Moorhead & Moriarty: Important Questions & Answers about Medicaid Expansion

by Bee Moorhead & Kevin C. Moriarty

A rebuttal from the groups that commissioned the Hamilton report on Medicaid expansion; they say the concerns about expansion, elucidated in a recent critique of the report by Sen. Bob Deuell, are unfounded

As representatives of the faith community, we believe that health care is a core value – but we also believe in weighing the facts and making smart policy decisions, so we commissioned a report by universally respected state budget expert Billy Hamilton to find out what the fiscal and economic impacts of Medicaid expansion would be in Texas. Since our report was released, legislators and others have raised important concerns about expanding Medicaid. We believe lawmakers deserve to have their questions and concerns addressed thoroughly as they debate one of the most important legislative decisions Texas has made in decades.

Many of the most common concerns about Medicaid expansion are unfounded.

Fears about the possibility of people shifting from private insurance to Medicaid causing negative effects to the insurance industry, creating a new class of uninsured and causing premiums to increase are unfounded. Dr. Michael Cline and Dr. Steve Murdock with the Hobby Center for the Study of Texas at Rice University have estimated that approximately 1.5 million uninsured individuals will sign up for the ACA subsidized insurance under a moderate enrollment scenario. The Health and Human Services Commission estimates about 10 percent of privately enrolled individuals will shift to Medicaid, although some states have experienced less. In Texas, that would be about 87,000, which the 1.5 million would totally overwhelm. The net effect of the ACA, then, will be a huge boost to the insurance industry. This issue was debated and put to rest during the original debates on passing the ACA. Our report provides a range of enrollment scenarios as well as the data for people to develop their own assumptions about shifting.

Worries that accepting the federal funds will somehow increase the federal deficit or debt are also unfounded. The federal government is not borrowing money to pay for the Medicaid extension to low-income adults or the ACA’s subsidized insurance. The ACA has built-in revenue streams and offsets that will more than pay for expanded Medicaid and subsidized insurance. In fact, it will generate more revenue than it spends; the Congressional Budget Office, the nonpartisan arm of Congress that estimates the fiscal impact of legislation similar to our Texas Legislative Budget Board, estimates that the ACA, including the Medicaid expansion, will shave more than $200 billion off the federal deficits over the next ten years.

To manage anxiety that the federal government will renege on its promise to fund 90 percent of the cost for low-income adults beyond 2020, Texas could include an automatic trigger, such as Arizona is doing. Texas could discontinue the program if Congress reneges on its promise.
Another concern is that the Medicaid system in Texas cannot handle an influx of new patients since only about 59 percent of physicians accept Medicaid patients, according to Community Health Choice (CHC), a managed care organization, that compared Medicaid payments from the Health and Human Services Master File to active physicians licensed by the Texas Medical Board. The ACA, however, recognized this national problem and fully funded a rate increase for primary care services up to the Medicare rate for 2013 and 2014. Extending the rate increase is optional for states, which would continue to receive federal matching funds to help pay for it.

In Texas, the Medicaid reimbursement rate was only 61 percent of the Medicare rate in 2012, according to the Kaiser Family Foundation, close to the national average of 59 percent. Nationally, the average cost of a 30-minute office visit for a new primary care patient was $63.46. In Texas, an increase to the Medicare rate would bring that fee up to $104.03—a substantial improvement.

A recent study conducted by Sandra Decker, an economist with the Centers for Disease Control, and published in Health Affairs, found that 83 percent of physicians nationally accepted Medicare compared to only about 69 percent that accepted Medicaid. She also found that the percent of physicians accepting new Medicaid patients correlated with the amount the state paid Medicaid doctors as a percent of the Medicare rate. Consequently, the rate increase that began in January in Texas should create a substantial increase in the number of physicians accepting new Medicaid patients.

Finally, Texas and other states have been looking for “flexibility” in the Medicaid program, including co-payments and a strong focus on managed care. Recently, the administration released its Final Rule for copayments and increased rates that states may charge for provider visits, including giving states’ the flexibility to charge higher rates to those above the poverty level who use hospitals for non-emergency care. Texas has long been a leader in implementation of Medicaid managed care, which is now available statewide. With the streamlining of eligibility systems that the ACA enacted and the new flexibility in co-payments now afforded the states, Texas no longer has a pressing need for a Medicaid block grant.
On the other hand, there are some very real dangers regarding Medicaid expansion that legislators should attend to promptly.

First, over the next ten years, Texans will be paying into a $100 billion kitty collected by the ACA’s new revenue streams and offsets to extend Medicaid to low-income Texans. If Texas opts out of the extension, then Texans will be effectively donating that $100 billion to the federal government!

If Texas delays the extension a biennium, presumably for time to “fix” Medicaid, then Texans will permanently lose $7.7 billion in federal funds. Texas has a long history of continuing to serve more than 3 million children and adults in its Medicaid program while implementing major reforms and structural changes. There is no reason why the state cannot implement improvements while serving this new population.
At the same time that Texans are paying in to the $100 billion kitty, Texans will continue to pay out the same high state and local costs for this group, who currently seek help in local hospital emergency rooms and community health clinics. The total annual amount of unreimbursed health care costs for local government alone in Texas amounted to about $2.5 billion in 2011 and hospitals shouldered another conservative estimate of $1.8 billion. This estimate includes only uninsured individuals and excludes any unreimbursed costs of Medicaid or other government-sponsored programs.

Although the ACA will relieve some of this burden, since people from 100 percent to 400 percent of the poverty level will be able to obtain subsidized insurance through the insurance exchange, much of it will remain unless the state extends Medicaid to adults below 138 percent of the poverty level.

We estimate that Texans will also need to find an additional $889 million for this next biennium alone to fund the additional children who are currently eligible for Medicaid but not enrolled and who will sign up through the streamlined enrollment process provided through the new federal health insurance exchange. For the 2016-2017 biennium, the total will increase to $1.6 billion.

And, if Texas wants to solve its Medicaid physician shortage, it will need to find yet an additional $161 million for the 2014-2015 biennium to extend the basic primary care services rate increase that the ACA funded for 2013 and 2014, according to HHSC’s July 2012 estimates, and an additional $92 million to extend it to all physicians providing primary care services. Although the extension of the primary care rate increase beyond 2014 is technically optional, the state will need to find the money anyway to ensure enough available physicians to treat the new children materializing in 2014.

Without the new state and local revenue that extending Medicaid would bring, however, Texas will be hard-pressed to find these additional revenues. If Texas opts in, however, then an estimated $500 million in state revenue will flow in for the next biennium and about $1 billion in the following biennium due to the influx of federal funds for the adults. In addition, it will add an estimated $700 million in the next biennium to state revenue and $1.4 billion to local coffers. Since the federal funds will pay 100 percent of the services to adults for the next three years and no less than 90 percent in 2020 and beyond, general revenue that Texas now spends on this population at the state and level would become available. And, local hospitals will no longer have to shoulder the burden of uncompensated costs for this population. In effect, we would be shifting this population from the “Locally Funded Emergency Room Treatment” program to managed care through Medicaid, a far more efficient option.

But most importantly, if Texas opts out, people below the poverty level will have no insurance. Since the ACA assumed that Medicaid would cover them, it does not provide an option for insurance subsidies for this group. If Texas opts in, however, people that do not currently have adequate health care and rely on expensive emergency rooms for sporadic care will have a primary care physician, preventive care and referrals to specialists when necessary—just like people with private insurance enjoy.

As other states, such as Arizona, New Mexico, Ohio and Florida have come to realize, this decision is a no-brainer. Politics need to be set aside, and Texans need to come together to do what is best for Texas: extend Medicaid to low-income adults.

Bee Moorhead is Executive Director of Texas Impact and Kevin C. Moriarty, President & CEO, Methodist Healthcare Ministries of South Texas, Inc.