How health insurance costs impact state budgets

Last week the U.S. House in the dead of the night passed a budget reconciliation bill that would take away health care from millions of Americans to provide tax cuts to the wealthy. The main tool? #Medicaid churn Churn happens when people fall off Medicaid, then re-enroll a few months later. Most of the time, it’s not because they’re ineligible. It’s because of missed forms, confusing notices, or outdated contact info. And it costs money & health A 2015 analysis estimated that Medicaid churn increases administrative expenses by as much as $400-600 per person. The health impacts are even worse Studies have shown that adults with diabetes who experience churn have higher emergency department use, more hospitalizations, & higher costs per month than those with more continuous coverage . Churn has also been linked to delays in cancer treatment, disrupted prescriptions for chronic conditions, & worse prenatal care—putting pregnant people and babies at risk. And now, proposals advancing in Congress want to make this worse—by requiring Medicaid eligibility checks every six months. The truth is: more frequent checks mean more people losing coverage unnecessarily. More churn. More costs. Worse outcomes. Policies like these ignore the reality of income volatility—especially for Black, Indigenous, & Latinx households. Workers in jobs with variable hours, irregular schedules, & seasonal employment—are all at increased risk due to sharp, short-term income changes even when annual income stays the same. This means families may temporarily appear ineligible during a redetermination—even though they qualify over the course of the year. These short-term fluctuations put them at higher risk of losing coverage for reasons that have nothing to do with actual eligibility. And it’s not just bad for patients—it’s inefficient for the system. Churn forces states to process more terminations and re-enrollments. It increases call volume, delays care coordination, and creates costly administrative work for Medicaid agencies, health plans, and providers. We've seen this in Minnesota. According to a 2023 JAMA study, half of children on Medicaid in Minnesota who lost coverage were re-enrolled within one year — meaning they were likely eligible for the entire period. These gaps in care can lead to missed vaccinations, untreated illnesses, and higher costs down the road. But there’s a better way. Minnesota has made progress. We’ve invested in culturally specific outreach, simplified renewal notices, implemented 72 months continuous coverage for children from birth to age 6 and expanded 12-month continuous eligibility for children from6-21. As a result, we’ve reduced churn, seen racial disparities in disenrollment reduced or eliminated and helped families stay covered. Tell Congress: Oppose six-month Medicaid eligibility checks. Support policies that keep people covered—consistently & equitably. Because no one should lose their health care due to paperwork.

Full text of my article @Forbes: Spend $1, Get $3 Back From Washington: The Medicaid Funding Conundrum (1/2) As the U.S. Senate deliberates the One Big Beautiful Bill, a key healthcare issue sparking debate is how to divide Medicaid costs, which serve low-income Americans, between state and federal taxpayers. Since 2014, Medicaid spending has surged 76%, reaching $872 billion in 2023—only 15% less than Medicare’s budget, which serves seniors and Americans with disabilities. Medicaid’s budget has grown faster than Medicare (66%), Social Security (60%), and the U.S. GDP (57%). Policymakers aiming to curb federal spending naturally focus on Medicaid. Medicaid costs are shared between the federal and state governments. One commonly used state funding practice—provider taxes—raises fiscal concerns for the federal government, according to the Government Accountability Office. Here’s how it works: A state levies a provider tax on hospitals and other healthcare providers, based on revenue or other measures of size. The state then claims this tax revenue (e.g., $1 billion) as its share of Medicaid funding and receives $3 billion in federal matching funds. The state returns most of the combined $4 billion to hospitals and uses the reminder for self-directed purposes related to Medicaid. It’s a lucrative investment for hospitals—pay $1, get nearly $3 back. For states, it’s an even better deal: a windfall of federal dollars with no real cost. But this game is rigged against federal taxpayers, who are left footing the bill. Worse still, both hospitals and states are now incentivized to expand provider taxes for bigger payoffs, further burdening federal taxpayers. The Government Accountability Office found that provider taxes drive a substantial and rapidly growing share of Medicaid spending, undermining accountability to federal taxpayers and limiting resources for patients in need. Moreover, as health policy expert Ann Kempski and I wrote in Health Affairs Forefront, this harms employers and workers. Directly, hospitals raise commercial prices to maximize Medicaid payments. Indirectly, large hospitals gain a competitive edge over smaller facilities and independent physicians, accelerating market consolidation and driving up commercial prices. Link to 2nd half @LinkedIn: https://lnkd.in/e2Re4YHj Link to article @Forbes: https://lnkd.in/eBgiV4m9 The Johns Hopkins University - Carey Business School Johns Hopkins Bloomberg School of Public Health

The One Big Beautiful Bill Act (OBB) is driving a reduction in Medicaid spending. I’m writing this because despite the overwhelming coverage, I couldn’t find many mainstream sources that explained the how - how exactly is OBB reducing Medicaid spend? What levers matter most? While there are quite a few provisions in OBB surrounding Medicaid eligibility, the one I want to hone in on - and the one that’s most meaningful - is the provider tax. At a high level, Medicaid is funded by both state and federal dollars. When states spend on Medicaid, they receive a federal match (which varies by state). For example, if a state puts in $200M and their federal match rate is 60%, the federal government puts in $300M - giving the state $500M to spend on Medicaid. So where does the provider tax fit in? It’s how states have been able to increase matched federal dollars without proportionately increasing their own spending. Today, 6% is the upper limit of how much states can tax a provider’s revenue while still guaranteeing repayment via higher Medicaid reimbursements. Proponents argue these higher reimbursements incentivize more providers to accept Medicaid and treat more Medicaid patients. For example, imagine your local hospital system pays a provider tax to the state. States earmark those dollars for Medicaid spend and get a federal match - effectively doubling their Medicaid budget. This allows states to pay your hospital system higher reimbursements. In this setup, opponents argue the biggest loser is the federal government - states can grow their Medicaid programs without much downside, and providers recoup taxes via reimbursements. Ultimately, the federal government foots the bill. Put simply, states use provider taxes to draw down more federal money to pay those same providers. That’s what OBB targets. Instead of a 6% “safe harbor” limit, OBB lowers the cap to 3.5%. That slashes how much states can collect in provider taxes - reducing their ability to draw federal funds. Returning to our example: if a state was collecting $200M in provider taxes and getting a $300M federal match (totaling $500M), under OBB, they might only collect $116M - reducing the federal match to $174M. That’s a loss of over $200M in total Medicaid funds. Extrapolated nationwide, this change has massive implications. The Congressional Budget Office estimates that lowering the safe harbor limit to 2.5% would reduce Medicaid spending by $241 billion. Whether that’s good or bad isn’t the point of this piece. The point is: policy doesn’t always change programs directly - sometimes, it rewires the incentives underneath. The provider tax cap may sound like a technical detail, but it fundamentally changes how states finance care.

Healthcare spending saw a notable 7.5% increase in 2023, with a continuing upward trend. A key factor driving these costs is pricing. To address this, many states are taking proactive measures by implementing price caps based on a percentage of the Medicare Rate for both inpatient and outpatient services. Brown University’s Hospital Payment Cap Simulator is a valuable tool in estimating state-specific savings and evaluating the impact on hospital operating margins post the adoption of this policy for state employee health plans. In states like New York, setting a payment rate at 200% of Medicare could result in potential savings amounting to hundreds of millions of dollars, especially in comparison to the current rates of 300-400%+ of Medicare being disbursed. The pressing issues of access, affordability, and sustainability in healthcare underscore the urgent need for action. Should the industry fail to self-regulate effectively, regulatory bodies are poised to intervene to ensure a balanced and sustainable healthcare system.

NAMD is proud to release another installment in our long-running series, Why Did They Do it That Way – this piece centered on Medicaid financing. Our intent with these features is to provide plain language explanations of how Medicaid translates on a day-to-day basis in the 56 states and territories that operate the program. We are so grateful here to have had insights from our esteemed colleagues at the National Association of State Budget Officers. Capsuling what you will see described in more detail:   * Federal and state/territory governments share the costs of the Medicaid program.   * States operate within annual or biennial budget cycles. Executive branch staff must continuously project future cost trends in their Medicaid programs and make recommendations on program spending and initiatives. Policymakers must negotiate budgets with governors, endeavoring to balance spending on Medicaid with many other state needs.   * Five key factors affect Medicaid spending: 1) enrollment; 2) the scope of covered benefits; 3) service utilization; 4) costs of services; and 5) administrative costs.   * Three leading cost drivers will impact the costs of operating the program in coming years: 1) prescription drugs; 2) long-term services and supports; and 3) price increases. https://lnkd.in/eA3h445P National Association of Medicaid Directors

With new attempts to cut federal #Medicaid funding, the consequences for states, rural hospitals, #providers, and #patients could be catastrophic, having major business implications as well as affecting patients. Cutting Medicaid dollars doesn’t reduce the cost of care—it just shifts the burden onto those least able to bear it. Who Will Suffer Most? -Rural hospitals already struggling to stay open will be forced to cut services or shut down. -Pediatric patients—nearly half of U.S. children rely on Medicaid. -Mental health and addiction treatment programs will lose essential funding, leading to more untreated mental illness and overdoses. -Hospitals and physicians will absorb the cost of uncompensated care, further destabilizing the healthcare system. How Would States Fill the Gaps? -Cutting provider reimbursement rates, making it harder for doctors to take Medicaid patients. -Reducing eligibility, kicking millions off Medicaid, including children and seniors. -Limiting covered services, meaning fewer mental health resources, addiction treatment, and maternity care. -Raising state taxes to offset the funding loss. Medicaid isn’t just a program—it’s a lifeline. If federal funding is cut, states will be left scrambling to fill the gaps, and millions will lose access to critical care. Now is the time to speak up. #Medicaid #HealthcareAccess #RuralHealth #PediatricCare #HealthPolicy #MentalHealthMatters ABIG Health MBA@UNC