New study says revised Medicaid expansion would cost 40 percent more

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. – A new study estimates a bill expanding Medicaid would cost the state of Nebraska $143 million through the year 2020, and would cost 40 percent more than a typical Medicaid expansion because it would use Medicaid money to help pay enrollees’ premiums.

That’s significantly higher than the $32 million estimated in the fiscal note attached to the bill.

Kerry Winterer, CEO of the Department of Health and Human Services, released the figures during a public hearing today on a bill that would expand Medicaid, a key provision of Obamacare that is voluntary for states.

Nebraska has so far declined to expand the program for low-income residents, but a group of lawmakers, including some Republicans, are pushing a revised proposal to do so. Gov. Dave Heineman has repeatedly, adamantly expressed opposition to the idea, saying the federal government can’t afford the program and is likely to renege on its promise to pay most of the costs. The feds pay all the costs of expansion for the first three years, and then support begins dropping to 90 percent by 2020.

Winterer, a Heineman appointee, said Wednesday Medicaid already covers more than 240,000 Nebraskans at a cost of more than $1.8 billion annually. Exanding the program would result in nearly one in five Nebraskans being on Medicaid, he said.

“The Medicaid program is the single largest program in state government,” he said. “It is also one of the fastest growing programs in the state budget.”

Under the bill, LB887, Medicaid would be expanded to adults under the age of 65 who earn up to 138 percent of the federal poverty level (nearly $16,000 for individuals or about $32,500 for a family of four). HHS estimates that would amount to 113,410 additional people eligible through 2020 at a cost of more than $3.3 billion, based on a draft report from the actuarial firm, Milliman, Inc.

Bellevue Sen. Sue Crawford expressed skepticism about the estimates, saying that “seems like a pretty big jump in enrollees to expect.”

Winterer said the bill is “Medicaid expansion at a higher cost.” It includes a premium assistance program requiring Medicaid to pay not only private insurance premiums for recipients but also provide additional “wrap around” benefits and pay all deductibles and copays. And premiums for private insurance are based on provider rates that are significantly higher than Medicaid provider rates.

That makes the bill “not only an expansion of Medicaid but a very costly expansion,” he said. HHS estimates the administrative costs of enrolling new people and cost to develop and administer the additional waiver requirements in the bill would add up to more than $143 million by 2020. The administrative costs would be matched 50/50.

The Milliman report estimates Medicaid expansion under the bill would cost about 40 percent more than Medicaid expansion alone.

Winterer said HHS’s coordination with the federal Obamacare marketplace – where people in the individual market can shop for insurance – has been “fraught with problems.” Thousands of Nebraskans have been in limbo since October due to the feds’ inability to move applications between the marketplace and state, he said.

The bill would increase the number of people trying to navigate “new and confusing requirements” and “adds complexity to a system that is still not working,” Winterer said.

To do the modified Medicaid expansion, Nebraska would have to get a waiver from
the Centers for Medicare and Medicaid Services, which has said it will grant a limited number effective through the end of 2016.

“There is a significant cost involved in “piloting” this program with no guarantee of either initial or ongoing federal approval,” he said.

Some lawmakers questioned why they were just getting the new estimates on Wednesday, when HHS received them on Monday. Omaha Sen. Bob Krist said since it was paid for with taxpayer dollars, it should have been shared with lawmakers when it arrived so they could ask educated questions.

“I’m not happy,” Krist said.

Winterer said HHS needed time to look at the report and determine if its assumptions were accurate. Krist disagreed, noting reports have been withheld before.

“My sarcasm is not withdrawn,” he said.

Previous estimates by Milliman have been criticized as flawed because they didn’t include the savings the state would enjoy by ending programs that will no longer be needed, thanks to Obamacare, such as a state high-risk insurance pool.

Ann Frohman, Heineman’s former insurance commissioner who is now a lobbyist for the Nebraska Medical Association, said in December the previous Milliman study “missed it by millions.”

A chief proponent of Medicaid expansion, Omaha Sen. Jeremy Nordquist, called the latest Milliman report “another 11th hour fiscal analysis” after the previous two “have been shown to be deeply flawed.”

Contact Deena Winter at deena@nebraskawatchdog.org. Follow Deena on Twitter at @DeenaNEWatchdog

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