Feb 23, 2017

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 ›

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Per-capita caps = Medicaid cuts

by | Feb 23, 2017

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

Recent articles

CCLP testifies in support of Clean Slate updates

Bethany Pray, CCLP’s Chief Legal and Policy Officer, provided testimony in support of House Bill 24-1133, Criminal Record Sealing & Expungement Changes. CCLP is in support of HB24-1133, as it is one of our priority bills.

CCLP testifies in support of TANF grant rule change

CCLP's Emeritus Advisor, Chaer Robert, provided written testimony in support of the CDHS rule on the COLA increase for TANF recipients. If the rule is adopted, the cost of living increase would go into effect on July 1, 2024.

HEALTH:
HEALTH FIRST COLORADO (MEDICAID)

To maintain health and well-being, people of all ages need access to quality health care that improves outcomes and reduces costs for the community. Health First Colorado, the state's Medicaid program, is public health insurance for low-income Coloradans who qualify. The program is funded jointly by a federal-state partnership and is administered by the Colorado Department of Health Care Policy & Financing.

Benefits of the program include behavioral health, dental services, emergency care, family planning services, hospitalization, laboratory services, maternity care, newborn care, outpatient care, prescription drugs, preventive and wellness services, primary care and rehabilitative services.

In tandem with the Affordable Care Act, Colorado expanded Medicaid eligibility in 2013 - providing hundreds of thousands of adults with incomes less than 133% FPL with health insurance for the first time increasing the health and economic well-being of these Coloradans. Most of the money for newly eligible Medicaid clients has been covered by the federal government, which will gradually decrease its contribution to 90% by 2020.

Other populations eligible for Medicaid include children, who qualify with income up to 142% FPL, pregnant women with household income under 195% FPL, and adults with dependent children with household income under 68% FPL.

Some analyses indicate that Colorado's investment in Medicaid will pay off in the long run by reducing spending on programs for the uninsured.

FOOD SECURITY:
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

Hunger, though often invisible, affects everyone. It impacts people's physical, mental and emotional health and can be a culprit of obesity, depression, acute and chronic illnesses and other preventable medical conditions. Hunger also hinders education and productivity, not only stunting a child's overall well-being and academic achievement, but consuming an adult's ability to be a focused, industrious member of society. Even those who have never worried about having enough food experience the ripple effects of hunger, which seeps into our communities and erodes our state's economy.

Community resources like the Supplemental Nutrition Assistance Program (SNAP), formerly known as Food Stamps, exist to ensure that families and individuals can purchase groceries, with the average benefit being about $1.40 per meal, per person.

Funding for SNAP comes from the USDA, but the administrative costs are split between local, state, and federal governments. Yet, the lack of investment in a strong, effective SNAP program impedes Colorado's progress in becoming the healthiest state in the nation and providing a better, brighter future for all. Indeed, Colorado ranks 44th in the nation for access to SNAP and lost out on more than $261 million in grocery sales due to a large access gap in SNAP enrollment.

See the Food Assistance (SNAP) Benefit Calculator to get an estimate of your eligibility for food benefits.

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

Every child deserves the nutritional resources needed to get a healthy start on life both inside and outside the mother's womb. In particular, good nutrition and health care is critical for establishing a strong foundation that could affect a child's future physical and mental health, academic achievement and economic productivity. Likewise, the inability to access good nutrition and health care endangers the very integrity of that foundation.

The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) provides federal grants to states for supplemental foods, health care referrals, and nutrition information for low-income pregnant, breastfeeding and non-breastfeeding postpartum women and to infants and children up to age five who are found to be at nutritional risk.

Research has shown that WIC has played an important role in improving birth outcomes and containing health care costs, resulting in longer pregnancies, fewer infant deaths, a greater likelihood of receiving prenatal care, improved infant-feeding practices, and immunization rates

Financial Security:
Colorado Works

In building a foundation for self-sufficiency, some Colorado families need some extra tools to ensure they can weather challenging financial circumstances and obtain basic resources to help them and their communities reach their potential.

Colorado Works is Colorado's Temporary Assistance for Needy Families (TANF) program and provides public assistance to families in need. The Colorado Works program is designed to assist participants in becoming self-sufficient by strengthening the economic and social stability of families. The program provides monthly cash assistance and support services to eligible Colorado families.

The program is primarily funded by a federal block grant to the state. Counties also contribute about 20% of the cost.

EARLY LEARNING:
COLORADO CHILD CARE ASSISTANCE PROGRAM (CCCAP)

Child care is a must for working families. Along with ensuring that parents can work or obtain job skills training to improve their families' economic security, studies show that quality child care improves children's academic performance, career development and health outcomes.

Yet despite these proven benefits, low-income families often struggle with the cost of child care. Colorado ranks among the top 10 most expensive states in the country for center-based child care. For families with an infant, full-time enrollment at a child care center cost an average of $15,140 a year-or about three-quarters of the total income of a family of three living at the Federal Poverty Level (FPL).

The Colorado Child Care Assistance Program (CCCAP) provides child care assistance to parents who are working, searching for employment or participating in training, and parents who are enrolled in the Colorado Works Program and need child care services to support their efforts toward self-sufficiency. Most of the money for CCCAP comes from the federal Child Care and Development Fund. Each county can set their own income eligibility limit as long as it is at or above 165% of the federal poverty level and does not exceed 85% of area median income.

Unfortunately, while the need is growing, only an estimated one-quarter of all eligible children in the state are served by CCCAP. Low reimbursement rates have also resulted in fewer providers willing to accept CCCAP subsidies.