1 Texas Has a Health Care Spending Problem, Not a Medicaid Problem: Issues and Prospects in the post-Supreme Court Moment July 10, 2012 UTMB’s 2012 Health Policy Lunch and Learn Lectures Galveston, Texas Anne Dunkelberg, Assoc. Director, Center for Public Policy Priorities 7020 Easy Wind Drive - Austin, Texas (512) –

Presentation Overview Review of ACA key components – Medicaid top details – Medicaid interactions with exchanges Supreme court Decision overview – Different Justices, different components – Medicaid decision details – Questions raised and interpretations being circulated – US HHS Agency role What this means for Texas – TX Uninsured and ACA – Census confusion: CPS vs. ACS – Further Confusion: Urban Institute – Without Medicaid expansion, <100 FPL no access to premiums subsidies in HIX, and even subsidies may be unaffordable for Big Picture: the challenge is health care spending, not Medicaid. 2

3 Source: US Census 3/2011 CPS

4 Medicaid Now (U.S) Health Insurance Coverage 31 million children & 17 million adults in low-income families; 14 million elderly and persons with disabilities Biggest Source of Federal Funds in State Budgets Federal share ranges 50% to 76%; 43% of all federal funds to states MEDICAID Support for Health Care System and Safety-net $16B in Disproportionate Share Hospital payments; 40% of community health center revenues Assistance to Low- income Medicare Beneficiaries 8.8 million aged and disabled — 19% of Medicare beneficiaries Long-Term Care Assistance 1 million nursing home residents; 2.8 million community-based residents SOURCE: Kaiser Commission on Medicaid and the Uninsured, 2009

5 5 Texas Medicaid/CHIP: Who is Helped Today January 2012, HHSC data Total enrolled 1/1/2012: 3.6 million Medicaid; 561,000 CHIP 1 in 7 Texans, but 42% of Texas kids 25.2 million Texans 7.4 million under 19

6 Income Caps for Texas Medicaid and CHIP, 2012 $25,390/yr $35,317/yr 185% 133% $19, % $2,256$3,696 12% 19% 75% $8, % $25,128 $38, % Income Limit as Percentage of Federal Poverty Income Annual Income is for a family of 3, except Individual Incomes shown for SSI and Long Term Care

Build on current system: Vast majority of Americans still get coverage through their employer. Medicaid expansion: US citizens to 133% FPL ($14,404 individual; $29,327 for 4). Reform Private Health Insurance: standard minimum benefits, can’t charge more based on health status, limits on premium increases as people age, no denial of coverage, no excluding pre-existing conditions, no annual or lifetime maximums. New Health Insurance Exchanges where private insurers’ options can be compared and purchased. Open to people without job-based coverage and small employers, and all members of Congress will get coverage thru exchange. Sliding scale premium assistance in the exchange up to 400% of FPL ($88,200 for family of 4). Sliding scale deductibles/co-pays and out-of-pocket caps in the exchange to increase affordability & reduce medical bankruptcy. Individual mandate to have coverage (with major exemptions). Some requirements for employers to contribute if their employees get sliding-scale help in exchange, with exemption for all employers with 50 or fewer workers. 2014: Health Reform Building Blocks 7

8 Health Reform Building Blocks Eligibility up to 133% of the federal poverty level ($29,700/yr for family of four) Adds ≈ 1.4 million TX adults (near term) – Must further upgrade eligibility system for full on-line function and interoperability with Exchange 100% federal funding Max state share of 10% starts 2020 Medicaid Expansion 2014

9 Health Reform Building Blocks States can’t reduce kids’ Medicaid-CHIP income limits before 2019 Also can’t reduce adult coverage before 2014 (when HIX fully operational) Medicaid primary care fees increased to Medicare levels in 2013 and 214, full federal funding. Eligibility rules (except SSI-related aged and disabled) must change to fed standard based on US tax income rules (MAGI). Ends asset test and F2F interview More Medicaid Provisions 2014

The SCOTUS Decision Unanimous: The fact that Congress chose not to LABEL the individual mandate’s free-rider penalty as a TAX is sufficient to exempt from the AIA Commerce Clause Rejected as basis for IM: Roberts, Alito, Kennedy, Scalia, Thomas But IM is a Tax, and Congress can Tax: Roberts, Breyer, Ginsburg, Kagan, Sotomayor Medicaid expansion mandate with all Medicaid funds at risk for states not implementing “unduly coercive”: Roberts, Alito, Breyer, Kagan, Kennedy, Scalia, Thomas BUT rest of ACA is OK, as long as the Medicaid expansion becomes a state option, and states opting out do not put the rest of their Medicaid $ at risk: Roberts, Breyer, Ginsburg, Kagan, Sotomayor 10

What Court said & What it means… Roberts: the expansion is a “New Program”; and states could not have foreseen this “shift in kind, not merely degree” BUT the decision maintains: – all other aspects of the ACA; and – The federal Medicaid law in all other respects. NO effect on earlier federally-mandated Medicaid expansions Congress can still adopt future publicly-funded health expansions (under the Spending Clause) 11

Questions, and What Experts are Opining No references at all in Roberts’ majority opinion to changing any other ACA Medicaid provisions. HHS/CMS will eventually provide guidance on ALL these questions States that expand must abide by all Medicaid provisions of the ACA in order to get the enhanced fed $ for the expansion. States NOT expanding are still bound by all provisions of the fed Medicaid law, and still put their Medicaid fed funds for their existing programs at risk for non-compliance (this is same as pre-ACA law) 12

Questions, and What Experts are Opining The ACA’s other new Medicaid provisions still are in force for all states, including: Increased primary care Medicaid rates Phasing down of DSH Mandatory coverage of birthing centers, smoking cessation for pregnant women New community services and supports options Expansion of Medicaid for youth aging out of foster care to 26 th birthday. 13

Questions, and What Experts are Opining Can a state expand to an income <133% FPL? – NASMD: No: “binary” all as written or nothing option) – Community Catalyst: No, states must comply with all ACA terms of the expansion, or risk no 100%/90% match Do MOE Stability Protections still apply, and to all states? – YES, only the HHS Secy’s ability to nuke entire Medicaid $$ altered by Court. All other Medicaid provisions unchanged by decision GWU, GU CCF, CC, NASHP) Is MAGI conversion required in opt-out states? How does “no Wrong Door” work if state opts out? Could a State drop expansion in out-years? Will rules from US HHS address this? 14

More Questions US HHS/CMS will Likely Clarify – Any due dates for deciding on Medicaid? – Will the shift of kids in Medicaid and CHIP to (Medicaid below 133%, CHIP above) still happen if a state opts out of the expansion? – Are expansion group Medicaid enrollees entitled to same legal protections as rest of Medicaid? – How can/will 1115 waiver authority be used to allow expanding states to depart from the general requirements of the ACA (e.g., to cover below 133% FPL) 15

16 FPL 400% 300% 200% 100% FPL 400% 300% 200% 100% Children Undocumented Immigrants Adults w/o Children Seniors & People with Disabilities ParentsPregnant Women 0%  Medicaid and CHIP (Texas 2011 eligibility levels) ■ Uninsured or i nsured via other coverage source 185% 200% Exchange Subsidized Unsubsidized % Medicaid Expansion Basic Health or Exchange 133% 20% 74% Linking Americans to Coverage (2014)

17 Under Reform Employer 156 million 56% Medicaid/CHIP 48 million 17% Nongroup & Other 27 million 10% Private Exchanges 23 million 8% Uninsured 26 million 9% Employer 161 million 58% Medicaid/CHIP 32 million 11% Uninsured 57 million 20% Nongroup & Other 30 million 11% Without Reform Million U.S. Residents Under Age 65 Americans’ Coverage in 2019: If nothing changed compared to health reform law Source: Congressional Budget Office, March 2012 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage

18 Texas Uninsured by Income 2010… 89% of 6.2 million uninsured have incomes <400% FPL 656K 501K 626K 614K Million 421K Annual income limits given for a family of four, 2011 federal poverty level U.S. Census, 2010 CPS 921K 6.2 million includes 1.7 million non-US citizens; ~2/3 of these (about 1.1 million) likely undocumented 525K

19 Uninsured Texans by Age Group, 2010 Source: U.S. Census, March 2011 CPS 6.2 million uninsured Texans 101,000 4% of Texas Seniors uninsured – twice the US average 19

20 How Could 2010 Uninsured Texans Gain Coverage If Reform were Fully Implemented Today? ≈ 2.6 million (adults and kids) may get help with coverage in the exchange ≈ 610,000+ would qualify for exchange coverage at full cost ≈ 1.4 million U.S. citizen adults would newly qualify for Medicaid ≈ 600,000 kids qualify for Medicaid or CHIP right now ≈ BUT: 1.1 to 1.8 million would remain uninsured (CBO) ≈ 3 uninsured Texans gain private exchange coverage for each 2 gaining through Medicaid/CHIP Of the 6.2 Million Uninsured Texans in 2010… 20

All Carrot and No Stick? Or is the carrot too big to refuse? Confusion factors in Reading the Estimates: US Census now has 2 different surveys estimating uninsured: ask different questions, and get different answers. Many estimates of Medicaid expansion are based not on “raw” Census numbers but on Urban Institute model (that builds on census), yielding a third set of numbers. Range of assumptions about what % of eligible folks actually enroll (take-up rates) drive HUGE differences in estimates. 21

All Carrot and No Stick? Or, is the carrot too big to refuse? Texas HHSC has projected from : – assuming over 90% take-up by newly-eligible adults – that Texas would have to put up $5.8 billion in new Medicaid state share, and would draw down $76.3 billion in federal match. Urban Institute (for Kaiser, also used by Bloomberg): – 1.7 million uninsured adults in Texas below 133% FPL who don’t qualify for Medicaid today, would be left uncovered if Texas does not expand. – Models 57% and 75% take-up rates (again ) 50%, 1.8 million enroll; Texas uninsured adults below 133% FPL drop by 49%; federal govt. pays $52.5 billion (95.3% of costs); state pays $2.6 billion 75%, 2.5 million enroll; Texas uninsured adults below 133% FPL drop by 74%; federal govt. pays $62 billion; state pays $4.5 billion (5.1% over baseline without expansion). 22

If Texas Opts Out What we would leave on the table... Bloomberg analysis (using the UI model and historical Medicaid spending by health care sector) projects that in the first five years ( ), $46 billion would go to Texas health care sectors, including: – $8.6 billion to Medicaid Managed care plans – $4.2 billion to nursing homes – $7.8 billion to hospitals – $4.9 million to home health providers... Meaning these sectors will lose out on these amounts in the expansion is not taken in Texas. 23

If Texas Opts Out ACA makes sliding-scale premium assistance available only to persons above 100% FPL (exception: legal immigrants excluded from Medicaid) – This means uninsured Texas adults below 100% FPL would have NO assistance available in – UI/KFF estimates 1.75 million uninsured TX adults under 133% FPL, 1.33 of these with incomes below 100% FPL. – Those from % FPL would be eligible for premium assistance, but because the system was designed with assumption that this group would have Medicaid, some of these near-poor will have difficulty affording the coverage even with a cap on premiums of 2% of family income. – Costs of care for uninsured poor Texas adults will continue to be carried primarily by local property taxpayers, secondarily by other charity care providers, and without benefit of the 90%+ federal matching dollars. 24

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Total Spending for Health Care Under CBO’s Extended- Baseline Scenario (Percentage of gross domestic product, without significant changes in policy) 26

27 WHY IS HEALTH SPENDING IN THE UNITED STATES SO HIGH?

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30 Health Reform: The Big Picture Or, Why ACA is worth Keeping, In Spite of Flaws First-ever system for making comprehensive care available to all (lawfully present) Americans at an affordable price. Profits in health insurance marketplace will no longer be based on avoiding risk, leaving Texans uninsured. Lays a foundation for controlling health costs and improving quality of care. 30

Texas Coalitions & Campaigns Working on ACA Implementation and Medicaid-CHIP Support Texas Well and Healthy 31

32 Collaborative campaign of 4 non-profits in TX Our goal: educate Texans about health care options Website: Facebook:

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2012 Poverty Guidelines for the 48 Contiguous States and the District of Columbia 2011 Tax Filing Thresholds (Below this income, exempt from penalty) Persons in family/householdPoverty guideline 1$11,170$9, ,130Married Joint filers $19, ,090Head of Hshld $12, ,050 Widow/er & dependent child $15, , , , ,890 For families/households with more than 8 persons, add $3,960 for each additional person. 34

35 Premium Help: Max % of Family Income for Premiums in Exchange 9.5% (< $695/month) $88,000 (400% FPL) $77, % (< $610/month) $77,000 (350% FPL) $66, % (< $522/month) $66,000 (300% FPL) $55, % (< $371/month) $55,000 (250% FPL) $44, % (< $231/month) $44,000 (200% FPL) $33, % (< $110/month) $33,000 (150% FPL) $29, %; ($37 to $73/month) $29,000 (133% FPL) $22,000 (100% FPL) To:From: Max % Income for Premiums Income for a Family of Four

36 Out-of-Pocket Costs: Share of Health Costs Covered under Exchange Plans 70% $88,000 (400% FPL) $77,000 $3,987/indiv. $7,973/family 70% $77,000 (350% FPL) $66,000 70% $66,000 (300% FPL) $55,000 $2,975/indiv. $5,950/family 73% $55,000 (250% FPL) $44,000 85% $44,000 (200% FPL) $33,000 $1,983/indiv. $3,967/family 94% $33,000 (150% FPL) $29,000 To: From: Out of Pocket MAX as % of income (not incl. premiums) Avg. Share of Costs Covered Income for a Family of Four

37 Examples of Family Costs: Premiums, Out-of-pocket help, and Out-of-pocket Caps Family of 4 Income, with Coverage through Exchange, 2014 and later Maximum Yearly Premiums Average % of health costs covered by plan (“Actuarial Value”) Cap on Uncovered spending (not including premiums) Upper Limit on TOTAL Family Spending (% of income) 150% FPL: $33,075$88094%$3,967 $4,847 (15%) 250% FPL: $55,125$4,46573%$5,950 $10,415 (19%) 350% FPL: $77,175$7,33270%$7,973 $15,305 (20%) 450% FPL: $99,225 (No Financial Assistance) None Buyer’s Choice; 60-90% $11,900n/a 37

38 State Budget Effects of ACA Medicaid expansion Budget No coverage costs Budget No costs for new adults. Federal government pays 100% cost of new Medicaid adults from Welcome Mat Effect: States expect to see increased Medicaid, CHIP enrollment by uninsured kids who are already eligible today once 2014 expansions begin. State share: ~ 39 cents on dollar for Medicaid Budget First budget with any new adult Medicaid costs: the state starts paying 5% in 2017, topping out at 10% share in State’s share of CHIP match drops to 5 cents on dollar