Michigan: Medicaid expansion producing big savings

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Gov. Rick Snyder’s administration wants to broaden the equation used to calculate state savings from expanded Medicaid eligibility as it works to protect the Healthy Michigan plan from a potential demise.

The 2013 Michigan law includes a trigger that would end expanded eligibility for the low-income health insurance coverage if state costs outweigh savings that result from federal funding.

That could happen by fiscal year 2021, according to the nonpartisan Senate Fiscal agency — and even sooner if Congress cuts Medicaid funding as part of the national health care overhaul legislation approved last month by the U.S. House.

The federal proposal would leave Michigan with an $800 million a year hole it could not afford, state Budget Director Al Pscholka and Health and Human Services Director Nick Lyon said in a Monday press conference organized by the Modern Medicaid Alliance.

But the administration is disputing projections that the cost-savings trigger could put the program on the chopping block regardless of what happens at the federal level, arguing state savings go beyond traditional budget lines.

“If you look at savings in uncompensated care and other savings that are out there, I don’t think that would sunset this particular plan,” Pscholka said. “I think you have to look at all the savings that are taking place with hospitals and everywhere else. That number is pretty large.”

Caring for individuals without health insurance cost state hospitals and health care providers $1 billion a year prior to the Healthy Michigan plan, according to the Michigan Health and Hospitals Association, which says the cost has been roughly halved under the new law.

Moving more people out of emergency rooms and into preventative care settings was a key promise of the Healthy Michigan plan, and supporters say it is working.

More than 679,000 Michigan residents are enrolled in the government program, which provides health care coverage to able-bodied individuals who earn up to 133 percent of the federal poverty level. It requires contributions to a Health Savings Account and co-pays that can be reduced through healthy behaviors.

Michigan’s Republican-led Legislature added the cost-savings trigger to the plan when it approved expansion of Medicaid eligibility under Democratic President Barack Obama’s signature health care law, which President Donald Trump and congressional Republicans are now working to repeal and replace. The federal government fully funded the initial expansion but is gradually reducing funding to 90 percent by 2020.

Michigan’s law would end expanded eligibility if state costs exceed general fund savings in areas such as prisoner health care. If the administration determines additional savings in other budget areas, it “shall” propose them to legislative budget committees for approval to use in yearly calculations.

“I think you have to look at the total impact,” Lyon said. “We certainly would present that case to the Legislature. I would hate to see the Healthy Michigan plan go away ... when it’s generating so much economic and health care benefits for the state.”

The U.S. House overhaul presents a more immediate threat to the Healthy Michigan plan.

The bill, which the U.S. Senate is expected to change, would close the program to new enrollees in 2020 and reduce enhanced federal match rates paid to states, likely forcing an earlier end to Michigan’s unique program.

The state would have to spend an extra $800 million a year if it wanted to continue Healthy Michigan, said Lyon, who added it would be “very difficult to maintain the program if we lose the federal funding that makes it possible today.”

Snyder is among a handful of Republican governors urging Congress to retain promised funding for expanded Medicaid eligibility.

A recent study by the University of Michigan concluded the program added nearly $554 million to the state budget in 2016 due to increase tax revenues and decreased state health care spending.

U.S. House Speaker Paul Ryan and other GOP proponents say the federal health care proposal would give states new flexibility to run their own Medicaid programs as they see fit, but Pscholka said it is not as bold as advertised.

“The House talked about flexibility, but I’m not sure the talking point landed in the legislation,” said Pscholka, a Republican and former state legislator. “If there was the flexibility they claimed was in there, perhaps we wouldn’t have as many objections.”

The American Health Care Act, as approved by the U.S. House, would reduce the cumulative federal deficit by $119 billion between 2017 and 2026, according to the Congressional Budget Office, mostly through reductions in Medicaid spending that would offset the repeal of tax increases for high-income earners.

By 2026, 23 million fewer Americans would have health insurance than if current law continued, according to the CBO.

“I don’t think its good politics to balance the budget on the backs of my patients,” said Dr. Farhan Bhatti, medical director and CEO of the Care Free medical and dental clinic in Lansing, which hosted the Monday press conference that included health care and business organizations.

Bhatti told reporters that prior to Healthy Michigan, 50 percent of the patients at his clinic were either uninsured or on a separate Ingham County health plan for low-income residents. Today, he said, seven to 10 percent are uninsured, and 70 percent are on Medicaid.

“Health care is economic development,” Bhatti said. “I’m in the business of putting people back to work.”