Grant Bosse: What are we going to do about Medicaid?
No single issue will have a greater impact on the next state budget than Medicaid. The program is not just at the center of the federal budget crisis, as spending on entitlement programs threatens to dwarf the rest of the budget. A series of long-simmering state issues will come to a boil in 2013.
In New Hampshire, 165,000 people received some or all of their health insurance coverage through Medicaid in 2010, the most recent fiscal year for which an annual report has been published.
The state runs the program, under certain limits set by the federal Centers for Medicare and Medicaid Services, and Washington provides a 50/50 funding match. For some services, the feds pick up 75 percent or even 90 percent of the cost. Medicaid alone accounts for about a quarter of all New Hampshire expenditures.
Medicaid Expansion: The one provision of the Patient Protection and Affordable Care Act that the U.S. Supreme Court struck down in June was expansion of Medicaid. The law forced states to raise their income eligibility levels to bring more low-income patients into the program, or lose all current funding. While upholding the individual mandate as an extension of Congress’s taxing power, the court ruled that forcing states to modify their Medicaid agreements was a step too close to coercion.
Having lost the stick, the Obama administration is counting on the carrot, promising states to pay the lion’s share of the increased costs for the next several years. But most does not mean all, and now does not mean forever. Expanding Medicaid eligibility will impose a huge long-term financial commitment on state governments.
So, it’s up to each state to decide whether to expand Medicaid to cover people who currently earn too much to qualify. A report commissioned by the New Hampshire Department of Health and Human Services estimates that expanding Medicaid to meet the ObamaCare goals would cost New Hampshire taxpayers $85 million over the next seven years, and federal taxpayers $2.5 billion.
According to the report, Medicaid expansion would cover an additional 22,000 Granite Staters without insurance. That’s at a cost of more than $117,000 for
each new beneficiary. This is a litmus test for how you see federal spending. I see expansion as adding an extra $2.5 billion to the federal deficit. Others might see declining to expand Medicaid as turning down $2.5 billion the state desperately needs.
The report also finds that almost as many people would drop their current health insurance for Medicaid. The report estimates 19,000 people, nearly a third of those covered under the expansion, are already insured.
But those costs are only part of the overall financial impact. Hospitals lose money every time a Medicaid patient walks in the door. We pay for these programs directly through higher taxes, and indirectly through higher insurance premiums that subsidize public health care programs.
Medicaid Lawsuit: Repeated cuts to Medicaid reimbursement rates led 10 New Hampshire hospitals to sue the state, arguing that they don’t get paid enough to continue to serve program beneficiaries. If this ongoing suit is successful, higher reimbursement rates could add several hundred million dollars more to the state budget.
Managed Care: Last year, the Executive Council approved Phase I of a contract to run Medicaid under managed care. Private companies will be paid on a per person basis to provide health care services, creating incentives to provide care that is effective, and not merely billable. New Hampshire is actually behind the curve, as 47 states and the District of Columbia have already adopted a managed care approach to save money and improve medical outcomes.
Phase II comes up for approval this year, and would expand managed care to developmental disabilities. Only other four states do this. Whether New Hampshire expands managed care or repeals it will determine how the state spends a quarter of its budget.
Medicaid Management Information System: The computer system that processes the six million annual Medicare claims from 19,000 health care providers will be replaced next spring. The two-year contract to build a new Medicaid Management Information System is already more than five years behind schedule, and there is no Plan B.
The state turns the key on the new system in April. The current vendor is leaving town, and no one knows if the new system will actually work. If it doesn’t, claims may not qualify for the federal match.
Our newly-elected Legislature is full of smart, dedicated people with lots of ideas on how to improve the state. The next time any of them share these ideas with you, I suggest you respond, “That’s great. What are you going to do about Medicaid?”
(Grant Bosse is vice-president for media for the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord.)