Federal Affairs UpdateMolina Policy & Government Advocacy Summit

Ken PreedeDirector, Federal Affairs

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Joint Select Committee on Deficit Reduction• 12 Member “Super Committee”• Equal Representation from each political party and branch of

Congress– Democratic Co-Chair: Senator Patty Murray (D-WA)– Republican Co-Chair: Representative Jeb Hensarling (R-TX)

• Required to trim at least $1.2 trillion from federal budget • Committee Required to report legislation by November 23, 2011• Bill required to pass both House and Senate by December 23, 2011 • Bill given special status in House and Senate

– No Amendments– Filibuster-proof simple majority vote in Senate

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Democratic Members

Senator Patty Murray

(WA)

Senator Max Baucus

(MT)

Senator John Kerry (MA)

RepresentativeChris Van Hollen

(MD)

RepresentativeXavier Becerra

(CA)

RepresentativeJames Clyburn

(SC)

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Republican Members

Senator Jon Kyl (AZ)

Senator Rob Portman

(OH)

Senator Pat Toomey (PA)

RepresentativeJeb Hensarling

(TX)

RepresentativeDave Camp (MI)

RepresentativeFred Upton (MI)

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Timeline of action under the Budget Control Act of 2011

Deadline for House and Senate Committees to submit recommendations to the Super Committee

October 14, 2011

Deadline for Super Committee to vote on a report and legislative recommendations

November 23, 2011

Deadline for Super Committee report/legislative language to be submitted to WH and Congressional Leaders

December 2, 2011

Bill must be introduced in House and Senate December 3, 2011

Deadline for any committee to which the Super Committee bill is referred to report it out without change

December 9, 2011

Deadline for vote on Super Committee in House & Senate December 23, 2011

Date by which bill must be enacted in order to avoid trigger of sequestration January 15, 2012

Termination of Super Committee January 31, 2012

Date on which sequestration for FY2013 would occur January 2, 2013

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Joint Select Committee on Deficit Reduction• If no Committee consensus or bill fails to pass either House or Senate,

a series of automatic cuts (called sequestration) to Defense, discretionary and Medicare spending would go into effect by 2013.– For Parts A and B, the applicable cut determined by OMB would apply to

each individual service ordered during the applicable year– For Parts C and D, the applicable cut determined by OMB would apply to

each monthly contractual payment during the applicable year– Maximum cut to Medicare spending is 2%

• No Automatic Cut to Medicaid funding• Approval of a balanced budget amendment to the U.S. Constitution

would allow the debt limit to be increased without enactment of a second round of budget savings.

Three Scenarios• Scenario One: Gridlock

– No plan developed by the Super Committee or plan fails to pass BOTH the House and the Senate or the plan passes both the House and Senate but is VETOED by the President

– Outcome: Sequestration for $1.2 Trillion with Medicaid OFF THE TABLE

Three Scenarios• Scenario Two: Full Plan to cut at least $1.2 Trillion

– Super Committee develops plan and it passes both Houses of Congress and is signed by the President

– Medicaid and Medicare ON THE TABLE and likely included in the plan

Three Scenarios• Scenario Three: Partial Plan

– Super Committee develops plan and it passes both Houses of Congress and is signed by the President – but doesn’t reach $1.2 Trillion target

– Medicaid and Medicare ON THE TABLE and likely included in the plan

– Sequestration to make up the difference (Medicaid OFF THE TABLE)

What’s at stake?

• Medicaid Funding – FMAP “blended rates”– Block grants– Maintenance of Effort – Dual-eligible integration

• Mandatory Medicaid HMO enrollment? Opt out?

What’s at stake?

• Medicare Funding– Fee-for-service provider cuts (hospitals, nursing

homes, home health care)– Medicare Advantage cuts– Change in age eligibility?– Cost-sharing?

What’s at stake?

• Revenue– Tax Reform?– Rate Reduction

coupled with closing loopholes and eliminating deductions

– Molina tax issue

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Projected Savings from Sequester$1.2 Trillion in Total Savings

PPACA HEALTH PLAN EXCISE TAX

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PPACA Health Plan Excise Tax• Takes effect in 2014 with $8 billion in collected

excise taxes – 2015 and 2016: $11.3 billion– 2017: $13.9 billion– 2018 and beyond: $14.3+ billion

• Based on market-share of total U.S. eligible premiums collected

• Self-insured plans and certain non-profit plans exempted from the excise tax

PPACA Health Plan Excise Tax

• Marwood Group Study• Commissioned by Molina and Amerigroup in

Summer of 2011• Independent analysis of impact of tax on Federal

and State Medicaid expenditures• Advocacy tool for future lobbying efforts to repeal

the tax

Marwood Study

Key Finding

• Total excise tax of $10.5 billion on Medicaid health plan premium revenue– State Medicaid expenditures between 2014 and 2019

up to $4.1 billion– Federal Medicaid expenditures between 2014 and

2019 up to $6.4 billion

Marwood Study

Likely Flow of Medicaid Managed Care Tax

$100 Assessment

ActuarialSoundness FMAP

$61$100 (?)$100

Federal Treasury will spend $61 out of $100 in tax revenue collected from Medicaid Managed Care Organizations - with

states paying the additional $39.

Marwood Study

ActuarialSoundness

$100 (?)

Key Step: The link between increased cost and state’s ability to pay a truly actuarially sound rate beginning in 2014

Marwood Study

Marwood Estimate of Financial Impact of Health Industry Excise Tax

YearMedicaid

MCO Spending

Total Health

Premiums

Medicaid % of Total

ACA Tax

Medicaid MCO Tax $

State FMAP (Avg.)

Total State

Share $

Federal Share $

2014 $88.3 Billion $643 Billion 13.73% $8

Billion $1.1 Billion 39% $428 Million

$670 Million

2015 $103.4 Billion $730 Billion 14.16% $11.3

Billion $1.6 Billion 39% $624 Million

$976 Million

The expected 2014 growth in Medicaid exacerbates the problem for both State and Federal spending (16+ Million newly eligible beneficiaries)

Marwood Study

Be careful what you wish for…

• Currently ABD expenditures account for 75-80% of all Medicaid spending with very little penetration in Medicaid managed care

• Medicaid’s share of premiums would likely increase due to more lives and the potential for higher premium rates associated with the ABD population

Marwood Study

Year Medicaid Managed Care Enrollment Growth

Commercial Insurance Enrollment Growth

2014 14% 11%

2015 5-6% 3.6%

2016 5-6% 7%

2017+ 1-2% 0%

59% of the growth in private, commercial health insurance enrollment could be through self-insured plans – EXEMPT from the tax

Just when you thought it couldn’t get any worse…

Marwood Study

Solution

• Maintain the size of the tax assessment but exempt Medicaid revenue as taxable

• Federal net savings: $6.4 billion• State net savings: $4.1 billion

Marwood Study

Pros • Levels the playing field for Medicaid MCOs

regardless of tax status• Provides savings for Federal budget in a deficit-

conscious environment• Provides savings for State Medicaid budgets

Marwood Study

Cons• Levels the playing field for Medicaid MCOs

regardless of tax status• Shifts more tax burden to other insurers not

exempt from the tax (i.e. commercial) – resulting in an increase in premiums for consumers

• Alerts federal and state lawmakers that Medicaid MCOs are not responsible for the tax which may result in future legislative/regulatory action

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Don’t tax you

Don’t tax me

Tax that man behind the tree

U.S. Senator Russell B. Long

Medicaid and CHIP Payment and Access Commission (MACPAC)

• Established under CHIPRA of 2009• Tasked with reviewing state and federal Medicaid

and CHIP access and payment policies • Make recommendations on issues affecting Medicaid

and CHIP populations

Medicaid and CHIP Payment and Access Commission (MACPAC)

• 7 public meetings held• In June, released report: “The Evolution of Managed

Care in Medicaid” but it contained no recommendations• We anticipate additional reports and policy

recommendations in the upcoming year.

www.macpac.gov