This is a follow-up from yesterday’s post on the limited Utah Medicaid expansion and my contention that the limited expansion has minimal cost savings compared to full expansion.
Ruckus asks a good question:
Given the numbers in Utah’s case would the cost be significantly different in 3 yrs when they actually do have to pay some towards full expansion?
The key elements for a back of the envelope calculation is the assumption about the health of the population not covered by the limited expansion and not eligible for other Medicaid services. If that is a healthy group in comparison to the limited expansion group, they will be cheaper at a net per member per month (PMPM). There are a lot more people who need to be covered and that is where the second element comes into play. Over the long term, Medicaid Expansion has the feds pay 90% of the costs. Over the short term, it ranges from 93% to 100% Federal share, and conversely 0% to 7% state share. The limited expansion only has a 70% Federal match for the life of the waiver. In year 1, full expansion always wins as the Feds pay for all of 2016. Assuming the actual question is what happens when the match drops to 90%, the long term cost differential is minimal.
Finally, and this is something I am qualified to be aware of but not qualified to fully model, Medicaid expansion is a massive cash inflow into the state so there should be some positive macro-economic effects at the regional import/export modeling level which should lead to slightly higher tax revenue than the current situation where Utah sends tax money out for Medicaid expansion but gets nothing coming back in.
Time to show some work.
a) The Legacy Expansion population being covered (homeless, individuals with significant mental/behavioral health concerns etc) are more expensive on average than the people who are Medicaid Expansion eligible but are not in this limited expansion.
The limited expansion population has a cost of $550 Per member per month (100 million year/16000 people/12 months). Actual PMPM will be a touch higher as average length of stay on the expansion will be less than 12 months every year.
b) The non-legacy expansion but eligible population is fairly cheap. 2011 Data is old, but Utah had a PMPM of $240 for non-disabled, non-aged adults. Throw in a 5% medical inflation trend $300 PMPM for 2016.
c) A portion of the Utah adult non-aged/non-disabled adult population is pregnant women (currently qualifies at income of under 139 FPL) Pregnant women are expensive so they bump up the PMPM. Pregnant women would be a net cost savings for Utah as they shift from high state match share to PPACA no and then low state cost share groupings.
d) Assuming pregnancy is not a risk factor for the excluded population, their actual PMPM is probably under $250 a month (professional judgement).
e) 30% of $550 is $165 per legacy expansion individual in state funds. 10% of $250 a month is $25 per covered individual in state funds. That is a rate of 6.6:1
16,000:110,000 is 6.875:1
F) That is pretty damn close to a breakeven proposition even if you tweak the PMPM’s a bit
G) I am not looking at any other program eligibility shifts of individuals currently in 70% Fed Match Medicaid to 100% step down to 90% Fed Match Medicaid Expansion programs (for example pregnant women over 100% FPL)
H) I am neglecting any regional import model multipliers and tax revenue as this will be a boat load of new spending coming into the state counter-acting money leaving the state under current tax law
I) For a quick back of the envelope long term costs of full expansion is slightly more expensive than the long term costs of this partial expansion using assumptions that are not particularly favorable to expansion.
Another excellent post. I appreciate your taking the trouble to “go deep” and run the numbers. I always read your posts, even if I don’t comment, as do many others, I presume.
As I recall, one of the ways that the Mormon polygamist cults operate is to put all the sister wives on Medicaid for health insurance. Add in their religious desire to breed like rabbits to populate their corner of the world and MK in Utah might be in the hook for a lot of high cost pregnancies.
Richard’s healthcare posts are serious nuts-and-bolts stuff so there’s really no opportunity for snark.
O. Felix Culpa
@Steeplejack: Ditto. I always appreciate Richard’s analyses, but rarely have anything to add besides “thank you.”
Richard, I figured given the size difference of the pops there might be a net cost increase in the full expansion but the 20% cost difference might make up for that given the much larger relatively healthy pop in normal expansion. Nice to see that my head scratching figuring and envelope scratching at least work in the same direction. You have taught us well.
Nice to see that conservative thinking works towards spite rather than any real money savings. Would hate to see them not follow form.
In other Utah related news – the state looks likely to abolish the death penalty.
@Wag: But those women were already eligible for Legacy Medicaid, so they are driving up the baseline cost of Legacy Medicaid PMPM (assumption D) If the pool of non-aged/non-disabled adults on Utah legacy Medicaid is even more heavily comprised of pregnant women, then the remaining pool PMPM goes down and the net cost of expansion compared to this alternative goes down as well.
Iowa Old Lady
I’m looking at Medicaid expansion here in Iowa. The state accepted the federal dollars under some of state tailored agreement that privatized it starting April 1. The governor claims it will save state money, while the companies running it make a profit. I don’t understand how both those things can be true at once except by cutting care.
I agree and understand your point. but is it possible that under Legacy MK there would be less federal oversight pushing their federal noses in to LDS dirty laundry than would be the case under MK expansion?
but the most likely reason is becasue Utah is governed by the RWNJ LDS GOP.
@Iowa Old Lady:
Medicaid is a very efficient program with a medical loss ratio (a measure of the % of dollars used for providing care vs overhead) of about 95+%. Before the ACA there were insurance companies that had a MLR of 60
%, meaning that only 60% of money coming in went for patient care, 40% went to “overhead”, meaning astronomical executive salaries. An efficient organization can provide care while getting a reasonable profit.
Did you see the Snooze Hour report on the rural hospital in Texas? It blamed ACA for the woes of rural hospitals.
Iowa Old Lady
@Wag: I’m probably not explaining why I’m puzzled very well. The state has Medicaid. Now it’s going to hand the running of it over to private, profit-making companies. At least, that’s what radio reports suggest.
The privatization was supposed to go into effect earlier this year, maybe January 1, but the feds said the state had failed to find enough providers to supply care. Supposedly that’s now fixed. The Dems in the state legislature tried to increase the supervision of the companies that will now be in charge, but with limited success.
So what I don’t understand is how the state can decrease money going in, and the insurance company can increase money going out into profits, and care can stay the same as it was when the state ran it.
@Iowa Old Lady:
thanks for the explanation. I wasn’t aware of the details in Iowa. i was speaking more broadly.
@Iowa Old Lady:
They are using the well-known and field-tested underpants gnome business model:
1. Privatize Medicaid.
Iowa Old Lady
@Steeplejack: That’s more or less what I suspected.
I figure they’re cutting payment to providers, which is why they had trouble getting enough. I know people on Medicaid now and they have problems getting seen as it is. My aerobics teacher, for instance, often travels to the med school in Iowa City, 90 miles away.
@Iowa Old Lady:
To be (semi-)serious, they could also be planning (hoping) to “right-size” their staff and have fewer reps process more cases and claims. Again, profit!
pseudonymous in nc
I’d assume that new Medicaid Expansion beneficiaries have some deferred treatment that they’d want or need addressing quickly. So, by the time the state has to kick in its 10%, won’t the feds will have covered the most expensive stuff?
@Iowa Old Lady: That is not Medicaid Expansion. That is converting the Medicaid system from being run by the state on a Fee for Service model to a Medicaid Managed Care model.
I had a post on that a week or two ago.
The Managed Care model gives the state more predictability and shifts immediate shock risk from the state books to the insurance company books. It gives the state politicians another evil bastard to blame when someone says no, and the Managed Care model does a bit better at getting preventative care done than Fee for Service state plans.
Managed Care can work reasonably well to very well. Getting it done right at the start is the problem in Iowa. They have not gotten all their ducks lined up, and that is why the Feds are holding up the conversion., If it went live on 1/1/ or 3/1 it would have been a clusterfuck of a conversion.
Iowa Old Lady
@Richard Mayhew: Thanks, Richard. I couldn’t figure out what was going on here, so I appreciate the clarification.
@Iowa Old Lady: NP, this stuff is arcane