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MEDICAID EXPANSIONBUDGET BACKGROUND

January 2013

Office of AdministrationDivision of Budget and Planning

MEDICAID EXPANSIONBUDGET BACKGROUND

Cost for new Medicaid eligibles

Savings in state share for existing populations

Additional revenue

Summary of budget impact

Provider payments2

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MEDICAID EXPANSION COST

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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%

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COST -- NUMBER OF PEOPLE

KEY ASSUMPTIONS

Assumed Take Up Rates: Parents -- 70% increasing to 80% by 2018Childless Adults -- 60% increasing to 80% by 2018Medically Frail -- 95% from first year

Data Sources:U.S. Census Bureau 2011 American Community SurveyU.S. Census Bureau 2010 Table on Prevalence of Disability

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MEDICAID EXPANSION COST NUMBER OF PEOPLE

115,685 115,685 115,685 122,626 129,567

124,032 132,572 141,112149,653

158,193

19,78219,782

19,78219,782

19,782

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

Parents Childless Adults Medically Frail

259,499 268,039276,579

292,061307,542

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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

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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%

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COST -- SUMMARY

$907.5

$1,857.8$1,955.3 $2,032.1

$2,131.8$2,239.7 $2,275.9 $2,329.7

$0.0

$0.0$0.0

$23.9

$55.3

$69.4$94.6

$115.6

$0.0

$0.0$0.0

$30.1

$69.3

$86.6$117.6

$143.3

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Mill

ions

of D

olla

rs

Federal Other GR

$1,858

$908

$1,955

$2.086

$2,256

$2,396$2,488

$2,589

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MEDICAID EXPANSION SAVINGS IN STATE SHARE

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SAVINGS – EXISTING POPULATIONSCurrent Medicaid Populations under 138% FPL

- Pregnant women – covered prior to pregnancy

- Ticket to Work

- Breast/Cervical Cancer

- Spenddown

- Women’s Health Services

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SAVINGS – EXISTING POPULATIONSCurrent State Only Populations under 138% FPL

- Blind Pension

- Corrections

- Dept of Mental Health Clients

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SAVINGS – EXISTING POPULATIONSGENERAL REVENUE (millions of $)

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$17.6

$44.4 $55.2 $54.2 $51.8 $52.4 $51.2 $50.8 $13.5

$27.0

$27.1 $27.1 $27.1 $27.1 $27.2 $27.2

Medicaid State Only Progs

$82.3 $81.3 $78.9 $79.5 $78.4 $78.0

$31.1

$71.4

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MEDICAID EXPANSION ADDITIONAL REVENUE

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ADDITIONAL REVENUEKey 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

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ADDITIONAL REVENUEKey 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

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ADDITIONAL REVENUEKey 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

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ADDITIONAL REVENUE$s in millions

$9.9

$30.5 $32.4 $33.5$3.8

$4.1 $4.3 $4.3

$1.8

$1.9 $2.1 $2.0

$17.0$18.5

$22.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

FY14 FY15 FY16 FY17

Ind Income Tax Sales Tax - Income Sales Tax - Other Tax Credits

$15.5

$53.5$57.3

$61.8

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MEDICAID EXPANSIONBUDGET SUMMARY

MEDICAID EXPANSIONBUDGET 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

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BUDGET SUMMARYCOST, SAVINGS & REVENUE

General Revenue Summary -- Dollars in MillionsFY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Cost New Eligibles $0.0 $0.0 $0.0 ($30.1) ($69.3) ($86.6) ($117.6) ($143.3)

Savings $31.0 $71.4 $82.3 $81.2 $78.9 $79.6 $78.4 $78.0

New Revenues $15.5 $53.6 $57.3 $61.8 $63.0 $65.0 $67.2 $69.6

Total Impact on GR $46.5 $125.0 $139.6 $112.9 $72.6 $58.0 $28.0 $4.3

PROVIDER PAYMENTS

Hospital ReductionsRegardless 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.

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HOSPITAL PAYMENT REDUCTIONSEach 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).

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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

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PROVIDER PAYMENTSMEDICAID 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

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CONCLUSIONCuts 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

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