States’ Projections for Medicaid Expansion Were Accurate

Medicaid spending and enrollment has increased in all states during fiscal years (FYs) 2014 and 2015 due to the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), according to a report from the Kaiser Family Foundation (KFF). Overall spending on Medicaid has increased 10.2 percent during FY 2014 with spending from state source increasing by 6.4 percent. These increases were in line with projections made by state Medicaid administrators. KFF projects that overall spending on Medicaid in FY 2015 will grow 14.3 percent. The higher rate of growth is due to the fact that FY 2105 will be the first full year of Medicaid expenditures since expansion occurred.

As would be expected, the majority of these increases occurred in the states that expanded Medicaid, but enrollment and spending also increased in states that did not choose to expand Medicaid eligibility to all adults with incomes below 133 percent of poverty. These findings are based on KFF’s 14th annual survey of Medicaid directors in all 50 states and the District of Columbia and conducted in conjunction with Health Management Associates. The findings of this study reflect earlier findings (see Hospital financials, access to care, state budgets improve under Medicaid expansion, September 17, 2014).

Medicaid Expansion

The ACA required states to expand eligibility to all individuals with incomes below 133 percent of poverty or lose all federal Medicaid funding. The Supreme Court in National Federation of Business v Sebelius found that this expansion radically changed the nature of Medicaid from a voluntary program providing states with funding to care for the poor and disabled to a program of limited universal coverage—and that those changes were unconstitutional. Following the Supreme Court’s decision states could decide to expand Medicaid or not. During 2014, 25 states and the District of Columbia choose to expand Medicaid and received 100 percent federal funding for the individuals enrolled under the expanded criterion. Those states will receive 100 percent funding for 2014, 2015 and 2016. In 2017 the federal funding will decrease to 95 percent. Funding will continue to decrease to 94 percent in 2018, to 93 percent in 2019, and to 90 percent in 2020 and beyond. During 2015, an additional two states expanded Medicaid eligibility and an additional two states are seeking CMS approval of a waiver to expand Medicaid coverage in their states.

Overall Spending

The average growth in spending on Medicaid was 10.2 percent in FY 2014. In the states that expanded Medicaid the increase in spending averaged 13.1 percent, and in states that did not expand Medicaid the average increase in growth was 5.6 percent. State legislatures did a good job of appropriating sufficient funds to cover this growth, KFF reported. State legislatures appropriated an additional 13.1 percent for Medicaid spending in states that expanded Medicaid, and state legislatures that did not expand Medicaid appropriated an additional 6.8 percent for Medicaid expenditures, which was more than the growth amount of 5.6 percent.

Enrollment Growth

Across the country Medicaid enrollment increased 8.3 percent in FY 2014 and is projected to increase 12.2 percent during FY 2015, KFF reported. Enrollment in states that expanded Medicaid grew by 12.2 percent, and in states that did not expand enrollment Medicaid enrollment increased 2.8 percent during FY 2014. In FY 2015 enrollment in states that have expanded Medicaid is projected to increase 18 percent and 5.2 percent in states that have not expanded Medicaid, according to KFF.

The increase in enrollment in states that did not expand Medicaid eligibility is attributed to individuals who were eligible for Medicaid prior to the ACA but who never applied. The reasoning is that due to increased media attention and outreach efforts these individuals now learned that they might be eligible for Medicaid, even though they were eligible all along. Medicaid directors have estimated that 20 percent of new enrollees were eligible prior to the ACA expansion of Medicaid eligibility, reported KFF.

KFF expects these trends to continue as additional states decide to expand Medicaid eligibility. KFF notes that Congress has increased the amount of federal funding to states for Medicaid during recessions and that this may occur again. Finally, the economy can also impact Medicaid funding, as legislatures have to make decisions based upon receipt of tax revenues. All of these factors could change the rates of change in Medicaid enrollment and spending.

Highlight on Hawaii: Can a Turn to the Business Realm Cure the Aloha State’s Ailing Exchange?

The Hawaii Health Connector, the state’s Health Insurance Exchange, announced the appointment of its new executive director recently. Jeffrey Kissel, the former CEO of HawaiiGas, will become the Exchange’s third director within the last year when he replaces current interim director, Tom Matsuda. Besides leadership turnover, the Exchange in Hawaii has experienced several other issues since its creation in 2013, including funding and provider shortages. Unlike other Exchange directors, Kissel does not have a background in the health or insurance industry. So will this change be the cure for what ails the Hawaii Exchange as the upcoming enrollment season approaches? Moreover, to what extent have other state Exchanges’ successes or failure stemmed from leadership in those Exchanges?

Hawaii Health Connector

The first director of the Hawaii Exchange, Coral Andrews, resigned in 2013 following a delay in the opening of the website after the beginning of the initial open enrollment period under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In addition to that delay, in its first year of existence, the Exchange experienced enrollment numbers that were lower than expected. While Hawaii was awarded additional federal grant money through the end of 2015 to run the exchange, recently, its largest insurer, Hawaii Medical Service Association (HMSA) decided not to participate in the Small Business Health Options Program (SHOP) as of January of 2015. After this withdrawal, the Exchange will only be left with one insurer, Kaiser Permanente Hawaii.

According to Insurance News Net, “the Connector was hoping it would earn $320,000 in the first six months of operations from a [two] percent fee it collects on each insurance policy, but it took in only $40,350.” Other sources note that the Hawaiian Exchange has the highest cost per enrollee in the country.


Unlike many of the other Exchange directors in states across the country, Kissel is not coming from the medical, health insurance, or even government fields. Instead, Kissel accepted the position as head of the Hawaii Health Connector after his early retirement as CEO of HawaiiGas. Previously, Kissel had a leadership role at URS, which is one of the largest engineering and construction companies in the world. Despite his inexperience in the subject matter, the Hawaii Exchange Board of Director Chairman, Clifford Alakai, asserted that Kissel was the “ideal person to lead the Connector forward for the long-term,” and that “his prior experience leading prominent and successful companies, as well as his drive and enthusiasm, will serve the Connector well to secure affordable health coverage for the residents of Hawaii.”

Other state experiences

While the state of Kentucky was praised with creating one of the best Exchanges in the county, others, such as Oregon, have experienced a laundry list of issues. Could leadership play a role in explaining these successes or failures? Carrie Banahan, the director of kynect, the Kentucky Exchange, and the former director of the state’s Office of Health Policy, was acknowledged and praised for building a simple and efficient website that appealed to Kentucky residents, many of whom were opposed to health care reform.

Oregon’s plagued Exchange hired a new director, Aaron Patnode, who was previously a manager for Kaiser Permanente and at Kaiser’s Sunnyside Medical Center emergency department. In June of 2014, Patnode took over the Exchange, which is currently at the center of a controversy over whether it should be dismantled. Cover Oregon, the Oregon Exchange, which never was able to provide residents with a portal to obtain coverage through, is also in the crossfires of litigation between the state and Oracle, the company that was hired to build the Exchange. Rocky King, Cover Oregon’s first director, who had also served as the director of the state’s high-risk insurance program was reportedly chosen for the position “in part for his relationships with the state’s insurers.”

Examples of leadership in Kentucky and Oregon exhibit the varying results that can come from veteran government or health leaders taking the reins in a state Exchange. Now, in Hawaii, a leader with no health, medical, or government experience will add another variable to the mysterious equation behind a successful Exchange. His failures or successes will be telling as to the proper path other ailing Exchanges may take in the future.

Highlight on Idaho: Your Health Idaho is Ready to Roll, but Fear Remains Over Costs

“Your Health Idaho,” the state’s Health Insurance Exchange is readying to open this fall, and this time, with its own technology platform. Last year, more than 76,000 Idahoans used the Exhange to obtain health insurance coverage, making Your Health Idaho per capita, the third most popular Exchange in the country. Idahoans will be able to shop for health insurance plans on Your Health Idaho beginning November 15. They will have through February 15 to choose an insurance plan and apply for a tax credit to help lower monthly premium costs. With the new technology platform, expectations are even greater for this year, as Idaho will be the first state to transition off the federal platform.

New Platform

Your Health Idaho is using information from the current insurance carriers to create accounts for Idahoans who bought health insurance plans on the federal Exchange last year and make eligibility determinations for tax credits in 2015. The state plans to use its own eligibility determination system to calculate 2015 tax credits. In order to determine tax credits, the Idaho Department of Health and Welfare will need to confirm the information provided by the carriers with each consumer who received a tax credit in 2014. Consumers will have a variety of ways to confirm their information is accurate, such as filling out a form over a secure website at, working with an agent or broker, calling 1-855-YH-Idaho or filling out a form which was mailed to them.

Your Health Idaho was established by state law in 2013 to provide an online marketplace where Idaho families and small businesses can go to compare and purchase health insurance. The Health Insurance Exchange is governed by an 18-member Board authorized by the Idaho legislature to set the rules and regulations for implementing a state-based health insurance exchange. Your Health Idaho has a new Executive Director, Pat Kelly, who has been serving as the interim executive director since July.

Cost Concerns

Despite the positive atmosphere surrounding the success of Idaho’s transition, some are still wary of new costs they believe might be associated with insurance coverage requirements from the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). This is because, under the ACA, employees working 30 or more hours in 2015 will be eligible for full insurance benefits in 2016.

In late September, a south-central Idaho school district took proactive actions to avoid incurring these ACA-mandated costs and voted to cut hours for more than 150 workers. The Twin Falls school board cut weekly hours for teaching aids, food service employees and other non-professionals down to 27.5 hours from previous workweeks of 30 to 34 hours, thereby also cutting their pay by $535 to $2,100. Cuts were made after school administrators said the move was necessary to provide necessary funding for the classrooms. Other school districts in the area, however, have indicated that they have no intention of cutting hours and benefits for their part-time employees.

Private Pay-for-Performance Growing Rapidly, Provider Risk More Slowly

The Catalyst for Payment Reform (CPR) released the results of a survey on September 30, 2014, which finds that private health plans have dramatically increased the use of some payment methods that are intended to reward quality and efficiency. CPR’s project, the National Scorecard on Payment Reform, measures the extent to which payment reforms have been adopted in the commercial group market. In 2013, CPR found that 11 percent of health plan payments to network providers were designed to reward quality in some way; in 2014, that percentage had jumped to 40 percent. Still, CPR found, 60 percent of health plan payments are not yet tied in any way to improvements in quality or safety or to minimizing unnecessary spending. By far the majority of these payments are fee-for-service- (FFS)-based.

The CPR promotes many of the same reforms in the private sector as the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) does in the public sector. Specifically, patient-centered medical homes, accountable care organizations (ACOs), and bundled payments all are high priorities. CPR found that 15 percent of the members of commercial plans were attributed to providers who participate in an ACO or similar payment model.

Defining Terms

CPR’s stated goal is that by 2020, 20 percent of all payments be made using methods that have been proven to increase value. So far, CPR found the value-oriented methods most commonly used include pay-for-performance, bundled payments, and shared savings, all of which reward providers for achieving specified goals. CPR describes these methods as having an upside, but no downside, because the providers are not at financial risk if the quality goals are not met. Under CPR’s definition, it found that 38 percent of all payments to hospitals were value-oriented, as were 10 percent of payments to outpatient specialists and 24 percent of payments to outpatient primary care physicians.

CPR posits that the addition of shared risk would create an even stronger incentive for providers to avoid waste or other unnecessary spending. Currently, 53 percent of value-oriented payments have a shared risk component, while 47 percent do not.

Next Steps

CPR plans to increase and focus on tracking of payments and plan features that increase transparency of cost and quality, in other words, give consumers the information that they need about the costs they will pay under their particular coverage plan. It found that 82 percent of cost information provided by responding health plans gives consumers this information. It also is measuring the extent to which the tools for choosing a physician or a hospital include integrated cost calculators.

Survey, Methodology, and Funding

CPR’s Scorecard is based on voluntary responses to surveys of private health plans. They do not purport to be based on a random sample of all plans. CPR also produced a National Compendium on Payment Reform, which tracks projects in detail. To be considered, proposed payment methods designed to minimize waste or improve efficiency also must have a component that addressee quality or safety. The research is funded by the Commonwealth Fund and the California Health Care Foundation.