Saturday, October 25, 2014

Kasich Wants Medicaid Expansion, But with 'Circuit-Breaker' on Federal Funding

Gov. John Kasich said Monday he'll seek to expand Medicaid eligibility under the Affordable Care Act in his new budget but also disclosed high-level negotiations with the Obama administration to ease rules on the expansion, and he promised to pull the plug if federal funding promises are broken.

Kasich's FY14-15 spending plan formalizes previously announced plans to make Medicaid a standalone cabinet agency while merging the Ohio Department of Mental Health and the Ohio Department of Alcohol and Drug Addiction Services. 

The governor sold the expansion proposal as a way to extend health coverage to the jobless and working poor, boost mental health and addiction treatment by freeing up local levy money, and prevent "financial chaos" at community hospitals, which now face the loss of federal payments for uncompensated care.

Kasich's plan includes provider cuts to offset costs of the "woodwork effect," where people now eligible for Medicaid but not enrolled will be driven into the system by the federal health care law's mandate for everyone to obtain coverage. But those providers, hospitals and health plans among them, should also expect to benefit from more business related to the Medicaid expansion, the administration said.

The administration estimates 92,000 children, 88,000 parents and 51,000 seniors will enter Medicaid through the woodwork effect.

Eligibility expansion is expected to bring about 365,000 new enrollees, offset by about 91,000 people now on Medicaid who'll instead get subsidies or tax credits to get coverage through the health insurance exchange, for a net expansion total of about 275,000 people.

Tax credits and subsidies to buy coverage in the exchange don't kick in until someone earns at least 100 percent of poverty, since the ACA was designed with a mandatory Medicaid expansion to cover people up to 138 percent. But the U.S. Supreme Court ruling that largely upheld the ACA also rendered the expansion optional. Without expansion, poor childless adults and some parents would be the only people in the low- to middle-income population not receiving government assistance for coverage.

"We don't want 275,000 people getting their primary care in an emergency room," Kasich said.

The administration also wants to implement an $8 copay for those earning above 100 percent of federal poverty if they visit the emergency room for non-emergency services. In addition, copays would run $8 for non-preferred drugs and $3 for preferred drugs.

Kasich has talked since the election of wanting "flexibility" from President Barack Obama's administration on the Medicaid expansion, perhaps taking it up only to 100 percent of federal poverty and then allowing those between 100 percent and 138 to get help buying coverage on the exchange. After pressing the matter with his allies in Washington, D.C., Kasich said he got a phone call last week from Valerie Jarrett, one of Obama's senior advisers, expressing a willingness to discuss the matter.

"We don't know how this is all going to work out. I mean ideally if they would allow us to be able to buy into the exchange between 100 and 138, that's great, and they're indicating a willingness to talk about that, which they had not done before," Kasich said.

State-share Medicaid costs related to the woodwork effect are estimated at $186 million in FY14 and $335 million in FY15. But, according to the administration, the coverage expansion actually brings a net decrease of $23 million in state share for FY14 and $68 million for FY15, based on full federal support and the shifting of some people off Medicaid and into the exchange.

Total Medicaid spending in the budget is projected to grow 13.2 percent to $22.4 billion in FY14 and 9.6 percent to $24.5 billion in FY15.

But Kasich and Greg Moody, director of the Office of Health Transformation, made clear Monday that the expansion decision is predicated on the federal government's assuming all or most of the cost.

"If the federal deal changes, that changes all those numbers," Moody said.

Thus, the executive budget proposal would codify an automatic reversal of the Medicaid expansion if the federal government changes the funding formula.

"If the federal government pulls the rug from under us and doesn't work with us, it's going to create chaos. They should not do that. They're making a promise. Live up to it. If you don't live up to it, you're going to create chaos," Kasich said.

"Believe me, we've looked at the circuit breaker, and we think we can implement the circuit breaker, but it will bring a very difficult situation to health care providers throughout the state," the governor said.

In Kasich's Monday budget briefing and a later teleconference with Tracy Plouck, head of the new Ohio Department of Mental Health and Addiction Services (DMHAS), the administration talked about the Medicaid expansion's potential to benefit county-level funding for mental health and addiction services to the tune of $105 million this biennium.

Medicaid is expected to cover some of the diagnostic and therapeutic services, such as counseling and inpatient care, that are currently paid for by county addiction and mental health services boards. That will free up county agencies to spend their local levy dollars on non-clinical services meant to help people find stability and employment, such as housing, transportation or job supports.

"Over time, the infusion of Medicaid as a payer for the clinical services will make available dollars locally that could be spent for other recovery services that are not clinical in nature," Plouck said.

Once Medicaid expansion takes full effect, the administration estimates a $70 million annual benefit to local services.

Plouck said the merger of two departments into DMHAS is not expected to require layoffs, but will lead to staff cuts through attrition. She said some of the administrative savings from the merger will flow into a new, $1.5 million "community innovations" fund, which will help support specific initiatives aimed at improving care and reducing costs.

The budget proposal for DMHAS also includes a new "Recovery Requires a Community" aimed at moving 1,200 nursing home residents with mental health diagnoses into community care.

"Our research indicates there is at least that level of interest," Plouck said.

Kasich's decision to expand Medicaid drew quick praise Monday from a variety of interests in the health care field, including advocacy groups for doctors, dentists, hospitals, nursing homes and managed care companies.
Story originally published in The Hannah Report on February 4, 2013.  Copyright 2013 Hannah News Service, Inc.


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