Senate plan ends Mich. Medicaid expansion by 2021

Melissa Nann Burke
Detroit News Washington Bureau

Washington — The new U.S. Senate health care overhaul plan would lead to “significant” cost increases for Michigan that would trigger the end of the state’s Medicaid expansion program that insures nearly 670,000 low-income people, according to the Michigan Senate Fiscal Agency.

In its current form, the Healthy Michigan Program would shut down by the end of fiscal year 2021 or Oct. 1, 2021, due to a requirement in state law that requires the insurance program to end if the state’s spending exceeds the program’s savings.

The state’s Senate analysts reached a similar conclusion about the House counterpart legislation.

Michigan Senate analysts estimate that the Better Care Reconciliation Act would raise state costs for Medicaid in the range of $900 million a year by fiscal 2025, though the increased costs would take two years longer to take effect and be “more easily absorbed” than the U.S. House bill approved in May.

The health care overhaul proposal unveiled last Thursday also has other effects.

It would provide a temporary new benefit by subsidizing services for Michigan’s institutionalized mentally ill adults who aren’t currently covered by the government health care program, according to the Michigan legislative experts. It also could translate into reduced funding for nursing homes.

But the projected end of the expanded Medicaid program worries Republican Gov. Rick Snyder, who has lobbied in Washington to preserve Michigan’s version of Medicaid expansion. The second-term governor has said the state can’t afford to finance the program on its own.

A Snyder spokesman said Monday that Snyder has “serious concerns” with the Senate bill, particularly its potential impact on Healthy Michigan, “which has been a very successful program for our residents.”

“We are still analyzing the bill, but at this time it doesn’t look like it contains a good outcome for Michigan,” spokesman Ari Adler said by email.

Laura Appel, senior vice president of the Michigan Health & Hospital Association, said that under the Senate bill she anticipates Healthy Michigan would end by Jan. 1, 2021, because the state doesn’t have the funds to cover the loss of federal aid.

“We’re going to be scrambling to keep the program serving all the people who need this program in Michigan at 75 percent of the money we have now,” said Appel, whose organization opposes the bill.

But state Sen. Patrick Colbeck, R-Canton, “adamantly” opposes any extension of the Health Michigan program beyond 2020 when he’s counting on it being repealed automatically after it meets the termination threshold.

“Healthy Michigan is not so healthy,” said Colbeck, who intends to run for governor in 2018. “There is so much bloat in the current health care system right now due to excessive administration.”

Notably, the Michigan Senate analysts say that, even without any action by federal lawmakers, the Healthy Michigan program would effectively end by fiscal 2021 anyway because state costs will exceed savings. The cost trigger was put in the 2013 state legislation to help win Republican votes to eke out a narrow legislative approval.

Some in and outside state government dispute that analysis.

Under President Barack Obama’s health care law, the federal government paid all of the cost of expanded Medicaid for three years. This year, states are supposed to contribute increasingly to payments up through 2020 when the federal contribution is at 90 percent.

As proposed, the Senate’s Better Care Reconciliation Act would phase out the expansion of Medicaid in states that adopted it over a four-year period, reducing the federal match from 90 percent in 2020 to a state’s traditional match by 2024. In Michigan, that traditional match is around 65 percent.

The Senate Fiscal Agency estimates that the bill’s proposed cuts to Medicaid spending would lead to $127.3 million in increased costs to the general fund in fiscal 2021, above the increases already anticipated under the Affordable Care Act.

General fund costs in fiscal 2022 would increase by $303.1 million; in 2023, $485.8 million; and in 2024, $810.8 million, according to analysts.

Like the U.S. House bill, the Senate version would switch to a per-capita funding system. But because of how it would determine baseline spending for eligibility groups, the state wouldn’t be “nearly as much at risk for exceeding the caps,” according to the Senate Fiscal Agency report.

Another aspect of the bill could mean reduced funding for nursing homes by capping what are known as provider taxes, said Jennifer Eisner, a spokeswoman for the Michigan Department of Health and Human Services.

Michigan’s provider tax on long-term care would be nearly 6 percent in fiscal 2018, but the Senate bill would impose caps starting at 5.8 percent in 2021 and stopping at 5 percent in 2025. The tax is imposed on health care providers such as nursing care facilities.

It would cost the state just under $50 million by the time the 5 percent limit takes effect, Senate analysts said.

A majority of other states have more provider taxes or fees than Michigan, according to the Kaiser Family Foundation.

The U.S. Senate bill would also provide new federal funding for Medicaid services provided to mentally ill people ages 21 to 64 who are institutionalized at Michigan state hospitals and centers. Currently, children are covered but not adults.

Senate analysts estimated that this provision could mean a savings of nearly $42 million for care provided at three adult facilities in Westland, Caro and Kalamazoo.

U.S. Sen. Debbie Stabenow, D-Lansing, said the bill would end expanded Medicaid coverage that was set up to help children and pregnant moms with lead exposure in Flint get more comprehensive health care.

“I urge my Senate Republican colleagues to vote ‘no’ on proceeding to this bill, and instead, work with us to lower costs and improve health care for all Americans,” she said

U.S. Rep. Sandy Levin, D-Royal Oak, on Monday wrote to Snyder urging him to speak out on concerns he might have about the Senate bill to repeal the Affordable Care Act.

“While the full impact of these draconian cuts will be felt after your governorship, they will frightfully undermine the benefits of the steps taken to create Healthy Michigan under your tenure,” Levin wrote.

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