Running head: Medicaid Expansion

Medicaid Expansion in Missouri

Medicaid Expansion

Increasing the accessibility of affordable healthcare is a main goal of the Affordable Care Act (ACA). With attaining that goal in mind, a provision to expand Medicaid eligibility was included in the ACA. Medicaid expansion effectively expands the group of individuals that qualify to participate in the state insurance program in effect decreasing the number of uninsured residents in states that chose to participate in the expansion. The cost saving provisions in the ACA include making cuts to federal reimbursements for healthcare. Missouri stands to benefit from the increased numbers of individuals eligible for Medicaid coverage under the plan. Taking advantage of Medicaid expansion will bridge the gap left by decreased reimbursement rates. Without the additional financial support, healthcare providers and hospitals will need to raise rates for existing patients in order to prevent revenue shortfalls. Expanding Medicaid will decrease the number of uninsured residents, slow the acceleration of healthcare costs, and decrease the amount of revenue lost to uncompensated care. Medicaid is a state run insurance program for low-income residents. Although individual states administer the program, the federal government shares the responsibility of funding the program. The federal government calculates each states federal medical assistance percentage (FMAP) by comparing the individual states average per capita income to the national average. The lower the average income, the greater the FMAP the state receives. In 2012, the FMAP ranged between 50 and 74.73 percent (Musumeci, 2012). Participation in the Medicaid program is voluntary for states. Mandatory coverage requirements are federal guidelines that the states must adhere to as a condition of continued participation. Currently three main groups are eligible for mandatory Medicaid coverage. The first group consists of children ages 6 through 18 from families with incomes at or below 100%

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Federal Poverty Level (FPL). Parents and caretakers in those families are eligible if their income makes them eligible for a states cash assistance program. Second are the disabled and/or elderly qualified for Supplemental Security Income. Lastly are children under the age of six and pregnant women in families with incomes at or below 133% of the (FPL) or $14,856 per year for an individual and $30,657 per year for a family of four in 2012 (Musumeci, 2012). Note states are not required to cover childless individuals. In Missouri, eligibility for Medicaid is restricted to low-income children, pregnant women, people with disabilities who are unable to work, seniors, and very low-income parents. For a parent to qualify for Medicaid, their income must be less than 19 percent of the federal poverty level (FPL), or approximately $292 per month for a family of three. Missourians with disabilities can earn up to 85 percent of the poverty level and meet Medicaid eligibility guidelines. On January 1, 2014, a new group of individuals will qualify for Medicaid. The guidelines for this group with ages between 19 and 65 are as follows; they must meet citizenship requirements, not be incarcerated, their income must not exceed 138% FPL, and they must not be eligible for Medicare. This coverage extends to individuals without children (Medicaid Expansion 2014, 2012). The federal government will fund 100% of the programs costs for the first three years (2014-2016). Federal funding will decrease to 95% in 2017, 94% in 2018, 93% in 2019, and settle at 90% in 2020 (Kramer, 2012). If lawmakers in Missouri approve Medicaid expansion, increasing the income threshold to 138 percent FPL from the current 19 percent, the result will be a reduction in the states uninsured by more than one-fourth, providing coverage for roughly 267,000 Missourians who

Medicaid Expansion

were previously uninsured Missourians. Medicaid expansion will lead to the creation of 24,000 jobs which is estimated to increase labor income in the state by nearly $7 billion and yield $856 million in additional state and local taxes from 2014 to 2020 (Expanded Medicaid brings economic benefits, 2013). An estimated $1.56 billion in new federal health care matching funds will enter Missouris economy in 2014 when coverage extends to include the homeless, working parents, the recently unemployed, veterans, high school and college graduates who are currently seeking full time work and other low wage workers (McBride, Watson, & Blouin, 2013). Although every region in the state will benefit from expanding Medicaid, rural areas will see the greatest improvement. Rural areas have a lower insurance rate due to fewer instances of employersponsored insurance. In Southeast Missouri, the rate of uninsured will decrease by as much as 31 percent (McBride, Watson, & Blouin, 2013). Low-income, working Missourians will face a significant gap in potential coverage if Missouri does not implement the Medicaid expansion. Under the new healthcare law, federal premium tax credits are available for Missourians earning between 100 and 400 percent of the FPL (approximately $11,000-$45,000 for an individual and $19,000-$77,000 for a family of three). These tax credits will go towards the purchase of individual health insurance plans through the new Health Insurance Exchange if they do not have access to affordable employersponsored coverage. The only option for Missourians with earnings less than 100 percent FPL is the Medicaid expansion (McBride, Watson, & Blouin, 2013). Another economic impact is the projected loss of up to nearly $400 million, which would come from cuts to federal Disproportionate Share Hospital (DSH) payments (Crisp, 2012). DSH

Medicaid Expansion

payments offer supplementary relief to hospitals that treat a significantly disproportionate number of patients with low incomes. Annually, states receive federal DSH allotments to subsidize the costs of DSH hospitals. A DSH hospital is a hospital that provides care to lowincome patients without reimbursement from Medicare, Medicaid, the Childrens Health Insurance Program (CHIP) or other health insurance. Calculations ensure that the payments to individual DSH hospitals are not higher than these actual uncompensated costs (Disproportionate Share Hospital ). Missouri hospitals provided more than $1.1 billion in uncompensated care statewide in 2011 (Association). The 2013 budget allots $784 million in disproportionate share payments to hospitals in Missouri (Crisp, 2012). Combined cuts in the Affordable Care Act and Budget Control Act of 2011 reduce hospital reimbursement by $4 billion between 2013 and 2019 and more than $22 billion in disproportionate share payment cuts between 2014 and 2022 (Crisp, 2012). Hospitals and healthcare professionals did not oppose the proposed cuts because they anticipated that more patients would have insurance coverage since more individuals would be able to enroll in Medicaid and purchase insurance through health insurance exchanges (Crisp, 2012). In the face of the cuts proposed by the Affordable Care Act, choosing not to participate in the Medicaid expansion would force hospitals to make difficult decisions to remain profitable and/or keep the doors open. The legislative stances split along party lines. Sen. Wayne Wallingford, R-Cape Girardeau, published an opinion piece featured in the Southeast Missourian. He is of the opinion that Medicaid expansion is tantamount to bribery. His view is that expanding Medicaid is not free because it is paid for by taxpayer dollars. Funding that will slowly become a burden for state

Medicaid Expansion

residents (as opposed to all American citizens), as the government decreases their contribution. He concludes with: Instead of expanding welfare and keeping struggling families locked in a cycle of poverty, we need to focus on ways we can help people succeed. We cannot continue to place so much emphasis on programs that encourage participants to accept poverty as the new normal. I will oppose Medicaid expansion and instead focus on policies that will help encourage the creation of new jobs that our state needs. Through job training and educational programs, we can prepare more Missourians to compete for new jobs. By adopting market-based policies to make our state more competitive, we can attract new familysupporting jobs that will help all Missourians prosper. Job creation and business expansion will be better for our state in the long run than throwing millions of dollars into our welfare system (Wallingford, 2013). Lack of funding could lead to a reduction in staff, services rendered, and infrastructure upgrades. Analysts project that the effects of the decrease in revenue will discourage workforce and capital investments between 2012 and 2021. Employment in the healthcare sector will decrease by 5,011 through 2021. Employment in numerous other fields in the community relies on hospital employment. Standard economic multipliers project that the effect on overall employment to be a total of 9019 lost statewide. Approximately $1 billion of investments go towards the improvement of physical plants and properties of Missouri hospitals annually. Without the offsetting revenue provided by Medicaid expansion, a $4 billion cut to hospital payments could reduce hospital capital expenditures by $1.9 billion through 2021 (Association).

Medicaid Expansion

Hospitals and doctors will have to resort to raising fees for services, which will lead to higher out of pocket expenses for individuals and families. Health insurance premiums will also increase as employers and insurance companies pass on more costs to employees. The growing number of uninsured Americans weighs heavily on our economy. The administration of uncompensated care has a domino effect. Hospitals face rising costs, which they pass on to insurers who in turn, pass their increasing costs on to working citizens, by way of increased premiums. With higher medical costs to consider, individuals are choosing to forego treatment until they have no choice but to seek treatment. This adds an additional strain to insurance companies again forcing them to pass their expenses on to the consumer. The cost cutting measures of the Affordable Care Act, call for a reduction in federal funding to hospitals with the highest numbers of uncompensated care. Lawmakers will need to approve the expansion of Medicaid in order to neutralize the economic effects. Medicaid expansion will subsidize the lost funding, allowing hospitals to maintain and increase their standard of treatment without increasing rates to cover expenses, allow more Missourians to receive timely treatment, and inject millions of dollars into the states economy.

Medicaid Expansion

References Medicaid Expansion 2014. (2012, February 3). Retrieved from Washington State Healthcare Authority: http://www.hca.wa.gov/hcr/me Expanded Medicaid brings economic benefits. (2013, January 24). Retrieved from The St. Louis American: http://www.stlamerican.com/news/editorials/article_4becbb3c-65d1-11e2a729-0019bb2963f4.html Association, M. H. (n.d.). $4 Billion In Cuts Would Damage Hospitals, Harm Missouri Communities. Retrieved from MHA News Releases: http://web.mhanet.com/mediaroom/news-releases/4-billion-in-cuts-would-damage-hospitals-harm-missouricommunities Crisp, E. (2012, August 6). Hospitals sound warnings about bypassing Medicaid expansion. Retrieved from The St. Louis Post Dispatch: http://www.stltoday.com/news/local/govtand-politics/hospitals-sound-warnings-about-bypassing-medicaidexpansion/article_0267a239-d5e3-5178-8780-f385a8867208.html Disproportionate Share Hospital . (n.d.). Retrieved from HHS.gov: http://www.hhs.gov/recovery/cms/dsh.html Kramer, K. (2012, 4 9). Medicaid Expansion 2014. Retrieved from wa.gov: http://www.hca.wa.gov/me/documents/ME2014_Project_Overview_Presentation.pdf McBride, T., Watson, S., & Blouin, A. (2013, January). The Missouri Medicaid Expansion: Good for All Missourians. Retrieved from www.statereforum.org: http://www.statereforum.org/sites/default/files/mo_medicaid_expansion.pdf Musumeci, M. (2012). The Health Reform Laws Medicaid Expansion: A Guide to the Supreme Court Arguments. Focus on Health Reform. Nixon, O. o. (2012, November 29). Gov. Nixon announces plans to provide health care coverage for additional estimated 300,000 Missourians. Retrieved from Office of Missouri Governor Jay Nixon: http://governor.mo.gov/newsroom/2012/Gov_Nixon_announces_plans_for_health_care_ coverage_for_additional_300_000_Missourians Wallingford, S. W. (2013, January 13). seMissourian.com: Op/Ed Column: Medicaid expansion is not free to Missouri taxpayers (01/13/13). Retrieved from seMissourian.com: http://www.semissourian.com/story/1930730.html