Home / Insights / IBR Features Article by Tom Mortell – Medicaid Redesign Is Important For Idaho’s Businesses

Insight IBR Features Article by Tom Mortell – Medicaid Redesign Is Important For Idaho’s Businesses

By Thomas J. Mortell,

For the fourth year in a row, it appears that the Idaho legislature will be asked to address very difficult issues relating the Affordable Care Act and the ACA’s effect on health care and health insurance in Idaho.

In 2012 and 2013, the Legislature faced the very contentious debate on whether Idaho should establish a state-based, locally controlled health insurance exchange or default to a federally controlled exchange. The 2013 legislation that came out of that initial ACA debate established Idaho’s own health insurance exchange, which is now known as “Your Health Idaho.” In 2014, and now in 2015, the Legislature will be asked to consider the ACA’s potential changes to Idaho’s Medicaid program.

As originally passed, the ACA was intended to provide access to health insurance for low-income individuals and families by doing two things: (1) establishing health insurance exchanges where subsidized health insurance coverage could be obtained by those making between 100 percent of the federal poverty level (or $24,250) and those earning up to 400 percent of the federal poverty level (or $97,000); and (2) expanding the states’ Medicaid programs to provide health care coverage to individuals and families who make less than 138 percent of the federal poverty level ($33,465 for a family of four). For states that expand their Medicaid programs, the ACA requires the federal government to pay 90 percent of the long-term costs associated with that expansion, with states paying 10 percent of those costs.

However, the ACA’s then-mandatory expansion of Medicaid was short-lived. In June 2012, the U.S. Supreme Court concluded that the federal government could not penalize states for not expanding Medicaid programs. As a result, expanding Medicaid is now optional for states. Many states, but not Idaho, have chosen to expand their Medicaid programs to cover these individuals and families. The net result of the Supreme Court’s decision was that families and individuals making less than 100 percent of the federal poverty level, in states where that state’s Medicaid program has not been expanded, receive no assistance with their health insurance coverage. In Idaho, this “gap” population, as it is called, is estimated at 77,000 individuals.

In response to the Supreme Court’s decision, Governor C.L. “Butch” Otter established the Idaho Workgroup on Medicaid Expansion. The workgroup broadly represents members of the Legislature, the health care industry, and Idaho’s counties. In late 2014, the workgroup held a series of meetings to revisit its 2012 recommendation that Idaho expand its Medicaid program. In a recommendation that was markedly different from the one made in 2012, the workgroup recommended that Idaho redesign, not expand, its Medicaid system to provide health insurance coverage to those making less than 138 percent of the federal poverty level.

In an effort to streamline care, control costs, and require more patient accountability, the workgroup’s recommendation was two-tiered. First, the workgroup recommended that the state use the federal Medicaid dollars, coupled with the state’s 10 percent match, to pay for health insurance coverage on Idaho’s health insurance exchange. Second, for those making between 100 percent and 138 percent of the federal poverty level, the federal Medicaid dollars and the state matching funds would be used to provide insurance coverage through a competitively bid managed care contract. Medicaid redesign, as recommended by the workgroup, would provide health insurance coverage to an additional 103,000 individuals.

The decision to redesign Medicaid requires a basic understanding of how many of Idaho’s working poor currently receive health insurance coverage and health care. Idaho children are eligible for Medicaid if they are disabled or are from families with incomes below 185 percent of the federal poverty level ($44,862 for a family of four). However, for the parents of these children from the same family of four to be eligible for Medicaid, the family’s annual income must be less than $6,300. As currently configured, Medicaid does not—and was not intended to—provide health care coverage for many of Idaho’s working poor.

As a result, many go without health care or belatedly access the health care system at a time when treatment is much more costly and often more difficult. For some indigent individuals, health care is paid for by county indigency funds and by the state’s catastrophic care program—two taxpayer-funded programs that are expected to cost state and local taxpayers $739 million over the next ten years.

The workgroup estimated that adopting Medicaid redesign will save state and county taxpayers $173 million over the next ten years. Rather than an expansion of the existing Medicaid program, the workgroup’s proposal is a wholesale redesign of how Medicaid funds are used to provide health care to Idaho’s poorest individuals and families. In his State of the State address at the start of the current legislative session, the governor signaled a willingness to discuss the workgroup’s recommendation and encouraged the legislative leaders to hold hearings on Medicaid redesign.

Idaho businesses should care about this issue. Each year at renewal time, Idaho businesses face ever-increasing costs of providing health insurance for their employees. However, many businesses fail to realize that a portion of each health insurance premium reflects the costs associated with health care provided to Idaho residents who have no insurance. Idaho’s health care providers write off millions of dollars of uncompensated care each year for services provided to patients with no insurance. Those very real costs are then passed on to the health insurance companies, which have no choice but to include those costs in their insurance premiums. The much-maligned ACA includes specific provisions intended to reduce some of the costs for uncompensated care that now fall on Idaho’s business owners and their employees.

It is hard to argue against a federal program that will actually save the state money and that may provide businesses with at least some relief from ever-escalating health insurance premiums. Many Idaho businesses and business groups have come to realize the benefits that Medicaid expansion will bring to Idaho’s business community and are supportive of such legislation. It remains to be seen whether Idaho’s legislature will follow the workgroup’s recommendation and redesign Idaho’s Medicaid program.

Mr. Mortell is a partner at Hawley Troxell, chairs the firm’s Health Law practice group and is a member of the firm’s governing board. He can be reached at tmortell@hawleytroxell.com

This article was originally featured in the Idaho Business Review on February 16, 2015. To read the original article click HERE!

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