1. 1 Office of Administration Division of Budget and Planning

2. MEDICAID EXPANSION BUDGET BACKGROUND Cost for new Medicaid eligibles Savings in state share for existing populations Additional revenue Summary of budget impact Provider payments 2

3. MEDICAID EXPANSION COST 3

4. COST -- STATE SHARE No state cost for first three fiscal years (FY14-FY16) State share then phases up to 10% - January 2017 – 5% (half year for FY 2017) - January 2018 – 6% - January 2019 – 7% - January 2020 – 10% 4

5. 5 COST -- NUMBER OF PEOPLE KEY ASSUMPTIONS Assumed Take Up Rates: Parents -- 70% increasing to 80% by 2018 Childless Adults -- 60% increasing to 80% by 2018 Medically Frail -- 95% from first year Data Sources: U.S. Census Bureau 2011 American Community Survey U.S. Census Bureau 2010 Table on Prevalence of Disability

6. 6 MEDICAID EXPANSION COST NUMBER OF PEOPLE 259,499 268,039 276,579 292,061 307,542

7. COST PER PERSON Cost per person developed by actuary Added cost for wrap around for medically frail Pay a commercial reimbursement rate Savings from care management (multiple avenues) Assumes maximum cost sharing (copays) allowed 7

8. COST PER PERSON Per Member/Per Month - $436 for parents - $583 for childless adults - $1,635 for medically frail Trended forward at average of 4% 8

9. COST -- SUMMARY 9 $1,858 $908 $1,955 $2.086 $2,256 $2,396 $2,488 $2,589

10. MEDICAID EXPANSION SAVINGS IN STATE SHARE 10

11. SAVINGS – EXISTING POPULATIONS Current Medicaid Populations under 138% FPL - Pregnant women – covered prior to pregnancy - Ticket to Work - Breast/Cervical Cancer - Spenddown - Women’s Health Services 11

12. SAVINGS – EXISTING POPULATIONS Current State Only Populations under 138% FPL - Blind Pension - Corrections - Dept of Mental Health Clients 12

13. SAVINGS – EXISTING POPULATIONS GENERAL REVENUE (millions of $) 13

14. MEDICAID EXPANSION ADDITIONAL REVENUE 14

15. ADDITIONAL REVENUE Key Assumptions – Income Tax - No multiplier assumed - Looked at increased federal revenue to providers - Discounted to portion typically used for salaries based on individual provider-type - Applied 4.5% income tax rate 15

16. ADDITIONAL REVENUE Key Assumptions – Sales Tax - No multiplier assumed - 19.2% of income spent on GR taxable goods - 6.9% of non-salary spent on GR taxable goods - Tax rate of 3% goes to GR 16

17. ADDITIONAL REVENUE Key Assumptions – High Risk Pool - High Risk Pool no longer necessary - Insurance companies help fund pool through assessments - Taken as credits against taxes owed - Typically do not take full credit in first year - Fully realized ($22M), with $1.5M savings from normal growth each year after that 17

18. ADDITIONAL REVENUE $s in millions 18 $15.5 $53.5 $57.3 $61.8

19. MEDICAID EXPANSION BUDGET SUMMARY 19

20. MEDICAID EXPANSION BUDGET SUMMARY State costs for new eligibles $0 until FY 2017 Full phase in of state share at 10% in FY 2021 Savings for existing populations begin immediately Additional revenue estimate conservative – no multiplier 20

21. BUDGET SUMMARY COST, SAVINGS & REVENUE 21

22. PROVIDER PAYMENTS Hospital Reductions Regardless of a state’s decision to expand Medicaid, payments to hospitals will be reduced. Reductions will be to Disproportionate Share Hospital (DSH) payments. Hospitals that serve a high percentage of Medicaid and/or other low income individuals qualify for DSH payments. These payments are designed to help cover the cost of uncompensated care. 22

23. HOSPITAL PAYMENT REDUCTIONS Each state’s share of the DSH reduction is unknown. HHS Secretary will determine methodology. That methodology to consider: - Percentage of uninsured, - State’s use of DSH funds, and - State’s current DSH level (high DSH states, like Missouri, may face a larger cut). 23

24. HOSPITAL PAYMENT REDUCTIONS Cuts at the national level: - 5% for first three years (starts FFY2014) - 15% for next year - 50% thereafter Missouri’s FY 2013 DSH payments: - $511 million hospitals - $207 million DMH hospitals 24

25. PROVIDER PAYMENTS MEDICAID EXPANSION Estimated payments by provider type: 49% ($900 million) professional services. - 13% ($240M) mental health - 11% ($200M) physician services - 9% ($160 M) in-home - 16% ($300M) other (DME, ambulance, ….) 40% ($740 million) hospital services 11% ($200 million) pharmacies 25

26. CONCLUSION Cuts to hospital payments will happen If expand Medicaid, those reductions will be more than offset through increased provider payments Expansion has a net positive impact on the budget Other considerations - indirect budget implications: - Improved access to care - Better health outcomes - Improved job retention when healthy 26