Medicaid Financing 101 Presentation Slides Monday, April 19, 2004 - PDF document

Medicaid Financing 101 Presentation Slides Monday, April 19, 2004

Figure 1 Medicaid’s Role • Provides health and long-term care coverage for over 50 million people – Provides comprehensive, low-cost health insurance for 38 million people in low-income families, reducing the number of uninsured – Finances care for over 12 million elderly and persons with disabilities, including over 6 million Medicare beneficiaries • Improves access to care and reduces disparities • Guarantees entitlement to individuals and federal financing to states • Provides $175 billion in federal and $120 billion in state and local funding of low-income populations • Largest source of federal grant support to states, accounting for 43 percent of all federal grant funds to states in 2002 K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured Figure 2 Medicaid’s Role in the Health System, 2001 48% Medicaid as a share of national spending: 17% 17% 17% 12% Total Personal Hospital Care Professional Nursing Home Prescription Health Care Services Care Drugs Total National $1,236 $451 $462 $99 $141 Spending (billions) SOURCE: Levit, et al, 2003. Based on National Health Care Expenditure Data, K A I S E R C O M M I S S I O N O N Centers for Medicare and Medicaid Services, Office of the Actuary. Medicaid and th edicaid and the Uninsured e Uninsured

Figure 3 Medicaid Enrollees and Expenditures by Enrollment Group, 2003 Elderly 9% Elderly Blind & Disabled 26% 16% Adults Blind & Disabled 27% 43% Children 48% Adults 12% Children 19% Enrollees Expenditures Total = 52.4 million Total = $235 billion Expenditure distribution based on CBO data that includes only federal spending on services and excludes DSH, supplemental provider payments, vaccines for children, administration, and the temporary FMAP increase. Total expenditures K A I S E R C O M M I S S I O N O N assume a state share of 43% of total program spending. Medicaid and th edicaid and the Uninsured e Uninsured SOURCE: Kaiser Commission estimates based on CBO and OMB data, 2004. Figure 4 Key Aspects of Current Medicaid Financing System • The federal government and states share financial responsibility for Medicaid – States decide how much to spend within federal rules – Federal government reimburses a set share of spending on covered groups and services based on the state’s matching rate; pays for at least half of all Medicaid spending in every state • Federal matching funds are an entitlement to states – No predetermined limits on federal matching funds – Medicaid spending not subject to annual appropriations process • Federal fiscal relief package temporarily increased Medicaid matching rates through June K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured

Figure 5 Federal Medical Assistance Percentages (FMAP), FY 2004, Including Temporary Fiscal Relief 74 + percent (10 states) 64 to <74 percent (15 states & DC) 54 to <64 percent (13 states) NOTE: The percentages listed reflect the temporary increase in federal Medicaid matching rates enacted in the Jobs and Growth 53 percent (12 states) Tax Relief Reconciliation Act of 2003, which is effective for the first 3 calendar quarters of FY 2004. K A I S E R C O M M I S S I O N O N SOURCE: Federal Register, June 17, 2003. Medicaid and th edicaid and the Uninsured e Uninsured Figure 6 Impact of Federal Matching Funds on Total Medicaid Spending Federal Medicaid spending provided when states spend a hypothetical $100 in Medicaid funds, using matching rates that include temporary State Funds Invested fiscal relief: Federal Dollars Gained $213 FMAP = 53% $100 $113 $286 FMAP = 65% $100 $186 $100 $270 FMAP = 73% $370 K A I S E R C O M M I S S I O N O N SOURCE: Kaiser Commission on Medicaid and the Uninsured. Medicaid and th edicaid and the Uninsured e Uninsured

Figure 7 State Medicaid Spending as a Percent of General Fund Expenditures, 2002 Public Assistance Higher Medicaid 2% Education 16% 13% Corrections 7% Transportation 1% Elementary & All Other Secondary 26% Education 35% Total State General Fund Spending = $496 billion SOURCE: National Association of State Budget Officers, 2002 State K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured Expenditure Report, November 2003. Figure 8 Recent Developments in Medicaid Financing • Expiration of fiscal relief in June will mean that to maintain their Medicaid spending states will have to put up additional state funds to offset the reduction in federal matching funds • Medicare drug law will cover Medicare/Medicaid “dual eligibles,” but provides only modest fiscal assistance to states • Administration’s 2003 proposal to cap federal Medicaid funding is on the back burner • Recently increased emphasis on Medicaid “program integrity” • Federal government and some states are focusing on waivers K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured

Figure 9 Overview of Section 1115 Waivers • HHS Secretary can permit states to receive federal Medicaid funds for expenditures not otherwise allowed by federal law • Health Insurance Flexibility and Accountability (HIFA) initiative – Encouraged states to seek waivers to expand coverage within existing resources – New flexibility to change benefits, eligibility, and cost sharing for new and current beneficiaries • Longstanding policy of “budget neutrality” for the federal government – Budget neutrality methodology is subject to negotiation and can vary state to state K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured Figure 10 Financing the Utah Waiver NARROW BENEFIT REDUCTIONS PACKAGE EXPANSION Parents with income below TANF eligibility levels (0-50% FPL) New co-payments Parents who work Reduced benefits but recently received TANF Parents with high medical expenses who “spend Enrollment Fee down” to qualify Benefits limited to primary Parents with incomes care; no hospital, specialty, over TANF eligibility levels or mental health care (50-150%) Copayments Other adults (0-150% FPL) Enrollment cap K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured

Figure 11 The Role of Recent Section 1115 Waivers in Medicaid and SCHIP Enrollment Growth Growth Due To 97,763 Recent 1115 Waivers 104,263 (Total = 202,026) Under HIFA-Type Section 1115 Waivers Growth Not Under Other Section 1115 Waivers Related to Recent 1115 Waivers Not Related to Recent 2,975,900 Section 1115 Waivers Net Medicaid/SCHIP Enrollment Growth 3.2 Million Total Note: Section 1115 waiver growth only includes comprehensive Section 1115 waivers approved since January 2001; other Medicaid/SCHIP growth is for the period from December 2001-December 2002. SOURCE: Mann, C., Artiga, S. and J. Guyer, “Assessing the Role of Recent K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured Waivers in Providing New Coverage,” KCMU, December 2003. Figure 12 Policy Implications • Without new financial resources states cannot significantly expand coverage. • Waiver financing places a state at risk for costs beyond the “budget neutrality” cap. • The primary impact of some waivers is reductions rather than expansions in coverage. • Recent waivers have affected every key element of the Medicaid program, and these changes are occurring outside the federal legislative process. K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured

Figure 13 Medicaid’s Financing Structure: Current Strengths • Uncapped federal matching funds key to the entitlement to coverage • Provides incentives for states to preserve and expand coverage • Helps states manage the risk of unpredictable changes in health care costs, economic conditions, demographics, public health • Funds health care services, such as mental health care, services for people with developmental disabilities, and maternal and child health services • State and federal contributions provide incentives to manage costs K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured Figure 14 Medicaid’s Financing Structure: Current Challenges • Although the risk is shared between the federal government and the states, health care spending, especially for the low-income and disabled population is difficult to predict • States have difficulty meeting program spending needs during economic downturns, when state revenues fall • Medicaid maximization has raised questions about accountability for federal funds K A I S E R C O M M I S S I O N O N Medicaid and th edicaid and the Uninsured e Uninsured