Aging of the population, Medicaid, and the budget outlook James R. - - PowerPoint PPT Presentation

Aging of the population, Medicaid, and the budget

• utlook

James R. Moody For George K. Baum January 2016

Our Aging Population

James R. Moody & Associates

Circa 2010 Circa 1989

Tom Gillaspy on Aging

“There is a new theory in demography.

It’s one of those math theories. Most of us age one year every twelve months. It’s a pretty regular process….We are poised on a very enormous retirement boom unprecedented in history…We are an aging society. This has never happened before.”

• Tom Gillaspy,

retired Minnesota demographer

James R. Moody & Associates

Data Sources

A few of the slides were developed for a presentation by Tom Gillaspy (retired Minnesota State Demographer) and Minnesota State Economist Tom Stinson. The population pyramid slides for Missouri were developed by a demographic team headed by the Missouri Office of Administration.

The Number Of Americans Turning Age 65 Increased Sharply (25%) In 2012

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

US Census Bureau ACS; The New Normal

Millions

By 2020 The United States Will Have More People 65+ Than School Age

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

Thousands

65+ 5-17

Census Bureau forecast 2012; The New Normal

Missouri’s Aging Population

• Between 1950 and 2000, the 65 and over population

grew by 85% to 755 thousand persons.

• Between 2000 and 2030, this group is expected to

grow an additional 87%, to 1.4 million persons.

• In 1950 in Missouri those over 85 represented one-

half of one percent of the population—21,000.

• By 2000 those over 85 were 99,000 persons—or 2%
• f the population.
• By 2030, those over 85 will represent 2.5% of the

population, or 176,000 persons.

James R. Moody & Associates

What Is A Reason The Average Population Age is Increasing?

Fewer Teen Pregnancies

• Teen births in 2013

(274,641) were the lowest number ever reported in the U.S.

• The new record-low

teen birthrate (26.6 births per 1,000 women age 15-19) is a 10% decline since 2012 and a 57% decline since 1991.

Lower Overall Fertility Rate

• The birthrate for

younger adult women fell to a record low of 81.2 births per 1,000 women aged 20-24.

• The general fertility

rate slipped to a record low of 62.9 births per 1,000 women aged 15- 44.

James R. Moody & Associates

Missouri Population

Population Pyramid of Missouri – 1900 6 5 4 3 2 1 1 2 3 4 5 6 0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+

Male and Female Combined

Percent of Total Population

Missouri Office of Administration, Division of Budget & Planning

6 5 4 3 2 1 1 2 3 4 5 6 0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+

Male Female

Population Pyramid of Missouri – 2000

Missouri Population

Percent of Total Population

Missouri Office of Administration, Division of Budget & Planning

6 5 4 3 2 1 1 2 3 4 5 6 0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+

Male Female

Population Pyramid of Missouri – 2030

Missouri Population

Percent of Total Population

Missouri Office of Administration, Division of Budget & Planning

The Rectangular AGe Pyramid in 2030

Year 2030 –By Age Group Percent of Population Cumulative Percent

• f

Population Preschool 6% 6% Kindergarten to 8th 11% 17% Grades 9 to 12 5% 22% Age 18 to 24 9% 31% Age 25 to 44 25% 56% Age 44 to 64 22% 78% Over 65 21% 100%

Source: Missouri Office of Administration

Cumulative is rounded to equal 100%

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What Services Does Medicaid cover Because Medicare Does Not?

• Skilled Nursing Care
• In-Home Services, such as

personal hygiene care, homemaker and chore services

• These services are normally

required for elderly people.

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60.5% 25.2% 12.1% 8.9% 8.7% 17.4% 18.7% 48.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percent of Enrollees (893,976* Average Monthly Enrollees) Percent of Expenditures ($7,004.8 M)

Persons With Disabilities (167,367) Seniors (77,460) Pregnant Women & Custodial Parents (108,325) Children (540,824)

($1,762.1 M)

MO Healthnet Enrollees & Expenditures

MO HealthNet SFY-2012

Number of People SFY-2012

(Average Monthly)

Total (893,976)

($3,398.0 M) ($1,218.6 M) ($626.1 M)

In SFY-2012, seniors and persons with disabilities comprised more than 27%

• f enrollees, however, they

accounted for nearly 66%

• f MO HealthNet expenditures.

Missouri Department of Social Services

The Impact of Elderly and Disabled on Medicaid

• The elderly and disabled

account for 27% of the Medicaid eligible population.

• However, the elderly and

disabled account for approximately 66% of Medicaid program expenditures.

The aging of the population May stress

• ur systems
• Fewer working people to pay for the

future costs.

• Older citizens are less likely to want to

pay more to take the payment stress off

• f younger citizens.
• The aging of the population will create

challenges for most government programs.

All Persons In Missouri Persons Under 65 Persons 65 and Over Children Under 18 773,000 Uninsured 768,000 Uninsured 4,000 Uninsured 98,000 Uninsured 13% 15.2% 0.5% 7%

Source: US Census Bureau 2013 American Community Survey

Missouri’s Uninsured Population

Growth in medicaid coverage for kids

Custodial Parents Medicaid and CHIP Children March 2013 78,361 535,084 October 2015 90,406 589,025 Growth 12,045 53,941

Missouri Medicaid and CHIP Income Eligibility for Children

Age Medicaid CHIP Infant 0-1 (No Premiums) 185% FPL Children 1-5 (No Premiums) 133% FPL 150% FPL Children 6-19 (No Premiums) 100% FPL 150% FPL Children 0-19 (With Premium) 300% FPL

fY 2016 Medicaid Supplemental and fy 2017 new decisions

General Revenue Federal Total FY 2016 Supplemental $197.7M $129.0M $327.6M FY 2017 New Decision Item Specialty Pharmacy $50.6M $89.1M $139.7M Non-Specialty Pharmacy $11.9M $21.0M $33.0M

Budget Outlook Impact of Senate Bill 509

June 2015 Fiscal year 2015 General Revenue Receipts

Category YTD Gross % Increase YTD Net % Increase (net of refunds)

Individual Income Tax +8.5% +10.1% Sales Tax +2.3% +3.3% Corporate Income/Franchise +3.3% +10.1% Insurance Premium Tax +18.1% +21.7% Total Year To Date +8.8% Source: FY 2015 Consolidated Revenue Report Net Increases are net of refunds paid

James R. Moody & Associates

Governor’s Revenue Estimate

FY 2016—2.8% FY 2017—4.1%

Growth In Declarations and Remittances Through June 2015

FY 2014 FY 2015 Growth Declarations $741,748,000 $832,310,000 $ 90,462,000 Remittances $797,468,000 $918,125,000 $120,657,000 Total $1,539,216,000 $1,750,435,000 $211,219,000

No Great Reason To Celebrate

Fiscal Year 2008 Fiscal Year 2014 Fiscal Year 2015 Individual Income Tax $5.210B $5.403B $5.947B Sales Tax $1.931B $1.925B $1.988B Total GR $8.003B $8.003B $8.709B Total GR Growth Over FY 2008 ZERO!!! $706 M

The consensus revenue estimate

• It appears to us a certainty that the current FY 2016

consensus revenue estimate will be exceeded.

• The FY 2016 consensus GR estimate from Governor

Nixon’s December 18, 2014 press release is $8.673 billion.

• Actual receipts from FY 2015 were $8.709 billion. So

the FY 2015 actual receipts were higher than the FY 2016 consensus estimate.

• Thus, even a zero % growth rate (which we do not

believe will happen) would exceed the current FY 2016 consensus estimate.

Recent Net General Revenue Growth

5 5.5 6 6.5 7 7.5 8 8.5 9 Billions

Net GR (in billions)

Net GR (in millions)

Negative Negative Negative

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Revenues Since FY 1998 If SB 509 Were In Effect

5 5.5 6 6.5 7 7.5 8 8.5 9 Fiscal Year FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 Billions

Net GR (in billions)

Actual Net GR If SB 509 In Effect

Triggers tax cut Triggers tax cuts Tax cut triggered

James R. Moody & Associates

GR Growth Since FY 2002

Fiscal Year GR Growth % Total GR 2002

• 2.79%

$6.21B 2003

• 4.58%

$5.92B 2004 7.08% $6.34B 2005 5.76% $6.71B 2006 9.25% $7.33B 2007 5.24% $7.71B 2008 3.73% $8.00B 2009

• 6.91%

$7.45B 2010

• 9.08%

$6.77B 2011 4.94% $7.10B 2012 3.25% $7.34B 2013 10.1% $8.08B 2014

• 1.0%

$8.00B 2015 8.8% $8.70B

No Growth No Growth

Odd consequences of SB 509

• Proponents of SB 509 sold the concept on rising state

general revenues.

• However, five of the past fifteen fiscal years have seen

negative general revenue growth.

• When this phenomenon of negative revenues occurs, the

$150 million in growth will come from a reduced base.

• Missouri has economic downturns due to a recession

roughly every ten years. The last recession started in

• 2008. So a recession in the early years of SB 509

implementation is highly likely.

• If that occurs we will be cutting taxes in the midst of an

economic downturn.

Components of SB 509 Tax Cuts

Impacts of SB 509 Implementation

Reduction In

• Max. Tax

Rate Business Income Deduction Additional Personal Deduction Below $20k ($500 total) Index Rate Brackets Year 1 5.9% 5% $500 2.3% Year 2 5.8% 10% $500 2.3% Year 3 5.7% 15% $500 2.3% Year 4 5.6% 20% $500 2.3% Year 5 5.5% 25% $500 2.3% Source: EPARC University of Missouri

Annual Estimated GR Loss When Tax Cuts Triggered

Year Tax Cuts– Single Year Cumulative Tax Cuts

Year 1 $145,679,000 $145,679,000 Year 2 $121,527,000 $267,206,000 Year 3 $121,414,000 $388,620,000 Year 4 $116,833,000 $505,453,000 Year 5 $115,534,000 $620,987,000

Source: EPARC— University of Missouri

Scenario 1—Constant Growth

• Scenario 1 is the best case scenario envisioned by

proponents of SB 509.

• This scenario assumes growth is constant and

revenues always increase.

• Scenario 1 envisions growth of +3.5% annually and

with two years of tax cuts generated by SB 509 in Fiscal Years 2016 and 2017.

• There is no third year of tax cuts after two years,

because revenue growth in the third fiscal year (with +3.5% growth triggering two years of tax cuts) would be below $150 million.

The ratcheting effect of SB 509—Steady Growth Of +3.5%

GR End Of Prior Year

GR Growth at 3.5% Tax Reduction FY 2017 Tax Reduction FY 2018 Tax Reduction FY 2019

Net GR Growth After Tax Cut

FY 2016 $8.803 B $308 million FY 2017 $9.111 B $319 million $72.8 million $246 million FY 2018 $9.357 B $246 million $72.8 million $60.8 million $112 million FY 2019 $9.469 B $219 million $60.8 million No tax cut triggere d $158 million

Summary

• The State is in relatively good budget shape, although

total revenues have not grown a lot since FY 2008. Much

• f the growth is related to capital gains.
• Medicaid growth will compete with K-12 funding in the

near future.

• The aging of the population will also put pressure on

future Medicaid expenditures.

• We believe that two tax cuts will be triggered in FY 2016

and FY 2017, which will stunt future revenues.

• There is a history of a recession every ten years or less.

The last recession was in 2008-2009. Be cautious of the future.