#9 - The state cost of Medicaid Expansion is manageable.
The cost of services provided to persons who would be eligible for Medicaid as a result of expanded eligibility is projected to reach $354,205,813 by FY-16. Since the federal government will cover 100% of the cost of services in 2014, 2015 and 2016, the General Fund cost of those services in FY-14, FY-15 and FY-16 will be $0.1
- By FY-20, service costs for those eligible as a result of expanded eligibility will be $403,305,530. The General Fund share of those costs will be $32,264,442.2
- In FY-12, General Fund expenditures for Medicaid were $569,363,532.3 If Medicaid spending grows at the same rate as the past ten years, Nebraska will spend $726,873,723 in General Fund in FY-20.4 In that circumstance, the cost of Medicaid expansion would increase GF Medicaid spending in FY-20 by 4.4%.
There will be offsetting savings that will accompany implementation of ACA, including the Medicaid expansion.
- Nebraska can begin to phase out the Comprehensive Health Insurance Pool (CHIP) in 2014. In 2011, CHIP diverted $10,893,411 of health insurance premiums from the General Fund.5 As more Nebraskans gain health coverage, premium tax receipts will rise.
- The State Disability Program (SDP) provides transitional Medicaid coverage for persons who have a disability who are waiting for Medicare coverage to begin. In the future, persons who would be covered by the SDP will be eligible for the expanded Medicaid Program. The state savings in FY-15 are projected to be $9,100,000.6 Assuming that program costs would have grown at the same rate through 2020 as Medicaid costs grew over the past ten years, savings in FY-20 would be $10,600,704.7
- Nebraska provides behavioral health services that are paid through the General Fund. The narrative for the fiscal note for LB 577 identifies up to $6 million in savings that were not included in the fiscal estimate due to the need for additional information.8 Assuming the rate of growth of Medicaid over the past ten years, savings in FY-20 would be $7,659,855.
- Additional savings have been identified that would be produced by Medicaid expansion include coverage of pregnant women up to 138% of poverty ($600,000 in FY-15), breast and cervical cancer screening ($600,000 in FY-15), AIDS drug assistance program ($900,000 in FY-15).9 At the rate of Medicaid growth over the past ten years, the three programs would produce combined savings of $2,446,316 in FY-20.
- If Nebraska decides to opt out of Medicaid expansion, we would effectively turn down an estimated $371,041,088 in federal funds in FY-20.10 Nebraskans would have contributed to those federal funds. From 2000 to 2012, GF revenue amounts to 3.9% of state GDP.11 Deferring $371B in income would effectively defer $14,841,644 in GF revenue
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1 Fiscal Note for LB 577 submitted February 28, 2013. http://www.nebraskalegislature.gov/bills/view_fiscal.php?DocumentID=18187
2 Fiscal Note for LB 577 submitted February 28, 2013. The FY-20 state share of cost will be 93% of total costs for the first half of the fiscal year and 90% in the second half. FY-21 will be the first full fiscal year in which the state will cover 90% of the total cost of services for the expanded population for the entire fiscal year.
3 Department of Administrative Services Budgetary Report for 2012. Page 26. http://das.nebraska.gov/accounting/budrept/buddoc12.pdf
4 The average rate of growth for Medicaid Vendor Payments in the past ten years has been 3.1%. Growth rates in Medicaid vendor payments for the past ten years are: FY-03 – 5.4%; FY-04 – 5.1%; FY-05 – 6.3%; FY-06 – 2.3%; FY-07 – 0.6%; FY-08 – 4.0%; FY-09 – 2.8%; FY-10 – 2.2%; FY-11 – 0.2%; FY-12 – 1.7%. The Information on Medicaid expenditures was gathered from reports on Medicaid Vendor Payments from FY-2002 through FY-2013. Recent reports may be found at the DHHS Medicaid Reform site. http://dhhs.ne.gov/medicaid/Pages/med_reform_reports.aspx
5 Information was gathered from NECHIP Monthly Financial Statements. 2011 was the last full year for which statements were available. http://www.nechip.com/cb_statements
6 Fiscal Note for LB 577 submitted February 28, 2013. http://www.nebraskalegislature.gov/bills/view_fiscal.php?DocumentID=18187
7 The average rate of Medicaid cost growth that was used to adjust FY-15 savings was 3.1%. That rate is explained in Footnote 4.
8 Fiscal Note for LB 577 submitted February 28, 2013. http://www.nebraskalegislature.gov/bills/view_fiscal.php?DocumentID=18187
9 Fiscal Note for LB 577 submitted February 28, 2013. http://www.nebraskalegislature.gov/bills/view_fiscal.php?DocumentID=18187
10 Fiscal Note for LB 577 submitted February 28, 2013. http://www.nebraskalegislature.gov/bills/view_fiscal.php?DocumentID=18187
11 GDP data is from the Bureau of Economic Analysis of the U.S. Department of Commerce. http://bea.gov/regional/index.htm. State revenue information is taken from the DAS Accounting Division Budgetary Reports. http://das.nebraska.gov/accounting/budrept/2000/incstmt.htm. For the period from 2000 to 2012, revenue as a percentage of State GDP ranged from 3.61% in 2003 to 4.32% in 2006.