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News

Feb 23, 2017

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Bethany Pray serves as CCLP's Chief Legal and Policy Officer. Her areas of expertise include regulatory analysis and advocacy for Medicaid and commercial coverage, access to behavioral health benefits, Medicaid eligibility and much more.Staff page ›

Recent articles

Per-capita caps = Medicaid cuts

by | Feb 23, 2017

Health

Members of Congress are pushing to end the Medicaid system that currently allows state dollars for mandatory and optional Medicaid services and populations to be matched with federal dollars.

Currently, federal dollars cover about a half of the cost of Colorado Medicaid, and 95 percent of the cost for adults who enrolled through the Medicaid expansion. The current matching system allows states to provide all medically necessary services, confident that those federal matching dollars are available to help them do so.

A recent analysis by CCLP’s Allison Neswood explained why one alternative Congress is considering – block grants – would prevent Health First Colorado, our Medicaid program, from maintaining benefits and services to the current enrolled population, and would negatively affect both Colorado’s economic wellbeing and the health of Colorado’s children, those with disabilities, the low-income elderly and working adults.

Here, we discuss another alternative funding scheme: The use of “per-capita caps” that would give states a set amount of funding per Medicaid enrollee. The concept is being framed by supporters as a “kinder, gentler” approach to reforming the Medicaid program. As with block-granting proposals, however, the proposed structure would result in substantial cuts in federal funding and commensurate reductions in service over time.

This piece addresses common questions and misconceptions about per-capital caps and how the concept might play out in Colorado.

Q. Wouldn’t per-capita caps allow growing states like Colorado to continue offering services to anyone who’s eligible?

A. The short answer is no. The goal of any restructuring would be reductions to federal spending, and that means that the base amount per enrollee and the rate of annual increase selected by the federal government would be set at levels that would guarantee shrinkage in the program.

Because the proposals’ overarching goal is to slash federal spending for Medicaid – to the tune of $1 trillion based on Tom Price’s budget for fiscal year 2017 – Colorado would not see any financial benefit. A recent Avalere study failed to take that premise into account. Either the starting per-capita amount, the rate of increase, or both must be lower than it is now or that overarching goal will not be achieved.

  • The newest Republican proposal outlined in the “Obamacare Repeal and Replace Policy Brief” (ORRPB) adjusts the base amount, removing the additional federal moneys that Colorado receives for its expansion population. Those cuts would reduce existing funds for expansion adults by as much as 45 percent, limiting funds for coverage of those already enrolled and also establishing a date to bar any new enrollments in the expansion category. .
  • The per-capita amount may be based on past spending, or could exclude some or all of the funding that has been provided to cover Coloradans who received coverage when the Medicaid program was expanded.
  • The per capita allotment outlined in ORRPB also excludes any federal support for administrative costs, though federal funds currently pay between 50 percent and 90 percent of Colorado’s administrative costs.
  • Basing the per-capita amount on each state’s expenditures could put Colorado in a worse position than other states. Current spending per enrollee in Colorado is at the low end, compared to other states; using Colorado’s numbers would lock in Colorado permanently to this low reimbursement level – effectively disadvantaging Coloradans for having a lower-cost program.

The reductions being sought are enormous, considering that Medicaid already maximizes savings by managing benefits carefully and paying providers less than commercial payers do. Those federal reductions will result in dramatic losses to Colorado’s state budget and its economy.

Q. If Colorado got almost the same amount per enrollee, but also didn’t have to do all the paperwork associated with getting the federal match, wouldn’t that work out fine?

A. No. Congress’s approach is based on the assumption that they can force a reduction in the growth of the Medicaid program by imposing an arbitrary growth rate. ORRPB states that Medicaid spending is unsustainable because it “will continue to grow at a rate faster than the economy,” ignoring the fact that commercial health care costs grow at rates significantly higher than rates in Medicaid. Those touting per-capita caps ignore the 6.7% annual growth in the health care sector, and instead support use of the Consumer Price Index, with increases ranging in recent years from 2.15 percent (2012) to just 0.1 percent (2015). Another suggested index, Gross Domestic Product + 1 percent, would be approximately 3.9 percent, based on 2000-2011 rates.

Use of either index would mean that Medicaid spending would lag farther and farther behind actual health care costs, , year-by-year, and the state program’s would be unable to cover the same services and benefits with the funds available. By tightening the thumb-screws over time, minor reductions in year 2 would lead to catastrophic reductions by year 10.

Second, the rate of increase varies historically among eligibility categories, meaning that costs for children and costs for people with disabilities rise at different rates. As a result, eligible children might fare better, in terms of maintaining their access to services and benefits, while people who need nursing home care might very quickly face wait-lists or have to go without the in-home care that maintains them in their homes and communities.

Third, flexibility to address changes in need would be lacking. In the event of a measles outbreak or an upswing in asthma rates, states would be solely responsible for covering those additional costs. In the event that a new-but-costly treatment became available – and would lead to short-term expense with long-term benefit – states would be solely responsible for covering those additional costs. In the almost-certain event that the over-64 population becomes, over time, older and in greater need of services, the per capita cap would not change with changing needs.

Q. So if federal dollars wouldn’t cover the current level of benefits for eligible Coloradans, who would?

A. Colorado is highly unlikely to cover more of the cost of the Medicaid program, because that would mean either raising taxes, or making corresponding cuts in other programs, such as K-12 education or infrastructure support. Instead, the loss of federal dollars would result in shrinkage to the program, meaning that benefits or services that are now available would be reduced. Doing so would have short-term and long-term health consequences, and even result in unnecessary death and disability as well as long-term widespread economic consequences. If the shortfall were to result in cuts in payments to providers, the likely outcome would be provider drop-out, longer wait-times, and worsening health.

Or the shortfall could result in requirements that Medicaid enrollees pay copays, premiums or deductibles, though doing so would also result in enrollees forgoing care. Indiana’s expansion waiver requires that expansion adults pay premiums, and serves as a case-in-point. In that state, over a third of enrollees did not pay required premiums, and as a result had a more limited benefit package; of enrollees who earned over 100 percent of the federal poverty level, over 4,000 Indianans got locked out of Medicaid entirely. Indiana’s requirement for copays on drugs and office visits – for those who don’t pay the monthly premium — means that people with the greatest health care needs often bear a greater financial burden than their healthier neighbors.

Q. But Medicaid costs are out of control. How can we improve things?

Saying that Medicaid costs are “out of control” doesn’t make it so. In fact, Medicaid costs are not out of control, if one considers the number of people covered and the moderate rate of increase in Medicaid costs.  Medicaid serves almost a quarter of Coloradans at fairly low cost per enrollee. Meanwhile, costs in the private market are much higher and rise more steeply, both because of cost and utilization.

  • A study that used 2005 data found that spending would be 26 percent higher for enrolled adults if they instead got their care through private health insurance, and 37 percent higher for children.
  • A later study examined the cost of insuring adults through Affordable Care Act (ACA) exchanges, with financial assistance, and found that the cost would be 50 percent higher than coverage through Medicaid.

Dollar-for-dollar, Medicaid provides more value than private insurance. Medicaid would more logically be seen as a model for the private market in its ability to restrain provider costs, require reasonable pharmaceutical prices, and provide preventive care, care coordination and services that keep people out of institutions.

Q. How can we keep Medicaid per-capita caps from becoming a reality?

A. Simply put, you should call or write members of the Colorado delegation or participate in town hall meetings in upcoming weeks. Visit this page for a list of U.S. Senators and Representatives from Colorado and their contact information.

– Bethany Pray

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Recent articles

HEALTH:
HEALTH FIRST COLORADO (MEDICAID)

Health First Colorado is the name given to Colorado’s Medicaid program. Medicaid provides public, low-cost health insurance to qualifying adults and children. It is an entitlement program funded by the federal, state, and county governments and is administered by counties in Colorado. Those who are required to pay must pay a small co-pay when receiving certain health care services.

State Department: Department of Health Care Policy and Financing

Eligibility: Most adults 18 to 64 are eligible for Medicaid in Colorado if their household income is at or below 133% of the federal poverty limit (FPL). Pregnant women are eligible with incomes of up to 195% FPL, while children under 18 may be eligible if the live in a household with income at or below 142% FPL. Some adults over 65 may also be eligible for Medicaid.

Program Benefits: Through Medicaid, low-income Coloradans are eligible for a range of health care services at little to not cost. Services provided include doctors visits, prescription drugs, mental health services, and dental care. Co-pays for certain individuals may be needed for certain services.

Program Funding and Access: Colorado funds our Medicaid program through state and federal dollars. Medicaid is an entitlement program, which means that all who are eligible for Medicaid can access the program, regardless of the funding level in a given year. This does not mean that it is always easy to access Medicaid, even when eligible. And since the program is administered by counties, funding levels for county staff and other administrative roles can make it easier or harder for Coloradans to access the program. On top of this, not all medical providers accept Medicaid which limits the ability of Coloradans to seek health services even if enrolled, such as if the nearest provider is a 2+ hour drive away.

Note: This data is from before the pandemic and does not reflect changes in enrollment rules during the COVID-19 pandemic and public health emergency.

Statewide Program Access 2015-19: Over the study period of this report, an average of 89.0% of the population at or below 133% of FPL (i.e., the population who is likely to be eligible for Medicaid) were enrolled in Medicaid in Colorado.

FOOD SECURITY:
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

The Supplemental Nutrition Assistance Program or SNAP helps low-income Coloradans purchase food by providing individuals and families with a monthly cash benefit that can be used to buy certain foods. SNAP is an entitlement program that is funded by the federal and state governments and administered by counties in Colorado.

State Department: Department of Human Services

Eligibility: Currently, Coloradans qualify for SNAP if they have incomes below 200% FPL, are unemployed or work part-time or receive other forms of assistance such as TANF, among other eligibility criteria. Income eligibility for SNAP was different during the study period of this report than today—it was 130% FPL back in 2019 for example. The US Department of Agriculture uses the population at or below 125% FPL when calculating the Program Access Index (or PAI) for SNAP. We follow this practice in our analysis despite Colorado currently having a higher income eligibility threshold.

Program Benefits: SNAP participants receive a monthly SNAP benefit that is determined by the number of people in their household and their income. Benefit amounts decrease as income increases, helping households avoid a sudden loss of SNAP when their incomes increase, even by a minor amount. Benefits are provided to an Electronic Benefit Transfer (EBT) card that can be used to purchase eligible food items, such as fruits and vegetables; meat, poultry, and fish; dairy products; and breads and cereals. Other items, such as foods that are hot at their point of sale, are not allowable purchases under current SNAP rules.

Program Funding and Access: SNAP, like Medicaid, is a federal entitlement program. This means that Colorado must serve any Coloradan who is eligible for the program. As such, funding should not be a limit to how many Coloradans can be served by the program. However, funding for administration of SNAP at the state and county level can limit the ability of county human service departments to enroll those who are eligible. Other program rules and administrative barriers can make it difficult for Coloradans to receive the benefits they are legally entitled to receive.

Statewide Program Access 2015-19: Over the study period of this report, an average of 61.1% of the population at or below 125% of FPL (i.e., the population who is likely to be eligible for SNAP) were enrolled.

FOOD SECURITY:
SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN (WIC)

The Special Supplemental Nutrition Program for Women, Infants, and Children, also know as WIC, provides healthcare and nutritional support to low-income Coloradans who are pregnant, recently pregnant, breastfeeding, and to children under 5 who are nutritionally at risk based on a nutrition assessment.

State Department: Department of Public Health and Environment

Eligibility: To participate in WIC you must be pregnant, pregnant in the last six months, breastfeeding a baby under 1 year of age, or a child under the age of 5. Coloradans do not need to be U.S. citizens to be eligible for WIC. In terms of income, households cannot have incomes that exceed 185% FPL. Families who are enrolled in SNAP, TANF, Food Distribution Program on Indian Reservations (FDPIR), or Medicaid are automatically eligible for WIC. Regardless of gender, any parents, foster parents, or caregivers are able to apply for and use WIC services for eligible children.

Program Benefits: WIC provides a range of services to young children and their parents. These include funds to purchase healthy, fresh foods; breastfeeding support; personalized nutrition education and shopping tips; and referrals to health care and other services participants may be eligible for.

Program Funding and Access: WIC is funded by the US Department of Agriculture. The state uses these federal funds to contract with local providers, known as WIC Clinics. In most cases, these are county public health agencies, but that is not the case in all Colorado counties. Some WIC Clinics cover multiple counties, while others are served by multiple clinics. Private non-profit providers are also eligible to be selected as a WIC Clinic.

Statewide Program Access 2015-17: Between 2015 and 2017, an average of 52.2% of the population eligible for WIC were enrolled in the program in Colorado.

Financial Security:
Colorado Works

Colorado Works is the name given to Colorado’s program for Temporary Assistance to Needy Families or TANF. It is an employment program that supports families with dependent children on their path to self-sufficiency. Participants can receive cash assistance, schooling, workforce development and skills training depending on the services available in their county.

State Department: Department of Human Services

Eligibility: In general, Coloradans are eligible to enroll in TANF if they are a resident of Colorado, have one or more children under the age of 18 or pregnant, and have very low or no income. For example, to be eligible to receive a basic cash assistance grant through TANF, a single-parent of one child could not earn more than $331 per month, with some exclusions—and would only receive $440 per month (as of 2022). That said, there are other services provided by counties through TANF that those with incomes as high as $75,000 may be eligible for. In addition to these, participants in TANF are required to work or be pursuing an eligible “work activity” or work-related activity. Any eligible individual can only receive assistance if they have not previously been enrolled in TANF for a cumulative amount of time of more than 60 months—this is a lifetime limit that does not reset. Counties may have additional requirements and offer benefits that are not available in other counties in Colorado.

Program Benefits:  While the exact benefits that one is eligible for under TANF can vary, all qualified participants are eligible to receive a monthly cash payment, call basic cash assistance. Other than cash assistance, counties are have a lot of choice in how to use their TANF funding; generally a use of TANF funds is appropriate so long as it advances one or more of the four purposes of the program: (1) provide assistance to needy families so that children can be cared for in their own homes or in the homes of their relatives; (2) end the dependence of needy families on government benefits by promoting job preparation, work, and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies; and (4) encourage the formation and maintenance of two-parent families.

It is important to note that those eligible for TANF are also eligible for many of the other programs we’ve included in this report, such as SNAP, Medicaid, and CCCAP.

Program Funding and Access: Colorado funds its TANF program through funds received from the federal government through the Temporary Assistance for Needy Families block grant. Most of the federal funds are allocated by the state to counties, which are required to provide a 20% match of state funding. Federal and state rules allow the state and counties to retain a portion of unspent funds in a TANF reserve.

Statewide Program Access 2015-19: Over the study period of this report, an average of 50.7% of the population at or below 100% of FPL (i.e., the population who is likely to be eligible for TANF) were enrolled in TANF in Colorado.

EARLY LEARNING:
COLORADO CHILD CARE ASSISTANCE PROGRAM (CCCAP)

The Colorado Child Care Assistance Program provides child care assistance to low-income families and caregivers living in Colorado in the form of reduced payments for child care. It is a program funded by the federal, state, and county governments and is administered by counties in Colorado. The share owed by parents/caregivers is determined on a sliding scale based on the family’s income.

State Department: Department of Early Childhood Education

Eligibility: Counties set eligibility for families separately, but must serve families with incomes at or below 185% of the Federal Poverty Limit. Families accepted to the program are no longer eligible once their income exceeds 85% of the state median income. Parents or caregivers must be employed, searching for work, or engaged in another approved activity to be eligible for CCCAP. Parents and caregivers enrolled in Colorado Works (Temporary Assistance to Needy Families or TANF) or in the child welfare system are also eligible to participate in CCCAP. Generally, CCCAP serves families with children under 13, although children as old as 19 may be eligible under certain circumstances.

Program Benefits: If a family is eligible for CCCAP and has income, they may likely have to pay a portion of their child’s or children’s child care costs each month. The amount that families owe is based on their gross income, number of household members, and the number of children in child care in the household. As such, households tend not to experience a benefit cliff with CCCAP when they see their incomes increase

Program Funding and Access: Colorado funds the CCCAP program using federal dollars it receives from the Child Care and Development Block Grant program. The state allocates federal and state funds to counties using a formula that takes into account factors like current caseloads and the number of eligible residents. Assistance is available until the county’s funds are spent, so the number of families that can be served is often a function of how much funding is available and the income and composition of the household that applies. It is not uncommon for counties to overspend or underspend their allocations of funds. The state reallocates unspent funds from counties who underspent to those who overspent. While underspending could indicate a problem with the way a county administers its CCCAP program, it could just as likely be a sign that there are few providers in the county who participate in CCCAP—or a lack of providers generally.

Statewide Program Access 2015-19: Over the study period of this report, an average of 10.8% of the population at or below 165% of FPL and younger than age 13 (i.e., the population who is likely to be eligible for CCCAP) were enrolled in CCCAP.

Housing:
HUD rental assistance programs

The US Department of Housing and Urban Development (HUD) has three housing assistance programs that we look at together: Housing Choice Vouchers (Section 8), Project-based Section 8, and Public Housing. In Colorado, these programs provided assistance to over 90% of the households who received federal housing assistance from all HUD programs. Through federally funded, local or regional public housing agencies (PHAs) are the agencies that administer these programs, through not all are available in all counties. These are not the only programs available in Colorado that assist households afford the cost of housing, such as units funded through federal and state tax credit programs.

State Department: Department of Local Affairs

Eligibility: Generally, households with incomes under 50% of the area median income (AMI) of the county they live in are eligible for these rental assistance programs, although PHAs have discretion to select households with incomes at higher percentages of AMI. That said, HUD requires that 75% of new vouchers issued through the Housing Choice Voucher/Section 8 program in a given year are targeted to households with incomes at or below 30% of AMI. PHAs are also able to create criteria that give priority to certain types of households who are on waiting lists for these programs.

Program Benefits: These rental assistance programs help households afford the cost of housing by reducing their housing costs to around 30% of their household income. In the case of the Housing Choice Voucher program, the PHA pays the voucher holder’s landlord the remaining portion of the rent.

Program Funding and Access: Funding and access are both challenges for these rental assistance programs. In addition to limitations on the number of public housing units or housing vouchers a PHA can manage or issue, lack of funding compared to the need constrains the ability of PHAs to assist low-income households. In 2020, Coloradans were on waitlists for Housing Choice Vouchers for an average of 17 months. Waitlists also exist for the other rental assistance programs.

Statewide Program Access 2015-19: Over the study period of this report, an average of 21.1% of renter households with incomes at or below 50% AMI (i.e., the population who is likely to be eligible for HUD rental assistance programs) were living in subsidized housing.