1. The ACA’s Medicaid expansion: Fiscal bane or boon to states?
THE URBAN INSTITUTE
The ACA’s Medicaid expansion: Fiscal bane or boon to states?
Stan Dorn
Senior Fellow
Urban Institute
Washington, DC
National Health Law Program
Advocates Call
August 6, 2012

2. Outline of Presentation
State costs
State savings
Administration
Revenue
Presentation today is divided into 4 parts:
Will briefly describe our research methods
Then focus on both federal policy that permits states to develop ELE, as well as Louisiana’s specific approach to designing and implementing the strategy
Then summarize of the impressive early results in the state, related to both enrollment and retention
Finish w/ a set of lessons learned that may help both federal and state policymakers interested in pursuing ELE in the future…and, indeed, in considering streamlined and automated enrollment strategies that can be used in implementing the Affordable Care Act…

3. Preliminary thoughts 50-state estimates can be a good starting point
State-specific analyses are crucial
Some key factors cannot be estimated using 50-state data
State administrative numbers can be more precise than national survey data
What if the federal government cuts its Medicaid spending below promised levels?
Not the historic pattern
Can craft the expansion to facilitate later retraction, if FMAP for new eligibles < ACA levels
Non-fiscal factors are important

4. I.
State Costs

5. Newly eligible adults
State begins paying a small share of costs in 2017
Cost-estimation factors
Participation levels
Currently, 62.6% of eligible non-elderly adults enroll
Considerable state variation
Average health care need
Newly eligible adults healthier than current beneficiaries
Adverse selection and “pent-up demand” limited to early years, when states receive full federal funding
Average risk levels will be high only if healthy adults fail to join, which means that total enrollment, hence total costs will be low

6. Benefits for newly eligible adults
Benchmark benefits for new eligibles can be—
= benefits for other adults; or
< benefits for other adults
Still must meet federal requirements
Fiscal analysis
Fewer benefits = lower coverage costs
Mostly federal savings
State fiscal risks from differential benefits
Administrative costs, 50% state share
Less capacity to claim enhanced FMAP for current, high-cost eligibles
In , states gain nothing from a narrow benefits package for newly eligible adults!
Differential benefits = state fiscal harm
No-brainer: same benefits for all adults in , use this period to assess longer-term costs and gains

7. Currently eligible adults
States pay standard Medicaid match
Increased enrollment, with or without Medicaid expansion
Individual mandate
New subsidies and enrollment venues in the health insurance exchange (HIX)
A Medicaid expansion probably causes an additional increase
Average cost of currently eligible but not enrolled < average cost of people who enrolled

8. II.
State Savings

9. Higher FMAP for current populations
General principle #1: “newly eligible” FMAP available for adults who qualified for < full Medicaid under 2010 state law
General principle #2: Newly eligible adult coverage will be the default for many enrollees
Beneficiaries can transfer to a more favorable category
Examples
1115 waivers providing limited benefits
Medically needy spend-down
“Special programs” – breast/cervical cancer, family planning waivers, etc.
Maternity care

10. Higher FMAP, continued Current law does not need to change
People who, pre-ACA, would have used a special eligibility category will be covered as regular adults
Pregnant women
If person identified as pregnant on application, must receive pregnancy-related Medicaid, standard FMAP
States not obliged to track pregnancy status of newly eligible adults
Pregnant women must be reclassified upon request
To avoid this result and preserve state fiscal gains, newly eligible adults could get the same coverage (including cost-sharing limits) available in pregnancy-related Medicaid

11. Higher FMAP: people with disabilities
Potentially covered as newly eligible if:
Under 65
At or below 138% FPL
Not receiving SSI
Not receiving services predicated on disability
Must be given a choice of eligibility categories
Fiscal advantages of giving all Medicaid adults benefits that are important to people with disabilities
State endangers enhanced FMAP by giving PWDs a reason to switch from general adult coverage
Many benefits important to PWDs are used infrequently by the non-disabled

12. Reduced non-Medicaid spending on health care for the poor uninsured
Hospital uncompensated care
Balance hospital gains and state savings
Can share savings with localities
Mental health services
Not all can be covered by Medicaid
Balance service restorations and state savings
Public health services
Social services for parents
Other spending

13. III.
administration

14. Costs and savings Costs Savings More applications
Many ACA features will lower application processing costs to states
If FFE determines Medicaid eligibility, pays all associated administrative costs
In fee-for-service state, more claims processed
Savings
Fewer fair hearings
Negotiating with MCOs on behalf of more covered lives may yield savings

15. IV.
REVENUE

16. Impact of Medicaid expansion
Federal Medicaid funds increase economic activity, raising state revenue
Income tax, sales tax, etc.
Example: Arkansas
Choices
No state choice about economic pain
State choice about economic gain
Insurance premium tax, health care claims tax, etc.
Example: Georgia
Ultimately paid by Medicaid, but most of the new money is federal

17. Conclusion
State officials are understandably concerned about expansion costs, based on historic experience
But this particular expansion is unique
Costs are often overstated
Fiscal gains are often ignored
Careful, state-specific analysis is essential to an accurate and comprehensive fiscal assessment