Medicaid Expansion a Hot Topic

The Patient Protection and Affordable Care Act (PPACA) provides incentives for states to expand their Medicaid programs. Gov. Walker has said he will decide whether Wisconsin will expand its program by the time he delivers his budget address on February 20.

In states like Wisconsin, that had a relatively expansive Medicaid Program prior to PPACA, the budget issues related to the potential expansion of the state program are familiar. The key Medical Assistance (MA) issue facing the state during the 2011-12 session was not so much how to comport the state program with PPACA, as it was how to afford the state’s existing program. At the beginning of the session, the state was facing an estimated $1.7 billion GPR shortfall in the MA program. The deficit reflected the ongoing cost of program expansion adopted by the state in recent years, coupled with the loss of one-time federal stimulus dollars, coupled with a recession-driven increase in enrollment.

The state’s MA budget issues, aside from being politically challenging, were compounded by the Act’s maintenance of effort (MOE) requirements restricting the state’s ability to address the shortfall by reducing program eligibility or benefit levels. In response, Gov. Walker and the Legislature passed a budget bill that provided roughly $1.24 billion in new GPR to the MA program; the single largest increase afforded any state program in what was otherwise viewed as an austerity budget.

During the 2013-14 session paying for the state’s MA program is again a challenge. Typically, the costs of Medicaid are shared between the state and federal government, with federal taxpayers currently picking up just under 60%. Shared funding and dual state and federal roles in the delivery of medical assistance is not a new concept created under PPACA; cost sharing, and the requirements associated with eligibility to receive federal funds, have been an integral part of the state Medical Assistance program for decades. However, PPACA temporarily enhances federal cost sharing for coverage of new populations.

From January 2014 through the end 2016, the federal health care law covers the full cost of expanding Medicaid coverage for adults with incomes of up to 133% of the federal poverty level, $15,281 for an individual and $20,628 for a couple. Starting in 2017, the coverage for those new enrollees drops gradually, reaching 90% of its initial coverage by 2020.

Democrats have introduced a bill, called the “Strengthen BadgerCare Act,” which would expand the state’s MA program and take advantage of the higher federal matching rate. The sponsors argue that taking the federal money to carry out the expansion would save the lives of patients and boost the state’s health care sector.

The Legislative Fiscal Bureau analysis says the bill will:

  • Expand BadgerCare Plus eligibility for non-pregnant adults who are under age 65 and whose income does not exceed 133% of the FPL.
  • Requires DHS to comply with all federal requirements to qualify for the highest available enhanced federal medical assistance percentage for individuals in the new category.
  • Prohibits DHS from creating a policy that affects the eligibility or benefits of individuals in the new eligibility category.
  • Repeals current statutory sections relating to BadgerCare Plus Core plan.
  • Repeals references to the Core Plan and the Basic Plan in Chapter 227.

With regards to fiscal analysis the LFB memo says:

  • The bill does not change funding levels in any state budget appropriation and “therefore does not have an explicit fiscal effect.”
  • There are some estimates on how the bill will affect MA benefit expenditures beginning January 1, 2014.
  • The cost analysis has two scenarios first for 125,000 new enrollees, and the second for 175,000 new enrollees.
  • A chart at the end of the memo breaks down the GPR spending vs. Federal funding proposed for 2014-2020. The first four years of the expansion the chart shows a decrease of GPR totaling $70.3 million while increasing Federal dollars by $1.5 billion, under the 125,000 new enrollee proposal. For 175,000 new enrollees that number goes to $2.2 billion increased federal dollars.

LFB said other factors may affect future MA costs and were not considered in the analysis. Those include:

  • Potential Cost: The “Woodwork Effect”. Individuals who are currently eligible for BadgerCare Plus but not enrolled will come forward due to increased outreach.
  • Potential Cost: Administrative Costs. Increased MA enrollment would increase the administrative costs for the state and the multi-county income maintenance consortia.
  • Potential Cost: Provider Rate Increases. Some reports suggest states will have to increase MA provider reimbursement rates to ensure covered services for an expanded group.
  • Potential Savings: Limited-Benefit Programs. Wisconsin uses GPR for limited-benefit programs. Federal matching funds could replace those GPR costs.
  • Potential Savings: Uncompensated Care. States may save under the MA expansion by reducing expenditures for uncompensated care.
  • Potential Savings: Prisoner Inpatient Hospital Costs. States may not claim MA federal matching funds for prisoners’ medical costs, but there is an exception for inpatient hospital costs provided outside the correctional facility. Wisconsin does not claim these matching funds.
  • Potential Savings: MA-Covered Costs Incurred by Local Units of Government. Local units of government pay for healthcare services for individuals who are not eligible for MA through their own local funds. Expansion of eligibility could reduce the number of individuals locals pay for.
  • Potential Savings: Enhanced Federal Matching for CHIP. Additional federal funds could offset GPR costs for CHIP enrollees.

A broad coalition of Wisconsin health care advocates, labor groups and advocates for the poor support the expansion, but Gov. Walker and other Republican leaders are skeptical the promised federal money will be available as claimed if the current economic climate and federal deficit persist.

Even with the state only responsible for around 40% of the cost of the current Medicaid program, the Department of Health Services (DHS) submitted the largest agency GPR budget request of all agencies for 2013-15, a $647 GPR increase over the biennium, which is an increase of 11.5% from $5.65 billion base year doubled to $6.3 billion requested.