Numbers Crunched: CHIP Helps Close Health Insurance Gap

Since creation of the Children’s Health Insurance Program (CHIP) in 1997, the number of uninsured children has fallen nationally from 10.7 million (15 percent of all children) to 6.6 million (9 percent of all children), according to a 50-state examination conducted by The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation. The report analyzes spending and enrollment data for CHIP programs in all 50 states plus the District of Columbia, and found wide variation in implementation among the states. It also considered the impact of the Patient Protection and Affordable Care Act (ACA) (P.L 111-148) on CHIP funding.

CHIP

CHIP is jointly funded by federal and state funds. In total, CHIP covers 8.1 million children in the United States. Federal contributions toward CHIP in each state are capped; states have two years to spend the federal funds allotted to them, otherwise the funds can be distributed to other states. States are given flexibility in structuring their programs and spending designated dollars, which allows for wide variation in how states have chosen to extend health insurance coverage to uninsured children. States must offer benefits above a federally-defined minimum, but may impose cost sharing or cap their CHIP enrollment.

States have three options for administering CHIP services: as an expansion to the state’s Medicaid program; separately from the state’s Medicaid program; or a combination of Medicaid expansion and separate CHIP program that cover different populations with separate eligibility criteria. All states have the option to cover specific populations of low-income individuals other than children; 200,000 such individuals are enrolled in CHIP overall.

Report Findings

The report found that CHIP is a relatively small program for states with regard to spending. State-funded CHIP spending amounted to 0.3 percent of revenue from states’ own sources in 2012; in comparison, Medicaid averaged 16 percent. From 2005 to 2012, CHIP spending experienced an inflation-adjusted compound annual growth rate of 5.5 percent, double that of overall national health expenditures; during that time period, enrollment in CHIP grew 32 percent. Overall numbers can be misleading, however. State spending in Arizona decreased by 27.2 percent, in part due to the state’s decision to freeze CHIP enrollment; conversely, New Mexico’s spending increased by 27.2 percent. There is also a wide variety in spending per child, ranging from under $1,000 in five states to over $2,000 in six states and the District of Columbia.

The ACA included CHIP-related provisions that will impact the program. The law funds CHIP through 2015; it will increase the federal match rate by up to 23 percent in October 2015—the federal share of CHIP funding due to this increase will average 93 percent. As a result, the report predicts that state spending on CHIP will be dramatically reduced or possibly eliminated in some states. The ACA also streamlines eligibility determinations for CHIP, and allows states to expand their CHIP programs to include children of low-income state employees. The report believes that because of these changes, the ACA will have a significant effect on CHIP.

Highlight on Georgia: Residents Favor Medicaid Expansion, Still Oppose ACA

Although certain implementation of the Patient Protection and Affordable Care Act (ACA) has been set in motion over the past year, a survey undertaken by the Healthcare Georgia Foundation observed Georgia residents’ division of support for the ACA with 42 percent approving and 46 percent disapproving of it. The survey of 400 adults also found that more than 70 percent of Georgia residents believe that there has been no difference in their access to health care and quality of services over the past year, which saw the full rollout of the ACA. Generally, the Georgia residents’ disapproval of the ACA stemmed from the key provision related to penalties for not purchasing health insurance. Conversely, there was noted support for the ACA’s prohibition of health insurers denying individuals coverage for pre-existing health conditions and the requirement for insurers to cover some preventative care services at no cost to the patient.

Regarding ACA implementation, the state of Georgia made two key policy determinations: (1) no to expansion of Medicaid and (2) no to offering a state marketplace for health insurance. The survey found that 90 percent of Georgia residents believe that Medicaid was important for healthcare in Georgia, with 75 percent finding that Medicaid was very important. Not surprisingly then, 60 percent of surveyed Georgia residents expressed their disapproval of the state’s decision not to expand Medicaid. In contrast, Georgia residents were evenly split on the state’s decision not to  offer a state marketplace for insurance, with 44 percent approving and 44 percent disapproving.

In August, Gallup reported that states with the largest declines in uninsured rates from 2013 to mid-year 2014 expanded Medicaid and established a state-based marketplace exchange or federal partnership. These states reduced their uninsured rates three times more than states that did not implement these mechanisms. For instance, the state with the largest reduction, Arkansas, saw a 10.1 percent decline in its number of uninsured residents, from 22.5 percent to 12.4 percent. In contrast, Georgia saw its uninsured percentage only drop 2.2 percent from 22.4 percent to 20.2 percent.

However, Georgia is unlikely to take up Medicaid expansion in the foreseeable future.  Georgia lawmakers did not expand Medicaid during the 2014 legislative session, instead passing legislation (HB 990) that prohibited Medicaid expansion without prior legislative approval. The governor and other state officials opposed to Medicaid expansion cite added costs to the state, with estimates of more than $2 billion over 10 years.

The Georgia Budget and Policy Institute (GBPI), factoring in new state revenues that the expansion would trigger, puts the figure much lower, at an estimated net expansion cost of about $350 million over the same time frame. In September, the GBPI had argued that almost 50,000 uninsured Georgia residents in a 10-county region could get guaranteed health coverage if the state accepted new federal money to expand Medicaid eligibility. The number of uninsured residents covered would be the third largest number of residents in any of Georgia’s 12 state-designated regions. Without Medicaid expansion, many uninsured Georgia residents with income below the federal poverty level will remain stuck in a coverage gap, according to the GBPI, as their income is above Georgia’s current Medicaid threshold, yet too low to qualify for new federal insurance subsidies. The institute noted that throughout the state, more than 400,000 uninsured adult residents fell into the coverage gap.

Georgia’s decision not to expand Medicaid has played a role in how residents access healthcare services. Forty-two percent of respondents in the Healthcare Georgia Foundation survey reported that they wanted to seek care for a health-related issue, but chose not to for some reason, including cost, distance to doctor’s office or time spent. Cost was cited as a major reason by 68 percent of these respondents. In part, this focus on cost not surprisingly results in the survey finding a majority of residents favoring Medicaid expansion.

 

 

 

 

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.

Kissel

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.