Medicaid

February 14, 2016

Medicaid is the biggest budget challenge faced by the state of Vermont.  By far.  Understanding the fiscal, not to mention health care policy, challenges faced by our state requires an understanding of Medicaid.

 

Medicaid is a publicly-funded health insurance program for low-income Americans, lower income children and pregnant women, and blind or disabled citizens.  Medicaid is not Medicare.  While both programs were created in the 1960s under the Johnson administration, Medicare is a program that provides health insurance for all Americans over the age of 65 regardless of income.

 

Medicaid is a joint state-federal program with a portion of costs paid for by the U.S. Treasury and a portion by state governments.  States administer Medicaid programs.  In contrast, Medicare is entirely a federal program paid for and managed by the U.S. government.  Medicare is a single-payer health care system, but only for the elderly.

 

Federal regulations set out the minimum health care benefits Medicaid must provide and the income levels that qualify for Medicaid.  Each state individually determines whether to offer additional health care benefits to Medicaid recipients, and whether to ease income level qualification requirements.

 

What proportion of Medicaid expenditures are paid for by a state vs. the federal government is determined by the Federal Medical Assistance Percentage (FMAP) calculation.  FMAP is a three-year average of a state’s per capita income compared to the national average.  The federal government pays no less than 50% of Medicaid costs for the highest income states.  Vermont’s federal Medicaid re-imbursement rate is about 54%.  Mississippi, the poorest state in the union, has the highest federal Medicaid match at over 74%.

 

A state’s FMAP is recalibrated annually and can wreak havoc with state budgets.  In 2009, the federal government re-imbursed Vermont for 59.45% of Medicaid costs.  While no one would consider our state’s income growth robust since 2009, it has grown faster than the national average and Vermont’s FMAP has shrunk every year since to its current 53.90%.  Considering total Medicaid spending in Vermont in 2016 will be approximately $1.75 billion (both federal & state dollars), one can see how the 5.5% decline in our FMAP has increasingly strained our state budget.

 

In 2015, approximately 155,000 Vermonters (24.5%) had Medicaid as their primary health insurance plan.  Nationally, about 22% of Americans have Medicaid insurance.  An additional 52,000 Vermonters received some form of supplemental health care benefit through Medicaid, including approximately 17,000 people who received subsidies to purchase private health care insurance on Vermont Health Connect (the “Exchange”).

 

Does Vermont offer more generous Medicaid benefits than other states?  Yes, in some targeted areas.  Federal regulations set the eligibility level to receive Medicaid insurance at below 138% of the Federal Poverty Level (FPL).  For a family of four, that’s approximately $33,500 per year; for a single person about $16,400 annually.  Vermont eases this income threshold in the case of pregnant women.  A pregnant woman with income less than 213% of FPL qualifies for Medicaid in Vermont.  This more generous VT Medicaid benefit costs the state about $2.3 million each year.

 

The subsidies the state provides to help qualified Vermonters purchase private insurance is not something required by federal Medicaid regulations.  In Vermont, if your income is greater than 138% of FPL but less than 300% of FPL, the state (with a federal dollar match) will subsidize your monthly payment to BlueCross BlueShield.  Those subsidies cost about $6 million annually.

 

Federal Medicaid regulations require that certain medical services be offered in state run Medicaid programs, but also allow states to include additional medical services.  Here is a list of optional services covered by Medicaid in Vermont relative to other states in the Northeast.  You’ll see that Vermont covers hospice care for Medicaid patients, while few other states do.  Federal guidelines don’t require physical therapy as part of Medicaid services, though nearly all states provide this optional care.  These two optional services cost about $3.5 million annually.

 

From a financial perspective, the trend lines for Vermont Medicaid are concerning.  The number of Medicaid recipients has increased dramatically and unexpectedly in recent years.  Some of this is the result of the Affordable Care Act encouraging citizens to get health insurance and confirm their Medicaid eligibility.  Some is the easing of the federal income qualifications for Medicaid eligibility.  Some of this demand relates to the prolonged below-average growth of our economy.

 

The expansion in Medicaid has had a variety of positive impacts.  Because it is a partnership program with the federal government, Medicaid brings significant funding into Vermont.  It has been a primary contributor in lowering Vermont’s uninsured rate (3.7%) to the second lowest level in the country (MA has the lowest).  Getting more people health insurance, and the medical care they need, ultimately improves health outcomes and reduces uncompensated care costs shouldered by health care providers.

 

From a health care policy perspective, Vermont has been highly innovative with its Medicaid program.  The federal government encourages states to design Medicaid programs to save costs, and then to rededicate those savings to expand the number of people covered or to invest in additional cost-saving initiatives.  As an example, Vermont has designed Medicaid programs to focus on serving elderly and disabled patients in their homes instead of an institutional setting.  The results have demonstrated better care at lower cost.  Vermont has used these savings for a wide variety of programs, including school health services, smoking cessation, and immunizations.

 

Even with Vermont’s programmatic successes, the fiscal challenges Medicaid presents to the state budget are great.  Increased Medicaid spending is squeezing out investment in other worthwhile areas.  How to address these challenges is a focus of the House Health Care Committee this session with the solution likely to involve a new governor next year.

 

A link and a couple of pictures to share with you from this past week:

 

I ran into Dartmouth Institute Prof. Gil Welch at the Thetford dump on Saturday and we discussed his recent op-ed piece on Senator Sanders’ call for universal Medicare.  Good read on the direction we need to go.

 

This is a picture I took of Rep. Kiah Morris and Rep. Diana Gonzalez from Friday’s meeting with Black Lives Matter activists at the State House.  Kiah serves with me on the House Health Care Committee.  Diana is the first Vermonter of Latino heritage to serve as a state rep.

 

Here’s a snap shot of the white board that hangs in the House Health Care Committee. Lots to do.

 

 

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