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May 18, 2010
TOPEKA Health reform is expected to increase federal health care spending in Kansas on the under-age-65 population by $820 million a year, according to an actuarial study of the new law released today.
To put that in perspective, that’s almost as much as the $883 million the federal government paid in subsidies to Kansas farmers last year.
The new federal health reform, after its major provisions begin in 2014, also likely will mean reduced health insurance costs for small Kansas businesses and most individuals, according to the report prepared for the Kansas Health Policy Authority by schramm-raleigh Health Strategy, a Scottsdale, Ariz. consulting firm.
The study was underwritten by the United Methodist Health Ministry Fund. It updates an earlier schramm-raleigh analysis done for the health policy authority that considered the ramifications for Kansas of earlier health reform plans considered by Congress.
More federal dollars
The massive influx of new federal health dollars is why the Kansas Medicaid program is expected to save $206 million between 2014 and 2019, when federal aid for the new programs begins to recede. During that six-year period, the federal government will pay an increased share of the costs for Medicaid and the Children’s Health Insurance Program, which in Kansas is branded and marketed as HealthWave.
The report forecast that 131,000 Kansans would gain coverage through Medicaid or the Children’s Health Insurance Program as a result of the reform law. Currently, the state has about 327,000 people receiving medical assistance.
The study includes four potential scenarios for the state treasury beginning in 2020.
If no pertinent state policies were changed before then and if the reforms leave uncovered 143,000 of the estimated 335,000 Kansans currently thought to be without health insurance, the new federal law would cost the state about $2 million a year, according to the report.
In a second scenario, that cost would be $5.3 million if 98,000 Kansas residents are left uninsured in 2020.
Third and fourth scenarios assumed a 5 percent increase in reimbursements to Medicaid providers, an option policymakers might consider as a way to encourage treatment of the state’s expanded Medicaid population and avoid cost shifting to private insurers. Costs to the state in those scenarios would be $32.9 million, if 143,000 Kansans were left uninsured; or $36.3 million, if 98,000 were left without coverage after the reforms became effective.
“We’re being conservative in terms of cost, aggressive in terms of coverage,” said Andy Allison, executive director of the health policy authority, describing the assumptions used in the scenarios.
The new law will greatly expand Medicaid eligibility in Kansas. Currently the program is mostly limited to the disabled and poor elderly. The new law will extend Medicaid to all adults who earn less than 138 percent of federal poverty guidelines, or about $15,000 a year for an individual.
Allison said the projections assumed that between 96 percent and 98 percent of people eligible for Medicaid would be enrolled because of coverage mandates included in the new law.
Persons who fail to have health insurance will pay a tax penalty to be phased in. In 2014, the penalty would be $95. In 2015, it would increase to $325. In 2016, it would be $695 and adjusted thereafter based on increases in the cost of living.
Small business benefits
The report predicted that overall costs of health insurance to small businesses would decrease significantly because many would see their workers become eligible either for Medicaid or for the new federal subsidies available to individuals who purchase private coverage through the insurance exchanges scheduled to become operational by 2014.
“Small businesses, many of them, will be able to get out of the business of health insurance and focus on what they do best,” Allison said.
Costs for most large employers would increase somewhat, according to the report, mostly because more of their workers would opt to purchase coverage.
As for individuals: “Some individuals would spend more on health insurance,” under the reforms, Allison said, but most people covered by private insurance should see their premiums decrease because the new law will bring thousands of new people into the insurance pool, thereby easing overall risk and premiums.
The projections in the report were based on 2011 dollars, which means they did not include the annual cost growth to the state for Medicaid and related services.
Current federal health care spending in Kansas, excluding Medicare, is about $2 billion annually, mostly accounted for by Medicaid services. Medicare, which provides health services to those over age 65, spends about $2.7 billion a year in Kansas.
The report drew mixed reactions from Kansas legislators.
"I'm concerned," said Sen. Ruth Teichman, a Stafford Republican, and a member of the Senate budget committee. "I still think there's a lot we don't know when it comes to how all this is going to work. And I don't see much being done to control costs."
"I think there's so many moving parts to this thing there's no way to really know how it's going to work or what it's going to cost," said Rep. Brenda Landwehr, a Wichita Republican who chairs the House Health and Human Services Committee.
"This is encouraging news," said Rep. Don Hill, an Emporia Republican. "I've said for a long time that the sooner we have access to some deliberative studies based on what's in the law rather than on speculation the better off we're going to be as policymakers."
Hill said there's still much left to figure when it comes to the law's rules and regulations, which remain unwritten.
"What I worry about is how consumers and providers are going to be affected by the rules-and-regulation processes," he said. "That, I suspect, will be a saga in and of itself."