Cindy Mann Center for Children and Families Georgetown University Health Policy Institute American Hospital Association State Issues Forum January 15, 2009 Moving Forward in Uncertain Times

Much is Happening State activity Immediate federal legislative action Federal administrative action Federal health reform

State Developments

FL NC SC GA LATX AL AR KS OKAZ TN MS NV UT NM CA WY ID WA OR ND SD NE MT MO IN MI WI IL ME OH KY HI AK PA WV VA CT NJ DE MD RI NH VT DC MA CO IA NY MN State Budget Woes Worsening Source: E. McNichol and I. Lav, “State Budget Troubles Worsen,” Center on Budget and Policy Priorities (December 23, 2008). Note: includes states with shortfalls in FY 2009 or projected shortfalls for FY States with Shortfalls (45 states, including DC)

State Cuts Most states are facing the prospect of either program cuts or provider rate cuts – or both – California - instituted renewals every six months for children in Medicaid – Illinois - lengthening the amount of time to pay providers – New Jersey - cuts in funds to charity hospitals – Rhode Island - reduced the income eligibility level for parents Source: V. Smith, et al., “Medicaid in a Crunch: A Mid-2009 Update on State Medicaid Issues in a Recession,” Kaiser Commission on Medicaid and the Uninsured (January 2009); and N. Johnson, E. Hudgins, and J. Koulish, “Facing Deficits, Most States are Imposing Cuts that Hurt Vulnerable Residents,” Center on Budget and Policy Priorities (December 2008).

Source: As of September 17, 2008 based on a review by the Center for Children and Families of state initiatives in 2007 and State Action on Children’s Health Coverage Implemented 2007 Legislation to Improve Children’s Coverage (15 states) FL NC SC GA LATX AL AR KS OKAZ TN MS NV UT NM CA WY ID WA OR ND SD NE MT MO IN MI WI IL ME OH KY HI AK PA WV VA CT NJ DE MD RI NH VT DC MA Enacted New Legislation/Took Administrative Action to Improve Children’s Coverage (10 states) CO IA NY MN

Moving Forward Even in Challenging Fiscal Climate “We are making tough decisions, but we're doing that while also protecting the core priorities, such as education, providing health care to our children and supporting tax reform that I believe will help revitalize our economy in the long run.” Governor Ted Strickland (D-OH) announcing $540 million in cuts (September 10, 2008)

The Affordability Gap is Widening Source: Center for Children and Families analysis of Kaiser/HRET Survey of Employer-Sponsored Health Benefits, ; and the Federal Poverty Level for a family of three, , available:

Average Total ESI Premium for Family Coverage as a Share of Income at Selected Income Levels Note: Share of income evaluated for families earning exactly 200% and exactly 300% of the FPL. Source: G. Kenney & J. Pelletier, “Setting Income Thresholds in Medicaid/SCHIP:Which Children Should be Eligible?” Urban Institute (January 2009).

Assuring Eligible Children Can be Enrolled “We have made great strides in improving access to health care for our vulnerable children.” Governor Huntsman (R-UT) celebrating the 10th Anniversary of SCHIP (August 21, 2008)

7 out of 10 Uninsured Children are Eligible But Unenrolled 49% are Medicaid Eligible 19% are SCHIP Eligible Source: L.Dubay analysis of March 2005 Current Population Survey using July 2004 state eligibility rules

The “Welcome Mat” Effect STATE Total New Enrollment Previously Eligible Illinois244,700165,600 (68%) Data from November June 2008 Massachusetts51,00032,750 (64%) Data from June June 2008 Pennsylvania19,00011,000 (59%) Data from February June 2008 Wisconsin49,10840,881 (83%) Data from February May 2008 Source: Center for Children and Families, "Putting Out the Welcome Mat: Implications of Coverage Expansions for Already-Eligible Children” (September 9, 2008).

Reaching the Eligible but Unenrolled Children < 1% Procedural closings in Louisiana: Source: LaCHIP/Medicaid Eligibility Division, La. Department of Health & Hospitals, September 2008

Federal Developments

Immediate Congressional Action SCHIP Economic Recovery – FMAP – Health IT – Infrastructure grants – Covering the uninsured

Changes in Coverage as Unemployment Rises Source: J. Holahan and A. Garrett, “Rising Unemployment, Medicaid and the Uninsured,” Kaiser Commission on Medicaid and the Uninsured (January 2009). Millions of People

Medicaid Costs Rise as Unemployment Rises Source: J. Holahan and A. Garrett, “Rising Unemployment, Medicaid and the Uninsured,” Kaiser Commission on Medicaid and the Uninsured (January 2009). Billions of Dollars $8.3 $15.2 $18.6 $11.7 Increased Coverage 2.4 million5.4 million4.4 million3.4 million

Hospital Uncompensated Care is Growing Source: American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet” (November 2008).

State Budgets and Potential Fiscal Relief Source: E. McNichol and I. Lav, “State Budget Troubles Worsen,” Center on Budget and Policy Priorities (December 23, 2008). Current proposed FMAP increases range from $80 to $100 billion over 9 – 10 quarters. Additional Mid- Year Shortfalls Debate ranges from $35b - $44b/1yr In Billions 38 States Reporting

SCHIP: More than You Might Expect Significant expansion in allotments – Use it or lose it formula Permanent allowance for use of funds for children eligible under pre-SCHIP Medicaid expansions “Performance Bonus” payments for Medicaid enrollment New enrollment options ? End of federal ban on states using Medicaid/SCHIP for legal immigrant children/pregnant women here <5 years But no further SCHIP waivers for parents/childless adults

Federal Developments: Administrative Activity

(Some) Matters That Have Been Raised In the Transition Review Process Medicaid regulations – 6+ August 17 th directive Waivers Improving relationships with…everyone Improving participation rates “Value based purchasing” Improving quality Health IT

Health Reform

Medicaid and Health Reform Likely that Medicaid will play an even greater coverage role in the future What changes are needed?

Medicaid Has A Large Role in the Health Care System Hospital Payments, 2007 Source: M. Hartman, et al., “National Health Spending in 2007: Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998,” Health Affairs (January/February 2009). In 2007, Medicaid Paid Hospitals $329.4 Billion

Medicaid Already Has a Large Coverage Role Children (Under 19) Total Population (Under 65) ESIMedicaid/ SCHIP Other Public UninsuredIndividual Coverage Source: Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the Census Bureau's March 2007 and 2008 Current Population Survey.

More Than Half of All Uninsured Have Incomes below 200% of the Poverty Level Total Uninsured Population (Persons in Poverty Universe) = 45.6 Million < 100% FPL 11.5 million (25.3%) Source: Commonwealth Fund based on US Census Bureau, Current Population Survey, Annual Social and Economic Supplement, % FPL 13.3 million (29.2%) % FPL 8.9 million (19.5%) 300%+ FPL 11.8 million (26.0%) < 200% FPL 24.8 million (54.4%)

Senator Baucus: Call for Action Public Program Proposals Medicaid extended to all at 100% of FPL, automatic FMAP increases during downturns, unspecified simplifications and financing SCHIP: All children must be covered to at least 250% of the FPL New options in Medicare

Medicaid and Health Reform What changes are needed? – Eligibility – Enrollment – Access/health provider payment levels – Financing – Integration with other components – Don’t leave Medicaid behind on quality, HIT

Realigning Responsibilities What percent of state Medicaid budgets is spent on Medicare beneficiaries? 5% 10% 15% 42%

Considerable Alignment of Interests