State analysis pinpoints state share of Medicaid expansion through 2025
by Ted Carter
Published: October 29,2012
That is a description an executive with the Mississippi Hospital Association recently gave the question of whether the state should expand its Medicaid rolls to include several hundred thousand of Mississippi low-income residents.
The math part of the question came closer to an answer last week with a report by state economists that concluded adding more than 300,000 of Mississippi’s uninsured working poor to Medicaid under the federal Affordable Care Act would cost the state about $95 million a year by 2025.
On the other hand, the federal government would be injecting from $800 million to $1 billion in Medicaid payments into the state’s economy annually, money that would help to ease the blow hospitals in the state would feel from the phase out of around $152 million a year in federal money they now receive for treating uninsured patients.
“That is definitely the math part,” said Gwen Combs, a former lawyer who serves as the Mississippi Hospital Association’s vice president for policy.
“There’s a bigger problem than $95 million (the state share of costs in 2025),” she said. “We will have a minimum of $152 million [a year] go away.”
Expanding Medicaid eligibility to the more than 300,000 Mississippians would cut the number of medically uninsured in the state by more than half, easing a sizeable burden on Mississippi’s 95 hospitals. “Uncompensated care would be reduced” significantly, Combs said.
But under the more-likely scenario in which the state rejects Medicaid expansion, Mississippi hospitals’ share of treating the uninsured would grow at a higher rate than any other part of the health care sector, according to Combs.
Without the $152 million annually in federal money hospitals receive to offset the uncompensated care costs, “I don’t think they will be able to manage,” she said of many of the state’s hospitals.
The analysis by economists with the University Research Center, an arm of the Mississippi Institutes of Higher Learning, concluded that the state’s participation in the Medicaid expansion will provide short-term gains, but may cost the state more in the long term.
The state’s leaders say they fear the prospect that the economic boost the state gets from the federal money would be outweighed by the financial burden as the federal share decreases from 100 percent o 90 percent. Republican Gov. Phil Bryant and GOP leaders in the Legislature have cited this fear in their pledges to resist state participation in the Medicaid expansion.
A U.S. Supreme Court ruling on the Affordable Care Act in July made the expansion optional for states. The state’s Medicaid program now serves about 800,000 poor children, pregnant women, disabled people and the elderly. Legislators struggle each year to come up with the hundreds of millions of dollars needed to pay the state’s share for current Medicaid patients, frequently removing money from special funds established for other purposes.
The state study projected a 95 percent participation rate of uninsured Mississippians, or about 310,000 residents. These are residents with incomes that fall within 138 percent of the federal poverty level, or about $15,000 a year for a single adult and about $31,000 a year for a family of four.
Unless added to the Medicaid rolls, it is uncertain how these residents would receive health care coverage under the new health care law. They would be eligible for neither Medicaid nor the plan subsidies offered participants in the health insurance exchanges the states must establish under the Affordable Care Act.
They would have to receive uncompensated care in hospital emergency rooms or find a health care provider willing to accept installment payments, said Bob Neal, a senior state economist who led preparation of the study released last week.
“That’s entirely another issue,” he said of where the uninsured ineligible for both Medicaid and subsidized coverage from the exchanges will go for health care.
The question of where they would go had an answer before the Supreme Court removed the mandate on states to provide Medicaid coverage of residents with incomes of up to 138 percent of the federal poverty, Neal said. “It is an example of how you take away the Medicaid element and the Affordable Health Care Act begins to unravel.”
Under the option presented to states, Washington would pay 100 percent of the costs of expanding Medicaid from 2014 to 2016. Between 2017 and 2020, the federal share would decrease to 90 percent and the states’ contribution would rise in stages to 10 percent, where the law says it’s supposed to stay.
The University Research Center study looks at costs and benefits up to 2025. In that year, 310,000 Mississippians’ would have been added to the Medicaid rolls at a cost $159.1 million. Of that, an additional $63.3 million of federal dollars would flow into the state’s general fund, leaving the state with a cost of $95.8 million. Cumulatively, the state’s fiscal burden from 2014 (the first year of the expansion) through 2025 would be an estimated $556 million.
The Center’s projections are based on a high participation scenario of 85 percent in 2014, 90 percent n 2015 and 95 percent from 2016 to 2025. Participation would be expected to decline thereafter.
Early on, the state would see net gains financially, with a surplus of $9.2 million in 2015, $20.2 million in 2016 before the balance would shift to give the state a $2 million fiscal burden in 2017. By 2018, the state burden would rise to $30.8 million and increase yearly before reaching $95.8 million in 2025.
The analysis does not make a recommendation on whether or not the state should expand its Medicaid rolls. The expansion decision will be up the governor and Legislature.
They are the ones who must consider the intangibles, such as the benefits of having a healthier population and the lower costs of treating an illness before it becomes chronic, said Neal, the economist and principal author of the Center’s study.
“Let’s face it: Good common sense tells us that there is certainly the opportunity that increased access to health care would make” Mississippians “more productive in their workplace and would enhance Mississippi’s economy in the long term,” Neal said.
“Economics isn’t the only thing that comes into play here.”
One constant in the latter five years of the study, Neal said, is the expectation that the state’s costs will grow while the federal share will remain the same. The growth in state costs is simple supply-and-demand, he noted.
Forty-nine counties in Mississippi are already designated as health care shortage areas, with the state deemed overall to have a shortage of 450 primary-care physicians. “If you add 350,000 to Medicaid, where are the doctors going to come from?” Neal asked.
With more people accessing health care and too few doctors to treat them, prices have nowhere to go but up, the economist noted.
Still, the state’s projected cost of $95 million in 2025 is not as high as some earlier projections put it, according to Neal, who conceded: “That’s still a serious chunk of change.”
Meanwhile, the loss of a minimum of $152 million annually to cover uncompensated care is but one source of worry for hospital executives. Hospitals around the country can expect to see lower Medicare reimbursement rates, as cuts in provider payments for senior citizen health care represent a rare area of agreement among members of Congress from both parties. A lot of hospitals in Mississippi already endure negative Medicare margins, said Combs, the Mississippi Hospital Association vice president for policy.
“That’s a pretty grim picture,” she said, referring to both the present and future.
The picture for Mississippi’s 95 hospitals get grimmer still, she said, by adding in an expected reduction of Medicaid reimbursement rates and the elimination of Disproportionate Share Hospital, or DSH, payments that go to hospitals to offset the cost of treating uninsured patients.
Addressing the loss of federal money for uncompensated health care, Combs said an erroneous expectation is growing that the federal government will ultimately restore the DSH payments that are now slated to be taken away, at least $152 million a year in Mississippi’s case.
“It’s hard-coded” in the Affordable Care Act, she said of the money’s withdrawal.
“All it says is that the federal DSH pot is going to be ‘X.’ It reduces every year. It does not say anything about how to allocate” the DSH money, Combs said.
Generally, the Centers for Medicare and Medicaid Services, an arm of the Department of Health and Human Service, has allocated the DSH money to states with the largest proportion of uncompensated care, which accounts for the large amount that Mississippi receives.
But the Centers for Medicare and Medicaid Services does not intend to reward states that opt out of insuring their uninsured, she said.
As a registered lobbyist, Combs said she will tell Mississippi lawmakers she understands their dilemma — “but here are the realities. If you want to use the hospitals as an economic driving force in our state, part of that equation is the financial viability of our hospitals.”
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