What is the Result of States Not Expanding Medicaid?

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1 Urban Institut e What Is the Result of States Not Expanding Medicaid? Stan Dorn, Megan McGrath, John Holahan AUGUST 2014 Timely Analysis of Immediate Health Policy Issues Results In-Brief In the 24 states that have not expanded Medicaid, 6.7 million residents are projected to remain uninsured in In the 24 states that have not expanded Medicaid, 6.7 million residents are projected to remain uninsured in These states are foregoing $423.6 billion in federal Medicaid funds from 2013 to 2022, which will lessen eco- 2016 as a result. These states are foregoing $423.6 billion in federal Medicaid funds from 2013 to 2022, which will lessen eco- 2016 as a result. nomic activity and job growth. Hospitals in these 24 states are also slated to lose a $167.8 billion (31 percent) boost in Medicaid nomic activity and job growth. Hospitals in these 24 states are also slated to lose a $167.8 billion (31 percent) boost in Medicaid funding that was originally intended to offset major cuts to their Medicare and Medicaid reimbursement. funding that was originally intended to offset major cuts to their Medicare and Medicaid reimbursement. of state-level concluded Each analysis states. from 16 diverse analyses found comprehensive fiscal studies review A A review of state-level fiscal studies found comprehensive analyses from 16 diverse states. Each analysis concluded that expansion helps state budgets. State savings and new state revenues exceeded increased state Medicaid expenses, with that expansion helps state budgets. State savings and new state revenues exceeded increased state Medicaid expenses, with spending, Medicaid federal reduce lawmakers Even if future costs. a high share of expansion paying government the federal the federal government paying a high share of expansion costs. Even if future lawmakers reduce federal Medicaid spending, - guber bipartisan Facing patterns. rates, given historic enhanced at the ACA’s rates are likely to remain matching high federal high federal matching rates are likely to remain at the ACA’s enhanced rates, given historic patterns. Facing bipartisan guber - of Medicaid spending just once since 1980, while cutting Medicaid natorial Medicaid while cutting just once since 1980, opposition, spending of Medicaid share the federal lowered Congress Congress lowered the federal share natorial opposition, and provider Medicaid expansion Medicaid more than 100 times. payments and provider services, eligibility, services, thus offers significant payments more than 100 times. state-level expansion thus offers significant state-level fiscal and eligibility, fiscal and economic benefits, along with increased health coverage. economic benefits, along with increased health coverage. Consequences of NOT State Price Tags to Expanding Medicaid Expand Medicaid Federal Medicaid Hospital 10-year total cost For States that funding reimbursement to expand LOST (billions) LOST (billions) Medicaid EXPAND (millions) Medicaid $14.4 $7.0 Alabama $1,081 $1.5 $0.6 Alaska $147 $22.6 $66.1 Florida $5,364 $12.8 $33.7 $2,541 Georgia $1.5 $3.3 $246 Idaho $9.2 $17.3 Indiana $1,099 $2.6 $5.3 Kansas $525 $8.0 $15.8 Louisiana $1,244 $3.1 $0.9 Maine $(570) $14.5 $4.8 Mississippi $1,048 $17.8 $6.8 Missouri $1,573 $1.1 $2.1 $194 Montana $1.6 $3.1 Nebraska $250 $39.6 $11.3 $3,075 North Carolina $4.1 $8.6 Oklahoma $689 $37.8 $10.6 Pennsylvania $2,842 $15.8 $6.2 South Carolina $1,155 $2.1 $0.8 South Dakota $157 For every $1 a state invests in Medicaid $22.5 $7.7 $1,715 Tennessee expansion, $13.41 in federal funds will flow into the state. Expanding Medicaid will likely $34.3 $65.6 $5,669 Texas also generate state savings and revenues $5.3 $3.1 Utah $364 that exceed expansion costs. $14.7 $6.2 Virginia $1,326 $3.7 $12.3 Wisconsin $(248) e Urban Institut $0.4 $1.4 Wyoming $118 Total: $423.6 $31.6 $167.8 BILLION BILLION BILLION Notes: Some states are shown with state Medicaid savings, indicated by placing numbers in parentheses, based on the assumed continuation of pre-ACA Medicaid eligibility for adults. State costs do not include offsetting savings and revenues.

2 2 Timely Analysis of Immediate Health Policy Issues have would which in 2016, billion $42.9 insurance marketplaces for two reasons: Introduction Medicaid such states’ federal increased most have incomes below 100 percent receipts by 30.3 percent. To claim those for income FPL, the minimum threshold Twenty-four states have not expanded resources, states would need to spend general tax credit eligibility in nonexpand- Medicaid eligibility to adults with incomes representing $0.3 billion ($291 million), a ing states; but some have incomes slightly at or below 138 percent of the federal 0.3 percent increase over state Medicaid - above that level and are disqualified be poverty by the as permitted level (FPL), costs without expansion. Each additional cause of employer-sponsored insurance Care and Affordable Protection Patient 1 state dollar would thus yield an extra - the ACA classifies Cov as affordable. Act (ACA). Here, we describe some 6 $147.42 in federal funds. erage that firms offer to employees and and macroeconomic fiscal, coverage, their dependents is deemed affordable if implications of this choice, including pre- worker-only insurance costs 9.5 percent vious results from the Health Insurance these states From 2013 to 2022, would of family income or less. Policy - Simulation We also sum Model. forgo an estimated $423.6 billion in feder- fiscal analyses and state-specific marize a 26.9 funding, representing al Medicaid State Economies examine the high federal matching rates percent increase above federal Medicaid on which those analyses rely. dollars received without expansion. The required state contribution is $31.6 billion, The 24 nonexpanding states have rejected The estimates we present generally are raising projected state Medicaid spend- federal funds projected to equal Medicaid projections. They accordingly involve inherent uncertainty. However, the effects on states not expanding Medicaid are al- Figure 1. Increase in Federal and State Medicaid ready being seen, even at this early date: Spending That Would Result From Expansion: 2016 and 2013–2022 (States Not Currently Expanding Eligibility) • Between September 2013 Coverage. and June 2014, the proportion of 30.3% Federal Spending State Spending nonelderly uninsured adults in non-ex- pansion states fell from 20.0 to 18.3 $42.9 billio n percent, compared to a drop from 16.2 26.9% to 10.1 percent in states that expanded Put differently, the number Medicaid. n $423.6 billio in of uninsured declined by 9 percent nonexpanding states and 38 percent in 2 states that expanded Medicaid. The uninsured liv - proportion of America’s ing in nonexpanding states rose from in September 49.7 percent 2013 to 3 60.6 percent in June 2014. Hospital finances. • First-quarter, 2014 earnings reports from several interstate hospital chains described major differences between states that expanded Medicaid—where hospital improved as uncompensat - finances ed care fell and Medicaid revenue both by significant amounts rose, —and nonexpanding states, where hospital with worsened, finances 3.3% uncompensated care and self-pay patient caseloads rising and Medicaid 0.3% $31.6 billio n 4 $0.3 billion revenue falling. Coverage 2016 2013–2022 In the 24 states that have not expanded Source: Health Insurance Policy Simulation Model 2012. Medicaid, 6.7 million residents are project- Note: The figure shows how total Medicaid spending would change compared with spending under ed to be uninsured in 2016 unless their the ACA, without expansion. The figure does not include state savings or revenues resulting from 5 states expand eligibility (table 2). They expansion. States included in the figure had not expanded eligibility as of July 2014. They include will be ineligible for tax credits in health Indiana, Pennsylvania, and Utah, which have pending waiver proposals to expand eligibility. What Is the Result of States Not Expanding Medicaid?

3 3 Timely Analysis of Immediate Health Policy Issues ing by 3.3 percent. Each new state dollar Table 1. Cost to Expand Medicaid Compared with State would accordingly draw down $13.41 in Incentive Payments to Attract Private Business (Millions) additional federal funds over this 10-year (States Not Currently Expanding Eligibility) . (figure 1) time period (CEA) of Economic Advisers The Council Incentive payments State cost to expand Medicaid recently concluded that expanding to attract private (without considering offsetting Medicaid - state eco under the ACA boosts savings and revenue) business nomic growth and employment, primarily 2013–2022 Most recent fund new federal in significant by bringing - year for which data ing to buy additional health care within are available the state. According estimates, to CEA’s Average annual 10-year total Usually 2012, amount Medicaid expansion would add, in non- 10 sometimes earlier expanding states, 78,600 jobs in 2014, 172,400 jobs in 2015, and 98,200 jobs in $108 $1,081 $277 Alabama 7 2016. to return the economy CEA expects Alaska $15 $991 $147 to full employment by 2017, after which - em continued CEA does not anticipate Florida $3,980 $536 $5,364 ployment gains from Medicaid expansion, $1,400 $254 $2,541 Georgia “because an increase in labor demand in one sector will mostly tend to reallocate Idaho $338 $25 $246 away from other sectors.” Many workers $110 $1,010 $1,099 Indiana state-level analysts appear to assume less than full employment and project that Kansas $52 $1,790 $525 Medicaid expansion would continue to 8 Louisiana $1,244 $124 $379 boost job growth well beyond 2017. $416 $(57) Maine $(570) Ordinarily, health coverage expansions Mississippi $1,048 $105 $97 have little effect on net economic activity, because the increased growth triggered $157 $101 $1,573 Missouri by additional health care spending is off- Montana $1,390 $19 $194 by shrinkage caused set by economic paying for that spending. In this case, $25 $250 Nebraska $39 however, federal law rather than state North Carolina $3,075 $307 $2,190 decisions financing the ACA’s determine mechanisms. The only question within $896 $69 $689 Oklahoma state policymakers’ control is whether to Pennsylvania $28 $284 $2,842 counter the adverse economic effects of those mechanisms by bringing in federal South Carolina $115 $19,100 $1,155 Medicaid dollars to buy additional health care. Adding these federal dollars to $207 $16 $157 South Dakota leaving economy a state’s while the $1,715 Tennessee $1,290 $171 can unchanged sources funding ACA’s generate economic growth and em- $567 $5,669 Texas $1,530 by both CEA and as found ployment, Utah $364 $36 $89 state-level analysts. Virginia $1,326 $133 $921 To place state policy choices in per- Wisconsin $(25) $(248) $4,840 spective, the 24 states not expanding Medicaid spent an estimated $44.9 $1,580 $118 Wyoming $12 billion on tax reductions and other sub- $3,160 $31,605 Total: $44,879 sidies to attract private business during the most recent single year for which Sources: Holahan, Buettgens, et al., July 2013; New York Times, December 2012, cited in Glied 9 data are available. Nonexpansion and Ma 2013. states thus spend on these business in- Notes: Listed states had not expanded eligibility as of July 2014. They include Indiana, Pennsylvania, centives more than 14 times the $3.16 and Utah, which have pending waiver proposals to expand eligibility. Some states are shown with state Medicaid savings, indicated by placing numbers in parentheses, based on the assumed billion average annual amount that continuation of pre-ACA Medicaid eligibility for adults. Incentive payments to attract private business Medicaid be required would to finance include tax reductions, grants, loans, loan guarantees, free services, and other subsidies. Totals may expansion during 2013–2022 (table 1). not add because of rounding. What Is the Result of States Not Expanding Medicaid?

4 4 Timely Analysis of Immediate Health Policy Issues Hospitals Table 2. Projected consequences of States Not Expanding Medicaid The combination of increased private and Medicaid coverage is expected to Uninsured not yield hospital revenue that offsets the Hospital Federal Medicaid qualifying for $22 billion ACA’s cuts to in Medicaid reimbursement funding lost coverage disproportionate share hospital payments, (billions) lost (billions) (thousands) $34 billion in Medicare disproportionate share hospital cuts, and $260 billion in 2013–2022 2016 2013–2022 2016 2016 Medicare fee-for-service cuts during Alabama $0.7 254 $7.0 $14.4 $1.5 11 2013–2022. In nonexpansion states, will pay the full cost of the ACA’s hospitals 25 Alaska $1.5 $0.6 $0.1 $0.1 funding mechanisms. However, they Florida $22.6 $2.1 $66.1 $6.7 1,060 will receive only part of the increased revenue for the newly insured that $12.8 $1.2 $33.7 $3.4 Georgia 572 original in the ACA’s was included the Supreme design, before Court made $0.3 Idaho 78 $3.3 $0.1 $1.5 Medicaid expansion optional for states. 291 $9.2 Indiana $1.8 $17.3 $0.9 The 24 states that have not expanded Kansas $0.5 $2.6 $5.3 $0.2 109 Medicaid are projected to cost their hospitals an estimated $15.9 billion in $0.8 287 $8.0 $1.6 $15.8 Louisiana Medicaid revenue for 2016 and $167.8 $0.9 30 $0.3 $3.1 $0.1 Maine . These (table 2) billion for 2013–2022 - hospitals’ have raised sums would Med $4.8 $1.5 201 $14.5 Mississippi $0.5 icaid payments by 32.3 percent and 30.7 274 $6.8 $1.8 Missouri $17.8 $0.6 percent, respectively. $1.1 Montana 50 $0.2 $2.1 $0.1 Medicaid expansion increases hospital costs by increasing utilization. In addition, Nebraska $1.6 $3.1 $0.3 57 $0.1 modestly lowers hospitals’ expansion 414 North Carolina $39.6 $11.3 $1.1 $4.0 - private insurance revenue, mainly by rais ing the lower bound of financial eligibility Oklahoma $0.9 $4.1 $0.4 $8.6 182 for marketplace subsidies from 100 to 138 percent two these FPL. However, $10.6 $1.0 381 $37.8 Pennsylvania $3.8 factors outweighed by are significantly $6.2 $0.6 $15.8 237 South Carolina $1.6 the increased Medicaid revenue resulting 12 from expansion. 34 $2.1 $0.1 $0.2 $0.8 South Dakota State Budgets Tennessee 257 $2.3 $22.5 $0.7 $7.7 $6.6 1,552 Texas $34.3 $3.2 $65.6 In many states, both private- and public-sector organizations have an- $0.3 $0.5 98 Utah $3.1 $5.3 impact the fiscal alyzed of Medicaid $14.7 $1.5 Virginia 268 $6.2 $0.6 assessments Comprehensive expansion. 13 considered effects in four categories: Wisconsin $0.4 $3.7 11 $1.3 $12.3 $0.4 $1.4 $0.1 20 Wyoming $0.0 Increased state costs because of 1. new enrollees. Expanded eligibility $15.9 $167.8 Total: $42.9 $423.6 6,740 increases enrollment among people eligibility pre-ACA within who qualify Sources: Buettgens, et al. May 2014; Holahan, Buettgens, et al., July 2013; Dorn, Buettgens, et al., categories, for whom states pay their March 2013. standard share of Medicaid costs. This Notes: Listed states had not expanded eligibility as of July 2014. They include Indiana, Pennsylvania, and Utah, which have pending waiver proposals to expand eligibility. Totals may not add because is sometimes called the “welcome of rounding. mat” or “woodwork” effect. Beginning in 2017, states that expand coverage also pay a small percentage of costs for newly eligible adults. What Is the Result of States Not Expanding Medicaid?

5 5 Timely Analysis of Immediate Health Policy Issues Researchers from the Universities of • 2013-2022, including $0.3 billion State Medicaid savings. With ex 2. - Alabama and South Carolina in “welcome mat” or “woodwork” found some pre-ACA pansion, coverage expenses; that, in 2014-2020, increased general federal qualifies for a higher medical revenue resulting from expansion percentage (FMAP). assistance For • State Medicaid costs for medically would exceed the state cost of example, in a state with standard needy coverage and certain services expansion million, by $935 $848 of 57 average FMAP at the national by $390 would decline for women million and $9 million for Alabama, percent, suppose a Medicaid appli- due to higher million, FMAP paid for Mississippi, Carolina, and South cation is submitted by an adult with affected beneficiaries; respectively—creating state budget of FPL who below 138 percent income gains even without considering is eventually found to have a disability Pennsylvania save $4.0 bil - • would possible state savings from enhanced him for Medicaid that qualifies under lion on non-Medicaid costs, including on non- spending FMAP or reduced rules. pre-ACA Such determinations 21 a pre-ACA health insurance program Medicaid programs; typically At that to obtain. take months and for childless adults, state mental health point, Medicaid retroactively covers and substance abuse services, inpa- care furnished while the application Department The Wyoming • of Health 14 tient care for state prisoners, and state was pending. found that savings resulting from If the state does not uncompensated care payments; and reduced enhanced FMAP and expand eligibility, it gets 57 percent spending on non-Medicaid programs before provided FMAP for services State personal and corporate income • would exceed increased state costs the disability determination. By con- tax, sales tax, and insurance gross from higher Medicaid enrollment by trast, if the state expands eligibility, receipts tax revenue would increase $126.8 million, yielding overall state is immediately the applicant classified by $3.6 billion. fiscal gains any without considering as a newly eligible adult, and the state 22 revenues resulting from expansion. receives 100 percent FMAP for care After an intensive search, we found 57 provided before the disability determi- Federal Matching Payments - estimat from 35 states fiscal analyses nation, eliminating the state share of 15 ing the impact of Medicaid expansion. those costs. For 16 states, we found comprehensive state officials worry that Congress Some analysis, like the Pennsylvania studies, 3. Non-Medicaid savings. For example, - the high FMAP ACA pro may not sustain that included effects in all four catego- states generally fund mental health vides for expansion, on which the above 23 ries. Each of those 16 comprehensive treatment for poor, uninsured adults. rely. favorable fiscal analyses These analyses found that expansion would A state expanding eligibility can place believe government the federal officials 18 help overall state budgets. most of these adults on Medicaid and reduction must someday focus on deficit Given the shift many (but not all) of their mental and, when it does, they fear it will have ACA’s very high FMAP for low-income health care costs to Medicaid, with unusually little choice but to cut ACA’s adults, state-level savings and revenue taking the federal over government for low-income adults. high FMAP exceeded increased state costs in every financial responsibilities significant case, over whatever multi-year period 19 from the state. Such fears can seem reasonable un- was studied. current into Medicaid’s til one delves 4. Increased revenue. - rais Expansion budget situation and past budget his- The costs, savings, and revenues that es state and local general revenue tory. The federal Medicaid budget result from expansion are highly con- to the extent that increased federal to cut. For contains many other places text-specific, comprehensive so a future Medicaid funding boosts economic 2015, Budget the Congressional Office analysis in a different state might reach activity. Also, many states tax provid- government (CBO) estimates the federal a different result. But that would be sur- 24 er or insurer revenue, which can rise will spend $330 billion on Medicaid, prising, the unanimous findings given of 16 with expansion. thus far in these 16 diverse states—Cal - results $42 billion which from the ACA’s 25 Kansas, Colorado, ifornia, Kentucky, coverage expansion. the latter Within Maryland, Michigan, Missouri, Montana, FMAP accounts amount, enhanced for firms To illustrate, economic consulting 26 New Hampshire, New Mexico, Ohio, less than $21 billion, - by a consortium of Penn commissioned or 6.4 percent of Texas, Virginia, Pennsylvania, Oregon, sylvania foundations concluded that, on all federal Medicaid spending for 2015 and Utah—as well as conclusions from balance, Medicaid expansion would help (21/330=6.4%). Throughout all of 2015- states other heterogeneous like Indiana, by $5.1 billion during that state’s budget 2024, enhanced FMAP for expansion Carolina, New York, South Mississippi, 2013-2022. Analysts reached the following is projected to consume less than 7.4 and Wyoming that expansion would conclusions about the four, above-listed percent of federal Medicaid spending 17 27 based budget, overall help each state’s categories of state fiscal effects: (table 3) . on partial rather than full analyses of 20 fiscal gains. potential Historically, Congress has cut almost To illustrate the state increase would Expansion • any other part of Medicaid before low- latter analyses: Medicaid costs by $2.8 billion during What Is the Result of States Not Expanding Medicaid?

6 6 Timely Analysis of Immediate Health Policy Issues Table 3. Increased Federal Matching Funds for Newly Eligible Adults as a Percentage of Total Federal Medicaid Spending, 2015–2027 2. Upper bound to increased 1. Increased federal Medicaid/ Maximum possible percentage of 3. Total federal federal costs resulting from CHIP costs resulting from ACA Medicaid spending total federal Medicaid spending enhanced FMAP (billions (billions of dollars) due to enhanced FMAP (2/3) (billions of dollars) of dollars) 2015 42.0 330.0 6.4% 21.0 2016 31.0 62.0 8.4% 368.0 2017 70.0 31.5 397.0 7.9% 2018 77.0 33.9 8.1% 418.0 2019 82.0 441.0 8.0% 35.3 2020 33.6 464.0 7.2% 84.0 2021 87.0 34.8 490.0 7.1% 2022 36.4 516.0 7.1% 91.0 2023 96.0 38.4 545.0 7.0% 2024 101.0 40.4 576.0 7.0% 2025 610.6 42.8 7.0% 107.1 2026 647.2 7.0% 45.4 113.5 2027 48.1 686.0 7.0% 120.3 2015–24 792.0 336.2 4,545.0 7.4% 2016–25 857.1 358.1 4,825.6 7.4% 2017–26 908.5 372.5 5,104.8 7.3% 2018–27 958.8 389.1 5,393.8 7.2% 28 Source: CBO April 2014. Notes: FMAP is federal medical assistance percentage. CHIP is Children’s Health Insurance Program. Enhanced FMAP costs estimated by CBO are necessarily below the amounts shown here as upper bounds, which are calculated based on the following assumptions: (1) All increased federal Medicaid/CHIP spending projected by CBO to result from the ACA is for newly eligible adults, the only group qualifying for enhanced FMAP; and (2) CBO’s projection assumed that the only states implementing the Medicaid expansion: (a) receive the legal minimum 50 percent for standard FMAP, so increased FMAP for expansion consumes as much of the projection as possible, and standard FMAP consumes as little of the projection as possible; and (b) receive full increased FMAP, not the reduced increase to FMAP provided to states that expanded eligibility for poor adults before 2019. CBO estimates are through 2024. We extrapolated estimates for later years by assuming a continuation of 6 percent annual increases to Medicaid costs. raising benefits, eliminating consumer recent budget bills actually raised the fed- ering the federal share of Medicaid costs, charges, cutting eligibility, reducing pro- share, even while making eral Medicaid largely due to bipartisan gubernatorial 29 31 vider payments, etc. other federal Medicaid cuts. laws 11 federal 1980, Since resistance. Only once—in have made more than 100 different cuts 1981—did lower the federal Congress 30 to reduce projected Medicaid spending by share of Medicaid spending. More What Is the Result of States Not Expanding Medicaid?

7 7 Timely Analysis of Immediate Health Policy Issues CONCLUSION The states that did not expand Medicaid left nearly 7 million uninsured residents without help. While the number of uninsured in other states fell by 38 percent since September 2013, nonexpanding states experienced a decline of just 9 percent. If they expand Medicaid, nonexpanding states would obtain more than $400 billion in federal funding over ten years, creating jobs during 2015, according 172,400 of Economic Advisers. Their hospitals would receive $168 billion in new to the Council revenue, offsetting the ACA’s cuts to Medicare and Medicaid reimbursement. Every comprehensive state-level budget analysis of which we know found that expansion helps state budgets, because it generates state savings and additional revenues that exceed increased Medicaid costs. The current structure and past history of federal Medicaid spending show that, when federal certainly the federal lowering without seek and find other ways to cut Medicaid they will almost reduction, turn to deficit leaders share of Medicaid spending below the ACA’s statutory level. In nonexpanding states, officials face the challenge of securing expansion’s practical benefits for their constituents without violating States lawmakers’ core principles. that incorporate have thus made creative expansion proposals privatization, personal respon - sibility, and commercial-style benefits. Federal agencies receiving such proposals then face the challenge of accommodating view as Medicaid’s what federal state leaders’ philosophical commitments without setting precedents that could endanger officials essential features. Low-income access to care now depends on these diverse leaders working together effectively. Americans’ The views expressed are those of the authors and should not be attributed to the Robert Wood Johnson Foundation or the Urban Institute, its trustees, or its funders. & ACKNOWLEDGMENTS ABOUT THE AUTHORS Fellow, and John Holahan fellow, a research McGrath, and an Institute are a senior respectively, Stan Dorn, Megan assistant, Institute’s Health Policy Center. The authors appreciate the comments and suggestions of Genevieve Kenney of the at the Urban The authors are grateful to the Robert Wood Johnson Foundation for supporting this research. Urban Institute. ABOUT THE URBAN INSTITUTE Institute is a nonprofit, nonpartisan policy research organization The Urban economic the social, that examines and educational visit http://www.urban.org the nation. facing problems and governance on Institute the Urban Follow . For more information, Twitter or Facebook www.urban.org/facebook . More information specific to the Urban Institute’s Health www.urban.org/twitter Policy Center, its staff, and its recent research can be found at www.healthpolicycenter.org. ABOUT THE ROBERT WOOD JOHNSON FOUNDATION Wood Johnson Foundation has worked to improve the health and health care of all Amer - For more than 40 years the Robert We are striving to build a national Culture of Health that will enable all Americans to live longer, healthier lives now and icans. for generations www.rwjf.org/twitter on Twitter the Foundation Follow . www.rwjf.org visit For more information, at to come. or on . www.rwjf.org/facebook Facebook at What Is the Result of States Not Expanding Medicaid?

8 8 Timely Analysis of Immediate Health Policy Issues Notes 9 New York Times, “United States of Subsidies: A Series Examining Business 1 We include a state in this category if, as of July 2014, the state had not implemented Medicaid expansion. We therefore include Indiana, Pennsylvania, and Utah, Incentives and Their Impact on Jobs and Local Economies,” December 1, 2012, notwithstanding those states’ pending waiver proposals to expand eligibility. http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html?_ r=0 . In no state was the year in question more recent than 2012. This article is cited 2 Among uninsured adults with incomes at or below 138 percent FPL, states that in Glied S and S Ma. How States Stand to Gain or Lose Federal Funds by Opting expanded Medicaid saw uninsurance rates fall by 13.7 percentage points; non- In or Out of the Medicaid Expansion. New York: The Commonwealth Fund, 2013. expansion states did not experience a statistically significant decline. Sharon K. http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2013/ Long, Genevieve M. Kenney, Stephen Zuckerman, Douglas Wissoker, Adele dec/1718_glied_how_states_stand_gain_lose_medicaid_expansion_ib_v2.pdf . Shartzer, Michael Karpman, Nathaniel Anderson, and Katherine Hempstead. 10 The date for which information about incentive payments is available varies Taking Stock at Mid-Year: Health Insurance Coverage under the ACA as of June by state and program. For example, the New York Times describes California 2014. July 29, 2015, Washington, DC: Urban Institute and Robert Wood Johnson as making at least $4.17 billion per year in incentive payments. All quantified Foundation, . See also http://hrms.urban.org/briefs/taking-stock-at-mid-year.html payments are estimated for FY 2012 except $38.9 million in sales and use tax Sommers, BD, T Musco, K Finegold, MZ Gunja, A Burke, AM McDowell. “Health exemptions for clean technology manufacturing, estimated for calendar year 2011; Reform and Changes in Health Insurance Coverage in 2014.” New England Journal $36.4 million for employment training services, estimated for FY 2009; and $211 of Medicine, July 23, 2014, DOI: 10.1056/NEJMsr1406753. To similar effect million for the alternative and renewable fuel and vehicle technology program regarding adults with incomes below poverty, see Collins, SR, PW Rasmussen, (involving cash grants, loans, or loan guarantees), estimated for calendar year and MM. Doty. Gaining Ground: Americans’ Health Insurance Coverage and 2010. The latter three incentive programs combined represent less than 7 percent July Access to Care After the Affordable Care Act’s First Open Enrollment Period, of the state’s quantified incentive payments as estimated by the New York Times, 2014, New York, NY: The Commonwealth Fund, http://www.commonwealthfund. with the rest coming in FY 2012. Additional unquantified incentive payments are org/~/media/files/publications/issue-brief/2014/jul/1760_collins_gaining_ground_ listed for pre-2012 time periods. Story, L, T Fehr and D Watkins, “California,” New tracking_survey.pdf . , December 1, 2012, York Times http://www.nytimes.com/interactive/2012/12/01/ 3 Adele Shartzer, Genevieve M. Kenney, Sharon K. Long, Katherine Hempstead, and us/government-incentives.html?_r=1& . July 29, Douglas Wissoker. Who Are the Remaining Uninsured as of June 2014? The Financial Benefit to Hospitals 11 Dorn S, Buettgens M, Holahan J and Carroll C. http:// 2015, Washington, DC: Urban Institute and Robert Wood Johnson Foundation, from State Expansion of Medicaid. Washington, D.C.: Urban Institute, 2013. hrms.urban.org/briefs/who-are-the-remaining-uninsured-as-of-june-2014.html . http://www.urban.org/uploadedpdf/412770-The-Financial-Benefit-to-Hospitals- http://www. 4 See, e.g., Tenet Healthcare Corporation, “Tenet: Q1 ’14,” May 5, 2014, from-State-Expansion-of-Medicaid.pdf . tenethealth.com/Investors/Documents/Earnings/Q1%202014%20SLIDES_2014_ ; Community Health Systems, Inc., “First Q1_D_16_trr_FINAL%205_5_2014.pdf Redistribution 12 Dorn, Buettgens, Holahan, Carroll; Dorn, S, B Garrett, J Holahan. Quarter 2014 Financial and Operating Results Conference Call,” May 7, 2014; Under the ACA is Modest in Scope. Washington, D.C.: Urban Institute, 2014. Hospital Corporation of American, “First Quarter 2014 Earnings Conference Call,” http://www.urban.org/UploadedPDF/413023-Redistribution-Under-the-ACA-is- April 29, 2014. The latter calls are summarized at Millman, J. “Hospitals see blue- Modest-in-Scope.pdf . Washington Post Wonkblog red divide early into Obamacare’s coverage expansion.” , 13 Expansion will also affect administrative costs. Some will rise—for example, more May 12, 2014, http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/12/ applications and renewals will need to be processed. Others will fall—for example, . See also hospitals-see-blue-red-divide-early-into-obamacares-coverage-expansion/ states with pre-ACA medically needy, “spend-down” coverage will carry out Center for Health Information and Data Analytics. Impact of Medicaid Expansion fewer labor-intensive spend-down determinations, because some former “spend- on Hospital Volumes, June 2014, Denver, CO: Colorado Hospital Association. downers” will qualify as newly eligible adults. We are not aware of any state-level The latter analysis compared data from 465 hospitals in 15 expanding and 15 analysis that has analyzed administrative costs in a comprehensive way, taking into nonexpanding states, concluding as follows: account specific factors like these, which are described in Holahan, Buettgens and • “The Medicaid proportion of patient volume at hospitals in states that expanded Dorn, The Cost of Not Expanding Medicaid. Medicaid increased substantially in the first quarter of 2014. At the same time, 14 Coverage extends retroactively to care provided up to three months before the date the proportion of self-pay and overall charity care declined in expansion- of application. state hospitals... The Medicaid proportion of total charges increased over three percentage points to 18.8 percent in 2014 from 15.3 percent in 2013, 15 After 2016, the state will start paying some of those costs, with its share rising to representing a 29 percent growth in the volume of Medicaid charges. When 10 percent in 2020 and beyond—still substantially less than the 43 percent it must compared to the first quarter of 2013, there was a 30 percent drop in average finance if it does not expand eligibility. charity care per hospital across expansion states, to $1.9 million from $2.8 million. Similarly, total self-pay charges declined 25 percent in expansion When the Medicaid program pays state taxes or fees on providers or insurers, the 16 states, bringing its proportion of total charges down to 3.1 percent from 4.7 state share of Medicaid payments is a “wash” fiscally—that is, the state Medicaid percent.” program pays the state revenue office—but the federal share is a transfer from the federal Treasury to the state. With expanded eligibility, most new Medicaid dollars • “Medicaid, self-pay and charity care showed no change outside normal variation are federal. for hospitals in non-expansion states in 2014.” The Economic Pennsylvania Economy League, Inc., and Econsult Solutions, Inc. 17 5 Buettgens M, Kenney GM, and Recht H. Eligibility for Assistance and Projected And Fiscal Impact Of Medicaid Expansion In Pennsylvania . April 2013, May 2014 Update. Changes in Coverage Under the ACA: Variation Across States, Harrisburg, PA: PA Health Funders Collaborative, http://economyleague.org/files/ Washington, D.C.: Urban Institute and Robert Wood Johnson Foundation, 2014. PEL_MEDICAID_EXPANSION_REPORT_FINAL.pdf . http://www.urban.org/url.cfm?ID=413129 . For Colorado, Maryland, Michigan, New Mexico, Oregon, and Virginia, see Dorn S, 18 6 The Cost of Not Expanding Medicaid. Holahan J, Buettgens M and Dorn S. Medicaid Expansion Under the ACA: How States Analyze Holahan J, Carroll C, et al. http://kaiserfamilyfoundation.files. Washington, D.C.: Urban Institute, 2013. http:// the Fiscal and Economic Trade-Offs. Washington, D.C.: Urban Institute, 2013. . wordpress.com/2013/07/8457-the-cost-of-not-expanding-medicaid4.pdf www.urban.org/UploadedPDF/412840-Medicaid-Expansion-Under-the-ACA.pdf . In addition, comprehensive analyses were conducted analyzing state fiscal effects Missed Opportunities: The Consequences Council of Economic Advisers. 7 Kansas, Kentucky, Missouri, Montana, New Hampshire, in California, Ohio, of State Decisions Not to Expand Medicaid , July 2014, Washington, DC: Pennsylvania, Texas, and Utah. For links to studies of the latter states, see the http://www.whitehouse.gov//sites/default/files/docs/missed_opportunities_ http://www.urban.org/UploadedPDF/413192- supplement to this paper, available at medicaid_0.pdf . What-is-the-Result-of-States-Not-Expanding-Medicaid-appendix.pdf . 8 See, e.g., Missouri Office of Administration, Division of Budget & Planning. 19 Many (but not all) of these analyses find that, by the end of the estimated multi- Medicaid Restructuring Budget background. February 2013, Springfield, MO, year periods, when the federal share of costs for newly eligible adults falls to 90 http://www.mobudget.org/files/Medicaid_Expansion_Save_MO_Money.pdf ; percent, increased costs exceed, by a small amount, the combination of savings Custer WS. The Economic Impact of Medicaid Expansion in Georgia . February 2013, and revenues resulting from expansion. However, none of the estimates that we Atlanta, GA: Institute of Health Administration, J. Mack Robinson College of Business, found considered state savings, which are likely to be significant, allowed by Georgia State University, 2013. For a comprehensive list of state macroeconomic CMS’s guidance permitting states to claim enhanced FMAP for health care costs analyses as of November 2013, see Kaiser Commission on Medicaid and the provided for certain adults with disabilities at or below 138 percent FPL, including Uninsured, , November 2013, The Role of Medicaid in State Economies and the ACA for services provided while such adults are awaiting their disability determinations. https://kaiserfamilyfoundation.files.wordpress.com/2013/11/8522-the-role-of- CMS. “Medicaid and the Affordable Care Act: FMAP Final Rule Frequently Asked medicaid-in-state-economies-looking-forward-to-the-aca.pdf . What Is the Result of States Not Expanding Medicaid?

9 9 Timely Analysis of Immediate Health Policy Issues http://www.medicaid.gov/Medicaid-CHIP-Program- Questions.” August 29, 2013, Congressional Budget Office (CBO). Updated Estimates of the Effects of the 28 Information/By-Topics/Financing-and-Reimbursement/Downloads/FMAP-FAQs. Insurance Coverage Provisions of the Affordable Care Act, April 2014 . April 2014. . On the other hand, if CEA’s analysis of the impact of future labor markets pdf Washington, DC, http://www.cbo.gov/sites/default/files/cbofiles/attachments/45231- on Medicaid expansion’s macroeconomic effects is correct, revenue gains from ; CBO. Detail of Spending and Enrollment for Medicaid for ACA_Estimates.pdf Medicaid expansion may fall below projected levels, in some states. . April 2014. Washington, DC, http://www.cbo.gov/sites/ CBO’s April 2014 Baseline default/files/cbofiles/attachments/44204-2014-04-Medicaid.pdf . 20 The studies that considered only some of the above categories of state budget gains reached mixed conclusions. While most such studies found expansion had 29 Omnibus Reconciliation Act of 1980 (P.L. 96-499), Omnibus Budget Reconciliation a negative overall impact, in 10 states analysts found net state budget gains even Act of 1981 (P.L. 97-35), Tax Equity and Fiscal Responsibility Act of 1982 (P.L. without considering all potential categories of state fiscal benefits. In addition to 97-248), Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272), Medicaid Expansion Minnesota and New York, (Dorn, Holahan, Carroll, et al., Omnibus Budget Reconciliation Act of 1986 (P.L. 99-509), Omnibus Budget Under the ACA ) those states were Alabama, Indiana, Louisiana (under a scenario Reconciliation Act of 1987 (P.L. 100-203), Omnibus Budget Reconciliation Act of that did not increase provider reimbursement), Mississippi, South Carolina, 1990 (P.L. 101-508), Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66), Tennessee, Wisconsin (in one of several analyses), and Wyoming. For links to Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. the latter studies, as well as the more numerous state-level analyses that failed to 104-193), Balanced Budget Act of 1997 (P.L. 105-33) , Deficit Reduction Act of consider all categories of potential state fiscal gains and concluded that Medicaid 2005 (P.L. 109-171) . expansion would harm state budgets, see the on-line supplement to this paper, 30 Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35). At that time, Medicaid’s http://www.urban.org/UploadedPDF/413192-What-is-the-Result-of- available at contribution to state budgets (hence governors’ motivation to resist cuts) was a third . States-Not-Expanding-Medicaid-appendix.pdf of current levels. In 1981, state general fund expenditures totaled $145.0 billion, The estimates for Alabama and Mississippi are for the “intermediate take-up 21 and the federal government spent $16.9 billion on Medicaid—the equivalent of 12 An Economic Evaluation of Medicaid scenario,” Becker DJ and MA Morrisey. percent of state general fund dollars. By 2012, those two amounts rose to $666.8 . Department of Health Expansion In Alabama under the Affordable Care Act billion and $237.9 billion, respectively. Federal Medicaid dollars thus equaled 36 Care Organization and Policy, School of Public Health, University of Alabama percent of state general fund expenditures. See Center on Medicare and Medicaid http://www.soph.uab.edu/files/faculty/mmorrisey/Becker- at Birmingham. 2012, Services. “National Health Expenditures by Type of Service and Source of Funds, Morrisey%20Study%20of%20Alabama%20Medicaid%20Expansion%202012. CY 1960–2012,” http://www.cms.gov/Research-Statistics-Data-and-Systems/ pdf ; Becker DJ and MA Morrisey. An Economic Analysis of the State and Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/NHE2012. . Department of Health Local Impact of Medicaid Expansion in Mississippi ; National Governors Association Office of Research and Development and zip Care Organization and Policy, School of Public Health, University of Alabama National Association of State Budget Officers. Fiscal Survey of the States: 1981- at Birmingham. 2013. For the South Carolina estimates, see Von Nessen, J. Washington D.C.: National Governors Association Office of Research and 1982. The Economic Impact of the Affordable : Medicaid Expansion in South Carolina Development and National Association of State Budget Officers, 1982, http:// Care Act . December 2013, Columbia, SC: Moore School of Business, University ; National Governors www.nasbo.org/sites/default/files/pdf/fs1981-1982.PDF of South Carolina, prepared for the South Carolina Hospital Association, Association Office of Research and Development and National Association of http://www.scha.org/files/documents/medicaid_expansion_in_sc_report.pdf . Note State Budget Officers. Washington, D.C.: The Fiscal Survey of States: Fall 2013. that if CEA is correct and labor market slack completely disappears, Medicaid National Governors Association Office of Research and Development and National expansion may not yield the economic growth forecast by these state-level http://www.nasbo.org/sites/default/ Association of State Budget Officers, 2013, analysts, leading to less general revenue growth than anticipated. files/NASBO%20Fall%202013%20Fiscal%20Survey%20of%20States.pdf . 22 The Optional Expansion of Medicaid in Wyoming Department of Health. 31 For example, the two most recent budget reconciliation bills that made Medicaid Wyoming: Costs, Offsets, and Considerations for Decision-Makers. Cheyenne, cuts were the Balanced Budget Act of 1997 (BBA) and the Deficit Reduction Act of . http://www.health.wyo.gov/Media.aspx?mediaId=13196 WA: November 2012, 2005 (DRA). The BBA eliminated the need for federal waivers before states could force Medicaid beneficiaries into closed-panel managed care plans; repealed the See, for example, New York Times Editorial Board, “A Health Care Showdown in 23 so-called “Boren Amendment,” thereby letting states cut payments to hospitals and New York Times Virginia,” http://www.nytimes.com/2014/05/11/ , May 10, 2014, nursing homes; cut payments to federally qualified health centers, pediatricians, opinion/sunday/a-health-care-showdown-in-virginia.html ; Howell WJ and Cox and obstetricians; cut payments to providers serving Medicare Savings Program Richmond K, “Medicaid Expansion: Promises on Future Costs Don’t Ring True,” beneficiaries; and limited states’ use of disproportionate share hospital payments http://www.timesdispatch.com/opinion/their- , February 2, 2014, Times-Dispatch and provider donations and taxes. At the same time, the BBA raised FMAP for opinion/columnists-blogs/guest-columnists/howell-and-cox-medicaid-expansion- Alaska and the District of Columbia and increased the dollar ceiling on FMAP promises-on-future-costs-don/article_0285f36b-9652-5a5a-9524-ae0f914d4afc. claimable by U.S. territories. Several years later, the DRA cut Medicaid payments ; Associated Press, “Kansas Legislature Extends Ban on Medicaid html for prescription drugs; cut Medicaid eligibility for long-term care; required states , April 5, 2014, Modern Healthcare Expansion,” http://www.modernhealthcare. to take specified anti-fraud measures; increased private insurers’ third-party com/article/20140405/INFO/304059935 ; Miller D, “Medicaid—To Expand or liability payments to Medicaid; let states raise beneficiaries’ premiums and co- Capitol Ideas: Council of State Governments E-Newsletter , Not to Expand?” payments; let states cut benefits for adults; limited states’ use of managed care May/June 2014, ; http://www.csg.org/pubs/capitolideas/enews/issue108_1.aspx taxes; ended coverage of certain case management services for children; made it Springfield Shorman J, “Shouting Protestors Shut Down Senate, Some Arrested,” harder for applicants to prove U.S. citizenship; capped emergency payments to out- News-Leader , May 7, 2014, http://www.news-leader.com/story/news/local/ of-network providers for managed care enrollees; and terminated states’ authority . ozarks/2014/05/06/shouting-protestors-shut-state-senate/8765497/ to grant new CHIP waivers to cover childless, nonpregnant adults. At the same time, the DRA raised FMAP for Alaska, Louisiana, and the District of Columbia CBO. Detail of Spending and Enrollment for Medicaid for CBO’s April 2014 24 and increased the dollar cap on FMAP for U.S. territories. Other examples of Baseline http://www.cbo.gov/sites/default/files/ . April 2014. Washington, DC, increased FMAP include enhanced FMAP to provide state Medicaid programs cbofiles/attachments/44204-2014-04-Medicaid.pdf . with fiscal relief in 2003 and 2009, neither of which was accompanied by Medicaid cuts; an elevated federal match rate for covering children through CHIP, enacted CBO. 25 Updated Estimates of the Effects of the Insurance Coverage Provisions of as part of the BBA in 1997, that exceeded the federal match rate available through the Affordable Care Act , April 2014. April 2014. Washington, DC, http://www.cbo. previous Medicaid coverage expansions for children; and still higher match rates gov/sites/default/files/cbofiles/attachments/45231-ACA_Estimates.pdf. for covering newly eligible adults enacted through the ACA in 2010. That estimate is based on the following assumptions:, all of which assume the 26 maximum possible proportion of federal Medicaid funding devoted to increased FMAP: (1) All increased federal Medicaid/CHIP spending projected by CBO to result from the ACA is for newly eligible adults, the only group qualifying for elevated FMAP; and (2) that CBO projection of increased spending assumed that the only states implementing the Medicaid expansion: (a) receive the legal minimum 50 percent for standard FMAP, so increased FMAP for expansion consumes as much of the projection as possible, and standard FMAP consumes as little of the projection as possible; and (b) receive full increased FMAP, not the reduced increase to FMAP provided to states, such as New York, that expanded eligibility for poor parents and childless adults before 2019. 27 That percentage will decline in the future as CBO’s 10-year “scoring window” moves forward to include additional years with 90 percent FMAP and fewer years with 100 percent FMAP. That is why, as shown by table 3, the percentage of total federal Medicaid spending consumed by enhanced FMAP drops from an upper bound of 7.4 percent in 2015–2024 to an upper bound of 7.2 percent in 2018–2027. What Is the Result of States Not Expanding Medicaid?

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