1. 1 Measuring Success in Medicaid Expansion: State Budget Impacts Health Action 2016: Next Steps in Health Reform Patti Boozang February 4, 2015

2. 2 Agenda  Economic Impact of Expansion in States that Expanded in 2014  State Savings from Accessing Enhanced Federal Matching Funds  State Savings from Replacing General Funds with Medicaid Funds  Revenue Gains  Measuring Broader Impacts of Expansion

3. 3 Economic Impact of Expansion in States that Expanded in 2014

4. 4 The Economics of Expansion: Impact on State Budgets  State Costs Increased administration Coverage for newly eligible adults State Savings Accessing enhanced federal matching funds for some previously eligible Medicaid beneficiaries now eligible for the new adult group Replacing State General Funds that have historically supported programs and services for the uninsured with Medicaid funds  Revenue Gains Expansion will result in State revenue gains related to existing health plan and/or provider taxes as health plan and provider revenues increase 1 2 3 ACA Newly Eligible FMAP Calendar YearFMAP 2015100% 2016100% 201795% 201894% 201993% 2020 and thereafter90%

5. 5 Experiences of Eight States that Expanded in 2014 California Nevada Arizona Utah Idaho Montana Wyoming Maine Vermont New York North Carolina South Carolina Alabama Nebraska Georgia Mississippi Louisiana Texas Oklahoma Pennsylvania Wisconsin Minnesota North Dakota Ohio South Dakota Kansas Iowa Illinois Indiana Tennessee Missouri Delaware New Jersey Connecticut Massachusetts Virginia Maryland Rhode Island Hawaii New Hampshire Expanded Medicaid and reported cost savings to RWJ (8) Alaska Expanded Medicaid (29 + DC) As of October 12, 2015 West Virginia Colorado New Mexico Oregon Washington Michigan Arkansas Kentucky Washington, DC

6. 6 Highlights: Economic Benefits Consistent Across States  Results are now available on the actual fiscal impact of Medicaid expansion  These are early results – additional savings likely  Savings and revenue gains are consistent across states  In Arkansas and Kentucky, savings and revenue gains expected to offset expansion costs through SFY 2021 Eliminating expansion would cost Arkansas $438 million over next 4 years Eliminating expansion would cost Kentucky $300 million over next 2 years Sources: “States Expanding Medicaid See Significant Budget Savings and Revenue Gains.” Robert Wood Johnson Foundation and Manatt. April 2015; http://governor.ky.gov/healthierky/Documents/medicaid/Kentucky_Medicaid_Expansion_One-Year_Study_FINAL.pdf; http://www.arkleg.state.ar.us/assembly/2015/2015R/Pages/MeetingDetails.aspx?committeecode=836&meetingID=26509

7. 7 State Savings from Accessing Enhanced Federal Matching Funds

8. 8  States used limited waivers or special eligibility categories to provide Medicaid coverage to targeted individuals  States were responsible for 30-50% of the cost of covering these individuals Pre-expansion Post-expansion  Individuals who were previously eligible under certain of the pre-ACA eligibility categories are now eligible for Medicaid in the new adult group  States receive enhanced federal funding to provide full Medicaid benefits to these populations Savings From Accessing Enhanced Federal Matching Funds

9. 9 Certain Adult Waiver Populations (e.g. HIV/AIDS, Tuberculosis) Medically Needy Pregnant Women Disabled Family Planning Breast & Cervical Cancer Treatment Program Other Targeted Medicaid Programs Savings May be Generated from Accessing Enhanced FMAP for Some or All of the Following Populations

10. 10 Previously, some adults became Medicaid eligible by “spending down” to a state’s medically needy eligibility threshold; post-expansion, individuals with incomes above this threshold but below 138% FPL are enrolled in the new adult group, and the state receives enhanced federal match.  Not every state has a medically needy program  No savings for elderly or those with a disability determination (do not qualify as new adults)  Most others will enroll in the new adult group  States see substantial savings in this category, as these are high cost individuals Breaking it Down Savings Related to Medically Needy Populations Arkansas SFY 2014: $1.7M SFY 2015: $6.6M Washington SFY 2014: $11.5M SFY 2015: $35M Kentucky SFY 2014: $2.4M SFY 2015: $14M Examples of State Savings Related to Medically Needy

11. 11 Women enrolled in the new adult group who become pregnant remain in the new adult group; states continue to receive enhanced federal match States accrue savings for:  Childless adults below 138% FPL who become pregnant (“first time moms”)  Newly eligible parents who become pregnant (between current eligibility and 138% FPL) Breaking it Down State Savings Related to Coverage of Pregnant Women States do not accrue savings for:  Individuals who attest to being pregnant at the time of application or renewal; at that point, they are not eligible for the new adult group Examples of State Savings from Coverage of Pregnant Women Washington SFY 2014: $6.7M SFY 2015: $31.5M Colorado CY 2014: $206K CY 2015: $903K Arkansas SFY 2014: $4.9M SFY 2015: $15.2M West Virginia SFY 2014: $3.8M SFY 2015: N/A Source: Bachrach, D., Boozang P., Glanz, D. “States Expanding Medicaid See Significant Budget Savings and Revenue Gains.” Robert Wood Johnson Foundation and Manatt. April 2015; Updated Arkansas estimate for SFY 2015 provided by State

12. 12 State Savings Related to Disabled Populations With expansion, some low-income individuals who previously would have had to pursue a disability determination to qualify for Medicaid will be able to enroll into the new adult group based on income alone. As a result, early expansion states are reporting sharp drops in the number of individuals seeking disability determinations. In the near-term, states see savings from the reduced administrative costs of conducting disability determinations, and in the longer term from fewer individuals in the disability category. OREGON Disability determinations dropped from 7,000 in CY 2013 to 1,400 in CY 2014 KENTUCKY SFY 2014: $1.7M SFY 2015: $7.9M Source: Bachrach, D., Boozang P., Glanz, D. “States Expanding Medicaid See Significant Budget Savings and Revenue Gains.” Robert Wood Johnson Foundation and Manatt. April 2015; Arkansas estimates provided by State ARKANSAS SFY 2015: $17.1M Examples of State Savings from Disabled Populations

13. 13 Through State Plan Amendments or waivers, states may cover individuals with incomes above Medicaid levels and not otherwise eligible for Medicaid in family planning programs. States receive 90% match for family planning services and regular match for family planning related services. Family planning related services currently reimbursed at regular match will become reimbursable at the enhanced match if state expands for enrollees who are:  Childless adults below 138% FPL  Newly eligible parents (between current eligibility and 138% FPL) Breaking it Down State Savings Related to Family Planning Programs

14. 14 Currently, states cover certain adults with breast or cervical through a special Medicaid coverage category—the Breast and Cervical Cancer Treatment Program. With expansion, most program enrollees with incomes under 138% FPL would qualify for the new adult group, and the state would receive enhanced federal match. Breast and cervical cancer screening and treatment services currently reimbursed at the state’s CHIP match will become reimbursable at the newly eligible enhanced match if state expands for enrollees who are:  Childless adults below 138% FPL  Newly eligible parents (between current eligibility and 138% FPL) Breaking it Down State Savings Related to Breast and Cervical Cancer Program

15. 15 State Savings from Replacing General Funds with Medicaid Funds

16. 16 Expansion will lead to state savings outside of the Medicaid budget Many states have historically supported programs and services for the uninsured with state general fund dollars Pre-expansion Post-expansion With expansion, many uninsured state program beneficiaries are eligible for coverage through the new adult group; these services can now be financed with federal Medicaid funds rather than state general funds Savings From Replacing General Funds with Medicaid Funds

17. 17 Savings From Replacing General Funds with Medicaid Funds Categories May Include: Uncompensated Care Funding Mental/Behavioral Health Public Health Inmates Other State Programs Targeted to the Uninsured

18. 18 Federal, state, and local governments devote significant funding to offset uncompensated care costs. With expansion, hospitals and other providers are reporting reductions in their uncompensated care costs.  California reduced state general fund spending on indigent care by $1.4 billion (SFY 14-16)  Arkansas saved $17.2 million in state general funds by reducing uncompensated care funding to hospitals (SFY 2015)  New Jersey reduced state-funded hospital charity care grants by $74 million in FY 2016, directing these funds instead to increased Medicaid physician reimbursement and graduate medical education funding Breaking it Down Sources: State Health Reform Assistance Network Issue Brief, The Impact of Medicaid Expansion on Uncompensated Care Costs: Early Results and Policy Implications for States, June 2015.; Missed Opportunities: The Consequences of State Decisions Not to Expand Medicaid, Updated June 2015 [on rural hospital impacts] Expansion also stabilizes rural hospitals As of Sept. 2015, non-expansion states had nearly double the percent of rural hospitals at risk of closure than expansion states (based on measures of financial strength, quality and outcomes, inpatient/outpatient share and population risk). Savings from Reductions in Uncompensated Care

19. 19 State-funded mental health and substance abuse treatment for uninsured individuals can be reduced with expansion, as previously uninsured individuals are now eligible for Medicaid in the new adult group. Breaking it Down Savings from Mental Health and Substance Abuse Services  100% state funding replaced with federal Medicaid funds; state share never exceeds 10%  Savings are outside of the Medicaid budget and often in the budget of another agency; legislative action may be needed to reduce spending and capture the savings  Some states reinvest a portion of savings back into the behavioral health delivery system  Enhanced federal match applies to spending on medical services; 50% federal match on administrative spending

20. 20 Savings from Inpatient Costs of Prisoners Medicaid covers inpatient costs of prisoners who would otherwise be eligible for Medicaid. With expansion, most prisoners will be Medicaid eligible (but for their incarceration status) resulting in savings to state corrections budgets related to inpatient care.  Savings accrue to corrections budget for costs of inpatient services for prisoners < 138% FPL  Michigan saved $6 million in SFY 2014 and $13.2 million in SFY 2015 due to reduced inpatient prisoner costs  Kentucky saved $5.4 million in SFY 2014 and expects to save $11 million in SFY 2015 on this population  Colorado expects savings of $5 million per year in state correctional spending Breaking it Down For more details on how State Medicaid Programs are using Medicaid Expansion to improve care for individuals upon release from prison or jails and reduce recidivism, see the RWJ Report linked below: http://statenetwork.org/wp-content/uploads/2015/11/State-Network-Manatt-Medicaid-Expansion-and-Criminal-Justice-Costs-November-2015.pdf Source: Bachrach, D., Boozang P., Glanz, D. “States Expanding Medicaid See Significant Budget Savings and Revenue Gains.” Robert Wood Johnson Foundation and Manatt. April 2015; Arkansas estimates provided by State

21. 21 Savings from Public Health Programs State and local funding often supports the provision of health services to uninsured individuals, for example, disease prevention and control screening programs. With expansion, previously uninsured individuals are now eligible for Medicaid in the new adult group; states receive Medicaid funding.  100% state funding replaced with Medicaid funding with enhanced federal match  Savings are outside of the Medicaid budget and often in the budget of another agency; legislative action may be needed to reduce spending and capture savings Breaking it Down

22. 22 States often use general fund dollars to supported targeted services for specific uninsured high need populations. With expansion, many, perhaps all, of these enrollees qualify for Medicaid coverage, enabling the state to reduce or eliminate state funding for these targeted programs.  Prescription Drug Assistance Programs  Cancer Screening Programs  HIV/AIDS Programs Savings from Other Targeted State Programs Potential Saving Opportunities

23. 23 Revenue Gains

24. 24 Revenue Gains Many states raise revenue through assessments/taxes on providers and health plans Pre-expansion With expansion, Medicaid revenue to providers and plans increases, generating additional tax revenue for states Post-expansion  New Mexico saw a $30 million increase in CY 2014 premium tax revenues due to increased revenue related to expansion adults, and the state projects continued revenue gains of $30 million in CY 2015.  Michigan expects revenue gains of $26 million in SFY 2015 from the state’s Health Insurance Claims Assessment. State Examples of Revenue Gains Source: Bachrach, D., Boozang P., Glanz, D. “States Expanding Medicaid See Significant Budget Savings and Revenue Gains.” Robert Wood Johnson Foundation and Manatt. April 2015; Arkansas estimates provided by State

25. 25 Measuring Broader Impacts of Expansion

26. 26 Adults in expansion states are nearly twice as likely to be insured as adults in non-expansion states NON-EXPANSION STATES  Medicaid enrollment rose 9.8% in June 2015 compared to baseline (July-September 2013)  Average state uninsurance rates dropped from 20.7% in September 2013 to 14.4% in April 2015 EXPANSION STATES  Medicaid enrollment rose 27.9% in June 2015 compared to baseline (July-September 2013)  Average state uninsurance rates dropped from 15.8% in September 2013 to 7.5% in April 2015 Source: Kaiser Family Foundation, “Medicaid Expansion, Health Coverage and Spending: An Update for the 21 States That Have Not Expanded Eligibility” (April 2015) Expansion Advances Coverage

27. 27 Overall access: 478,000 more individuals will receive all medically necessary care in a given year Primary care: 1.0 million more individuals will gain a usual source of care Preventive care: An additional 609,000 cholesterol screenings and 155,000 mammograms will be completed annually Office visits: 11.3 million additional physician office visits will be completed each year Medicaid Expansion Increases Access to Care EXPANSION ACCESS TO HEALTH CARE Sources: Council of Economic Advisers, “Missed Opportunities: The Consequences of State Decisions Not To Expand Medicaid” (July 2014); Deloitte, “Commonwealth of Kentucky: Medicaid Expansion Report” (February 2015)

28. 28  576,624 residents are now enrolled in Healthy Michigan  The percentage of Primary Care Providers (PCPs) accepting new Medicaid patients rose from 49% to 55%  Median wait times for new appointments now <2 weeks  Healthy Michigan enrollees participated in health risk assessments more than twice as often as enrollees of typical commercial plan Source: State of Michigan, “Healthy Michigan Plan—Risk Assessment Report” (July 2015) Early Michigan Experience

29. 29  232,000 expansion enrollees had a non-annual physician office visit, using primary care at a rate 55% higher than traditional Medicaid enrollees  Medication monitoring services were used 75% more frequently while cholesterol screenings were used 116% more frequently among expansion enrollees compared to traditional Medicaid enrollees Source: Deloitte, “Commonwealth of Kentucky: Medicaid Expansion Report” (February 2015) Early Kentucky Experience

30. 30 Macro-Economic Impacts of Expansion Sources: Council of Economic Advisers, “Missed Opportunities: The Consequences of State Decisions Not To Expand Medicaid” (July 2014); Deloitte, “Commonwealth of Kentucky: Medicaid Expansion Report” (February 2015) Kentucky As a result of expansion, by SFY 2021 Kentucky expects: Total economic gains of $30.1 billion 40,000 new jobs $11.3 billion in new taxable wages Job creation as demand for healthcare services increases Higher income tax revenue from newly created jobs Lower out-of-pocket healthcare costs, allowing consumers to increase spending in other areas

31. 31 Thank You! Patti Boozang, Sr. Managing Director pboozang@manatt.com 212.790.4523