Ripley Discusses Medicaid Expansion with IBJ

Mike Ripley, the Indiana Chamber's VP of health care policy, was recently interviewed by the Indianapolis Business Journal about Medicaid expansion in Indiana. Here's what he said:

Mike Ripley, a health care lobbyist for the Indiana Chamber of Commerce, talked about the business group’s views on a proposed expansion of coverage by the Indiana Medicaid program. As it stands now, the 2013 Indiana budget bill includes a plan passed by the Senate as Senate Bill 551, which would have OK’d the Pence administration to negotiate a block grant deal with the U.S. Department of Health and Human Services to expand Medicaid coverage via a program like the Healthy Indiana Plan. When that bill was altered in the House to remove the block grant concept, the chamber dropped its support. The altered House bill is now dead, and the original Senate plan has been added to the budget bill. Its ultimate fate is still unknown.

IBJ: Why did the chamber drop its support of SB 551 when the House altered it so it no longer required the state to negotiate a block grant with the government?

A: The inference is that, you’re on the hook for the full expansion, however you do that. And at the end of the day, how do you pay for that? How I’ve interpreted the block grant is, "OK, we’re going to get X amount of dollars and then we expand as much as we can." But without that, it’s pretty much open-ended.

IBJ: Why is an open-ended expansion of Medicaid, which is what President Obama’s health reform law originally called for, a problem—particularly considering that the federal government will pay 100 percent of the expansion costs for three years and then step its support to no less than 90 percent by 2020?

A: Then after 2020, what happens then? Where do you come up with those resources? That’s where we’ve been very concerned from a business perspective. Because who’s going to foot that bill? Employers are.

IBJ: Why do you prefer expanding coverage via the Healthy Indiana Plan, which gives participants a health savings accounts to pay for health care, but also caps enrollment if their use of health care exhausts the state’s allotted revenue for the program?

A: It has better reimbursement [than Medicaid] for doctors and hospitals. And it puts some skin in the game for individuals. I think that’s the best of all worlds. You’re not going to get everybody covered. But it’s something we can cope with financially.

Spend, Spend and More Spend

Few will argue with the idea that federal government spending is out of control. The Heritage Foundation's Federal Spending by the Numbers is a comprehensive look at the situation. We'll share a few of the many bullet points that just make me (and I'm sure many of you) wonder why our political leaders can't realize that the current course is a disastrous one.

  • Over the past 20 years, federal spending grew 71 percent faster than inflation.
  • In 1962, defense spending was nearly half the total federal budget (49 percent); Social Security and other mandatory programs were less than one-third of the budget (31 percent). Two major entitlement programs, Medicaid and Medicare, were signed into law by President Johnson in 1965.
  • In 2012 entitlements were nearly 62 percent of total spending, while defense dropped to less than one-fifth (18.7 percent) of the budget.
  • Federal spending per household reached $29,691 in 2012, a 29 percent increase (adjusted for inflation) from $23,010 in 2002. The government collected $20,293 per household in taxes in 2012.
  • The excess of spending over taxes produced a budget deficit of $9,398 per household in 2012.
  • For every $6.80 the federal government collected in taxes in 2012, it spent $10. Consequently, $3.20 out of every $10 spent was borrowed.
  • Major entitlements (Social Security, Medicare, Medicaid, Children's Health Insurance Program, Obamacare) will increase from 44 percent of federal spending in 2012 to 57 percent in 2022.
  • In 1993, Social Security surpassed national defense as the largest federal spending category, and remains first today.
  • Federal energy spending has increased steadily over the past decade with the government increasingly subsidizing activities like energy efficiency, energy supply, and technology commercialization. An unprecedented $42 billion was spent in 2009 as part of the stimulus, a nine-fold increase over the 2008 spending level.
  • Interest on the debt is the fifth largest federal spending category, even at today’s low interest rates.
  • All entitlements (excluding net interest) total nearly 62 percent of all federal spending today.
  • Spending on the largest, Social Security, Medicare, and Medicaid, will leap from 10.4 percent of GDP in 2012 to 18.2 percent by 2048.
  • The big three entitlements alone will absorb all tax revenues by 2048. Other spending, such as national defense or interest on the debt would have to be financed completely on borrowed money.
  • Medicare is the fastest-growing major entitlement, growing 68 percent since 2002. Medicaid grew 38 percent and Social Security 37 percent.

Governor Gets Down to Business Quickly

While the Indiana General Assembly began its work on January 7, new Gov. Mike Pence had to wait a week for his January 14 inauguration. He quickly went to work, however, with significant positive actions on his first two days on the job.

A series of executive orders that Pence signed following his official ascension into office included a moratorium on new rules and regulations (with obvious emergency exceptions) that were not proposed before January 14, as well as a cost-benefit analysis of existing administrative rules. Priority will be given to review of those rules with the most negative effect on job creation and economic development.

Candidate Pence promised this action leading up to the election. While federal regulatory challenges are often at the forefront today, this step will help ensure that state government is not unnecessarily limiting job and economic growth.

On day two, the Pence team delivered a two-year, $29 billion spending plan to the State Budget Committee. The first six pages of this extensive document provide an overview of the key elements.

This is a very good starting point for legislators. It is a fiscally sound proposal, with a focus on meeting key state priorities and providing the 10% individual income tax relief (which also encompasses 90% of Hoosier businesses) that Pence proposed in his campaign. As we’ve indicated previously, lawmakers have questioned whether the income tax cut should take precedence over other budget desires. That will be worked out in the legislative process and could be determined by the updated revenue forecast that will be presented in early April.

A few highlights:

  • A 1% increase in each of the next two years for K-12 and higher education. The second year for K-12 would have that 1% be divided among the state’s highest performing schools. Combined, the education funding totals 65% of the budget.
  • While the administration did not include money to specifically expand the Medicaid program as outlined under federal health care reform, it does significantly increase funding for health insurance for the poor – from $1.65 billion this year to $2.1 billion in 2015.
  • The budget calls for a change in projected excess revenues. After 12.5% of annual spending is set aside in reserves, the remainder would be divided between the automatic income tax credits that were enacted during the Daniels administration and a new fund to help maintain roads, bridges and other infrastructure critical to economic growth.
  • Spending is kept in line in this proposal. A structural surplus is maintained and reserves are allocated effectively, with the infrastructure fund a good start to the larger question of financing future transportation needs. The Chamber will be working with the governor’s team and legislators to help ensure that as many pro-job, pro-economy priorities as possible are achieved in a responsible manner.

Bottom Line: Not a Lot of Extra Money in State Budget Forecasts

The Indiana State Budget Committee listened to three separate forecasts recently regarding Medicaid, the economy and revenue; together these will set the stage for debates in the coming session over the next state biennium budget.

Medicaid Forecast
The day started with the Medicaid presentation by Michael A. Gargano, secretary of the Family and Social Services Administration (FSSA) and Robert M. Damler, an actuary with the firm of Milliman, Inc., a financial and health care consultant on contract to the FSSA. The duo outlined the various projections relative to Medicaid expenditure obligations anticipated over the next two years. While predicting Medicaid expenses is particularly difficult this year due to the unknowns of the Affordable Care Act (ACA), the forecast nevertheless attempts to estimate the potential liabilities of the state by making a series of assumptions regarding: the implementation of programs, reimbursement amounts, the impact of new provisions, additional federal actions, long-term trends, and ultimately, the increase in Medicaid recipients and the state’s financial obligations.

Their forecast projects the general fund monies needed to provide Medicaid assistance will grow by 17.1% in fiscal year (FY) 2014 and 8.7% in FY2015. That translates to almost $450 million over the biennium. Fortunately, however, the appropriations for Medicaid have exceeded the actual expenditures in FY2012 and are expected to do so again in FY2013 (by $264 million and $234 million, respectively). The over appropriation in FY2013 will help offset the FY2014 increase some, but overall dollar obligations will nevertheless grow significantly. If you compare the appropriated amounts in the last budget with the projections of what will be needed for Medicaid in the next two years, you still end up with a difference of $428 million (The math: FY12 appropriation = $1716M, FY13 appropriation = $1882M, projected FY14 = $1929M, FY15 = projected $2097M; 1716 +1882= 3598; 1929 + 2097 = 4026; 4026-3598 = 428) Keep this additional $428 million dollars in mind when we consider the general fund revenue projections below.

Economic Forecast
This presentation was given by James Diffley, chief regional economist for IHS Global Insight. Diffley gave the big picture on the U.S. and Indiana economic outlooks. His overview considered the effects of global and domestic uncertainties on exports and business capital spending, housing and vehicle markets, consumer spending, employment and income levels, potential tax changes and the chance of recession if we go over the “fiscal cliff.” In short, IHS is predicting a continuation of modest/slow growth. Indiana is situated well, but remains vulnerable to all the outside factors.

Revenue Forecast
The main attraction of the day was the general fund revenue forecast for fiscal years 2013-2015. This forecast is based on the underlying economic projections of IHS Global Insight but gets down to the nitty-gritty of how much money the budget-makers will have to work with as they put together and debate the details of the next budget. These projections are arrived at by consensus of a bipartisan and non-partisan committee of fiscal analysts who look very closely at all state revenue sources. They meet regularly, apply sophisticated models, track a multitude of factors, receive counsel from numerous advisors, academics and other sources, and have in recent years proven very accurate.

The report took into account recent legislative changes and such things as how alterations to the gaming laws in surrounding states will likely lead to even further reduction in Indiana’s gaming revenues. The bottom line of the revenue forecast committee: Total general revenues are projected to increase by a very modest 2.2% for FY2014 and then another 2.9% in FY2015. In dollar terms, that is $14.65 billion in FY2014 and $15.08 billion in FY2015. The collections for FY2013 were $14.33 billion. The projections represent a slight increase of $320 million for the first year of the new budget and another $430 million in the second year – a mere $750 million over the biennium.

Now let’s go back to the additional $428 million needed simply to meet the projected increase in Medicaid: $750 million minus $428 million leaves only $322 million (a little over 2% of the annual budget) to pay for all other desired budget and fiscal priorities that have been put forth. These include restoring over $350 million in K-12 education cuts, an approximately $100 million pre-school program, several hundred million in stymied university capital projects, billions in long-term road maintenance and other infrastructure needs, as well as the incoming Governor’s proposal to cut individual income taxes by well over $500 million. Clearly, there’s not enough money to go around – let’s see what gets done!

Setting the Record Straight on Medicaid Emergency Room Use

There are more than a few misconceptions in the health care world, including that many Medicaid patients are using hospital emergency rooms in place of family doctors. While that does take place in some cases, the percentage is not nearly as high as commonly thought. That is among several interesting findings in a new Center for Studying Health System Change report.

Policy makers and providers frequently point to Medicaid patients’ heavy reliance on hospital emergency departments as a problem that contributes to crowded emergency departments, long wait times and high costs, as well as poor management of chronic conditions. Recent research has dispelled misconceptions linking ED use to crowding, finding that most crowding results from emergency patients admitted to the hospital but waiting for an inpatient bed—so-called ED boarding—not a high volume of nonurgent ED visits. Other research has dispelled the mistaken belief that most ED users have Medicaid coverage, are uninsured or do not have a usual source of care. In fact, people with private insurance account for most ED use, and people with higher incomes and a private physician as their usual source of care are driving ED visit increases over time.

Other misconceptions about Medicaid patients’ ED use continue to drive policy. In response to state budget crises, some Medicaid programs have sought to cut ED use by denying payment for emergency care viewed as unnecessary, increasing patient cost sharing to discourage visits and penalizing patients for too many ED visits—all based on the assumption that Medicaid patients commonly use EDs to evaluate symptoms that could wait for a primary care clinician to treat. Media coverage of so-called frequent flyers—a small number of people with hundreds of ED visits—may have contributed to commonly held views that Medicaid and uninsured patients often use emergency departments inappropriately.

Nonelderly Medicaid patients do use EDs at higher rates than nonelderly privately insured patients. In 2008, people aged 0 to 64 covered by Medicaid had 45.8 ED visits per 100 enrollees compared with 24.0 visits per 100 nonelderly privately insured people, according to the most recent data available from the National Hospital Ambulatory Medical Care Survey (NHAMCS) (see Table 1 and Data Source). Across children and working-age adults with Medicaid, all age groups mirror a pattern of higher rates of ED use than the privately insured, including children aged 0-12, teens and young adults aged 13-20 and adults aged 21-64.5 However, this study’s findings indicate that Medicaid patients’ higher rates of ED visits are not disproportionately for minor health concerns when compared to privately insured patients.

Governors Faced with Difficult Medicaid Decision

The Medicaid expansion decision for each state is one of several critical aspects of the Affordable Care Act, which was recently deemed Constitutional by the Supreme Court. Although federal dollars are at stake, it’s not a given that states (including Indiana) will agree to the changes to the program for low-income residents. Stateline offers a strong summary.

Although the lineup is shifting, more than a dozen Republican governors have suggested they might decline to participate in the Medicaid expansion. Governors in Florida, Iowa, Kansas, Louisiana, Nebraska, Texas, South Carolina and Wisconsin have said they will not participate. GOP governors in Alabama, Georgia, Indiana, Mississippi, Nevada and Virginia indicate they are leaning in that direction.

Meanwhile, about a dozen Democratic governors have said their states will opt in. The rest have not declared their intentions.

According to data from the Congressional Budget Office, the federal government would spend $923 billion on a full Medicaid expansion between 2014 and 2022, and states would spend about $73 billion. But nobody is sure how many people will enroll in the Medicaid expansion. According to a 2010 report by the Kaiser Family Foundation, states’ share of the Medicaid expansion could range anywhere from $20 billion to $43 billion in the first five years.

According to Kaiser, most states opting into the expansion likely would have to ramp up their Medicaid spending between 2014 and 2019, but four would spend less (Hawaii, Maine, Massachusetts and Vermont) and several others would have to boost state spending only slightly.

Mississippi’s Medicaid program, for example, cost a total of $4 billion in 2011—the federal government paid $3 billion, and the state paid $1 billion. Expanding that program to everybody at or below 138 percent of the federal poverty line would cost the state as much as $581 million between 2014 and 2019, according to Kaiser’s 2010 study.  That’s a 6.4 percent increase in state spending compared to what Mississippi would spend without an expansion

The day after the Supreme Court ruled the Medicaid expansion was optional, Mississippi Governor Phil Bryant, a Republican, said: “Although I am continuing to review the ruling by the Supreme Court, I would resist any expansion of Medicaid that could result in significant tax increases or dramatic cuts to education, public safety and job creation.”

Budget Reflects Changing Times

I’ve seen these federal budget comparisons before, but they prove to be a somewhat fascinating look at how our nation has changed over the past 40-plus years. In this case, Kiplinger breaks down 1968 vs. projected fiscal year 2012. Some of the highlights:

  • Defense was an amazing 46% of the budget in 1968; it’s 19.8% now
  • In 1968, Social Security (13.4%), Medicare (2.3%) and Medicaid (1.1%) totaled less than 17%; today, it’s 20.6%, 13.2% and 7.2%, respectively, for a total of 41%
  • Not part of the picture 43 years ago, but with dollar numbers in the billions now are food stamps (2.2%, $80 billion), housing subsidies (1.6%, $61 billion), low-income tax credit (1.3%, $47 billion), supplemental security income (1.2%, $44 billion), nutrition programs (0.7%, $26 billion) and disaster relief (0.3%, $11 billion)

Maybe the scariest part is putting those billions next to the big-ticket social programs. The message: Something has to be done.

  • Social Security: $767 billion
  • Medicare: $492 billion
  • Medicaid: $269 billion
  • Net interest on debt: $242 billion 

Gov. Daniels Asks Feds Not to Trash State Health Program; Will they Listen?

Gov. Mitch Daniels recently sent a formal request to Health and Human Services Secretary Kathleen Sebelius asking federal officials not to terminate the state’s Healthy Indiana Plan, which has many satisfied participants and 99% planning to renew their coverage, according to the state of Indiana.

The state has sent several letters to Health and Human Services representatives requesting answers to questions about utilizing HIP as the program to serve Indiana’s newly-eligible Medicaid recipients beginning 2014. So far, there has been no guidance.

Here is a link to the governor’s letter: http://www.in.gov/gov/files/Press/011411letter.pdf

Previous correspondence may be found at this link: http://www.in.gov/aca/2330.htm

Executive Order authorizes establishment of state healthcare exchange

The governor also has signed an executive order authorizing the Family and Social Services Administration to work with other state agencies to conditionally establish and operate a state-based healthcare benefit exchange. The steps taken will be preparatory only and do not connote a decision to put a state-run exchange in place.

According to Affordable Care Act (ACA), states are required to establish a health benefit exchange by January 1, 2014. The federal government will establish exchanges for states that have not made adequate progress by January 1, 2013.

The governor said it is in Hoosiers’ best interest to begin to put a framework in place. There has been little information or guidance from the White House about how a federally-based exchange would operate.

“The nation will be best served by the repeal of this expensive and unworkable law, or by its judicial overturn. But for now, there seems no alternative but to prepare for the possibility that Indiana will try to operate an exchange of some kind,” said Daniels.

Individuals and small businesses will use health exchanges to find, compare and enroll in health insurance plans and to obtain federal tax credits for premium expenses. It is estimated that at least 1.4 million Hoosiers will use the exchange; however, the numbers are likely to increase as businesses and individuals drop their existing health insurance to receive tax credits.

Medicaid Still a Puzzler for State Governments

While health care reform and its unknown costs have been popular topics, states have also specifically focused on Medicaid. Texas is among several states that have at least explored dropping out of the federal program. The consequences would be severe and there is no good choice, experts say. Stateline reports:

Arizona has generated national attention in recent weeks for its decision to stop paying for life-saving organ transplants under the state’s Medicaid program. The decision — made in the face of a severe fiscal crisis — has been portrayed as one of the recession’s sharpest state budget cuts.

In Texas, however, some Republican lawmakers — and Governor Rick Perry — have talked not only about dropping certain procedures and benefits under Medicaid, but about dropping out of the program altogether. They say the state can no longer afford the 45-year-old, state-federal health insurance program for the poor.

On Friday (December 3), a long-awaited state study quantified what such a decision would mean for Texas.

The study, by the Texas Department of Insurance and the state’s Health and Human Services Commission, found that as many as 2.6 million residents would lose their health insurance if Medicaid were abandoned. Many of those losing coverage would be pregnant women and babies, as the Austin American-Statesman noted. Texas would also lose $15 billion a year in federal assistance, or about a tenth of the state’s entire health care sector.

Keeping Medicaid without reforming it, however, is also not a viable option, according to the study. Rigid federal rules and a dramatic expansion of the program under the new federal health care law leave it on an unsustainable path in Texas — a "no-win dilemma."

"We have to reform the program to save it," Stephanie Goodman, a spokeswoman for the Texas Health and Human Services Commission, told The Dallas Morning News, which noted that Nevada and Wyoming are among other states that have studied dropping out of Medicaid.

Dead But Not Gone From Government Rolls

There’s the old joke (well, not really a joke in some cases) about dead people casting their ballots in elections. Now, it appears the dead are collecting taxpayer money in another example of government gone awry.

The National Center for Policy Analysis reported the following:

About $1 billion in taxpayer money goes to 250,000 deceased individuals, according to a review of reports by the Government Accountability Office, inspectors general and Congress itself.  How, might you ask?  According to Sen. Tom Coburn’s, R-Okla., office:

The Social Security Administration sent $18 million in stimulus funds to 71,688 dead people and $40.3 million in questionable benefit payments to 1,760 dead people.

The Department of Health and Human Services sent 11,000 dead people $3.9 million in assistance to pay heating and cooling costs.

The Department of Agriculture sent $1.1 billion in farming subsidies to deceased farmers.

But that’s not all, says the Washington Examiner:

The Department of Housing and Urban Development overseeing local agencies knowingly distributed $15.2 million in housing subsidies to 3,995 households with at least one deceased person.

Medicaid paid over $700,000 in claims for prescriptions for controlled substances written for over 1,800 deceased patients and prescriptions for controlled substances written by 1,200 deceased doctors.

Medicare paid as much as $92 million in claims for medical supplies prescribed by dead doctors and $8.2 million for medical supplies prescribed for dead patients.