Medicaid expansion has turned into a budget buster for several states as Paul Volker predicted several years ago. Oregon is now looking at coughing up nearly $2 billion to cover its Medicaid expansion as the federal spigot covering ten percent of the expansion costs is now closed. Other states face the same dilemma. The Associated Press reported this week:
More than a dozen states that opted to expand Medicaid under the Affordable Care Act have seen enrollments surge way beyond projections, raising concerns that the added costs will strain their budgets when federal aid is scaled back starting in two years.
Some lawmakers warn the price of expanding the health care program for poor and lower-income Americans could mean less money available for other state services, including education.
In Kentucky, for example, enrollments during the 2014 fiscal year were more than double the number projected, with almost 311,000 newly eligible residents signing up. That's greater than what was initially predicted through 2021. As a result, the state revised its Medicaid cost estimate from $33 million to $74 million for the 2017 fiscal year. By 2021, those costs could climb to a projected $363 million.....
For patients who have only recently gained access to health care, the program is about far more than dollars and cents. And supporters downplay the budget concerns, pointing to studies that indicate the economic benefits of expanding health care will result in significant savings over time.
Several expansion states have already revised their budget estimates due to the larger than expected enrollments, according to an Associated Press review.
McDaniel said the added Medicaid costs will reduce the pool of money that can be invested in higher education, pension plans or other services.
Supporters of the expansion, including Kentucky Gov. Steve Beshear, predict their states will save money in the long run because Medicaid will allow some state-run services to be eliminated and will stimulate the economy through new revenues and job creation. Beshear, a Democrat, released a study earlier this year touting the creation of 12,000 jobs and nearly $1.2 billion in new revenue to health care providers as a result of expansion.
Thirty states and the District of Columbia have expanded Medicaid, or plan to do so, to include all adults with incomes at or below 138 percent of the federal poverty level, currently $16,243 for an individual.
The federal government agreed to pay all costs for the new enrollees through 2016, but it will begin lowering its share in 2017. States will pay 10 percent of the costs by 2020.
In the expansion states, enrollment for Medicaid and a related program for children have increased an overall 28.2 percent compared with a three-month period before the law's implementation, according to the federal government. In a recent report, economic experts at the U.S. Department of Health and Human Services said they expect estimated enrollment and per-person cost increases to level off and even decline over the long run.
At least 14 states have seen new enrollments exceed their original projections, causing at least seven to increase their cost estimates for 2017, according to an Associated Press analysis of state budget projections, Medicaid enrollments and cost details in the expansion states. A few states said they could not provide original projections.
California has enrolled nearly 2.3 million people so far — almost three times more than the 800,257 the state had anticipated. Enrollment in neighboring Washington more than doubled. Oregon's new enrollments have exceeded estimates by 73 percent.
In Michigan, estimated costs have shot up by 50 percent because of soaring enrollment. Ohio's projected costs more than doubled.
Some states that expanded their Medicaid programs prior to the federal health care law are also seeing enrollment increases based on people signing up because of increased publicity and outreach efforts.
In states where ongoing discussions over Medicaid expansion have yet to be resolved, opponents are quick to cite the surging enrollments and costs. Last month, Republicans in the Florida House repeatedly warned about the costs before soundly defeating an expansion bill.
"Every piece of metrics and data we have seen has showed the Medicaid rolls have exploded," said state Rep. Blaise Ingoglia. "And it's putting taxpayers and future prosperity at risk."
Health care already consumes a large portion of state spending each year, second only to K-12 education. It now represents more than half of all federal funds received by states, according to the National Association of State Budget Officers....
An Associated Press review earlier this year found at least 22 states were dealing with budget shortfalls for the 2016 fiscal year.
"In those states that do have budgetary balance, it's somewhat tenuous," said credit analyst Gabriel Petek with Standard & Poor's Ratings Services. Add the cost of rising Medicaid enrollments and "something has to give. Most likely, it means they have to spend less in other areas or they have to increase their tax revenues."
Oregon originally estimated 222,700 newly eligible Medicaid recipients would sign up by the end of June, but that number ballooned to 386,000.
Paying for the new enrollees isn't the only Medicaid cost troubling Oregon lawmakers. Starting in 2017, the state loses $1.9 billion in federal aid that has propped up the Medicaid program since 2012 under a special deal with the government.
Between the Medicaid expansion, the lost federal aid and normal growth, Oregon's Medicaid budget is expected to need $500 million between 2017 and 2019, said Democratic state Sen. Richard Devlin, one of two lawmakers who oversee the budget.
The best solution, he said, is to make sure people are working and don't need the government health care program.
"I think, really, the only way to keep this manageable is to keep those costs under control, get people off Medicaid," he said....
Supporters of expanding Medicaid say states will eventually save money by doing away with some of their own services for the uninsured, such as mental and behavioral health programs, and by reducing payments to hospitals and other providers for treatment of the uninsured.
Kentucky saved $9 million in 2014 as enrollees in behavioral and mental health programs were fully covered by Medicaid, according to a report by the State Health Reform Assistance Network, a program of the Robert Wood Johnson Foundation. Some states, including West Virginia and Arkansas, are reporting costs are lower than expected.
Elsewhere, there are signs that some of the hoped-for savings might not be realized quickly.
In New Mexico, where enrollment under the Medicaid expansion surpassed projections by 44 percent, legislative analysts warned last month that the state will not save as much money as originally projected because cost-containing measures have proven difficult to implement..... Rest of article.
Such problems should not surprise anyone who read Paul Volker's report three years ago. Full report. Mr. Volker's report said:
Medicaid, the single largest spending category in most state budgets, is growing faster than the economy and faster than state tax revenues. This trend will continue as long as health care costs grow faster than the overall economy and Medicaid caseloads continue to increase.
According to the federal Centers for Medicare and Medicaid Services (CMS), total Medicaid costs are likely to grow at an average annual rate of 8.1 percent between 2012 and 2020 if the health care reforms in the Affordable Care Act (ACA) are implemented and at a rate of 6.6 percent if they are not.If state Medicaid spending and state tax revenues continue their trends of the past decade, with a 7.2 percent average annual growth for Medicaid and a 3.9 percent growth rate for revenues, the gap between Medicaid and state tax revenue growth will increase by at least $22 billion annually within five years and will grow even larger thereafter.
Federal health care reform, as upheld by the Supreme Court, will not change the fundamental imbalance between rising Medicaid costs and state revenues. The longer term cost pressures resulting from dramatic increases in the elderly population and the inexorable growth in health care costs continue to build. As the CMS Actuary puts it, “The increased Medicaid costs associated with growing caseloads and the pressures on government revenues are likely to add to the financial stress of States’ Medicaid programs...