Straight talk on health care reform: Ryan budget plan and impact on Medicaid in Colorado

By Bob Semro

In our last email, we discussed the Ryan budget plan and its broader implications for health care and the Affordable Care Act. In this email, we focus on Colorado and the impact on Medicaid.

In 2010, 526,200 Coloradans received health coverage through Medicaid,(1) and that number would surely decline under the Ryan budget plan, primarily by funding Medicaid through block grants and by dismantling the Affordable Care Act, which expands Medicaid eligibility for American families. (Nationally, 31 million to 44 million fewer Americans would be eligible for Medicaid.(2))

For Colorado and other states, a key component of the Medicaid structure is the maintenance-of-effort requirement, or MOE. The MOE is a federal guideline that prohibits states from reducing Medicaid eligibility levels or setting restrictive enrollment requirements that would make it more difficult for people to enter the Medicaid program. In January, in a development unrelated to the Ryan budget plan, 28 state governors (not Gov. John Hickenlooper) petitioned the president to remove those maintenance-of-effort requirements.

Here's a snapshot of some of the Coloradans served by Medicaid in 2010:

• 51,100 Colorado seniors received health coverage through Medicaid; that represents 9.3 percent of all seniors in the state.(3)
• 85,700 Coloradans with disabilities received health coverage through Medicaid; that represents almost 29 percent of all residents with disabilities.(4)
• 9,610 Coloradans who are nursing home residents are covered by Medicaid; that represents 59 percent of all Coloradans in nursing homes. In our state, the average annual cost for a semi-private room in a nursing home is $72,300.(5) That cost will only increase over time.

Under the national Affordable Care Act and Colorado's Health Care Affordability Act of 2009, an additional 339,200 Coloradans, the large majority of whom are likely to be uninsured, will be eligible for health coverage under Medicaid by 2020.(6) Currently, the cost of treating uninsured Coloradans is passed on to those businesses and individuals who have health insurance. Without the national health care reform law, insured Coloradans would continue to pick up the tab – paying an additional $1.8 billion by 2020.(7)

Opponents of the Affordable Care Act contend that the Medicaid expansions will force Colorado to take on a heavy financial burden. There will be extra costs, but the state is not responsible for the entire price tag. The federal government will cover the full cost of the expansions until the end of 2016. In 2017, states will be required to cover 5 percent of the Medicaid expansions. That percentage will increase annually until the state's contribution reaches 10 percent in the year 2020. In terms of actual dollars, Colorado would pay an estimated $72.5 million (not including the hospital provider fee) to cover thousands of Coloradans, most of them uninsured, in 2020.

Should the Affordable Care Act be repealed, Colorado would face three options: pay the entire cost of covering that population, cover a smaller number of people or not cover any at all, leaving thousands uninsured. In the first case, Colorado would need to absorb the entire$1.67 billion cost. In the latter two cases, some of the cost of uncompensated care would be passed down as a "hidden tax" to providers, businesses and individuals.

If Medicaid funding were reduced to block grants and if federal MOE requirements were eliminated, benefits for almost 137,000 seniors and people with disabilities, as well as the other 389,000 Coloradans in the program, would be put at risk. While Medicaid block grants would be less costly at the federal level, costs would certainly be transferred to the states.

According to the non-partisan Congressional Budget Office, "Federal payments to states under the (House block grant) proposal would be significantly lower than under current law." In order to maintain current Medicaid service levels, states would need to consider reducing spending in other areas, reducing benefits, limiting eligibility or cutting payment rates for doctors, hospitals and nursing homes.(8) If federal maintenance-of-effort requirements were eliminated, states would likely meet those additional financial burdens not only by reducing benefits but by making enrollment in Medicaid more difficult.

Balancing the budget in this way doesn't reduce or eliminate costs, it merely shifts the burden. The bottom line is that vulnerable people who can't afford insurance coverage will pay for it with their health, and people who are insured and businesses that cover their employees will pick up additional costs in the most expensive way possible – emergency room care. Strategies like these don't solve problems they just pass them on.

End notes
(1) Kaiser Family Foundation, Medicaid Enrollment: June 2010 Data Snapshot, February 2011. Total Medicaid enrollment in Colorado, for June 2010.
(2) Pecquet, Julian, GOP Overhaul Could Cut Medicaid Enrollment by Up to 44 Million, The Hill, May 10, 2011.
(3) Families USA Foundation, Cutting Medicaid: Harming Seniors and People with Disabilities Who Need Long Term Care, May 2011.
(4) Ibid.
(5) Ibid.
(6) Beck, Melodie, and JBC staff, FY2011-12 Staff Budget Briefing, Department of Health Care Policy and Financing, Dec. 9, 2010.
(7) Weinberg, Micah, Ph.D., Colorado Trust Issue Brief, The Economic Impact of health Reform in Colorado, February 2011.
(8) Congressional Budget Office, Long-Term Analysis of a Budget Proposal by Chairman Ryan, April 5, 2011.