Today, Nebraska’s Medicaid Director, Calder Lynch, testified to his state legislature that Medicaid expansion under LB 1032 would cost the state nearly a billion dollars over 10 years, appearing totally unaffordable. What the media failed to point out is how the actuarial analysis the state commissioned was biased through a project scope that was determined by the state and guaranteed to tell the (false) story that Lynch peddled today. They simply ignored the savings and revenue!
Towards the end of the actuarial analysis (PDF), under a section titled “External Impacts of Evaluation”, comes this critical disclosure:
Medicaid Expansion can have many impacts outside of the direct cost paid for services provided to newly eligible individuals. Reductions in uncompensated care could result in less cost-shifting towards commercial payors. Paying higher, commercial levels of reimbursement for the newly-eligible population could further reduce the cost shift dynamic. The influx of a large number of lives into the HIX could help stabilize premiums by providing a larger base of lives, and could also entice additional carriers to compete for business in Nebraska. Impacts such as these have not been incorporated as part of this analysis. The focus has been limited to direct impacts of Medicaid Expansion as proposed by LB1032.
According to AARP Nebraska:
The bill will... boost Nebraska’s economy, supporting an estimated 10,000 jobs and generating about $175 million in state tax revenue.
Nor are the human impacts of failing to expand Medicaid being discussed by Nebraska’s embarrassment of a Medicaid Director. In a peer-reviewed journal article (open access), it was estimated that just in Nebraska the decision to not expand Medicaid costs between 67 and 212 preventable deaths, every year.
Counting 2014, ‘15 and ‘16—when by the way the federal government is paying 100% of the cost of expansion—that’s some 201 to 636 Nebraskans dead because of political intransigence. What’s the cost-benefit of that? Beyond the tragedy in deaths and morbidity, over these three years an estimated 6,000+ Nebraskans faced medical bankruptcy but would have been covered by a Medicaid expansion.
It’s inhumane for the public official in charge of Medicaid to not even acknowledge the human element at stake here. These are real people, living and dead Nebraskans. Read their stories.
Now, let me just briefly back-up to the actual meat and bones of the economic analysis. The so-called ‘woodwork effect’ was included as a direct cost of Medicaid expansion, although these people are already eligible for Medicaid coverage as is. Under a Medicaid expansion, the heightened awareness about Medicaid availability would lead these already eligible people to enroll in the traditional Medicaid program. Ignoring the savings and revenue of expansion, while including this indirect cost is suspect in my opinion and greatly inflates the cost.
How much? I’m not going to cost it out exactly, but a ballpark figure is $200 million. Yep. They calculate a woodwork population of 2,870, costing $464 per month with an annual increased cost of 6%, and my rough calculation is attached below.
Note: Since I’m not an actuarial professional, I may be misunderstanding this final section of my analysis. So take it or leave it, and I’m happy to receive feedback
Of the many other assumptions in the report, the two adjustments discussed in the below paragraph seem to drastically inflate the cost, even though what they are assuming would be explicitly prohibited by the Centers for Medicare and Medicaid Services. Basically, Nebraskans intend to expand Medicaid through the so-called “private option” (as Iowa and Arkansas did), whereby Medicaid money is instead used to buy private health insurance for people earning up to 138% of the federal poverty level, in addition to providing premium assistance to people to be able to buy into their employer’s health plan if cost-effective, etc. If that’s what Nebraska wants to do, so be it. But they would need the federal government to approve their alternative expansion plan under a specific waiver (Section 1115 of the SSA) which can’t be approved if the state’s actuarial analysis says the waiver would cost more money than a traditional Medicaid expansion and which can’t be approved if less people are covered with worse care. CMS can be flexible, sure, but not straight up financially negligent as assumed.
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Nebraska’s actuarial analysis adds 37.5% to the cost of care under traditional Medicaid expansion in order to match the reimbursement rate of private plans, and then they tack on an extra 15% in “non-medical load” for administrative expenses and profit (seriously), finally reaching a cost of $835 per Medicaid expansion person per month. That’s some mathematical gymnastics. If we instead understand that a waiver may not increase the cost of Medicaid expansion, we can reverse those cartwheels and back into the actual cost of $444 per person per year (835*0.85*0.625). This artificial doubling in cost also seems somewhat critical. Here’s some of the relevant text:
An additional consideration in projecting forward the expansion population’s expense under the QHP Expansion scenario is reimbursement level. Since this aspect of the cost projection is built on Medicaid data, inherent in that is Medicaid reimbursement levels. However, under QHP Expansion the state will pay commercial reimbursement for the newly eligible population. Optumas converted the reimbursement from Medicaid to commercial levels using a report produced by the Centers for Medicare and Medicaid Services (CMS).8 The report specifically discusses Hospital and Physician reimbursement; Optumas discussed Pharmacy reimbursement with the State and decided that no adjustment was necessary to convert Medicaid Fee-for-Service (FFS) reimbursement to commercial reimbursement. Since this report was published the State has changed policy to pay primary care services at Medicare rates. Due to this change the Medicare-to-Commercial fee ratio was used for primary care services to adjust reimbursement to commercial values. The aggregate impact of the reimbursement adjustment is a 37.3% increase to the projected PMPM.
At this point in the rate development all experience has been converted to be consistent with a commercial product. Consistent with that approach Optumas applied a non-medical load to that rate of 15% of premium to create the final projected CY18 experience. This created a final loaded rate of $835.48 PMPM