards with details on who qualifies and how to apply.
- States have also successfully utilized community locations, such as shopping malls, libraries, and schools, to educate the public about affordable health coverage and enroll individuals in Medicaid. The state of Washington set up kiosks at local malls and tied its marketing campaign to the idea of “shopping” for affordable health insurance.
- States have found other partners that may not be directly tied to health care system to help get the word out. Colorado enrollment assisters engaged for-profit entities, including pizza delivery companies and supermarkets, to include enrollment information during delivery or checkout. Kentucky has utilized community leaders, including faith leaders, to help spread the word of health insurance opportunities.
- Outreach efforts to inform American Indians of new coverage opportunities in Medicaid must recognize how having health insurance relates to accessing care through IHS, Tribal health clinics, Urban Indian health centers. Outreach efforts should emphasize that American Indians can continue to access care at IHS, tribal, and urban Indian clinics. Gaining access to Medicaid allows clinics to access reimbursements for services through Medicaid, which frees up IHS funds to increase and improve health services for their communities.
We encourage you to take a look at the report, and we look forward to working with our partners across the state to continue to emphasize the success of Medicaid expansion in Montana.
In just the first few months of new coverage under Medicaid expansion, we are seeing significant enrollment levels and evidence that thousands of Montanans need (and are now receiving) affordable health insurance. This month, the Montana Department of Public Health and Human Services (DPHHS) released new data on the number of people who have enrolled through the Montana Health and Economic Livelihood Partnership (HELP) Act. Since enrollment began on November 2 (with coverage beginning on January 1), over 36,320 Montanans have signed up, exceeding first-year projections on all levels.
This week, we will release a new report analyzing this enrollment and the populations that the state should consider focusing future outreach efforts. The report will also detail a number of successful strategies that other states have deployed to reach eligible families and get them enrolled.
As a preview of this work, here are some of our thoughts so far on enrollment.
It is not surprising that Montana has seen a significant portion of newly enrolled individuals at very low incomes. So far, over 60 percent (or approximately 22,000) of those enrolled are living with family incomes below 50 percent of the federal poverty line. For an individual, this represents an annual income of $5,990, or about $490 per month. These are families that, in the past, have had few or no options for affordable coverage. The state and other partner organizations did incredible work to reach these populations using existing data and let them know they would be eligible for new health care coverage options in 2016.
We know that a significant percentage of the uninsured population below 50 percent has now enrolled; future enrollment efforts may be best targeted to populations with incomes between 50 and 138 percent of FPL. This population will be enrolled in the HELP Plan and subject to premiums and copays, so it is critical that the state’s materials are clear on what these premium levels are and the importance of gaining health insurance.
While we have seen over 4,300 American Indians enroll, this number is low compared to the estimated percentage of the entire eligible population that is American Indian. According to Census data, American Indians represent nearly 20 percent of the total eligible uninsured population. And yet, only 12 percent of newly enrollees are American Indian.
Outreach efforts focused on eligible American Indians must take into account the unique health care dynamics, including how insurance relates to accessing services through Indian Health Service (IHS), tribal health clinics, and urban Indian health clinics. The state should work closely with tribal leaders and tribal advocates to ensure enrollment is supporting this existing tribal healthcare infrastructure. These types of partnerships are happening across the state, but even more can be done to support health coverage enrollment in Indian country.
We are seeing regional health departments and health centers actively engaged in enrollment efforts across the state, but enrollment numbers show opportunities to expand efforts in certain areas. Over 56 percent of enrollment has occurred in the top five counties in Montana (Cascade, Flathead, Gallatin, Lewis & Clark, Missoula, and Yellowstone counties). And while all five counties are reaching significant numbers of newly eligible, Gallatin County is lagging behind the other counties when comparing enrollment as a percent of eligible uninsured population.
MBPC commends the state, those engaged in Cover Montana, and others involved in enrollment efforts. The need for the HELP Act is clear – with over 36,000 Montanans accessing coverage in just the first couple months.
But thousands more Montanans are eligible. Stay tuned for the release of our report later this week, which will detail our research on strategies that other states have undertaken to reach eligible individuals and get them the health coverage they need.
The open enrollment period for accessing private insurance on the Marketplace exchange ended last night at midnight. However, those who missed the deadline may qualify for a Special Enrollment Period (SEP) — generally triggered by a change in circumstances, such as:
- moving to a new state, or to a place within the same state where different Qualified Health Plans (QHPs) are available;
- losing other health coverage;
- gaining or becoming a dependent (e.g., through marriage, birth, adoption, placement for adoption or in foster care, a child support order or other court order);
- meeting other “exceptional circumstances”.
It’s also important to note that there is no deadline for enrolling in Medicaid. To find information on eligible income levels and how to enroll, go to www.covermt.org or http://dphhs.mt.gov/healthcare.