Financing Medicaid
Expansions
Implications from
Medicaid Everyone Can Count On
by Thomas W. Grannemann and Mark V. Pauly
Academy Health Annual Research Meeting, June 2010
Disclaimer
• The views expressed here are personal views and do
not represent the views of any organization. Thomas
Grannemann has prepared this presentation in his
personal capacity. It is based on work begun prior to his
employment
p y
with the Centers for Medicare and Medicaid
Services and was completed as an outside activity
separate from his official CMS duties. This work does not
represent the official
ff
views off the U.S.
S Department off
Health and Human Services or the Centers for Medicare
and
dM
Medicaid
di id S
Services.
i
Implications from Medicaid
Everyone Can Count On
2
Understanding State Medicaid
Expansion Decisions
• States
St t choose
h
Medicaid
M di id spending
di to
t reflect:
fl t
• the perceived value of Medicaid services
• the costs (tax burden) of providing services
• State fiscal resources & federal financial assistance
• We see wide variation in state Medicaid
programs and in their interest in expansions
• Higher-income
Higher income states in Northeast have higher spending
• Lower-income states in the South and West have lagged
behind in providing Medicaid benefits; the fraction of the
population uninsured also tends to be higher in these
states
Implications from Medicaid
Everyone Can Count On
3
Medicaid Spending per Poor
Person
The image cannot be display ed. Your computer may not hav e enough memory to open the image, or the image may hav e been corrupted. Restart y our computer, and then open the file again. If the red x still appears, y ou may hav e to delete the image and then insert it again.
Implications from Medicaid
Everyone Can Count On
4
Cost-Adjusted Medicaid
Spending per Poor Person
Adj. Pay Per Person <125% FPL
$0 to $5,000
$5,000 to $6,000
$6,000 to $7,000
$7,000 to $8,000
$8 000 to $12
$8,000
$12,000
000
Implications from Medicaid
Everyone Can Count On
5
Achieving Expansions
Where They are Most Needed
• H
How can we gett appropriate
i t llevels
l off ffederal
d l and
d state
t t
funding to states, especially those that have lagged
behind in insurance coverage
g and Medicaid eligibility?
g
y
• Two financial barriers to Medicaid expansion:
– FMAP is p
poorly
y constructed to match federal funding
g
to state needs and fiscal capacity
– FMAP inadequately compensates for economic
cycles
• The Affordable Care Act’s high match for new coverage
moves in the right direction, but leaves many states in
South and West financially stressed by the program.
Implications from Medicaid
Everyone Can Count On
6
EBEB Matching Rates:
a Possible Solution
“Equal burden for equal benefit” is a method
for computing Medicaid matching rates that are
equitable for both taxpayers and the poor.
Ideally such rates should enable each state to
provide the same level of real benefits as each
other state by spending the same fraction of
taxpayer income on its share of benefits. (p. 329)
Implications from Medicaid
Everyone Can Count On
7
EBEB Input Parameters
• Standard
St d d benefit
b
fit level
l
l (chosen)
( h
)
– (e.g. desired Medicaid payment per poor person)
• Standard state tax burden (chosen)
– (e.g., share of taxpayer income or other fiscal
p
y measure to be devoted to state share))
capacity
• Number of poor
– (e.g., below FPL as a measure of need)
• Aggregate fiscal capacity
– (e.g. taxpayer income, adjusted for cost of living)
• Medical
M di l prices
i
– (e.g., index of medical services input prices)
Implications from Medicaid
Everyone Can Count On
8
EBEB Formula
 AggFiscalCapi * FixedTaxPct 
EBEBFMAPi  1  

 NPoori * StdBenPPP * Med Pr icei 
Implications from Medicaid
Everyone Can Count On
9
EBEB Matching Rates
Can be Set High or Low
Comparison of Basic and Enhanced EBEB Matching Rates
100%
90%
Fede
eral Match
h
80%
70%
EBEB Std Prog
EBEB Enh Prog
60%
50%
40%
30%
20%
10%
0%
M S WV K Y NM CA
SC
NC A R
HI
OR M E M T A Z
LA
AL VT
TN TX
GA NY DC
OK OH
MO MI
UT
RI
IN
ID
AK
FL
KS PA
WI ND
NB DE
IA
SD WA M A NV
NJ M D CO
MN
IL
V A WY CT
NH
State
Implications from Medicaid
Everyone Can Count On
10
Basic FMAP Deviates Markedly
from EBEB Principles
Comparison of EBEB with Current FMAP Matching Rates
90%
80%
70%
Federal Matc
ch
Current
EBEB Std Prog
60%
50%
40%
30%
20%
10%
0%
M S WV K Y
NM
CA
SC NC
AR
HI
OR
ME MT
AZ
LA
AL
VT
TN TX
GA
NY
DC
OK
OH M O
MI
UT
RI
IN
ID
AK
FL
KS PA
WI ND
NB
DE
IA
SD
WA M A NV
NJ
M D CO M N
IL
VA
WY CT
NH
State
Implications from Medicaid
Everyone Can Count On
11
Countercyclical FMAP
• Three-part
Th
t solution
l ti
– Part 1: EBEB Matching rates to better reflect
needs and ability of states to contribute to
costs
– Part 2: Overcoming lag through timely
updates using regression-based projections
and
d iinterim
t i payments
t
– Part 3: Federal and State Medicaid trust
f d to
funds
t reduce
d
swings
i
iin fi
financing
i
(p. 174-175)
Implications from Medicaid
Everyone Can Count On
12
Implications for Expansions
• Medicaid expansions may be deferred
– Under current economic conditions and federal matching many
states (especially lower-income states in South and West) may
choose to wait
wait.
• Willingness to expand may return
– Perhaps with a vengeance”, especially in higher-income states
when
h th
the economy recovers, and
d iin 2014 with
ith th
the hi
high
h
expansion match.
• Federal financing is flawed
– a strong policy tool but is not currently well structured to promote
desired expansions in a way that is equitable for state taxpayers.
• EBEB
– Financing based on “equal burden for equal benefit” principles
can help encourage expansions when and where they are most
needed.
Implications from Medicaid
Everyone Can Count On
13