Medicaid Financing 101 Presentation Slides Monday, April 19, 2004 - - PDF document

Medicaid Financing 101

Presentation Slides

Monday, April 19, 2004

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 1

Medicaid’s Role

• Provides health and long-term care coverage for over 50 million

people

– Provides comprehensive, low-cost health insurance for 38 million people in low-income families, reducing the number of uninsured – Finances care for over 12 million elderly and persons with disabilities, including over 6 million Medicare beneficiaries

• Improves access to care and reduces disparities
• Guarantees entitlement to individuals and federal financing to

states

• Provides $175 billion in federal and $120 billion in state and

local funding of low-income populations

• Largest source of federal grant support to states, accounting for

43 percent of all federal grant funds to states in 2002

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 2

Medicaid’s Role in the Health System, 2001

17% 17% 12% 17% 48%

Total Personal Health Care Hospital Care Professional Services Nursing Home Care Prescription Drugs

SOURCE: Levit, et al, 2003. Based on National Health Care Expenditure Data, Centers for Medicare and Medicaid Services, Office of the Actuary.

Total National Spending (billions)

$1,236 $451 $462 $99 $141

Medicaid as a share of national spending:

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 3

Enrollees Expenditures

Medicaid Enrollees and Expenditures by Enrollment Group, 2003

Expenditure distribution based on CBO data that includes only federal spending

• n services and excludes DSH, supplemental provider payments, vaccines for

children, administration, and the temporary FMAP increase. Total expenditures assume a state share of 43% of total program spending. SOURCE: Kaiser Commission estimates based on CBO and OMB data, 2004.

Children 19% Elderly 26% Blind & Disabled 43% Adults 12% Children 48% Elderly 9% Blind & Disabled 16% Adults 27% Total = 52.4 million Total = $235 billion

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 4

Key Aspects of Current Medicaid Financing System

• The federal government and states share financial

responsibility for Medicaid

– States decide how much to spend within federal rules – Federal government reimburses a set share of spending on covered groups and services based on the state’s matching rate; pays for at least half of all Medicaid spending in every state

• Federal matching funds are an entitlement to states

– No predetermined limits on federal matching funds – Medicaid spending not subject to annual appropriations process

• Federal fiscal relief package temporarily increased

Medicaid matching rates through June

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 5

Federal Medical Assistance Percentages (FMAP), FY 2004, Including Temporary Fiscal Relief

53 percent (12 states) 64 to <74 percent (15 states & DC) 54 to <64 percent (13 states) 74 + percent (10 states)

NOTE: The percentages listed reflect the temporary increase in federal Medicaid matching rates enacted in the Jobs and Growth Tax Relief Reconciliation Act of 2003, which is effective for the first 3 calendar quarters of FY 2004. SOURCE: Federal Register, June 17, 2003. K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 6

$100 $100 $100 $270 $186 $113 FMAP = 73% FMAP = 65% FMAP = 53% State Funds Invested Federal Dollars Gained

Impact of Federal Matching Funds on Total Medicaid Spending

Federal Medicaid spending provided when states spend a hypothetical $100 in Medicaid funds, using matching rates that include temporary fiscal relief:

SOURCE: Kaiser Commission on Medicaid and the Uninsured.

$213 $286 $370

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 7

State Medicaid Spending as a Percent

• f General Fund Expenditures, 2002

All Other 26% Medicaid 16% Public Assistance 2% Higher Education 13% Elementary & Secondary Education 35% Transportation 1% Corrections 7%

SOURCE: National Association of State Budget Officers, 2002 State Expenditure Report, November 2003.

Total State General Fund Spending = $496 billion

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 8

Recent Developments in Medicaid Financing

• Expiration of fiscal relief in June will mean that to

maintain their Medicaid spending states will have to put up additional state funds to offset the reduction in federal matching funds

• Medicare drug law will cover Medicare/Medicaid

“dual eligibles,” but provides only modest fiscal assistance to states

• Administration’s 2003 proposal to cap federal

Medicaid funding is on the back burner

• Recently increased emphasis on Medicaid

“program integrity”

• Federal government and some states are

focusing on waivers

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 9

Overview of Section 1115 Waivers

• HHS Secretary can permit states to receive federal

Medicaid funds for expenditures not otherwise allowed by federal law

• Health Insurance Flexibility and Accountability (HIFA)

initiative

– Encouraged states to seek waivers to expand coverage within existing resources – New flexibility to change benefits, eligibility, and cost sharing for new and current beneficiaries

• Longstanding policy of “budget neutrality” for the federal

government

– Budget neutrality methodology is subject to negotiation and can vary state to state

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 10 Parents with income below TANF eligibility levels (0-50% FPL)

Financing the Utah Waiver

REDUCTIONS NARROW BENEFIT PACKAGE EXPANSION

Parents who work but recently received TANF

New co-payments Reduced benefits

Parents with high medical expenses who “spend down” to qualify Parents with incomes

• ver TANF eligibility levels

(50-150%)

Enrollment Fee Benefits limited to primary care; no hospital, specialty,

• r mental health care

Copayments Enrollment cap

Other adults (0-150% FPL)

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 11

The Role of Recent Section 1115 Waivers in Medicaid and SCHIP Enrollment Growth

2,975,900

104,263 97,763 Under HIFA-Type Section 1115 Waivers Under Other Section 1115 Waivers Not Related to Recent Section 1115 Waivers Growth Due To Recent 1115 Waivers (Total = 202,026)

Net Medicaid/SCHIP Enrollment Growth 3.2 Million Total

Growth Not Related to Recent 1115 Waivers

SOURCE: Mann, C., Artiga, S. and J. Guyer, “Assessing the Role of Recent Waivers in Providing New Coverage,” KCMU, December 2003. Note: Section 1115 waiver growth only includes comprehensive Section 1115 waivers approved since January 2001; other Medicaid/SCHIP growth is for the period from December 2001-December 2002. K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 12

Policy Implications

• Without new financial resources states cannot significantly

expand coverage.

• Waiver financing places a state at risk for costs beyond

the “budget neutrality” cap.

• The primary impact of some waivers is reductions rather

than expansions in coverage.

• Recent waivers have affected every key element of the

Medicaid program, and these changes are occurring

• utside the federal legislative process.

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 13

Medicaid’s Financing Structure: Current Strengths

• Uncapped federal matching funds key to the

entitlement to coverage

• Provides incentives for states to preserve and

expand coverage

• Helps states manage the risk of unpredictable

changes in health care costs, economic conditions, demographics, public health

• Funds health care services, such as mental health

care, services for people with developmental disabilities, and maternal and child health services

• State and federal contributions provide incentives to

manage costs

K A I S E R C O M M I S S I O N O N

Medicaid and th edicaid and the Uninsured e Uninsured Figure 14

Medicaid’s Financing Structure: Current Challenges

• Although the risk is shared between the

federal government and the states, health care spending, especially for the low-income and disabled population is difficult to predict

• States have difficulty meeting program

spending needs during economic downturns, when state revenues fall

• Medicaid maximization has raised questions

about accountability for federal funds