SM
[Type text] Health Policy Center
The Urban Institute
2100 M St NW
Washington DC 20037
http://www.healthpolicycenter.org
Health Insurance Policy Simulation Model
Medicaid Expansion Options for
Washington
In June 2012, the Supreme Court upheld the Affordable Care Act, but ruled that states could opt
out of the expansion of Medicaid eligibility without losing their existing federal funding. This gave
states options regarding the expansion that were not previously available. Using the Washington
State Population Survey (WSPS) augmented with results from the Urban Institute’s Health
Insurance Policy Simulation Model (HIPSM), we estimated Medicaid/CHIP enrollment and costs
under three scenarios: the full Medicaid expansion up to 138 percent of the federal poverty
level, an expansion up to 100 percent of poverty, and no expansion at all. Comparing the
options—
•
A full Medicaid expansion would lead to notably higher Medicaid enrollment than would
opting out of any expansion (256,000 more adults and 16,000 more children in 2020).
•
Under full expansion, higher enrollment would raise total Medicaid spending on acute
care for the nonelderly ($2.1 billion more in 2020). However, the difference in the state’s
share of those costs would be much smaller ($115 million more in 2020) than if not
expanding at all. State costs for 2014 to 2017 would actually be higher if the state opts
out of any expansion.
•
Opting out of the expansion would have other budgetary consequences as well. For
example, spending on uncompensated care would be higher than under full expansion.
If a conservative estimate of uncompensated care savings is subtracted from projected
state Medicaid costs, the state would spend more from 2014 to 2019 by opting out than
by expanding.
•
Expanding only to 100 percent of the FPL would decrease enrollment among those
made newly eligible (46,000 fewer in 2020). However, the resulting savings in state costs
would be modest (zero in 2014-16, about $34 million in 2020).
Matthew Buettgens
Randall R. Bovbjerg
Habib Moody
September 2012
mbuettgens@urban.org
202 261-5901
Fax: 202 223-1149
Medicaid
Expansion Options for Washington
2 Contents
Introduction ............................................................................................................................................... 3 New Medicaid and CHIP Enrollment ................................................................................................. 4 Costs to the State .................................................................................................................................... 8 Estimates for Each Year ........................................................................................................................ 11 Methods.................................................................................................................................................... 14 About the Authors ................................................................................................................................. 15 Medicaid
Expansion Options for Washington
3 Introduction
On June 28, 2012, the Supreme Court upheld the Affordable Care Act.1 In doing so, however, the Court ruled that states could choose to forego the enhanced federal match for people made newly eligible by the ACA eligibility without losing federal funding for the populations traditionally covered.2 This change to the ACA as written gave states options regarding Medicaid’s scope going forward that were not previously available. This report updates our prior work on the Medicaid expansion in Washington to show the effects of each of three Medicaid expansion alternatives now open to the state:3 1. The full Medicaid expansion up to 138 percent of the federal poverty level (FPL). This corresponds to the medium, or HIPSM, take‐up scenario in the earlier report. 2. Medicaid expansion up to 100 percent FPL. Those between 100 and 138 percent FPL would be eligible for subsidized exchange coverage, provided there was no affordable offer of employer coverage in their family. This approach would likely require a Section 1115 waiver, whose legality is as yet uncertain.4 3. No expansion beyond current Medicaid eligibility. This is the alternative explicitly allowed by the Supreme Court decision. This report also differs from the previous work in that we used the latest available reported and forecast cost data from the state. These showed noticeably lower costs than the earlier data provided to us by the state that were used in the earlier projections. Also, our forecasts of caseload growth over time presented in this document have now been coordinated with those of the Caseload Forecasting Council. The greatest value of a model such as the one used here is that the effects of different alternatives are simulated using a consistent framework. There is necessarily uncertainty around point estimates of 1
NFIB v. Sebelius, 567 U.S. ___ (2012); No. 11–393. Argued March 26, 27, 28, 2012—Decided June 28, 2012, http://www.supremecourt.gov/opinions/11pdf/11‐393c3a2.pdf. 2
Ricardo Alonso‐Zaldivar, Supreme Court Upholds Affordable Care Act–Health Care Law: 5‐4 decision finds insurance overhaul, mandate mostly legal, The News Tribune / Tacoma, WA, June 29, 2012, http://www.thenewstribune.com/2012/06/29/v‐printerfriendly/2198749/ruling‐constitutional‐supreme.html 3
Matthew Buettgens, Randall R. Bovbjerg, Caitlin Carroll, Habib Moody, The ACA Medicaid Expansion in Washington (Washington, DC; The Urban Institute report for the Washington State Office of Financial Management, May 2012, http://www.hca.wa.gov/hcr/documents/ACA_Medicaid_Expansion_WA_State.pdf or http://www.urban.org/health_policy/url.cfm?ID=412581). 4
It has been argued that a waiver is inappropriate in this case, Sara Rosenbaum and Timothy M. Westmoreland, “The Supreme Court’s Surprising Decision On The Medicaid Expansion: How Will The Federal Government And States Proceed?” Health Affairs, August 2012, vol. 31 no. 8 1663‐1672. A contrary argument is that the state of Arizona has always run its entire “AHCCCS” program with a very large number of variations from conventional Medicaid, but with standard Medicaid FMAP, Arizona Section 1115 Demonstration Project Waiver, updated July 30, 2012, http://www.azahcccs.gov/reporting/federal/waiver.aspx?ID=Archive. Beyond legality of any waiver is the issue of what FMAP would apply. Here, one argument is that the Supreme Court essentially made the expansion adults an optional eligibility category, for which states have long had discretion to set their own income ceilings and yet receive applicable FMAP, which for this group is 100 percent during 2014‐16. Medicaid
Expansion Options for Washington
4 enrollment and spending for a given year, but the relative differences between the three Medicaid expansion scenarios are much more certain. New Medicaid and CHIP Enrollment
Under the full Medicaid expansion, we estimate that 498,000 nonelderly adults would be covered by Medicaid in 2014, rising to 658,000 in 2020 (figure 1). New enrollment due to the ACA would phase in over the first several years of implementation, settling down to a normal rate of caseload growth after 2017. If Medicaid is expanded up to 100 percent FPL, there will, of course, be less enrollment of those whom the ACA makes newly eligible for Medicaid, i.e., to 138 percent FPL. However, the majority of the new enrollees under the full expansion would be below 100 percent FPL. Also, the incentives for those currently eligible to enroll would be largely the same regardless of whether the expansion was up to 100 percent or 138 percent FPL. As a result, differences in enrollment under the expansion to 100 percent FPL, as against 138 percent, would be modest: 477,000 nonelderly adults in 2014, rising to 613,000 in 2020. What are the comparable numbers without any expansion? In that case, no one would gain new eligibility. There will, however, be additional enrollment among those currently eligible due to other provisions in the ACA (assuming no change in the ACA itself). The two most important provisions are the individual mandate and the “no wrong door” interface. The individual mandate will cause more to seek coverage. The “no wrong door” interface will screen those seeking coverage for Medicaid and CHIP eligibility and provide the opportunity for them to enroll. We estimate that without an expansion, 377,000 nonelderly adults would be enrolled in 2014, rising to 402,000 in 2020. Medicaid
Expansion Options for Washington
5 Under the full expansion in 2020, there would be a total of 658,000 nonelderly adults enrolled in Medicaid (figure 1). Of these, 285,000 would be new enrollees due to the ACA including 255,000 made newly eligible, and 30,000 would be eligible under pre‐ACA rules but newly enrolled under the ACA (figure 2). In contrast, if expansion is limited to 100 percent FPL, the overall total will be slightly lower, at 613,000. In this scenario, the number of new enrollees is reduced to 239,000, while the number of new enrollees eligible pre‐ACA is essentially unchanged, at 30,000. Without any expansion, there would still be significant new enrollment of those eligible under current rules (28,000). Outreach provisions in the ACA, the individual mandate, and the “no wrong door” interface would still be in place even without the expansion of income eligibility. Medicaid
Expansion Options for Washington
6 Very few children would gain eligibility even under full ACA Medicaid expansion (figure 4). New enrollment of children would occur almost entirely among those already eligible but not enrolled. Again, such new enrollment will occur because of the individual mandate and the “no wrong door” interface. There would be no substantial difference in children’s enrollment between the full Medicaid expansion and the expansion up to 100 percent FPL. Enrollment would be 766,000 in 2014, rising to 831,000 in 2020 (figure 3). Enrollment would be lower with no Medicaid expansion at all because fewer parents of eligible children would seek coverage and hence would omit their children as well. Without any expansion, 758,000 children would be enrolled in 2014, rising to 815,000 in 2020. Medicaid
Expansion Options for Washington
7 There would be 58,000 more children enrolled under the ACA with the full Medicaid expansion. Of those, 52,000 of those would be eligible for coverage under current rules and would come in because of higher take‐up (figure 4). Increased enrollment among children is due largely to their parents being more likely to seek coverage and increased eligibility screening through the “no wrong door” interface. The differences in how the income is computed for purposes of computing eligibility before and after the ACA would also account for a few children gaining eligibility. New enrollment would be slightly less under the expansion up to 100 percent FPL than for full expansion. New enrollment of children would be slightly less than the level of either expansion, if there were no expansion at all (some 41,000 children, see figure 4). Medicaid
Expansion Options for Washington
8 Costs to the State
As one would expect, higher enrollment under the Medicaid expansion would mean higher total spending by both federal and state governments. Under the full expansion of eligibility, total program spending on acute care for the nonelderly would be $5.2 billion in 2014, rising to $8.1 billion in 2020 (figure 5). Limiting the expansion to 100 percent FPL would reduce total spending modestly. Total spending with no expansion would be notably lower: $4.4 billion in 2014 and $6.0 billion in 2020. Medicaid
Expansion Options for Washington
9 Total spending is, of course, always split between the federal and the state shares. Those made newly eligible under the expansion will have all of their costs paid for by the federal government from 2014 to 2016 (the ACA’s initial 100 percent match for those years). The federal share will decrease gradually each year until it reaches 90 percent of total costs in 2020 and subsequent years. Those currently enrolled through Washington State’s bridge waiver would also qualify for this higher federal matching rate. If the state expands Medicaid only up to 100 percent FPL, only those with MAGI up to 100 percent FPL would get the higher rate. If Washington opts out of any expansion, there would be no increase in the federal share of the bridge waiver population and, obviously, no new eligibles. Other Medicaid enrollees would have their costs divided according to the existing FMAP. The federal share of CHIP costs is set higher by law, and under the ACA will increase by 23 percentage points beginning in 2016.5 These rates are the same for all three expansion options. The net effect of these different state/federal splits of costs is shown in figure 6. Costs of acute care for the nonelderly borne by the state are actually higher without a Medicaid expansion than with one for 2014 through 2016. This counterintuitive result occurs because the federal government pays the entire cost of newly eligible people, and the current bridge waiver savings will be lost without the expansion. In later years, state Medicaid costs without an expansion do become less than with an expansion, which is the intuitive result. The largest difference during the projected time frame occurs in 2020, when the federal share of the costs of new eligibles falls to 90 percent. The expansion would lead to additional 5
On the other hand, there are currently no allocations of federal funding for CHIP beyond fiscal year 2015. For this analysis, we assume that federal funding of CHIP continues. Any changes to CHIP will affect state costs in all three Medicaid expansion scenarios equally. Medicaid
Expansion Options for Washington
10 state expenditures of $115 million in that year. These cost estimates assume that Medicaid cost growth over time would follow the current long‐term trend in Washington state. However, spending on Medicaid is only one element of the ACA’s impact on state budgets. New savings as well as new costs will occur because of expansion and the ACA’s other changes.6 We consider here only one source of savings: reductions in uncompensated care provided to the uninsured. Taking into account increases in coverage due to the ACA, we estimate that spending on uncompensated care would decline by about 40 percent with a full Medicaid expansion, 38 percent with an expansion up to 100 percent of the FPL, and by only about 12 percent with no Medicaid expansion. This reduced spending will result in “windfall” savings, but the distribution of those savings among providers and government at all levels will be determined by policy choices. In a typical state, about 30 percent of today’s uncompensated care is estimated to be funded by state and local governments in various ways. Fewer uninsured people will mean less uncompensated care consumed, even if not at a 1:1 ratio because of unmet need for free care. The state has the option to realize some share of these windfall savings from expansion, which is supportable by the observation that governments are bearing the costs. The state can recoup a portion of the savings by altering payments to providers to reflect the reduction in uncompensated care provided. To project budgetary impact of the ACA in more comprehensive fashion, we conservatively estimate uncompensated care savings to the state at 25 6
For a more complete list and discussion, see Stan Dorn, “Considerations in Assessing State‐Specific Fiscal Effects of the ACA's Medicaid Expansion,” (Washington, DC; The Urban Institute; 2012) http://www.urban.org/health_policy/url.cfm?ID=412628 Medicaid
Expansion Options for Washington
11 percent of the state’s share of the difference in uncompensated care consumed, assuming that the state and local share of uncompensated care is not far from the national average. The resulting savings thus represents only 7.5 percent of the total expected reduction in uncompensated care spending. Offsetting this low estimate from state spending on acute care for the nonelderly, we find that, until 2019, net state budgetary costs would be higher if Washington opts out of the expansion than if it implements the expansion. The difference in 2020 would only be $64 million. Estimates for Each Year
In tables 1 and 2, we give more detail for our year‐by‐year estimates of Medicaid enrollment and costs. Medicaid
Expansion Options for Washington
12 Table 1. Medicaid Enrollment by Year (Thousands of enrollees) 2014 2015 2016 2017 2018 2019 2020 Full Medicaid Expansion
Enrollment without ACA 1,100,710 1,108,427
1,116,200
1,124,030
1,131,917 1,139,862 1,147,864
New adult enrollment due to ACA 135,069 205,261
249,453
276,954
281,627 283,036 284,451
New child enrollment due to ACA 28,469 41,968
50,649
54,498
56,565 57,017 57,474
1,264,248 1,355,655
1,416,302
1,455,182
1,470,109 1,479,915 1,489,789
Total enrollment Expansion to 100 percent FPL Enrollment without ACA 1,100,710 1,108,427
1,116,200
1,124,030
1,131,917 1,139,862 1,147,864
New adult enrollment due to ACA 114,252 172,980 209,844 232,348 236,416 237,598 238,786 New child enrollment due to ACA 28,283 41,687
50,310
54,118
56,182 56,631 57,084
Total enrollment 1,243,245 1,323,094
1,376,353
1,410,496
1,424,515 1,434,091 1,443,735
No Expansion Enrollment without ACA 1,100,710 1,108,427
1,116,200
1,124,030
1,131,917 1,139,862 1,147,864
New adult enrollment due to ACA 14,598 21,099
25,172
26,780
27,659 27,797 27,936
New child enrollment due to ACA 20,558 30,029
36,079
38,625
40,072 40,392 40,715
1,135,866 1,159,554
1,177,451
1,189,435
1,199,647 1,208,051 1,216,516
Total enrollment Medicaid
Expansion Options for Washington
13 Table 2. Medicaid Spending on Acute Care for the Nonelderly by Year (Thousands of dollars) 2014 2015 2016 2017 2018 2019 2020 Full Medicaid Expansion
Total cost $5,194,340 $5,921,307
$6,514,272
$7,017,768
$7,383,405 $7,737,951
$8,109,536
State share of cost $2,084,468 $2,197,440
$2,321,407
$2,544,001
$2,693,279 $2,846,104
$3,055,259
$55,141 $57,898
$60,793
$63,833
$67,024 $70,376
$73,894
$2,029,327 $2,139,542
$2,260,613
$2,480,167
$2,626,254 $2,775,728
$2,981,364
State uncompensated care savings State costs net savings Expansion to 100 percent FPL Total cost $5,061,488 $5,706,658
$6,239,848
$6,697,910
$7,043,308 $7,381,796
$7,736,564
State share of cost $2,084,297 $2,197,171
$2,321,067
$2,527,651
$2,672,507 $2,820,797
$3,017,594
$52,384 $55,003
$57,753
$60,641
$63,673 $66,857
$70,200
$2,031,913 $2,142,167
$2,263,313
$2,467,009
$2,608,833 $2,753,939
$2,947,394
State uncompensated care savings State costs net savings No Expansion Total cost $4,410,941 $4,674,974
$4,933,370
$5,183,950
$5,440,735 $5,703,417
$5,978,794
State share of cost $2,179,438 $2,295,783
$2,422,144
$2,547,151
$2,673,661 $2,803,110
$2,939,796
$16,588 $17,417
$18,288
$19,202
$20,162 $21,171
$22,229
$2,162,850 $2,278,366
$2,403,856
$2,527,949
$2,653,499 $2,781,939
$2,917,566
State uncompensated care savings State costs net savings Medicaid
Expansion Options for Washington
14 Methods
These estimates are based on the augmented Washington State Population Survey (WSPS) dataset developed in Buettgens, et al. (2012), note [3] above. The results for the full Medicaid expansion presented here are exactly what was reported there. For the expansion up to 100 percent FPL, we included only newly eligible enrollees below that threshold. New enrollment among those currently eligible is not expected to differ significantly. For the results without a Medicaid expansion, we ran a simulation of the ACA without the expansion on the full national HIPSM model. New enrollment in Medicaid from those results was used to make a take‐
up model to predict new enrollment among current eligibles on the WSPS. For multiyear projections of enrollment, we used the latest forecast of 2013 caseloads from the Caseload Forecasting Council and projected caseload growth without the ACA for 2014 to 2019 using long‐term growth trends in Washington, 0.5 percent a year for adults and 0.8 percent for children. To this, we added new enrollment due to the ACA. This new enrollment ramps up from 2014 to 2017 as described in Buettgens, et al. (2012). For multiyear cost estimates, we began with the latest state forecasts of spending in 2013. Per capita Medicaid costs were grown at 4.32 percent a year, the long‐term trend for Washington. Per capita Medicaid costs themselves were adjusted to reflect the latest data available from the state. These costs were generally lower than those provided to us in 2011 for use in our earlier work. We also adjusted the number of people covered under the bridge waiver to reflect the latest available enrollment numbers. For uncompensated care costs, we used some of the work from our analysis of the Basic Health Program in Washington.7 We estimated the gain in coverages bought with exchange subsidies as well as from the Medicaid expansion, but only up to the ACA Medicaid income ceiling. HIPSM was used to estimate exchange take‐up of those between 100 and 138 percent FPL if the Medicaid expansion does not cover them. We then computed the resulting decrease in the amount of uncompensated care consumed. We assumed that 30 percent of uncompensated care is paid for by state and local governments and made the conservative assumption that only a quarter of that share would actually be realized as state budgetary savings. 7
Matthew Buettgens and Caitlin Carroll, “The ACA Basic Health Program in Washington,” (Washington, DC; The Urban Institute; 2012) http://www.urban.org/health_policy/url.cfm?ID=412572 Medicaid
Expansion Options for Washington
15 About the Authors
Matthew Buettgens, Ph.D., is a mathematician leading the development of the Urban Institute’s Health Insurance Policy Simulation (HIPSM) model. The model is currently being used to provide technical assistance for health reform implementation in Massachusetts, Missouri, New York, Virginia, and Washington as well as to the federal government. His recent work includes a number of papers analyzing various aspects of national health insurance reform, both nationally and state‐by‐state. Topics have included the costs and savings of health reform for both federal and state governments, state‐by‐
state analysis of changes in health insurance coverage and the remaining uninsured, the effect of reform on employers, the role of the individual mandate, the affordability of coverage under health insurance exchanges, and the implications of age rating for the affordability of coverage. Dr. Buettgens was previously a major developer of the HIRSM model—the predecessor to HIPSM—used in the design of the 2005 roadmap to universal health insurance coverage in the state of Massachusetts. Randall R. Bovbjerg, JD, is a senior fellow in the Health Policy Center of The Urban Institute. A policy analyst and lawyer, his specialties include health insurance and reform, reinsurance, the safety net for the uninsured, public health and workforce, as well as legal issues in health care, notably those relating to medical injury. His projects have ranged from case studies to analyses of large data sets. Over a long career in health policy and research, Bovbjerg has written four books, over 100 other publications, and many reports and briefs. He frequently speaks or testifies to audiences in government, academe, and the media. Concurrently, he has also served on editorial boards and commissions and has taught at the university level. Before coming to the Institute in 1979, he was a practicing state insurance regulator and volunteer health planner. Habib Moody is a research assistant on the HIPSM team. His current research includes churning in Medicaid and exchange eligibility, the Medicaid expansion, and exchange costs, and he was involved in health reform implementation technical assistance for Washington, Massachusetts, and New York. Moody received a bachelor’s degree from Yale University.