Growing Medicaid rolls could cost Michigan $500M during budget crunch
Lansing — More than 110,000 lower-income individuals have enrolled in Michigan's Medicaid health care program during the past two months because of coronavirus-related shutdowns, adding pressure to a state budget that's expected to be short $1 billion to $3 billion in the current year.
Nearly 1.8 million Michiganians were enrolled in traditional Medicaid as of the end of last week, according to the state. More than 702,000 individuals were enrolled in Healthy Michigan — the expanded form of Medicaid through the federal Affordable Care Act — as of early Monday, Health and Human Services Department spokesman Bob Wheaton said.
The increased cost to the state could range from the "low hundreds of millions" to as much as $500 million or more — depending on the growth in Medicaid caseloads over the next few months, said Senate Fiscal Agency Associate Director Steve Angelotti, who's been finalizing projections in advance of Friday's revenue estimating conference in Lansing that sets budget numbers.
Both traditional Medicaid and the Healthy Michigan Plan are funded jointly by the state and federal governments.
Medicaid enrollments are expected to increase across the country because of COVID-19-related unemployment that reached 14.7% nationwide at the end of April, causing some Americans to lose their employer-paid health plans.
In Dearborn, Gamal Al-Sawaf, 40, lost his job as a hi-lo driver with a logistics company on March 18, leaving him and his wife without health insurance. His children, ages 17, 15, 11 and 2, were already covered by Medicaid.
A worker with ACCESS, a Dearborn-based human services agency, helped the couple sign up for the Healthy Michigan Plan, the state's expanded Medicaid program for low-income adults.
Al-Sawaf will start back at work on Monday but doesn't know if he'll immediately qualify for the company's health insurance plan — so the Medicaid enrollment sets his mind at ease.
"I was worried and concerned that if anything happened to me or my wife that we wouldn’t be covered," he said.
Michigan could add another 377,000 people to its Medicaid caseload if the state unemployment rate reaches 10% — or 599,000 more if joblessness hits 17.5%, according to an April 3 analysis by the Lansing-based national health research and consulting firm Health Management Associates.
In the worst-case scenario, Medicaid could add an estimated 841,000 individuals to the government health care rolls if unemployment reaches 25% in Michigan, according to the Health Management Associates' study.
At the same time, the number of uninsured people in Michigan would decline by 6,000 at the 10% unemployment rate because more people qualify for Medicaid due to drops in their income, the study concluded. By contrast, Georgia would add 101,000 uninsured if unemployment reaches 10% because it is among the states that opted not to expand Medicaid under the federal Affordable Care Act.
Matt Powers, managing director at Health Management Associates and a co-author of the report, said the group is updating the study but wouldn't comment on what its new findings will be.
Michigan's decision to pick expanded Medicaid means more people flock to government-subsidized health care than become uninsured during economic difficulty, Powers said. "Folks migrate to the Medicaid side rather than the uninsured side," he said.
ACCESS is receiving 150 to 200 calls daily from people asking for help applying for unemployment benefits, said Brigitte Anouti, the group's director of social services.
"At least 60-70% of those people requesting unemployment assistance are also requesting health care coverage," Anouti said.
The estimate of Michigan's Medicaid increase is a snapshot since many people delay seeking health insurance after losing a job or pay to continue their employer-sponsored plan for a couple of months.
"After people get laid off, they have the ability to continue their coverage under COBRA, so we may not see the real growth in the caseload for a while — it may accelerate," Angelotti said. "This is uncharted territory. We really don’t know.
"We've never had a situation where the economy has dropped this much this quickly."
More than 1.7 million people in Michigan have filed for unemployment benefits, according to the state's latest numbers. People are applying for Medicaid, the federal-state program for low-income earners, after losing their employer-paid health coverage, Angelotti said.
In April, Michigan enrolled 41,057 new people in Healthy Michigan, the state's expanded Medicaid program for lower-income adults — about a 56% increase over the number newly enrolled in the program during April 2019, according to the state Department of Health and Human Services.
The program covers adults with incomes at or below 133% of the federal poverty level, or about $16,000 per year for an individual or $33,000 annually for a family of four.
The federal match for Healthy Michigan, the expanded Medicaid program for low-income adults, has remained the same, with the federal government paying 90% and Michigan paying 10% of the costs.
Angelotti estimated Michigan in the past eight weeks has added about 70,000 to its caseload for traditional Medicaid, the federal health insurance program for pregnant and new mothers, children, people in nursing homes, those with disabilities and some seniors.
Some growth is because Michigan, like other states, agreed not to drop people from the program during the COVID-19 crisis as a condition for receiving a temporary 6.2% increase in the federal match for traditional Medicaid. Including that increase, Michigan pays about 30% of the costs for people enrolled in the traditional Medicaid program, Angelotti said.
Cost-sharing rules suspended
When it approved expanding Medicaid in 2013, the Republican-controlled Legislature attempted to make the expanded Medicaid program financially sustainable by requiring participants to make minor cost-sharing payments. But the rules have been suspended for COVID-19 treatment and testing.
People on the Healthy Michigan Plan pay small amounts for their health care, but the payments were suspended by Democratic Michigan Gov. Gretchen Whitmer during the COVID-19 crisis. They normally make monthly contributions up to about $26, with co-pays that can range from about $1 for an office visit to $50 for a hospital stay.
The Michigan Legislature last year passed a work requirement for the Healthy Michigan Plan, but a federal judge ruled on March 4 that Medicaid work requirements are unlawful.
The average cost for an adult on traditional or expanded Medicaid is about $6,000 annually, Angelotti said. But children cost less to insure, and he said the largest share of new enrollees in traditional Medicaid will be kids whose parents have lost their employer-paid health plans.
The financial impact of the increase in Medicaid enrollment on the state budget will largely depend on how long the federal government continues the 6.2% increase in the federal match for traditional Medicaid, Angliotti said.
That increase in the federal match offsets the cost of the increase in enrollment by about $170 per quarter, he said.
"We think (the increase in Medicaid enrollment) is going to peak in (fiscal year) 2021 and hopefully return to some normalcy in 2023," he said.
"How much it's going to cost is going to depend on how many people we add to the caseload and how costly they are."
Medicaid plans near capacity
Medicaid plans in a handful of Michigan counties are nearing their capacity to take on new members — but each of the counties has other health plans available for people to enroll in, according to the Michigan Department of Health and Human Services, which is headed by Robert Gordon.
The counties of Barry, Berrien, Clare, Kent, Mecosta, and Monroe each have one Medicaid plan near 80% of its capacity, Wheaton said.
Oceana County has two plans near the 80% limit, where the state stops automatically enrolling new members in a Medicaid plan.
"Each of those counties has other five other managed health plans available for enrollment," Wheaton said. "In Oceana County, there are two plans near 80% capacity with four other managed health plans available."
But access to health care has not been an issue. Wheaton noted demand for health care services has declined dramatically during the pandemic.
"Even with the dramatic growth in enrollment, we still able to meet the needs of our enrollment," said Nick Pallone, executive director of the Michigan Association of Health Plans.
Ohio Gov. Mike DeWine last week proposed nearly $800 million in cuts to Ohio's budget to offset tax revenue losses due to the coronavirus virus, including a $210 million reduction for Medicaid.
The neighboring Rust Belt state could add 425,000 to its Medicaid caseload if Ohio reaches 10% unemployment, or 679,000 more cases if joblessness hits 17.5% there, according to the Health Management Associates analysis.
The cut in Ohio's Medicaid program would be cut mostly through proposed reductions in payments to Medicaid managed health plans, said Allan Baumgarten, a Minneapolis-based hospital analyst who follows Michigan's health care industry.
"There's a sense (in Ohio) that that's OK because Medicaid HMOs are for now experiencing this very light level of claims," Baumgarten said.
"You can expect that Michigan is probably looking at its claims experience ... and is going to propose something similar in terms of adjustment to the payment rates for the rest of 2020."