Nov/Dec 2009

State News: August 2009



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From the Expert:
Baucus and the Bottom Line for States

By Debra Miller, CSG Director of Health Policy, and
Chris Whatley, CSG Washington, D.C. Office Director
As the U.S. Senate Finance Committee this week worked on the third major health care reform proposal to make it to Capitol Hill, a popular parlor game in political circles is predicting whether health care reform will pass and just what it will look like.
On Tuesday the finance committee began work on legislation introduced last week by U.S. Sen. Max Baucus of Montana called “America’s Healthy Futures Act of 2009.”
The Baucus bill reads like a road map of political compromise. Although, it has yet to receive public approval from a single Republican, the plan abandons the controversial “public option” and achieves considerable cost savings over other competing proposals. In charting a middle course, Baucus has drawn fire both from Republicans who still have deep concerns about the direction of health reform and Democrats who believe that the Baucus’ compromises do not do enough to make health insurance affordable.
For state budgets, the Baucus bill offers both good news and bad news. During six weeks of closed door negotiations, trial balloons regularly emanated from the Senate Finance Committee suggesting that states could be left on the hook for covering as much as $30 billion per year of the cost of adding 11 million new patients to Medicaid. Fortunately, governors and state officials from across the country were successful in convincing the chairman that battered state budgets could not absorb such a hit. In the end, the bill released this week would likely cost states roughly $14 billion over the next 10 years — no  small sum for states that are still in the grips of the worst fiscal crisis in recent memory, but a huge improvement over the initial proposals.
Medicaid Expansion
The Baucus bill expands Medicaid eligibility to 133 percent of the Federal Poverty Level beginning Jan. 1, 2014 for all non-elderly individuals, including parents, children and childless adults. This level of expanded eligibility is equivalent to the House proposal, except the Baucus bill offers a phase-in period and favorable maintenance of effort language for states. Additionally, adults between 100 percent and 133 percent of the Federal Poverty Level would be able to choose between Medicaid and coverage through their state health insurance exchange. While Baucus’ plan requires all states to cover part of the costs of covering an expanded Medicaid population, in some states these costs will be more than offset by the savings achieved in scaling back coverage to the 133 percent level. The table that accompanies this article, prepared based on an initial estimate by Senate Finance Committee staff, outlines the potential winners and losers in the Baucus bill.
Expanded federal payments are offered to states to cover the majority of the costs of covering the new patient load — with states receiving between 77 percent and 95 percent federal matching rates based on classification as an “expansion state” or an “other state.” Expansions states are those states that have already expanded Medicaid eligibility above 100 percent of the Federal Poverty Level for parents or childless adults; however, unlike the House plan, the bill allows these previously generous states such as California, Minnesota, and Vermont to dial back their plans after three years to only cover the required 133 percent level. Patients that were formerly covered by state Medicaid programs with benefits for individuals over 133 percent of poverty would receive federal subsidies under Baucus’ plan to purchase private insurance through the so called “exchange”.
Expansion to 133 percent of the Federal Poverty Level will not significantly expand Medicaid coverage of children nationwide, because children older than age five up to this income threshold are already covered by either state Medicaid or Medicaid expansions funded by federal Children’s Health Insurance Program funds in all but 21 states. In those 21 states, CHIP programs cover the children between 100 percent and 133 percent of the Federal Poverty Level with a range of services nearly commensurate with Medicaid. Federal law already requires that Medicaid cover pregnant women up to 133 percent of the Federal Poverty Level.
The big change for some states will be expanded Medicaid coverage for adults. Eighteen states have already moved to cover parents at income levels of 100 percent of the Federal Poverty Level or higher. Working parents in 24 states are not eligible for Medicaid if their incomes are at or below 66 percent of the Federal Poverty Level ($14,553 annually for a family of four). Only 21 states currently offer any health coverage (at Medicaid levels or less) for childless adults who do not meet disability eligibility.  
As the Baucus bill moves through committee and onto the Senate floor, provisions in the bill that would impact state Medicaid programs could change. Even over the past week, Baucus has already proposed a change to his initial bill that would provide full federal funding for the increased Medicaid patient load for states whose current Medicaid enrollment is under the national average and whose unemployment rate was over 12 percent in August 2009.
If adopted, the change would increase federal funding for Michigan, Nevada, Oregon, and Rhode Island. The list should be no surprise to many as U.S. Senate Majority Leader Harry Reid of Nevada indicated earlier in the week that the Medicaid reimbursement rates would need to change following reports that Nevada would face the second largest Medicaid cost burden in the country.  Another proposed amendment, sponsored by Senator Jay Rockefeller of West Virginia, would create an automatic trigger from increased federal Medicaid payments when a state’s unemployment rate dips below a specific threshold.
Despite the criticism the bill has attracted from both sides of the aisle, most insiders agree that the Baucus bill is the only proposal on the table with real legs. Most would also agree that there is still at least an even money chance that Congress will pass a bill—likely in the waning days before Christmas. The Council of State Governments will continue to monitor the debate — with an eye toward the state bottom line as it unfolds over the coming weeks.

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