Idaho officials expect costs to soar from proposed Medicaid expansion

Idaho officials expect costs to soar from proposed Medicaid expansion

by
Idaho Freedom Foundation staff
September 11, 2012
Idaho Freedom Foundation staff
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September 11, 2012

The Idaho Legislature's health care task force spent most of its meeting on Monday considering potential ways to save money in the state's Medicaid program and its array of other indigent care services, particularly if Idaho saddles itself with the costs of the federal government's proposed Medicaid expansion.

One thing remains clear, though: No matter which of the array of available options lawmakers might favor, nobody is sure what the costs will be or how the state will pay for them.

"We are doing our best to forecast into the future, because these funding numbers are going to change as they develop," said Richard Armstrong, director of the Idaho Department of Health and Welfare. "We're looking, certainly, at five years and then we're looking at 10 years. The problem we have is, as we look further out, what is the health care inflation rate going to be?"

It's important to focus on the long range, Armstrong said, because the amount of federal subsidy for the short-term costs are understood for the first five years. It's widely known that the provisions of the Patient Protection and Affordable Care Act (PPACA), commonly known as Obamacare, specifies that the federal government will pay for all of the expansion costs for the first couple of years, followed by a 90 percent federal subsidy for three more years.

Even during those first few years, though, states may well be on the hook for a far greater cost than they realize. The federal subsidy for Medicaid expansion only covers medical expenses, not the hefty administrative costs and Federal Medical Assistance Percentage (FMAP) matching that states would encounter, according to Grace-Marie Turner, president of the Galen Institute, a public policy organization devoted to health reform.

"In the first two years, the federal government pays 100 percent of medical expenses for Medicaid expansion populations (up to 133 percent of poverty), with the federal match dropping down to 90 percent after that," Turner wrote in an email to IdahoReporter.com. "But states are responsible for administrative costs, and also they must pay at the regular FMAP match rate (which is lower, and sometimes much lower) for adding people below 100 percent of poverty."

Turner also noted that the number of those who would covered by the Medicaid expansion would grow beyond current forecasts, explaining that "many of those eligible for Medicaid today but not signed up will enroll because they will be subject to the new federal mandate that virtually everyone must carry health insurance or face federal fines. Overall, governors estimate that the added cost of the Obamacare Medicaid expansion will be an additional $118 billion over 10 years. That is why many states are saying they simply cannot afford to comply."

The most recent actual expenditure figures for Medicaid in Idaho, from the 2011 fiscal year, show an administrative cost percentage of about 2.6 percent. The appropriations figures for 2012 bump that percentage up to somewhere between 3.1 and 3.3 percent, depending on how the costs are broken down, and projected 2013 figures are higher still, between 3.6 and 3.8 percent. Add these mounting administrative costs to the fact that a federal subsidy comes out of the pockets of present and future taxpayers, including Idaho taxpayers, and the expense for Idahoans will be higher still.

After the first few years have passed, Armstrong said, Idaho would likely see the state's share of costs increase and would need to be prepared to forecast much higher expenditures, such as facing a drop from a 90 percent federal subsidy to 70 percent or lower.

"What we're being told by the feds is that the 90 percent will go on forever," Armstrong said. "Well, we know forever is not forever."

Sen. Dean Cameron, R-Rupert, agreed that the uncertainty of future costs are a primary concern.

"It's really easy, I think, for all of us to get caught up in the short-term cost savings," Cameron said. "The fear I have is that we'll have the short-term savings, and that will get spent, in one form or another, someplace else. And then—10 years, 20 years from now—not us, but colleagues of ours will be sitting around the table trying to figure out how to pay for it."

Even that short-term subsidy and potential for efficiency gains may be too optimistic, Armstrong hastened to add. "The savings actually have to be realized," he said.

Other legislators, like Sen. Joyce Broadsword, R-Sagle, and Rep. John Rusche, D-Lewiston, expressed their belief that cost reductions for Idahoans would be realized through the proposed expansion.

The bulk of the meeting focused on proposed methods for creating cost-savings and efficiency, from implementing "telemedicine" videoconferencing capabilities to hospitals and doctors' offices in rural areas of the state to systems of integrated managed care that focus on electronic records and data sharing between medical professionals.

"Like everything, there's a number of choices," said Armstrong. "The question is, what's it going to cost, and out of which pocket does the money come?"

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