Understanding and evaluating block grants and other capped funding proposals. Manatt Health January 17, 2017

Transcription

1 Understanding and evaluating block grants and other capped funding proposals Manatt Health January 17, 2017

2 Agenda Medicaid Today Alternative Financing Structures Key Policy and Implementation Considerations Discussion 2

3 Medicaid Today 3

4 Medicaid is Nation s Largest Single Source of Coverage U.S. Health Insurance Enrollment by Source, CY 2015 (millions) Source: National Health Expenditures Projections , Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/downloads/proj2 012.pdf. 4

5 Medicaid is Major State Budget Item and Largest Source of Federal Revenue for States State Medicaid Spending as Share of Budget (State Funds Only), FY 2015 Sources of Federal Funds to States, FY 2015 Source: National Association of State Budget Officers, State Expenditure Report FY

6 Recent Growth: 31 States and DC Have Expanded Medicaid Washington Oregon Montana North Dakota Minnesota Vermont Maine California Nevada Idaho Utah Arizona Wyoming Colorado New Mexico South Dakota Nebraska Kansas Oklahoma Iowa Iowa Missouri Arkansas Wisconsin Illinois Michigan Indiana Kentucky Tennessee Ohio New York Pennsylvania West Virginia North Carolina South Carolina New Hampshire Massachusetts Rhode Island Connecticut New Jersey Delaware Washington, DC Maryland Virginia Alaska Hawaii Texas Louisiana Mississippi Alabama Georgia Not Expanded Medicaid (19) Expanded Medicaid (31 + DC) 6

7 Impact of Medicaid Expansion Coverage Gains and Federal Funding 14.5 million are covered under Medicaid expansion million newly eligible adults and 3.25 million adults who would have qualified for Medicaid pre-aca 1 Adult uninsured rate dropped an average of 8.3 percentage points in expansion states compared to an average of 5.7 percentage points in non-expansion states, Largest decrease of 19.9 percentage points in West Virginia 2,3 Expansion states received an estimated $72.6 billion in federal funding in 2016 for coverage of newly eligible adults; state share begins in Centers for Medicare & Medicaid Services, January - March 2016 Medicaid MBES Enrollment Report. 2. National Health Interview Survey Early Release Program for adults aged 18-64, Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, Data on the uninsured in 2013 was not available for six expansion and two non-expansion states. 4. Manatt analysis based on Dec CMS-64 data. $72.6 billion was for the newly eligible adults. 7

8 Enrollment Drives Medicaid Expenditure Growth Annual Growth Rate in Medicaid Enrollment and Spending, FYs Expansions, recession Welfare reform Recession Recession Expansion Source: Office of the Actuary (OACT), Centers for Medicare & Medicaid Services, 2015, data compilation provided to MACPAC staff, August Available at content/uploads/2015/01/exhibit-9.-annual-growth-in-medicaid- Enrollment-and-Spending-FYs-1975%E2%80% pdf. 8

9 Medicaid Per Enrollee Spending Growth Lower Than Other Payers Average Annual Growth in Per Enrollee Spending Source: MACPAC, Trends in Hospital Spending Available at: Medicaid-Spending.pdf. 1. MACPAC reported a range of %. 9

10 Medicaid s Financing Structure Today States receive federal funding for all allowable program costs Federal dollars guaranteed as match to state spending In aggregate, states received $346 billion in federal Medicaid funds in FY 2015, as a match to $205 billion in state funds Matching rates vary by state, population and service States claim federal dollars for medical and administrative services provided to Medicaid enrollees; states also claim federal dollars for DSH, UPL, GME payments and in some cases payments under waiver authority (e.g. Designated State Health Programs (DSHPs)) States must follow federal rules (or waiver terms & conditions) Source: MACPAC, MACstats: Medicaid Spending by State, Category, and Source of Funds, FY 2015 (millions) Available at: millions.pdf. 10

11 Alternative Financing Structures 11

12 Proposals Sharply Reduce Federal Payments to States Percent Cut in Federal Medicaid and CHIP Funds (House FY 2017 Plan Relative to Current Law) Proposal would cut federal Medicaid funds by $1 trillion (or 25%) over ten years, resulting in a combined 33% reduction in federal funds for Medicaid and CHIP. Source: House Budget Committee, FY 2017 Budget Proposal, Appendix IV, Table S-4, Available online at: df. Figures in table include some savings due to changes to CHIP. 12

13 Block Grants States receive no more than a set amount of federal funds annually Amounts typically allocated among states by reference to spending in a base year Caps could be frozen (no year-to-year increase), but Medicaid block grant proposals typically allow capped payments to grow based on a national trend rate (e.g., CPI or GDP) Provides funding certainty to federal government; shifts risk for enrollment and health care costs to states States may or may not have a state spending requirement Eligibility and benefit rules set by block grant legislation, generally giving states more flexibility to set eligibility, benefits and other program features; may also impose new obligations on states Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Block Grants and Per Capita Caps, Urban Institute, September Available at: 13

14 Different Block Grant Designs Some guarantee a set amount - no state spending required o For example, the Social Services Block Grant provides a fixed amount of federal funding, not conditioned on state spending Some guarantee a set amount so long as a state spends a certain amount of state funds o For example, TANF block grant provides federal funding at the capped level so long as the states spends minimum amount of its own dollars on TANF-related initiatives Some guarantee funding up to set amount; federal payments are provided as match to state spending up to federal cap (sometimes referred to as capped allotment) o For example, CHIP provides federal funding as a match to state spending up to the federal cap Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Block Grants and Per Capita Caps, Urban Institute, September Available at: 14

15 Taking a Closer Look at CHIP Key Differences between CHIP and Medicaid CHIP is much smaller program, covering mostly healthy children o CHIP finances coverage for 6 million generally healthy children in low-income families; Medicaid covers 69 million children and adults, including individuals with disabilities and seniors Program roles are different o Medicaid, in addition to providing coverage for low-income populations, supports safety net providers, low-income Medicare beneficiaries and finances long term services and supports; CHIP has a narrower scope coverage for children with family incomes above 1997 Medicaid levels In recent years, CHIP financing has been robust o In the early years, funding was low relative to need; some states were forced to close enrollment. In response, CHIPRA set generous federal allotments and established other funding protections o Funding has been subject to more than $35B in rescissions between 2011 and 2016 Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Medicaid-Financing.pdf; Block Grants and Per Capita Caps, Urban Institute, September Available at: 15

16 Federal Funding for CHIP Federal funding for CHIP has increased over the years and appropriations to states were expanded with the passage of CHIPRA Federal CHIP Expenditures and Appropriations During FY , more than $35 B in federal CHIP funding was rescinded Source: Congressional Research Service, Federal Financing for the State Children s Health Insurance Program (CHIP). Available at: 16

17 Federal Funding for TANF and Social Services Block Grants Total dollars of federal funding for TANF and Social Services block grants have declined in value due to inflation Reductions in Inflation-Adjusted Funding for the Social Services Block Grant Total Spending on TANF and Programs That Preceded It 73% reduction in block grant value between 1982 and 2016 due to inflation, funding freezes, budget cuts and sequestration TANF s purchasing power has declined 25% since 1998 Source: CBPP, Eliminating Social Services Block Grant Would Weaken Services for Vulnerable Children, Adults, and Disabled, Available at: and Congressional Budget Office, Temporary Assistance for Needy Families Spending and Policy Options, Available at: 17

18 Per Capita Caps States receive fixed amount of federal funds per Medicaid enrollee Per capita amount set based on each state s per enrollee spending in base year; amounts typically grow consistent with a national trend rate Under the proposals, caps would vary by eligibility category (e.g., disabled, children) Shifts risk of higher health care costs, but not enrollment, to states o However, may be subject to national cap, limiting ability for federal funds to grow with enrollment; in which case, both enrollment and cost risk shifted to state State match typically required; federal funds provided to states based on actual expenditures up to the cap Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Block Grants and Per Capita Caps, Urban Institute, September Available at: 18

19 Per Capita Cap Proposals Differ from Caps in 1115 Waivers States operating under 1115 waivers are subject to per person cap on federal funding to assure budget neutrality Waiver caps are set to reflect state s expected medical spend without waiver; they are not designed to achieve savings Waivers are optional and features, including per capita caps, are negotiated between CMS and state; scope is limited to aspects of the program subject to the waiver Waiver caps can be adjusted to reflect unexpected costs and are not subject to an aggregate cap 19

20 Recent Block Grant and Per Cap Proposals Most proposals are missing key details Feature A Better Way (Ryan) Patient CARE Act (Hatch/Upton/Burr) FY17 House Budget Comm. (Price) HAEL Act of 2016 (Sessions/Cassidy) Heritage Foundation Type State Match Required Per capita cap, with option for block grant (per capita cap)? (block grant) Per capita cap Block grant Per capita cap Per capita cap?? National aggregate cap Different caps for populations? Populations covered All All, except acute care of elderly & disabled All All All Base amount Average Medicaid spend in state during base year Nat l Medicaid spend allocated based on state population with income < 100% FPL Unclear Average Federal Medicaid spend during base year Unclear Trend rate Unclear CPI + 1 Unclear GDP + 1 Unclear 20

21 Implications of Alternative Financing 21

22 State Risks Capping federal funds puts states at risk for costs above cap and limits new investments All recent proposals to cap federal Medicaid funding would sharply reduce federal payments to states. o FY 2013 House Budget plan: $1.7 trillion reduction (-38%) from o FY 2017 House Budget Plan: $1 trillion reduction (-25%) from Annual growth rates are below estimates o FY 2013 House Budget plan included an average 3% growth rate each year, falling short of the estimated 7% annual cost growth Capping federal Medicaid dollars locks in funding based on earlier state choices, constraining future state decisions on eligibility, benefits, payment rates and other new investments. Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Block Grants and Per Capita Caps, Urban Institute, September Available at: 22

23 Shifting Risk to States Capped federal funds constrains states ability to respond to events beyond their control Neither block grants nor per capita caps account for: o Public health crisis such as HIV/AIDS, Opioid epidemic, Zika o New block buster drugs or other medical advances o Natural disasters such as Hurricane Katrina o Manmade disasters such as 9/11 and lead poisoning In addition, block grants do not account for: o Economic downturns or other causes of higher-than-anticipated enrollment Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Approaches-to-Federal-Medicaid-Financing.pdf; Block Grants and Per Capita Caps, Urban Institute, September Available at: 23

24 Capped Funding: Locks in Disparities Across States Capped funding freezes in historic differences in spending Spending Per Full Medicaid Enrollee, FY 2011 Source: Rudowitz, R., Garfield, R., and Young, K., Overview of Medicaid Per Capita Cap Proposals, Kaiser Family Foundation, June Available at: 24

25 Adding to the Disparities: $72.6 B in Expansion Funding Examples of federal funds for new adult group Washington: $2.8 B California: $20.8 B California Washington Oregon Nevada New Mexico: $1.4 B Alaska Idaho Utah Arizona Hawaii North Dakota: $251 M Montana Wyoming Colorado New Mexico North Dakota South Dakota Nebraska Kansas Oklahoma Texas Minnesota Michigan: $3.3 B Iowa Wisconsin Missouri Arkansas Illinois Michigan Tennessee Alabama Louisiana Mississippi Arkansas: $1.4 B Indiana Kentucky Ohio: $3.4 B Ohio Georgia West Virginia Vermont New York Pennsylvania North Carolina South Carolina Maine New Hampshire Massachusetts Rhode Island Connecticut New Jersey Delaware Washington, DC Maryland Virginia Kentucky: $3.0 B Connecticut: $1.2 B Expanded Medicaid (31 + DC) Not Expanded Medicaid (19) Sources: Manatt analysis based on December 2016 CMS-64 expenditure data. Data available online at: Current Status of State Medicaid Expansion Decisions, Kaiser Family Foundation, July Available at: Note: Federal funding does not reflect enhanced funding provided by the ACA to states that expanded before the ACA ("early expansion states"). Total federal funding for all expansion adult enrollees (not just those that are newly eligible) from January June 2015 was $78.8 billion. 25

26 Capped Funding: One-Size-Fits-All Growth Rate Capped funding does not account for differences in state growth rates Growth in Federal Medicaid Spending By Group and State, FY Source: Rudowitz, R., Garfield, R., and Young, K., Overview of Medicaid Per Capita Cap Proposals, Kaiser Family Foundation, June Available at: 26

27 Capped Funding, Supplemental Payments and Waivers Supplemental Payments & Existing Waiver Pools Proposals vary on how they handle supplemental payments: o o Patient CARE Act includes supplemental payments in cap A Better Way excludes DSH and GME from cap and does not address other supplemental payments Unclear whether cap amounts would account for Delivery System Reform Incentive Payment Programs and uncompensated care pools Financing the Non-Federal Share HAELA (Sessions Cassidy proposal) would prohibit use of intergovernmental transfers Future Waivers Unclear if federal funds will continue to be available through waivers A Better Way limits use of federal funds for state program costs not otherwise matchable Sources: Alternative Approaches to Federal Medicaid Matching, MACPAC, June Available at: Approaches-to-Federal-Medicaid-Financing.pdf; Block Grants and Per Capita Caps, Urban Institute, September Available at: 27

28 How Will the Flexibility Play Out with Reduced, Capped Funding? Fewer people served? More churning, less continuity of coverage? Limited benefits, limited access? Greater competition for constrained funding? With funding reductions, will new positive programmatic opportunities be more theoretical than real? 28

29 Discussion 29

30 Thank you! Cindy Mann Partner Deborah Bachrach Partner Patricia Boozang Senior Managing Director 30