A group of researchers at the Center for Health Economics and Policy at Washington University, including myself, recently analyzed the fiscal impact of a potential Medicaid expansion in Missouri from a state budgetary perspective. The report represents a non-partisan estimate of the direct impact of expansion on the Medicaid budget.
The estimate is based upon a set of assumptions documented and discussed in the report, which also acknowledges various uncertainties and the role those uncertainties play in producing the estimate. Overall, the findings are in keeping with other reports conducted at the national level, which have demonstrated significant savings across multiple states that have previously expanded Medicaid.
We find that a Medicaid expansion in Missouri is likely to be approximately revenue neutral, with the potential for cost savings in 2020 and with increased cost savings likely over the 2020-2024 time horizon. This is largely due to the opportunity to receive a 90 percent federal match on certain expenditures already being incurred by relatively high-cost populations which are currently receiving a 65 percent match. These savings are likely to be on the same order as the increased costs to cover the new “expansion population” of relatively healthy, low-income adults.
More specifically, we made assumptions that mirror the evidence in other states about how certain populations who currently qualify for coverage as “disabled” will move into the new “expansion” coverage category. Many low-income disabled individuals currently qualify for coverage through what is known as the “spend down” program; i.e., they must document that their monthly medical expenditures are high enough to deplete their incomes down to the level at which they would actually be eligible. Missouri receives a 65 percent federal match on these high-cost individuals, but under a Medicaid expansion, they would be covered automatically and Missouri would receive a 90 percent federal match on those dollars.
Similarly, there is another group of disabled individuals who have federal Supplemental Security Income (SSI) determination and, upon applying for Missouri Medicaid, are rejected and must appeal, a process that takes about 12 months and is not certain to be successful. Under an expansion, these individuals would be eligible automatically and their spending would be matched at a 90 percent rate. Currently, those who eventually gain access to Medicaid coverage have their spending matched at the standard 65 percent rate.
Taken together, savings on these two disabled groups in 2020 is estimated to be at least $73 million.
Other savings are available for other adults in special programs, such as Breast and Cervical Cancer Treatment, also currently receiving a 65 percent federal match. Again, these individuals would be eligible under an expansion and their spending would receive a 90 percent federal match. This would save about $32 million. Lower-income women who currently qualify for Medicaid only because of a pregnancy would already be eligible as part of the expansion, and their spending would therefore receive a 90 percent federal match. This would save the state about $28 million. Finally, there are other savings due to changes in funding for uncompensated care which would save several million dollars.
Costs of covering the new expansion population are estimated by using Census data to estimate the number of Missourians currently earning incomes below 138 percent of the Federal Poverty Level, which would be the cutoff for Medicaid expansion eligibility. We then estimated the costs per person based upon other states’ experiences as well as medical cost data from the Medical Expenditure Panel Survey. We estimate the total cost at $1.3 billion, with 90 percent paid by the federal government and Missouri’s share equal to about $130 million, for about 231,000 adults to gain coverage.
Combining these findings, our best estimate is that Medicaid expansion would save $39 million in 2020 from the state share of the Medicaid budget (of about $4 billion) alone. Other savings are likely in the Department of Mental Health and the Department of Corrections.
Furthermore, Medicaid expansion has the obvious benefit of increasing access to healthcare – and in particular preventive healthcare services – which has the potential to save money by keeping low-income Missourians healthier and more able to be productive as taxpaying members of the workforce. None of these benefits was included in our analysis, which focused just on the net impact to the Medicaid budget.
To complete this analysis, we conducted reviews of all existing documentation of other states’ experiences, including reports at the national level by the Urban Institute, Robert Wood Johnson Foundation, the Commonwealth Fund, and the Centers for Medicare and Medicaid Services. We relied upon published Missouri Medicaid enrollment and cost data as well as a prior fiscal analysis of Medicaid expansion conducted by the Department of Social Services in 2014. We also carried out independent analyses of American Community Survey data and Medical Expenditure Panel Survey data.
Parts of the analysis were informed by a discussion with analysts at The Urban Institute. The key assumptions were vetted by health policy staff at the Missouri Foundation for Health, the Missouri Hospital Association, the Missouri Primary Care Association, and others. The research was funded by the Missouri Foundation for Health.
Read the report at http://tinyurl.com/WUSTL-Medicaid.
Abigail R. Barker is a research assistant professor at the Brown School, the Center for Health Economics and Policy and the Institute for Public Health at Washington University in St. Louis
