Medicaid Expansion Overview

Medicaid Opportunities & Challenges Task Force

April 23, 2013

Jeff Bechtel, Senior ConsultantJennifer Jordan, Senior Consultant

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Tuesday, April 231. Background – ACA and Coverage Expansions

2. Medicaid Expansion Overview and Options

3. Medicaid Expansion Considerations

Wednesday, April 244. Overview of State Expansion Status

5. Medicaid Expansion Debate• Arguments for Expansion• Arguments against Expansion

6. State Approaches

* Note: This briefing document incorporates a significant amount of material from presentations provided by South Dakota state staff relating to Medicaid expansion.

Agendas – April 23 & 24 Briefings

1. Background – ACA and Coverage Expansions

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• Medicaid Expansion

• Health Insurance Exchange Background

• Interaction – Medicaid and Exchange

• Supreme Court Decision

1. Background – ACA and Coverage Expansions

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• PPACA (Patient Protection and Affordable Care Act) was signed March 23, 2010 by President Obama.

• The Affordable Care Act (ACA) refers to PPACA and the Health Education Reconciliation Act, which amended PPACA.

• Three major components of the ACA:• Health Insurance Reform• Health Insurance Exchange • Medicaid Expansion

• The ACA was challenged as unconstitutional by 26 states.

Patient Protection and Affordable Care Act (PPACA)

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ACA Health Coverage Expansion

MedicaidExpansion

(State Option)

Subsidized Coverage in

Health Insurance

Exchanges

Medicaid eligibility for most adults 18-64

if state opts in

0% to 138% of

FPL

Federal Premium Subsidies on Sliding Scale, about

$4,800 per person

100% to 400% of

FPL

400% of Federal Poverty Level (FPL) = $44,680 for individual, $92,200 for family of four

138% of Federal Poverty Level (FPL) = $15,415 for individual, $31,809 for family of four

Plus Subsidized Cost Sharing up to 250% FPL

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Medicaid Expansion

• New, uniform nationwide floor for Medicaid eligibility for most adults age 18-64 below 133%.

• Because of 5% “eligibility disregard,” Medicaid was effectively expanded to 138% FPL.

• Under the ACA (pre-Supreme Court ruling), states that didn’t comply would jeopardize all of their Medicaid funding.

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Health Insurance Exchange: Overview

1. A new, government-managed marketplace for buying and selling health insurance.2. Think of an Exchange being an Expedia, Orbitz, or Kayak but for health insurance.3. Health plans must meet array of new federal and state requirements. Many new

requirements are similar, but not identical to Medicaid requirements. 4. Initially only individuals and small employers may buy via Exchange. In 2017, any

employer may use Exchange (state option).5. New federal subsidies only available through Exchange.6. State may choose to operate Exchange. State agency, non-profit, or quasi-

governmental entity. Option for regional, multi-state Exchanges.7. CMS will run Exchange in any state unready or unwilling to operate federally

compliant Exchange.8. Exchanges must be financially self-sustaining. Taxes or assessments on insurers

likely to pay for Exchange operations.

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Federal Subsidies in Exchange

Premium Subsidies:• Federal premium subsidies for Exchange enrollees between 100% and 400% of FPL.• Some legal immigrants eligible for premium subsidies 0-400%.• Sliding scale based on income. No asset test.• Premium subsidies of roughly $5,000 to $6,000 per person.• No federal premium subsidies if person is:

• Enrolled in Medicaid, CHIP, or Medicare

• Eligible for Medicaid or CHIP

• Parent of child who is not covered via Medicaid, CHIP, Exchange, or private insurance

• Unauthorized immigrant

• Incarcerated in jail or prison

Cost Sharing Subsidies: • Deductibles and co-payments also subsidized for those with incomes below 250% FPL.

Maximum Out-of-Pocket:• Total out-of-pocket cost capped.

Estimates and Examples – Premiums and Cost Sharing • Premium Credits

• The amount will vary from person to person: it depends primarily on household income and the premium for the plan in which the person is enrolled.

• The amount of premium is capped as a percent of income. Examples (if premiums were available in 2011):• 133% FPL – 2% of income / $31 Maximum Monthly Premium (family of 3)• 133.1% FPL – 3% of income / $62 Maximum Monthly Premium • 150% FPL - 4% of income/ $93 Maximum Monthly Premium• 250% FPL – 8.05% of income/ $311 Maximum Monthly Premium

• Cost Sharing • Cost sharing subsidies protect lower-income individuals from high out-of-pocket costs at the point of

service.• Subsidies are available to individuals below 250% of FPL.

• Out-of-Pocket Caps• ACA limits the total amount that individuals at of below 400% FPL must pay out-of-pocket for essential

benefits. Examples (if out-of-pocket caps were available in 2011):• 133% - $3,967 / year (family of 3)• 200% - $3,967 / year• 300% - $5,950 / year• 400% - $7,933 / year

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Primary Function of Exchange

Health Insurance Exchange must perform a wide range of functions. Basic functions include:

1. Certify and oversee Qualified Health Plans (QHPs) offering coverage in Exchange.

2. Facilitate enrollment in QHPs.

3. Screen and enroll eligibles in Medicaid and CHIP.

4. Facilitate federal subsidies and tax credits. Determine exemptions from individual mandate.

5. Rate QHPs on value – based on relative quality and price.

6. System-interchange with other agencies (e.g., Medicaid, IRS, Social Security, Homeland Security).

7. Inform individuals about Medicaid and CHIP.

8. Operate comprehensive navigator program for public education and outreach.

9. Perform anti-fraud, anti-waste activities.

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Interaction of Medicaid and Exchange

• Considerable interface required between Medicaid, CHIP, and new Exchange.

• Medicaid market and QHP market very similar in population under 200% FPL.

• Exchange must:• Allow individuals to apply for Medicaid, CHIP, and Exchange plan coverage through

website. • Allow Medicaid applications and renewals on the web, with electronic signatures.• Screen all applicants for everyone for Medicaid and CHIP eligibility and automatically

enroll. • Conduct outreach to uninsured and underinsured.

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• Incomes of low-income Americans tend to fluctuate – from year to year and within a year. Especially high fluctuations below 200% of FPL.

• Churn is when an individual or family moves from one benefit to another due to income changes.

• Therefore, a large portion of individuals/families will go back and forth across the income levels for Medicaid and Exchange subsidy eligibility.

• Churn will be high even without Medicaid expansion.

• Models project that ~50% of persons under 200% of poverty will move between Medicaid and Exchange subsidy coverage within a year.

• Means large number of individuals and families will routinely move between Medicaid and Exchange plans.

Churn: Members Moving Between Programs

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ACA Health Coverage Expansion

MedicaidExpansion

(State Option)

Subsidized Coverage in

Health Insurance

Exchanges

Medicaid eligibility for most adults 18-64

if state opts in

0% to 138% of

FPL

Federal Premium Subsidies on Sliding Scale, about

$4,800 per person

100% to 400% of

FPL

400% of Federal Poverty Level (FPL) = $44,680 for individual, $92,200 for family of four

138% of Federal Poverty Level (FPL) = $15,415 for individual, $31,809 for family of four

Plus Subsidized Cost Sharing up to 250% FPL

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Supreme Court Decision

• The Supreme Court evaluated the constitutionality of the State Mandate to expand Medicaid.• ACA requires states to expand their Medicaid programs to most adults under age 65 with

incomes at or below 138% of federal poverty level. • If a state fails to expand Medicaid, it risked loss of all current federal Medicaid matching

funds.

• The Court held that Congress may not use the loss of existing federal Medicaid funds to coerce a state to expand Medicaid. • The ACA requirement violated state sovereignty under the Constitution and the

voluntary contractual nature of the federal-state relationship in Medicaid.

• As a result of the Supreme Court decision, the Medicaid Expansion is now voluntary for states.

2. Medicaid Expansion Overview and Options

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2. Medicaid Expansion Overview and Options

• Description - Optional Medicaid Expansion

• Description of New Eligibles

• Medicaid Expansion Services/Benefits

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State Decision

• Each state must now decide whether or not to accept federal matching funds to expand Medicaid eligibility to most adults under 65 with income at or below 138% of poverty.

• Federal matching funds for the cost of the new Medicaid eligibility group remains unchanged from the ACA:

• 100% in CY 2014 thru CY 2016, • 95% in CY 2017, • 94% in CY 2018, • 93% in CY 2019, and • 90% in CY 2020 and “all subsequent calendar years.” (42 C.F.R. 433.10(6)(i)).

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Optional Medicaid Eligibility Expansion

Starting January 2014:• New, uniform nationwide floor for Medicaid eligibility at 138% of Federal Poverty Level

(FPL). 133% + 5 percentage point income disregard = 138%

• Income test based on Modified Adjusted Gross Income (MAGI). No asset test.

• Medicaid coverage extended to most adults age 18 to 64 who are below 138% FPL.

Bottom Line:• Medicaid: Most individuals and families at or below 138% of FPL.

• CHIP: Children now in CHIP between 100% and 138% FPL transitioned to Medicaid.

• Subsidized Exchange Coverage: Individuals and families between 138% and 400% of FPL would be eligible for subsidized coverage in an Exchange plan.

National Estimates

• If all states implement Medicaid Expansion, an additional 21.3 million people would enroll in Medicaid by 2022.

• This is a 41% increase compared to projected levels without the ACA.

• Most of these 21.3 million people would be newly eligible, but some of the increase will be related to participation among people who are currently eligible.

• Even if no states expand Medicaid, national enrollment will increase by 5.7 million people.

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• A large portion of individuals newly covered – whether by Medicaid or Exchange subsidized plans – are already privately insured.

• Crowd Out is when a new government benefit “crowds out” private spending on that same service. Public spending “crowds out” private spending.

• At least 30% of those newly covered by ACA already have individual or employer-sponsored coverage. They will drop (or be dropped) private coverage and sign up for public coverage.

• Private insurance coverage will shrink – shifting a percentage of individuals from commercial market to new Exchange plans.

• Crowd Out will also drive enrollment in federally subsidized plans.

Crowd Out: Shift from Private to Public Coverage

Kaiser Commission Estimates

• The Kaiser Commission on Medicaid and the Uninsured recently prepared state-specific estimates.

• Kaiser’s estimates were generally consistent with South Dakota’s numbers.

• Kaiser concluded that a Medicaid Expansion in South Dakota would insure an additional 44,000 people.

• Kaiser also concluded that an additional 6,000 people will be eligible regardless of whether South Dakota decides to move forward with the expansion.

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Who is Currently Covered by South Dakota Medicaid? • 69 percent are children and 31 percent are adults:

• Low income children, up to 200% FPL or $46,100 for a family of 3

• Pregnant women, up to 133% FPL or $14,857 for family of 1

• Very low income parents, up to 53% FPL or $9,552 for a family of 3

• Elderly or disabled adults with low incomes

• Adults who are not disabled or parents with very low incomes are not covered by Medicaid.

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Who is covered by Medicaid?

21%

11%

2%

66%

Aged/Blind/Disabled

Low Income Families

Pregnant Women

Children

31%

69%

AdultsChildren

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Medicaid Expansion – Eligibles

• Who are the new eligibles?

• Adults: • Without disabilities;

• Single; or

• Parents between 49%-138% FPL.

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2013 FPL

2013 Poverty Guidelines for the 48 Contiguous States and the District of Columbia

Persons in family/house

hold

Poverty guideline

(100% FPL)

138% FPL

1 $11,490 $15,8562 $15,510 $21,4033 $19,530 $26,9514 $23,550 $32,499

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Medicaid Expansion - Eligibles

31%

69%

Current Eligibles

AdultsChildren

52%48%

Eligibles with Medicaid Ex-pansion

AdultsChildren

Summary – Medicaid Expansion Population

• The Medicaid expansion population will consist primarily of parents and adults without dependent children.

• Medicaid currently covers millions of poor and near-poor Americans, but income and categorical restrictions currently exclude millions of low-income people from the program.

• While all poor children are eligible for Medicaid, many of their parents are not because most states have much stricter income eligibility for parents than for children. In addition, federal law categorically excludes most adults without dependent children from Medicaid.

• In simple terms, the Medicaid expansion would change Medicaid from a program that provides health coverage to a subset of the poor (e.g. children, pregnant women, disabled adults), to a program that covers all of the poor.

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Medicaid Expansion Services

• Expansion population must be provided “Essential Health Benefits” (EHB) per the ACA. EHBs include: • Ambulatory Patient Services• Emergency Services• Hospitalization• Maternity and Newborn Care• Mental Health and Substance Use Disorder Services• Prescription Drugs• Rehabilitative and Habilitative Services & Devices• Laboratory Services• Preventive and Wellness Services and Chronic Disease• Management• Pediatric Services, including oral and vision care

• Most EHB already covered by Medicaid in South Dakota.• Will have to add substance use disorder services for adults.

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Benefits for Medicaid Expansion Population

• In addition to providing EHBs, coverage for newly eligible adults under optional Medicaid expansion must receive a benchmark benefit package or actuarial equivalent. This applies to services covered, not cost sharing.

• Coverage modeled after “typical employer plan” with prevention, wellness, prescription drug, and mental health benefits included. Options:

• Standard Blue Cross/ Blue Shield preferred provider option plan under Federal Employee Health Benefits Plan (FEHBP),

• State employee plan,• Largest commercial HMO plan in state, and• Secretary-approved coverage.

• Current, mandatory Medicaid benefit package does not precisely match up with benchmark.

Benefits for Medicaid Expansion Population (cont’d)

• Populations currently exempt from mandatory enrollment in Medicaid benchmark plans include: seniors, disabled, pregnant women, dual eligibles, persons with special needs. These groups will continue to receive full Medicaid benefit package (Medicaid mandatory services, plus optional services elected by that state).

• Medicaid Early Periodic Screening, Diagnosis & Treatment (EPSDT) coverage continues for all children, regardless.

• “Benchmark” benefits are relatively new to Medicaid. Prior to the Deficit Reduction Act (DRA) of 2005, states were required to cover a federally-specified set of services. In the DRA, states were provide certain groups with a benchmark or “benchmark-equivalent” coverage.

• To date, states have used the benchmark benefits options sparingly.

• Just ten states have used benchmark benefits for some of their beneficiaries. In most cases, the option is adopted as a means to provide additional services to certain groups.

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3. Medicaid Expansion Considerations

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1. Scope of Medicaid Expansion Option:

• States face a “take it or leave it” decision.

• That is, to receive the enhanced federal match, states must expand Medicaid to the entire population outlined in ACA up to 138% of Federal Poverty Line (FPL).

• They may not, for example, cover only adults up to 100% of FPL and still receive the enhanced match.

• Through pre-ACA State Plan options or federal waivers, states could expand Medicaid eligibility differently than specified in ACA. However, the regular federal Medicaid match for the state would apply.

Medicaid Expansion Considerations

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2. Timing of Medicaid Expansion Decision

• Through the State Plan, Medicaid is a contractual arrangement between the state and CMS. Medicaid expansion will be “opt-in” through a State Plan Amendment.

• Medicaid expansion requires significant changes to state systems and procedures. It also affects Medicaid contracts, Exchange implementation, and outreach efforts. Thus, for expansion to take effect in January 2014, most states will need to decide by mid 2013.

• States could opt to expand effective January 2014 or choose to implement expansion some later time. It is not “now or never.”

• However, the timing of enhanced federal match is fixed. Any delay would reduce the time where the state receives the 100% federal match.

Medicaid Expansion Considerations (cont’d)

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3. Ability to Opt Out in the Future:

• If a state opts to expand Medicaid in 2014, it will have the option to opt-out in the future.

• Some states are considering legislating a “sunset” provision. For example, to end expansion in 2017 when state match is required.

• Today’s state leaders cannot legally obligate state government in perpetuity.

Medicaid Expansion Considerations (cont’d)

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4. Potential Coverage Gap Below 100% of Poverty if State Declines Expansion

• If a state declines to opt for the ACA Medicaid eligibility expansion, federally subsidized premiums and subsidized cost sharing will be available through Health Insurance Exchanges for:• Citizens with incomes between 100% and 400% of the Federal Poverty Level.• Legal immigrants with incomes between 0% and 400% of FPL. • Nationally, about 80% of the ACA Medicaid expansion population have incomes below 100%

FPL.

• Therefore, with the exception of legal immigrants, most individuals and families coverable under the ACA Medicaid expansion option could not receive subsidized Exchange coverage. CMS has indicated that this group will not be subject to insurance mandate.

Medicaid Expansion Considerations (cont’d)

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5. Woodwork Effect of Streamlined Medicaid Eligibility and Enrollment• ACA provides for streamlined Medicaid eligibility and enrollment for both (a) most

current eligibility groups and (b) the new ACA expansion population.

• ACA and new CMS rules setup a new, simplified process for applications, eligibility determinations, and re-determinations. This includes ability to apply online, by phone, or in person and electronic verification of income.

• Also, all Exchange applicants will be screened for Medicaid and CHIP eligibility, with automatic enrollment if eligible.

• All this will make it much easier for eligible individuals to apply for Medicaid and maintain uninterrupted Medicaid coverage year to year.

• The resulting “woodwork effect” will increase average monthly enrollment even in a state without the ACA Medicaid eligibility expansion group.

• To receive subsidized coverage in Exchanges, parents must show children are covered. This will increase Medicaid and CHIP enrollment regardless of ACA Medicaid expansion.

Medicaid Expansion Considerations (cont’d)

6. Medicaid Expansion as Bargaining Chip in Waiver Negotiations:

• Every state Medicaid agency has one or more federal waiver. Perhaps a third of Medicaid spending is under a Section 1115 waiver instead of Title XIX statutes.

• Waivers are discretionary. CMS is not obligated to issue or re-new them.

• CMS may impose conditions. Conditions are common element in CMS-State negotiations on waivers. States can accept the conditions or decline the deal.

• Both CMS and states could use acceptance of ACA Medicaid eligibility expansion as a bargaining chip in waiver negotiations.

• CMS could condition a waiver (or waiver renewal) on a state agreeing to Medicaid expansion. Or states could offer Medicaid expansion in exchange for a requested waiver. The waiver involved need not have anything to do with eligibility.

Medicaid Expansion Considerations (cont’d)

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For More Information

Sellers Dorseywww.sellersdorsey.com

Jeff Bechtel, JDSenior ConsultantSellers Dorsey717.712.6247jbechtel@sellersdorsey.com

Jennifer JordanSenior ConsultantSellers Dorsey215.279.9739jjordan@sellersdorsey.com