The following is a commentary from UHA Board Chair David Entwistle. Mr. Entwistle serves as CEO of the University of Utah Hospitals & Clinics.
In April, Governor Herbert convened the Medicaid Expansion Options Community Workgroup (the Workgroup) to explore the various Medicaid expansion options available to Utah, and to present those options to the Governor at his second annual Health Innovation Summit on September 26, 2013. Since that time, UHA members, including Rod Betit, Greg Poulsen, and myself, have been working hard with our colleagues in the Workgroup to develop different expansion options that address Utah’s unique political, economic and social needs.
As you may recall, Rod Betit updated us on some of the key advantages of one of the options the Workgroup is exploring – the partial expansion option. To give you another perspective as you consider how Medicaid expansion affects your hospitals, your communities, and the vulnerable populations you serve, we thought it would be helpful if I followed up on Rod’s report with an update on another option the Workgroup is exploring – the full expansion option.
Under full expansion, Utah would expand Medicaid eligibility in accordance with the Patient Protection and Affordable Care Act (ACA) – that is, to 138% of the federal poverty level (e.g., individuals earning up to $15,858 per year; a family of two adults and two children with a combined annual income of up to $32,499 per year.) Like partial expansion, full expansion would provide the State of Utah and its hospitals and health systems with several benefits, including those identified by the Full Expansion Subgroup below.
Key Advantages of Full Expansion:
There will be fewer uninsured individuals and significantly less spending on uncompensated care and public assistance programs. With full expansion, approximately 123,000 more Utahns will have health insurance. Not only will this improve access to healthcare services for thousands of needy individuals, it will also save Utah over $814 million in uncompensated care costs and $39 million in public assistance costs over the next decade.
Utah’s businesses will benefit. Full expansion will benefit Utah’s businesses in at least four important ways.
- First, full expansion will help Utah businesses by reducing cost shifting. As you know, hospitals must either absorb the costs generated by uncompensated and under-compensated care or shift those costs to private insurers. When hospitals shift costs to private insurers, insurers pass on the added expense to Utah businesses and, ultimately, their employees in the form of higher premiums. Full expansion will help reduce this “hidden health care tax” by significantly reducing the amount of uncompensated care hospitals provide.
- Second, full expansion will help Utah businesses by shielding employers from higher tax penalties. Under the ACA, employers with 50 or more full-time equivalent employees are liable for employer “shared responsibility” payments, if they do not offer affordable healthcare coverage and at least one of their employees is eligible for a premium tax credit through the state health exchange. Because full expansion allows more employees to receive healthcare coverage through Medicaid instead of the state health exchange, employers in full expansion states face lower shared responsibility payments than employers in partial or non-expansion states. This makes full expansion states more attractive to businesses than partial or non-expansion states.
- Third, full expansion will help Utah businesses by keeping integral, low-income workers in the state. If Utah does not fully expand, Utah may lose important low-wage earners to neighboring states that have expanded, including Nevada, Arizona, New Mexico, and Colorado.
- Fourth, full expansion will help Utah businesses by boosting Utah’s economy. According to the Public Consulting Group’s State of Utah Medicaid Expansion Assessment, full expansion will add more than $2 billion to Utah’s economy, create 3,000 to 4,000 new jobs, and increase state and local tax revenue by over $154 million by 2023. Such strong economic activity will help Utah’s businesses thrive.
Hospitals will receive additional revenue to help offset the drastic cuts to provider reimbursement brought on by sequestration and the ACA. In 2013 alone, healthcare providers face an estimated $11 billion reduction in reimbursement as a result of sequestration. This reduction comes on top of a $22 billion cut in Medicaid DSH funding, a $34 billion cut in Medicare DSH funding, and a $260 billion cut to Medicare fee-for-service payments over the next ten years as a result of the ACA – cuts that will go forward regardless of whether or how Utah expands Medicaid. Full expansion will help Utah hospitals offset these significant cuts by providing hospitals with an estimated $3.1 billion in additional revenue over the next decade. If Utah does not expand or only partially expands, Utah will not receive this additional federal funding. This is why partial expansion is significantly more expensive than full expansion – without the enhanced federal match rate, partial expansion will cost the state approximately $20 to $23 million more each year on average over the next decade, compared to full expansion.
The federal government will cover 100% of the cost of expansion for the first three years (2014-2016), gradually tapering off to 90% in 2020. These enhanced match rates are much higher than the 70% match rate Utah typically receives from the federal government.
The incremental state cost of full expansion is small relative to total state Medicaid spending. According to a study by the Urban Institute, fully expanding Medicaid will increase Utah’s Medicaid budget by only 2.9%. This amounts to only 0.4% of Utah’s general fund expenditures.
Unlike partial expansion, full expansion can be implemented without a Medicaid waiver or significant changes in state law.
Utah has flexibility in choosing how it expands to 138% of the federal poverty level. One example of this flexibility is the type of benefits Utah offers to the expanded Medicaid population – Utah can provide new beneficiaries with traditional Medicaid benefits or an essential benefits package, which is less expensive than traditional Medicaid, but still satisfies the ACA’s minimum essential health benefits requirement.
In addition to the type of benefits package it provides to new beneficiaries, Utah also has flexibility in how it structures the full expansion. For example, Utah may simply expand its existing Medicaid model, follow Arkansas’ lead and use a premium assistance model, expand the Utah Premium Partnership model, or develop a hybrid model. This flexibility will allow us to come up with a true “Utah solution” to Medicaid expansion.
I hope this information is helpful as we seek to make the best decision for the State, its citizens, employers, and providers.