States

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Have States made any progress towards implementing Health Exchanges?

February 6, 2012 in CHIP, Health Reform, Medicaid | 2 comments

The answer depends on the state. Today, I examine an Urban Institute research paper that looks at this progress in more detail.

Dividing States into 3 Group

The most advance States fall into Group 1 (CA, CO, CT, DC, HI, IN, MA, MD, NV, OR, RI, UT, VT, WA, WV). These states have either enacted an exchange establishment law or in which the governor has established one by issuing an executive order. Massachusetts and Utah had already passed exchange laws before enactment of the ACA. All Group 1 states (except Colorado, Massachusetts and Utah) have received an exchange establishment grant.

Group 2 states (AL, AZ, DE, IA, ID, IL, KY, ME, MI, MN, MO, MS, NC, NE, NJ, NM, NY, PA, TN, VA, WI) have not yet established exchanges, but have demonstrated significant interest in doing so. Most notably, 17 of the 21 states have received level 1 federal establishment grants, which represent a second round of funding for state exchange development work beyond the initial state planning grants. Although Wisconsin has not received a level 1 federal establishment grant, Wisconsin is using federal funds to develop an IT system to fully integrate exchange eligibility determination and enrollment with state-based public insurance programs (i.e., Medicaid and CHIP). Recently, however, Wisconsin Governor Scott Walker has rejected all federal funding for implementation of the ACA. Of the remaining four states, Virginia and Wisconsin have passed legislation stating its intent to develop an exchange, although they have not yet passed exchange establishment legislation, New Jersey has establishment legislation pending in its legislature, and Pennsylvania’s governor has recently announced that his administration is taking steps to establish a state exchange.

Group 3 states (AK, AR, FL, GA, KA, LA, MT, ND, NH, OH, OK, SC, SD, TX, WY) do not meet any of the criteria for Groups 1 and 2 and are the furthest from successfully implementing the ACA provisions.

Correlation between Exchange Progress and Potential Increases in State Health Insurance Coverage

A research article from the Urban Institute finds that States with the ‘most to gain’ from the ACA are actually the most likely to fall into Group 3. States that currently have the least generous Medicaid programs and the largest share of uninsured workers are the least likely to have made significant progress in implementing the ACA provisions.

I can think of two reasons for this finding. The first is philosophical. These States began with less generous health insurance programs. Thus, the residents (or politicians) in these States may prefer to have less generous health insurance programs than other States. Hence the natural aversion to implementing the ACA provisions. The second reason is financial. Because these States have the largest share of uninsured individuals, they would also incur the largest percentage increase in cost to finance the ACA provisions. Although it is true that these States would likely receive the largest subsidies, these subsidies will not cover the full cost of the ACA implementation.

Questions States need to answer to implement an Exchanges

  • Should the exchange be run by an existing government agency, a new agency, a quasi-governmental entity or a not-for-profit private entity?
  • What should the composition of the governing board be?
  • How should the administrative costs of running an exchange be financed?
  • Should the exchange be able to actively negotiate with plans over premiums?
  • Can plans be excluded, or must all qualified plans be allowed to participate?
  • In computing premiums, should enrollees in the Small Business Health Options Program (SHOP) exchange and nongroup exchange markets be pooled together, or should their premiums be set separately?
  • What will be the role of agents and brokers in the exchange?
  • Should state insurance regulations be identical inside and outside the exchange?
  • How will Medicaid/CHIP eligibility and enrollment be integrated with the exchange?
  • Should the Basic Health Plan option be implemented?

Source: Blavin F, Buettgens M and Roth J “State Progress Toward Health Reform Implementation: Slower Moving States Have Much to Gain.” RWJF and Urban Institute Real Time Policy Analysis, January 2012.

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How will Health Reform affect State Finances?

August 13, 2010 in Health Reform, Medicaid | 1 comment

How will health reform affect state health care costs?  Will reform bankrupt states as some Republicans say?  Or will costs be negligible, as Democrats claims?  According to a study by Holahan and Dorn (2010) the answer is somewhere in the middle.

Most of the additional costs will come from expanding Medicaid to newly eligible population, individuals between 100% and 133% of the federal poverty line.

“These state cost increases range from $21.1 billion to $43.2 billion over the 2014-2019 period, with the difference depending on the extent of beneficiary participation. These represent increases in state spending of 1.4 to 2.9 percent relative to what states would spend on such adults in the absence of reform.”

Although there will likely be a significant increase in the number of Medicaid beneficiaries, the federal government is financing a large share of this expansion.

“the federal government will pay 100 percent of health care costs between 2014 and 2016. In 2017, this percentage will drop to 95 percent, and continue to decline until 2010—falling to 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and thereafter.by advocacy groups and providers. Even with higher participation rates, the increased cost to states will be limited. States that will be affected the most from increased participation among those who are currently eligible are those with more current.”

Although the federal government is footing most of the bill, Tyler Cowen thinks it should go a step further.  ”The correct fiscal policy move would have been, and still is, to take Medicaid away from the states and make it fully federal.”

Another area where states will lose money is through the  additional administrative costs needed to process more Medicaid applicants.

However, states will also receive some savings.  States and local governments often provide medical care for poor, non-Medicaid eligible individuals.  Because more of these individuals will receive Medicaid coverage, this should displace a significant share of state/local spending in these areas.  Additional areas of savings include:

  • states could stop covering individuals with incomes above 133% FPL
  • CHIP beneficiaries (children) with incomes below 133% FPL will be transitioned to Medicaid
  • states that currently cover parents between 133 and 200 percent of FPL can, in effect, shift these parents to full federal funding by implementing PPACA’s “basic health program” option, through which states convert PPACA’s tax credits to funding for contracts with health plans serving adults in this income range.  Alternatively, they could just end coverage altogether.

Who are the winners?  The poor and near-poor who receive additional coverage.  Who are the losers?  Providers who must accept lower payment for Medicaid and the rich who must pay higher taxes to cover these individuals.

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