1 Testimony: FMAP and Health Insurance House Select Committee on Federal Economic Stabilization Funding March 12, 2009 Testimony: FMAP and Health Insurance House Select Committee on Federal Economic Stabilization Funding March 12, 2009 Anne Dunkelberg, Assoc. Director, Stacey Pogue, Policy Analyst, 900 Lydia Street - Austin, Texas Phone (512) (X102) –

2 Source: Stan Dorn, Bowen Garrett, John Holahan, and Aimee Williams, Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses, prepared for the Kaiser Commission on Medicaid and the Uninsured, April 2008Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses Impact of Unemployment Growth on Medicaid and SCHIP and the Number Uninsured 1% Increase in National Unemployment Rate = Increase in Medicaid and SCHIP Enrollment (million) Increase in Uninsured (million) & $2.0 $1.4 $3.4 Increase in Medicaid and SCHIP Spending (billion) State Federal 1% increase in unemployment also = a 3-4% decline in state revenues

3 ARRA FMAP Assistance Texas is expected to get $5.45 billion in federal funds to help pay for Medicaid through 2011 (GAO). Congress intended these funds for 2 primary purposes: to make sure that in a time of economic hardship when the need is greatest, (1)states do not cut Medicaid, and (2)states have extra funds to meet the increased number of uninsured as unemployment rises and incomes decline.

4 How the Economic Recovery FMAP Works Example: If Texas Medicaid Spending for were $60 billion $24 B State $36 B Fed Before ARRA With ARRA FMAP “Bump” (1) State puts up fewer $ to provide same amount of care (2) BUT STATE DOES NOT HAVE TO INVEST A SINGLE PENNY TO IMPROVE PROGRAM. $41.45 B Fed $18.55 B State

5 FMAP: Accountability and Priorities Per ARRA, Texas cannot (1)Cut Medicaid eligibility or complicate enrollment OR (2)put $5.45 B in Rainy Day Fund or other reserve. Beyond avoiding Medicaid cuts, the next priority for these economic recovery funds is to address Texas Medicaid’s enrollment system crisis. The system can’t handle current demand, much less growing needs with rising unemployment. Additional staff and 12- month enrollment are the keys to improvement. –HHSC Exceptional Items #2 and #3 to maintain and expand eligibility staff (to get back to 2004 staff-to-client ratios and move toward compliance with fed law: $133 million GR (biennium, agency estimate) –12-month child Medicaid enrollment, which would dramatically reduce the HHSC eligibility backlogs (allows 2 million fewer renewals per year) and allow the system to operate competently with fewer staff.

6 Eligibility Staff Shortage: A Vicious Cycle

7 Texas Medicaid: Who it Helps December 2008, HHSC data. Total enrolled 12/1/2008: 2.9 million Because children account for over 2/3 of enrollment, 12-month renewals WOULD transform workload for entire program

8 Year-long coverage in Children’s Medicaid —equality with CHIP policy—would be the single most effective way: To prove Texans’ commitment to the bipartisan goal of insuring the poorest uninsured children first. To increase enrollment of Texas’ eligible uninsured children, and cut uninsured kids by one quarter! (per HHSC enrollment estimates) To dramatically cut the costs and workload of our state eligibility workers, and boost their performance. 12-month coverage will: Promote continuity of care and stable medical homes for children, and ease recruitment and retention of Medicaid doctors & providers. Help Texas Medicaid meet Frew federal court lawsuit settlement goals for check- ups, immunizations, and access to care (7.6 months average) Reduce costs per child: Texas and California studies have found that 12-month coverage reduced hospitalizations and the annual cost per child. 12 month continuous eligibility for Children’s Medicaid would dramatically reduce HHSC’s workload from 3.8 million renewals per year to 1.9 million, –helping Texas get back into compliance with the Federal law requiring 45 day application processing, and –reducing the number of state workers needed to comply with federal law. Earn Texas an estimated $25.6 million in 2011 and $54 million in in bonuses (part of Congressional CHIP Reauthorization)

9 COBRA/Continuation Help in Recovery ARRA has a temporary 65% premium reduction for COBRA and state continuation coverage –COBRA for firms with 20+ employees Coverage lasts 18 months –State continuation is “COBRA-like” coverage Only option for small firms (under 20 full-time employees) Coverage only for 6 months Premium reduction for workers laid off between 9/1/08 and 12/31/09 and their families Premium reduction lasts up to 9 months Enrollees pay 35% of premiums to health plan. Health plan takes the 65% reduction as a credit against payroll taxes ARRA has a second chance for electing COBRA. Workers laid off between 9/1/08 and 2/17/09 can elect COBRA now and get the premium reduction

10 Steps Needed to Help Texas Workers Increase state continuation to 18 months for firms not eligible for COBRA –Short 6-month continuation prevents recently unemployed Texans from getting full 9 months of premium reduction –Makes coverage period consistent with COBRA –Allows 9 months of reduction to Texans laid off at the beginning of the recession who would otherwise get little or no help –HB 2453 and SB 1771 Create a new enrollment period for state continuation that conforms with ARRA –ARRA creates a new enrollment period only for COBRA –Otherwise workers laid off from small businesses from 9/1/08 to 2/17/08 will not get a second chance at continuation with the 65% reduction Changes will: –Help recently unemployed Texans get the maximum federal assistance –Help unemployed maintain private health insurance while seeking new jobs –Not require GR nor create GR obligations in the future

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