New Hampshire legislators examine possible costs of Medicaid expansionBy GARRY RAYNO
State House Bureau
August 05. 2012 8:18PM
CONCORD - The potential costs of expanding the state's Medicaid program is one of several concerns raised by Republican legislative leaders about the Affordable Care Act.
But those on the other side say the potential costs need to be balanced against the economic benefits of the act and Medicaid expansion before decisions are made in what has become a politically-charged atmosphere.
Numerous studies and reviews have been done on the possible effects of the federal health care reform act on the state's Medicaid program - the latest by former Health and Human Services Commissioner and Republican gubernatorial candidate John Stephen - showing a range of impacts from several hundred million dollars to over $1.7 billion over a seven- to 10-year period.
From lawmakers to advocates to government officials, all agree there are three main issues: the proposal to expand Medicaid, the state and federal health insurance program for the poor, disabled and elderly, to those earning up to 138 percent of the federal poverty level; people currently eligible but not on the Medicaid program who will become eligible once the individual mandate to have health insurance kicks in, and the phasing out of the Disproportionate Share Hospital program that reimburses hospitals for the uncompensated services they provide to the poor and uninsured.
The U.S. Supreme Court caught many by surprise when it ruled earlier this year states could not be forced to expand Medicaid coverage to those earning up to 138 percent of the federal poverty level, while it upheld the individual mandate requiring everyone to have health insurance.
The court's decision forced state elected leaders and officials to have to decide fairly quickly whether to join in the expansion and spurred additional discussions about the value and cost of the act.
Here in New Hampshire state Senate Majority Leader Jeb Bradley, R-Wolfeboro, and House Speaker William O'Brien, R-Mont Vernon, both say lawmakers need much more information at this critical juncture.
State Health and Human Services Commissioner Nicholas Toupmas believes policy makers, the public and his department need an independent analysis that provides a more detailed look at the costs and the benefits of expanding Medicaid eligibility and its implications.
He said he is not in a position of advocating for one side or the other.
'Our role is to provide information to the policy makers that they need to have, that is the responsible thing,' Toumpas said. 'They can take action as they see fit.'
He wants an outside analysis done with input from key lawmakers of the areas that need to be addressed.
Tom Bunnell, consultant to New Hampshire Voices for Health, a group promoting access to affordable health care, said a detailed 'drilling down' will be good for the discussion.
'It is our hope and desire that policymakers will look not just look at the potential costs for New Hampshire but the overall economic benefits,' Bunnell said. 'There is a bigger picture here and we hope (policymakers) take a pragmatic look.'
O'Brien has already said he opposes the state's expansion of Medicaid eligibility.
'I'm very concerned about the effects on state finances,' he said. 'It's not too harsh to say the full implementation of the Affordable Care Act is a hijacking of our state's finances.' He said the act amounts to the 'government take -over of health care for low- and moderate-income people and then dumping them unto the state Medicaid system.'
He said the federal government has not lived up to its promises in the past, using the Individuals with Disabilities Education Act as an example. O'Brien said the federal government promised to pay 45 percent of the cost but has never paid more than 20 percent in New Hampshire, and he does not believe it will pay its full share for Medicaid expansion.
Bradley, who backs Toumpas's request for an independent analysis, asked Stephen of the Stephen Group to update his analysis of the effects of the Affordable Care Act on New Hampshire after the Supreme Court's decision letting states decide if they want to expand Medicaid eligibility and upholding the individual mandate requirement.
'I need more information about expected costs and expected benefits before someone in my position says 'Yes' to proceed with expansion,' said Bradley. 'I don't know how rationally we move forward.' In his analysis, Stephen projects the costs to be $365 million to $1.76 billion over the next decade.
'That's a pretty significant impact to our state,' Stephen said.
Stephen's estimate of the cost of expanding Medicaid eligibility for approximately 50,000 new recipients is $53.8 million over 10 years, which is in line with a number of studies done by groups ranging from the Kaiser Family Foundation to the Heritage Foundation.
But Bunnell also notes, the state is projected to see an influx of between $1.2 billion and $2.3 billion of federal money to pay for the expansion, and that will have a positive economic impact.
The numbers game
Under the ACA, the federal government will pay 100 percent of the Medicaid expansion costs until 2017 when the percentage steps down to 90 percent in 2020 where it will remain. But this is where the agreement ends.
The greatest impact under Stephen's projections would be from the phasing out and eventual elimination of the DSH program which he believes would also result in the loss of $1.4 billion in state Medicaid Enhancement Tax (MET) revenue that hospitals pay the state. The state collected $172 million in MET in the 2012 fiscal year that ended June 30.
What was known as Mediscam - the state taxed the hospitals, used that money for its share of the federal match for the uncompensated care program, and then sent the money back to the hospitals - changed about six years ago due to federal requirements on how the money was used.
Currently, the state receives about $160 million annually for the DSH program with $50 million used to reimburse the state's smaller hospitals. The rest of the money goes into the general fund to be used for other health-care costs like provider payments.
The federal government will begin phasing out the program beginning in 2015 with the assumption more and more citizens will have health insurance so there will be less 'charity care' provided by hospitals.
When that happens, Stephen projects the state will be pressured to do away with the MET if hospitals are no longer receiving DSH money.
But the state's tax is not legally tied to the federal program.
Former Deputy and Acting HHS Commissioner and state Sen. Kathy Sgambati said there is nothing tying the DSH program and the MET together.
'I don't think anybody can project what the costs and savings are going to be until the rules are written,' she said. 'The law is one thing, but the details are in the rules.'
Without adding the additional people to the Medicaid program, Bunnell said, uncompensated care costs will increase dramatically because the number of uninsured will not go down, shifting those costs to the private insurance payers, and greatly increasing the cost of health insurance for businesses and individuals.
The 'woodwork effect'
Stephens believes the second biggest liability for the state is the 'woodwork effect' that will cause people eligible but not on Medicaid to sign up when they realize they will be penalized for not having health insurance.
Stephen projects those costs to be $311 million over the next 10 years as about 25,000 new people enroll in Medicaid. Unlike the expansion to 138 percent of poverty, if those already eligible sign up, the state will have to pay half the costs.
Other estimates of the woodwork effect costs from organizations and foundations range from $63 million to $133 million over the next seven years.
Both Bunnell and Sgambati are not so sure there are that many people who would come out of the woodwork to sign up for Medicaid.
Bunnell notes the state's Medicaid program is very restrictive, but says that is the kind of information a more detailed analysis would produce.
Sgambati noted some people never want to sign up for anything that says Medicaid. 'We saw that with the Healthy Kids program,' she said.
'I don't see a huge increase to the state from that population and the point of the law is to cover as many people as possible, that's the only way to reduce insurance costs.'