AHCA’s Patient and Stability Fund would benefit large states, study finds

Large states and states with fewer insurers offering coverage in the individual and small group markets could receive the most money under the American Health Care Act’s (AHCA) Patient and State Stability Fund, according to a study by Avalere. The AHCA, which consists of two bills that came out of the House Ways and Means and Energy and Commerce Committees, is touted as an effort to repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148).


Section 132 of the Ways and Means bill would add title XXII to the Social Security Act to create the Patient and State Stability Fund. The Fund would provide funding for the states and District of Columbia from 2018 through 2026 for eligible states to do any of the following:

  • provide financial assistance to high-risk individuals who do not have employer health insurance to enroll in health insurance coverage in the state’s individual market;
  • provide incentives for entities to enter into agreements with the state to help stabilize health insurance premiums in the health insurance market;
  • reduce the cost for providing coverage in the individual and small group markets;
  • promote participation in the individual and small group markets and increase available insurance options;
  • promote access to preventive services, dental care, and certain services for individuals with mental or substance abuse disorders;
  • provide payments to providers for the provision of health care services as specified by the Administrator; and
  • provide assistance to reduce out-of-pocket costs for individuals enrolled in health insurance coverage in the state.


The bill would appropriate $100 billion over 10 years to provide allocations to states. According to Avalere, the first 85 percent of the funds would be distributed based on the share of the state’s insurance claims as a percentage of the nation, so states that have more people with insurance and higher medical costs could receive more funding that states lower overall enrollment and spending.

The remaining 15 percent would be distributed to states that have seen an increase in the number of low-income uninsured from 2013 to 2015 or have fewer than three insurers offering coverage in their exchange in 2017.

Distribution among states

According to Avalere, the allocation methodology could result in states like California, Florida, and New York receiving the most money North Carolina, Arizona, Alabama, Oklahoma, and South Carolina could receive disproportionately high amounts of money due to the lack of health insurance participation on their markets in 2017.

The funding levels “vary widely” on a per capita basis compared to the state’s individual market enrollment in 2015, Avalere concluded. They range from $1,830 in the District of Columbia to $220 in Montana.

DOJ sues Mississippi, says mentally ill are unnecessarily institutionalized

The federal government emphasized its stance on the importance of using home- and community-based services (HCBS) by filing a lawsuit against the state of Mississippi over its mental health program. The Department of Justice (DOJ) alleged that the state ran afoul of the integration mandate of the Americans with Disabilities Act (ADA) (P.L. 101-336) and forced thousands of people to be institutionalized when the services could be provided in a community setting.

Integration mandate and lawsuit

In Olmstead v. L.C., 527 U.S. 581 (1999), the Supreme Court found that the ADA requires public entities to provide services to the disabled in home- and community-based settings as much as possible. The ‘integration mandate’ states, “A public entity shall administer services, programs, and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities” (28 C.F.R. section 35.130(d)). According to the Olmstead Court, unnecessary institutionalization diminishes patients’ abilities to interact socially,  pursue education and employment, and find cultural enrichment.

The suit against Mississippi alleges that state-run hospitals are segregating mentally ill patients who could be successful in community treatment. The Justice Department believes that patients are regularly cycling through the state’s four mental health facilities because they are not able to thrive in their communities due to a lack of services. The cuts to the DOMH have limited its ability to offer HCBS services and activities, and State Attorney General Jim Hood expressed his displeasure toward the state legislature following the filing of the suit, blaming them for offering corporate tax cuts instead of serving the population. The state attempted to settle with the federal government, but negotiations failed. The DOJ wants a consent decree, but Hood objects due to expense and perpetual oversight. The state is now in the expensive position of defending itself against the DOJ.

Mississippi budget cuts

The state of Mississippi’s budget woes have turned into what some are calling a crisis, resulting in significant budget cuts. The state government admitted in June that at the close of the state fiscal year, there would be unpaid bills and a $50-60 million shortfall. Although some representatives disagreed on the impact of the amount, overcoming the shortfall would have required collections in the $725-750 million range in the month of June.

Significant budget cuts and dipping into funds failed to ward off the shortfall. Governor Phil Bryant (R) already cut $60 million from the budget and spent $50 million out of state accounts, making use of the Rainy Day Fund. The cuts impacted  state departments, such as the Department of Revenue, which was forced to dismiss temporary workers during tax season. In July, this blog covered some of these budget issues, including an editorial written by the director of the Mississippi Public Health Association that highlighted the Department of Corrections’ generous allocations, nearly nine times more than what the Health Department will be able to use (see Highlight on Mississippi: Budget crisis has health pundits grumbling, July 1, 2016).

Health impacts

Health agencies were not immune to the budget cuts, although there are arguments that they only lost a small chunk of money and, in one case, ended up on top. According to watchdog.org, in the latest round of cuts, the Department of Health (DOH) lost $5.8 million and the Department of Mental Health (DOMH) lost $7.3 million, which amounted to 1.53 percent and 1.17 percent of their budgets, respectively.

Departments heads note that these cuts are only the latest in a line of issues. The Dr. Mary Currier, head of the DOH, said the agency closed six clinics, failed to fill 89 positions, and has cut 64 employees. Diana Mikula, who directs the DOMH, said their reserves are tapped after absorbing a total of $8.39 million in cuts. The agency cut some of its workforce or transferred employees to other positions, but was still forced to eliminate a significant amount of facility space that psychiatrists used to determine if criminals were able to stand trial. Other closures include the Acute Medical Psychiatric Service unit at a state hospital,  Male Chemical Dependency Units, early intervention services, and psychiatric beds.

State budgets loosening belts due to enhanced federal funds, increased revenue

Medicaid expansion is a source of revenue and savings for many states. The Robert Wood Johnson Foundation (RWJF) sponsored research reviewing expansion in 11 states, which revealed that Medicaid spending actually grew more slowly in expansion states as opposed to those that did not expand. Additionally, expanded coverage was attributed to reducing hospitals’ uncompensated care costs by $7.4 billion in 2014, compared to non-expansion estimates.

Saving money, creating jobs

The impact of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) has been a hot topic in recent days, as March 23, 2016 marked six years since the president signed the legislation. States that chose to expand their Medicaid programs to include new populations under section 2001 of the ACA began to do so in 2014, but the decision to do so was and still is a controversial topic.

Despite the hesitation to expand, mainly coming from Republican-led states, the RWJF’s report suggested that savings and revenue make expansion a wise financial option, rather than an expensive one. Between fiscal years (FY) 2014 and 2015, Medicaid spending in non-expansion states grew by 6.9 percent, while expansion state spending growth was limited to 3.4 percent. Expansion states saw jobs grow at a faster rate in 2014.

Tracking the money

States were able to rely on enhanced federal matching funds for the new population. The federal government offered 100 percent federal funding for the first three years of Medicaid expansion, with a gradual reduction to 90 percent in 2020. In the past, certain enrollees deemed “medically needy” were covered through waivers, requiring states to bear between 30 and 50 percent of the cost for coverage. Under expansion, some of these enrollees were eligible for full coverage at a higher matching rate.

For example, many states had previously covered pregnant women under waivers at a hefty cost. However, because many women who became pregnant were already enrolled in Medicaid in the new adult group, states were able to take advantage of federal funding. Maryland estimated savings of $8.2 million in state fiscal year (SFY) 2015, West Virginia reported $3.8 million in savings in calendar year 2014, and Arkansas saw a 50 percent decrease in spending for treating pregnant women.

States were also able to use expansion to shift certain costs for services that had been offered to the uninsured through public health programs paid for with general fund dollars to the federal government. Michigan estimated that it would save about $190 million in SFY 2015 by transitioning those enrolled in some behavioral health services to Medicaid. In addition to finding savings, the states were able to use fees on providers and health plans to take a piece of the additional revenue generated by higher business volume. California expected nearly a billion dollars in extra revenue through 2015 from such sources.