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State deliberates Medicaid expansion
Move would cost the state $85 million over seven years

11/29/12



New Hampshire legislators have to make the call, most likely next year, on whether the state should expand its Medicaid program as part of the Affordable Care Act. 
 
Initially, expanding Medicaid was a mandatory piece of the Affordable Care Act, otherwise known as Obamacare, but a Supreme Court decision earlier this year declared that mandate unconstitutional. Instead, each state can opt in or opt out of expanding.
 
The state does not have to expand its program; there is no penalty for opting against it. However, the federal government lays out benefits for states that do expand -- specifically, entirely paying for the expansion during the first three years, which is when policy officials expect costs to be the greatest. 
 
If state officials decide to expand Medicaid, about 58,000 more people will begin participating in Medicaid in New Hampshire, according to a report by the Lewin Group, which was hired to provide an analysis of expanding Medicaid. Currently, there are about 132,000 people enrolled in Medicaid each month. 
 
The expansion would allow any individual who makes less than 138 percent of the federal poverty level per year, or about $15,000 per year, to be eligible for Medicaid. (The current Medicaid income threshold in New Hampshire is about $7,000 per year for an individual.) That is essentially someone who is working a minimum wage job, 40 hours per week, taking two weeks off per year. This often included people working in retail, food service, child care, and personal care attendants —the working poor, said Deb Fournier, policy analyst for the New Hampshire Fiscal Policy Institute. 
 
House leadership in New Hampshire has pushed hard against expansion this year, but the legislative makeup has changed dramatically in the House following elections earlier this month, with Democrats re-taking control. Gov.-elect Maggie Hassan has spoken in favor of expanding Medicaid, though in a recent statement, she said officials need to examine the second phase of the Lewin Group’s report as well. The second phase, which is due in December, was expected to detail economic impacts from expansion. 
 
For eligible people, Medicaid is a relatively strong health insurance benefit, at little or no cost to those individuals, Fournier said. The current Medicaid cutoff for an individual parent is 40 percent of the federal poverty level. There is some cost sharing under Medicaid, though most people in New Hampshire who are enrolled in Medicaid do not pay for the benefit, Fournier said. 
 
From 2014 to 2020, Lewin Group analysts determined expanding Medicaid would cost the state an additional $85 million total. The expansion in New Hampshire would cost federal taxpayers an additional $2.5 billion during the same time period. According to the report, the increased cost of expansion could range between $38 million and $102 million, depending on enrollment. The $85 million projection is the midpoint between high and low enrollment projections, according to the report.
New Hampshire’s Medicaid program costs about $1.42 billion each year, with the state and the federal government splitting it 50-50, so the state spends about $700 million on Medicaid each year. Expanding it would amount to about a 2-percent increase in Medicaid costs for covering a 30- to 40-percent increase in the Medicaid population, Fournier said. 
 
“I think this underscores what a tremendous benefit this is for the tens of thousands of working people in New Hampshire who currently don’t have health insurance or … their insurance is incredibly unaffordable to them,” Fournier said. 
 
Costs of expansion
In the short term, expanding Medicaid wouldn’t cost New Hampshire anything. For the first three years, the federal government would pay 100 percent of the cost of the expansion. There is no timeline for expanding Medicaid, but the federal government will only cover the entire cost of expansion for 2014, 2015 and 2016, regardless of when states opt to expand. 
Currently, most of the folks the expansion would apply to either have no health insurance or do not have particularly comprehensive health insurance. Of the 58,000 people who would likely join Medicaid under an expansion, about two-thirds of them don’t have health insurance, while the remaining third have some form of insurance, Fournier said. 
“They are probably generally well, but there is a lot of pent-up demand,” Fournier said. “They might need to get a lot of overdue maintenance done, so it might be expensive up front.”
During the next few years, the federal government would gradually reduce the rate it contributes to the expansion, ultimately to 90 percent by 2020, unless or until Congress amends that part of the statute, Fournier said. 
 
New Hampshire officials can simply decide to expand Medicaid or not, but they have other options as well. The Lewin report details nine options for the state, ranging from no expansion to full expansion of Medicaid. It details costs for delaying expansion for one year or two years. If the state opts not to expand Medicaid, the total extra Medicaid cost for the state between 2014 to 2020 would be $65 million. If the state opts to delay expansion by one year, the total extra Medicaid cost to New Hampshire would be nearly $80 million. If the state waits two years to expand, the state would spend an extra $71 million on Medicaid from 2014 to 2020, according to the report. 
 
The state already pays for people who do not have insurance, which is called uncompensated care, but, Fournier said, the state doesn’t pay for those folks in a rational way. 
 
“We have cost-shifting that happens from providers to people who are privately insured to make up the lost revenue they would take,” Fournier said. 
 
Theoretically, the Medicaid expansion would cause state Medicaid costs to rise, but it could also reduce uncompensated care costs by between 12.5 percent and 25 percent, Fournier said. 
 
“There could be a substantial amount of money saved,” Fournier said. 
 
The Lewin Group predicts the Medicaid expansion would bring more than $2 billion into the state’s economy, primarily in the healthcare sector in the form of federal reimbursements. The second phase of the report was expected to detail secondary effects of expansion, such as effects on other state health programs, healthcare providers, commercial premiums and the state economy.
 
State officials are also undertaking a complex move to switch the existing Medicaid system to a managed care model. Officials have signed off on contracts with three managed care companies. The plan was to have the first phase of the managed care system up and running next year, officials say. 
 
State officials agreed to the managed care contracts prior to the U.S. Supreme Court’s decision that prevented the federal government from requiring states to expand Medicaid. In turn, companies are prepared for the expansion, and Fournier said she guessed that would be financially beneficial to the companies anyway. Managed care companies are technically contracted to cover the expansion. 
 
“It’s probably advantageous for them to cover that population since New Hampshire … already has a relatively small Medicaid population,” Fournier said. 

 






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