Setting the Facts Straight on Medicaid Costs
The Center for Budget and Policy Priorities is out this morning with a report claiming that last month’s Hatch/Upton report estimating new unfunded mandates of at least $118 billion is inflated. The CBPP report criticizes the $118 billion finding on several grounds. It attacks the Republican compilation of state-based estimates for assuming most or all individuals eligible for Medicaid will enroll in the program – raising questions about why a liberal group wants to assume people will NOT obtain health coverage. And it also criticizes state-based estimates for assuming Medicaid physician reimbursements will increase due to the law – even though many Medicaid beneficiaries have access problems already, and most programs are not equipped to handle 15-25 million newly enrolled at current payment levels, and even though CMS could be on the cusp of REQUIRING state programs to meet minimum reimbursement levels (See below.).
What’s most interesting though is what the CBPP report OMITS about states’ Medicaid costs – namely, two important ways in which most reports have UNDER-estimated state obligations under the health care law:
CBO May Have Underestimated Medicaid Enrollment Due to An Incorrect Definition of Income
Medicare actuary Rick Foster’s testimony to the House Budget Committee hearing raised this issue, in a significant footnote on page 10:
In addition to the higher level of allowable income, the Affordable Care Act expands eligibility to people under age 65 who have no other qualifying factors that would have made them eligible for Medicaid under prior law, such as being under age 18, disabled, pregnant, or parents of eligible children. The estimated increase in Medicaid enrollment is based on an assumption that Social Security benefits would continue to be included in the definition of income for determining Medicaid eligibility. If a strict application of the modified adjusted gross income definition is instead applied, as may be intended by the Act, then an additional 5 million or more Social Security early retirees would be potentially eligible for Medicaid coverage.
In other words, if the new definition of income introduced in the law excludes Social Security benefits – and the actuary believes it may – upwards of an additional 5 million early retirees (along with some Social Security disability recipients) would be forced on to the Medicaid rolls. While officials at the Centers for Medicare and Medicaid Services have yet to opine on the official interpretation of “income” as defined by the law, it’s difficult to see how CMS could change in regulations definitions of income that are based in statute (i.e., the health care law and the Internal Revenue Code), meaning the actuary’s footnote is actually a possible, even likely, scenario.
Staff have confirmed that the Congressional Budget Office did NOT consider this possibility when scoring the bill last March – meaning that this one definitional interpretation could have a significant budgetary impact. (Likewise, the Urban Institute study cited by CBPP did not assume that Social Security early retirees would be forced into Medicaid, meaning its estimates could well be understated also – see the footnote on page 34.) An additional 5 million individuals added to the Medicaid rolls would increase by nearly one-third the CBO’s estimate of 16 million individuals covered under the Medicaid expansion. Moreover, because many of these 5 million additional enrollees would be early retirees (and therefore older and sicker than the population as a whole), CBO’s estimated $60 billion cost to states for the Medicaid expansion could skyrocket.
Washington Is Planning to Impose NEW Reimbursement Mandates on State Medicaid Programs Later This Year
In a filing with the Supreme Court dated December 2010, the Justice Department petitioned (unsuccessfully) for the Court NOT to hear a case from California in which several patient advocate and provider groups had sued the state regarding what they view as improperly low Medicaid physician reimbursement levels. The filing merits particular attention because of the reasons the government asked the Court not to take the case: The government will be issuing rules on Medicaid physician reimbursement levels shortly: “HHS is committed to promulgating a notice of proposed rulemaking in April 2011 and a final rule by December 2011.” Page 20 of the filing provided a sense of what the rulemaking process might entail, and it sounds as though the rulemaking process will take a comprehensive look at Medicaid provider reimbursement issues:
The rulemaking may include a determination whether Section 1396a(a)(30)(A) protects interests of providers at all following repeal of the Boren Amendment (note 3, supra); what procedural or substantive requirements the statute imposes on States with respect to beneficiaries; and how the various provisions of Section 1396a(a)(30)(A) and other Medicaid requirements interact. Insofar as the question petitioner raises implicates concerns about the standards applicable under Section 1396a(a)(30)(A), Pet. 16, the outcome of the rulemaking process may affect the appropriate analysis.
In other words, it’s possible – perhaps even likely – that on top of the mandates on states not to constrain eligibility standards, HHS will now pile on another federal mandate when it comes to reimbursement levels. To be sure, Medicaid’s poor reimbursement levels create access problems for low-income beneficiaries in many states. But one of the reasons why states are looking to reduce reimbursement rates in the first place is because the mandate to maintain eligibility levels prevents them from taking other actions to trim their budget deficits. So it would appear that the Administration’s solution to a failed government mandate (i.e., Medicaid maintenance of effort requirements) is yet another government mandate on states, this one requiring certain reimbursement levels for states’ Medicaid programs.
Speaker Pelosi famously said we had to pass the bill to find out what’s in it. Unfortunately, states may soon find out what CBPP omitted from its report – there are as-yet undiscovered ways in which the unpopular measure will place an impossible burden on their already unsustainable Medicaid programs.