new hampshire medicaid

8/6/2019 New Hampshire Medicaid

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New Hampshire ’s Medicaid Burden:How the Affordable Care Act Threatens the Live Free or

Die State Derek Pyburn

Abstract : The central component of the Patient Protection and Affordable Care Act is the increased eligibilitystandards for Medicaid. By increasing the eligibility level to 133% FPL, both states and the federal government will be responsible for funding this increased expansion. In order to maximize the number of individuals withcoverage, a maintenance of effort provision was included that prohibits states from reducing their eligibilityrequirements. In New Hampshire this is problematic because the state is already facing budget deficits;additionally, because of the Affordable Care Act they are unable to deal with the deficits in the way that is intheir best interest. In order to control for the cost of Medicaid, states require flexibility to develop their ownbudgets. The program, which is notorious for fraud, should be converted into a block grant system which will

require states to make their programs efficient and eliminate the perverse incentives inherent in the programtoday .

What is Medicaid?

Medicaid is a government entitlement programthat plays a significant role in the United Stateshealthcare industry. Originally, Medicaid wasintended for individuals who were receiving welfaresupport. As time progressed, the eligibility levelsand services provided by Medicaid have increasedto cover those without jobs, those whose income isa certain percentage of the federal poverty level(FPL), children, and the disabled, including seniorswho receive Medicare (“dual eligibles ”).1 Medicaidis jointly funded by both state and federalgovernment. The federal government funds anaverage of 50% of total Medicaid spending. Due tothe nature of Medicaid, when an economicdownturn occurs, the number of Medicaidbeneficiaries greatly increases. 2

With the enactment of the Patient Protection andAffordable Care Act (ACA), the number of individuals who will be enrolled in Medicaid willincrease because the eligibility level has beenexpanded to 133% of the federal poverty line

1“Medicaid: A Primer: Key Information on Our Nation’s HealthCoverage Program for Low-Income People ” , The Kaiser Commission on Medicaid and the Uninsured , June 2010. 2 Ibid

(FPL). 3 In 2009, Medicaid services were used by

50.1 million Americans, which cost $380.6 billionin total expenditures, $250.9 billion of which wasfinanced by the federal government. Chief ActuaryRichard Foster at the Center for Medicare andMedicaid Services estimates that in the time periodbetween 2014 — when Medicaid eligibility will be

3 Richard Foster, “2010 Actuarial Report on the FinancialOutlook for Medicaid, ” Department of Health and HumanServices: Center for Medicare and Medicaid Services

Talking Points

The Patient Protection and Affordable Care Actcontains numerous provisions that will causefinancial difficulty for the state of NewHampshire

New Hampshire spends 26.5% of its totalrevenue on Medicaid, making it the largestbudget entitlement since it surpassedelementary and secondary education in 2004.

The Maintenance of Effort requirement must berepealed in order to allow for states to controltheir own Medicaid spending and changeeligibility rules that are suitable for the state.

To control Medicaid costs, funding should beconverted into a block grant system, which willforce the states to make the program asefficient as possible .



increased — and 2019, Medicaid spending willincrease by over by $400 billion. 4

This increase in total Medicaid spending directlyaffects the states. With the increase in projectedexpenditures, state governments are debating

budgets that will allow for the increased eligibilityexpansion. While the federal government has beenthe main focus of media attention, states are alsohaving issues balancing their own budgets, and havebeen forced to cut back programs such as educationfunding. It must not be forgotten that when thefederal government experiences increased expensesin Medicaid, the states also experience theseincreases.

This crisis is not confined to the most populous orthe poorest states. Provisions within the ACA, such

as expanded Medicaid eligibility and theMaintenance of Effort (MOE) requirements placeincreased pressure on all state budgets that willlikely cause increased deficits or the cutting of otheritems. Each of the 50 states is trying to decide howto counteract the coming debt increase and theAffordable Care Act is preventing them fromcontrolling their largest budget item, Medicaid .

New Hampshire Medicaid Overview

The state of New Hampshire, tied for the freeststate in the Union and ranked first in the nation forfiscal policy by the Mercatus Center, 5 is facingbudget deficits 6 that will only be exacerbated by thePatient Protection and Affordable Care Act (ACA).Currently, New Hampshire spends 26.5% of its totalbudget on Medicaid, followed by elementary andsecondary education (22.4%) and thentransportation (10%). 7 For fiscal year 2009, the state

4 Ibid 5William P. Ruger, “Freedom in the 50 States: An Index of Personal and Economical Freedom ,” Mercatus Center, George Mason University,http://mercatus.org/sites/default/files/publication/Freedom_in_the_50_States.pdf , 20096 “House Finance Committee’s FY 2012 -13 Budget Proposal, ” New Hampshire Fiscal Policy Institute , March 29, 20117 “Fiscal Year 2009 State Expenditure Report, ” National

Association of State Budget Officers ,2010

of New Hampshire spent $4.95 billion on medicalcare, while $1.36 billion went to Medicaid alone. 8

Due to the economic wellbeing of the state, NewHampshire typically receives a 50% FederalMedical Assistance Percentage (FMAP), which

means that for every dollar the state spends, thefederal government gives the state one dollar. Whenthe economy began to decline, Congress enacted theAmerican Recovery and Reinvestment Act whichincreased this percentage to 61.59%, which helpedrelieve budget shortfalls. 9 Since the economicconditions have not improved much, unemploymentcompensation claims have only slightly decreasedsince 2008 10, Medicaid expenditures haveincreased, and the amount of tax revenue for thestate have decreased. 11

In July of 2008, 117,810 people signed up forMedicaid; in June 2009, the number increased to129,071 in one month. 12 With the continuingincrease of citizens signing up on the Medicaidrolls, the state is facing tough budget problemswhich will likely be dealt with by cutting fundingfor certain programs, such as elementary andsecondary education. In order for New Hampshireto be able to deal with their budget problems, theymust have the ability to reform their Medicaidsystem. In the ACA, New Hampshire will belimited in the action they can take in reforming theirbudget as well as being required to increase theirMedicaid eligibility level.

Maintenance of Effort

The Affordable Care Act contains a provisionknown as Maintenance of Effort which states,

http://www.nasbo.org/LinkClick.aspx?fileticket=w7RqO74llEw%3d&tabid=79 8 Office of Medicaid Business and Policy, New HampshireMedicaid Annual Report , 20099 Ibid 10 “New Hampshire Economic and Labor Market InformationBureau Initial Claims 1991-2011, ” New HampshireUnemployment Security 11 “An Overview of New Hampshire Tax System, ” New Hampshire Fiscal Policy Institute , December 2010.12 Ibid

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“ The Affordable Care Act is projected toincrease Medicaid expenditures by a total of $445billion for FY 2010 thought 2019, an increase inabout 8 percent over projections of Medicaidspending without the impact of the legislation”

---Richard Foster, CMS

As a condition for receiving any Federalpayments under section 1903(a) for calendarquarters occurring during such period, aState shall not have in effect eligibilitystandards, methodologies, or procedures

under the State plan… that are morerestrictive than the eligibility standards,methodologies, or procedures, respectivelyunder the plan or waiver that are in effect onthe date of enactment of the PatientProtection and Affordable Care Act. 13

This provision is not something that is unique to theAffordable Care Act since it was included in theAmerican Recovery and Reinvestment Act(ARRA). 14 The Affordable Care Act makes thisprovision more permanent and does not run out in

the short term as the economic assistance of theARRA does. For New Hampshire, the Medicaideligibility that was in place atthe passage of the AffordableCare Act cannot be changedor the state will lose itsfederal funding. Given thatthe state normally receives a50% (temporarily 61.95%)match for its Medicaidprogram from Washington, itwould be unwise to cutservices and lose the federal funding. This provisionforces states to look for other programs to cut whenattempting to balance their budgets. Since areduction in the Medicaid coverage will force thestate to have to pay 100% of the expenditures, otherprograms such as elementary and secondaryeducation, higher education, transportation, andother programs are on the table for funding cuts.

New Hampshire offers numerous state andfederally mandated Medicaid services. Along withthe state and federal services, New Hampshire has along list of “optional” services, which means that

13 H.R. 3590, The Patient Protection and Affordable Care Act,http://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf , p. 15714 Brian Blasé, “Crushing Weight: National Health Care LawThreatens to Make Medicaid and Unstable Burden forOhioans, ” The Buckeye Institute , December 2010.

they are subsidized according to the states FMAP. 15

In 2014, when the Medicaid eligibility standardswill relax, the states will adopt those eligibilitystandards and will be unable to change them. WhileNew Hampshire is already experiencing an increase

in Medicaid spending, the coming eligibilityincrease will force them to take on more recipientsand will not give them a feasible option to reducethe growth of the program.

Generally, when costs increase, states have threeoptions to reduce their Medicaid spending: reduceeligibility, cut services, or reduce providerreimbursements. 16 The MOE provision eliminatesthe ability to tighten eligibility standards andservices, which leaves cutting providerreimbursement rates as the only option left. This

can be problematic because the reimbursement ratesfor Medicaid are already low in comparison to othertypes of insurance. This isproblematic becauseMedicaid patients alreadyhave difficulty being seen byphysicians. 1718

Increased Eligibility One of the primary

objectives of the AffordableCare Act is to decrease the

number of Americans without health insurance. Byincreasing the eligibility to 133% FPL, RichardFoster, the actuary at CMS, expects the increase inMedicaid recipients to reach 20 million. 19 Thisexpansion of Medicaid is the primary way in whichhealth reform will actually be implemented. Notonly is eligibility increased to accommodate those

15 “Medicaid: An Overview of Spending on “Mandatory” vs.“Optional” Populations and Services” , Kaiser Commission onMedicaid and the Uninsured, June 200516 Brian Blasé, “Crushing Weight ” 17 R J Blendon, K Donelan, C Hill, A Scheck , “Medicaidbeneficiaries and health reform ,” Health Affairs , 12, no.1(1993):132-143,http://content.healthaffairs.org/content/12/1/132.full.pdf 18 Peter Cunningham, “Do Reimbursement Delays DiscourageMedicaid Participation By Physicians?, ” Health Affairs , Vol. 8January 200919 2010 Actuarial Report

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who have lower income, but eligibility has alsoincreased so that children under the age of 26 arerequired to be under their parents ’ plan. Along withthe increase in FPL and the children’s agerequirement, insurance companies are not allowed

to deny coverage to those who have pre-existingconditions. Until 2019, the federal government willpay 95% of the expenditures of the new enrollees.This will be problematic because “t he AffordableCare Act is projected to increase Medicaidexpenditures by a total of $455 billion for FY 2010through FY 2019, an increase of about 8 percentover projections of Medicaid spending without theimpact of the legislation.” 20 After 2019, the federalgovernment will reduce its share of spending,putting more of the burden on the states to cover the

newly insured individuals.21

However, it isimportant to note that the federal government willnot pay for everyone who enrolls in the programafter the law ’s implementation. Those who applyfor Medicaid and were eligible under previous stateeligibility will not be covered by the federalgovernment’s FMAP 22 and the cost will be taken onby the state. This raises questions for states becausethey must construct a budget and project possiblespending increases since individuals may enroll inthe program but not be covered by the federalgovernment.

Along with the budgetary issues into whichthe ACA forces states, access and quality of carecome into question. Medicaid is already notoriousfor paying physicians low reimbursement rates,which has caused a decrease in doctors who arewilling to see patients. When the Medicaidexpansion is implemented, an increase in theamount of health care seekers will increase, whichwill likely result in physicians turning down morepeople. Also, because of the poor reimbursementrates, Medicaid patients tend to have lower qualityof care in comparison to someone who does nothave insurance. 23

20 2010 Actuarial Report21 Ibid.22 Brian Blase, “Crushing Weight ” 23 Scott Gottlieb, Medicaid Is Worse Than No Coverage at All

By combining the increased eligibilitystandards with the poor quality of care, the ACAalso contains an individual mandate, meaning thatall Americans must obtain insurance or be subject toa fine. 24 The individual mandate assures states that

they must comply. Not only must the stategovernments comply, but the mandate also putsstress on private businesses that will affect theeconomic wellbeing of the state.

Remove the Maintenance of Effort Requirement

The MOE must be removed from the legislationor fully repealed altogether. Because of thisprovision, New Hampshire, like many other states,does not have the ability to properly address budgetissues. Medicaid spending in New Hampshire hasbeen increasing since 1995 and has rapidlyaccelerated since 2003. Projected spending forMedicaid shows a large increase in budgetexpenditures, adding a fiscal burden to the state. Asshown on the graphs on page 4 , New Hampshire’sMedicaid spending has been on the rise. While theunemployment and fiscal health of the state are wellabove most in the country, Medicaid is still thenumber one spending category. As seen on thegraphs, in order for the state to be able to pay forthe increase in Medicaid spending, elementary andsecondary education is usually the first to go.Between 2003 and 2004 Medicaid took the top spotfor spending, and then it decreased when theeconomy was strong, and now it has drasticallyincreased and is still projected to increase, whileeducation suffers in the state.

By removing the MOE, the Medicaid programcan still be in place and also allow the states tomodify their programs. This is not to say that theMedicaid program must be removed altogether;however, the state would be able to control theamount of increased spending. Since NewHampshire provides a long list of “optional”

http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html 24 “Congress and the Affordable Care Act,” Health Affairs and Robert Wood Johnson , February 25, 2011,http://www.rwjf.org/files/research/71968.pdf

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services, these could face the possible budget axefirst. Some of these programs, such as psychology,wheelchair vans, speech therapy, and others couldface budget changes since these services are not ascritical to the state ’s wellbeing. 25 The main problem

with this provision is that it does not allow the stateto decide what is in its best interest. Instead,authority is centralized in the federal government.Since the market is always changing, it would makesense for New Hampshire to be able to maintaincontrol over its own budget when they are in needof savings instead of debt. As Nina Owcharenko of the Heritage Foundation believes, “ Federal healthcare reform should include a strong state componentthat provides additional federal flexibility so thatstates can better tailor reforms to fit the needs of

their citizens”26

With the MOE in place, the states only have fewoptions which will likely harm the patients.Reimbursement rates are already low, resulting indiminished quality of care and the low rate of doctor acceptance of Medicaid patients. Theadministration understands this problem and isgoing in the wrong direction to improve it. Insteadof allowing the states to be able to change thereimbursement rates on their own to deal withdeficit problems, the administration has proposedremoving this authority from the states 27 so theythose who are about to go on the Medicaid rolls willnot have problems finding a doctors, which willcost the state and federal government more money .

In order to remove the MOE requirement,states must petition the federal government and ask for an exemption. By being exempt from the MOE,New Hampshire will be able to reduce the Medicaidspending while not having to decrease funding forelementary and secondary education.

25 New Hampshire Medicaid Annual Report, 200926 Nina Owcharenko, “Restarting Health Care Reform: A NewAgenda, “The Heritage Foundation Webmemo, March 21,2011 p. 227 Robert Pear, “Rule Would Discourage States’ CuttingMedicaid Payments to Providers ,” The New York Times , May2, 2011,http://www.nytimes.com/2011/05/03/us/politics/03medicaid.html?partner=rss&emc=rss

Remove Individual Mandate

In order for health reform to work, removing theindividual mandate is a must. 28 This was firstmentioned when the ACA began to come under fire

by attorneys general. The administration wants toachieve the goal of covering almost all Americanswith health insurance; however, removing themandate will undermine that aim. But with themandate, more people have coverage at the expenseof the state and taxpayers. Also, not every Americanrequires health insurance, such as many young andhealthy individuals. With the mandate, theseindividuals are required to purchase insurance orpay a fine. Businesses are subject to fines if they donot provide certain options for coverage for their

employees, which will impact them via reduced payor higher unemployment among young Americans.The mandate has been already affecting

businesses across the country, resulting in “mini -med” plans being dropped. As typically happens,larger industries lobby the federal government forwaivers from this program. Recently updated, theamount of waivers granted by the Department of Health and Human Services (HHS), has reached1,040. 29 Because of this, small business will beforced to pay for the mandate while largerbusinesses will not, causing damaging effects to thesmall businesses.

Opt-Out of Medicaid

The option to stop participation in Medicaid is adrastic possible solution to state budget problems.While the ACA has the MOE provision, states arenot required by federal law to administer theMedicaid program. With the changes to the

28 Jonathan Gruber, “ Health Care Reform Without theIndividual Mandate ,” Center for American Progress , 2011,http://www.americanprogress.org/issues/2011/02/gruber_mandate.html 29 Jason Millman, “Number of healthcare reform law waiversclimbs above 1,000, ” The Hill: Health watch ,http://thehill.com/blogs/healthwatch/health-reform-implementation/147715-number-of-healthcare-reform-law-waivers-climbs-above-1000

http://www.nytimes.com/2011/05/03/us/politics/03medicaid.html?partner=rss&emc=rss



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should be the one to decide what its residents needand provide those services based on what they canafford and not be subject to rules and regulationscoming from the national government that cover allthe states equally as if their interests are equal. New

Hampshire is relatively fiscally sound, andeconomically freer than any state in the country;why jeopardize that freedom and wellbeing basedon interests of other states or the political powergained in Washington? The reason for this fiscalwellbeing and freedom is the decentralization of power and fiscal decision making 35, which is clearlycontrasted with the methods that the ACA tend toemploy. If New Hampshire hopes to maintain itssovereignty, it must stay true to its motto and “livefree or die.”

35 William p. Ruger & Jason Sorens , “Freedom in the50 states an index of personal and Economic freedom,” 2009



New Hampshire Medicaid SpendingThe New Hampshire Medicaid program has grown to become the largest expense for the state. Medicaidbecame the largest items in 2004 where it surged past elementary and secondary education. During thatsame time period, the percent of state spending for Medicaid passed the elementary and secondaryeducation and now accounts for 26.5% of total state spending 36

36 Note: Numbers include federal fundsSource: State expenditure reports from the National Association of State Budget Officers

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new hampshire medicaid

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