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Edwards expansion assumptions highly questionable

More questions have surfaced over the mysterious and increasingly extravagant claims made by the Gov. John Bel Edwards Administration over alleged savings from Medicaid expansion, claims that threaten to introduce budgetary chaos in the upcoming fiscal year.

It’s not just that the Department of Health and Hospitals continues to hike the “savings” number for fiscal year 2017, currently up to $184 million, while refusing to make public the details of its analysis despite data from other states’ experiences continuing to show steep underestimations in the costs involved. For example, commonly the numbers of people coming onto to Medicaid as a result of expansion include not just new enrollees at the expanded, designed-to-addict-states lower rate, but also others at the higher standard rate, many of whom abandon private plans voluntarily or otherwise. So while DHH may have forecast 300,000 new enrollees, it acknowledges this could go as high as 450,000 in the first year – a figure much more in line with a 2013 previous analysis by DHH under former Gov. Bobby Jindal.

But now a pair of the hospital partners operating designated state charity hospitals have expressed doubt over another component comprising the reputed savings – reductions in state payments for uncompensated care costs. The state sees a reduction of these because, theoretically, the more people insured through Medicaid, the fewer UCC dollars needed. The partners think the state’s estimates too rosy, requiring at least 70 percent of the uninsured enrolling in the first year.

The partners’ real-world, on-the-ground observations seem more congruent with the follow-up DHH analysis in 2014, built upon other states’ experiences that saw a rate only half of that in the initial year. Original Edwards Administration numbers, based upon the partners’ belief that to hit 25 percent UCC savings would require a 70 percent reduction in the uninsured population, at the original 10.5 percent rate works out to a 29 percent decrease.

This not only comes close to the 2014 Jindal Administration estimate of 35 percent, but also receives support from national data. In 2014, the typical state that expanded prior to that year – which includes mostly more mature experiences as expansion could start in 2010 that would inflate enrollment proportions – had seen a 28.83 percent decrease in the uninsured rate from 2010-14, while states that had not by then had a decline of 18.49 percent; thus, expansion caused a 10.34 percent decline in the uninsured rate in those four years, which nationally remained at 11.7 percent. In terms of UCC, expansion states over that time span saw a reduction of 26 percent while non-expansion states UCC went down 16 percent – the difference close to the original Edwards’ Administration FY 2017 prediction but far below its now-assumed 25 percent.

These numbers suggest the new estimate not only is optimistic, but wildly so. The number could be somewhat higher than national norms given Louisiana’s unique charity hospital system that forced care to anyone below the 200 percent federal poverty limit for which the state pays extra onto federal funds the 25-100 percent tier of which expansion will cover, but it seems highly unlikely to reach the 25 percent total.

Besides the historical data from Medicaid expansion casting doubt on the proportion of accrued “savings,” the computation of those – rate of reduction times money budgeted – also raises questions. Looking at recent budgetary data, the base amount from which the percentage reductions are derived seems counterintuitive. At about $887 million originally budgeted for UCC by Edwards – now apparently closer to $800 million – this represents $164 million more than the $723 million budgeted last year – with the FY 2016 amount lowered throughout the year by the necessity of budget cutting and the 2017 estimate already including the impact (10.5 percent reduction presumably from about $990 million) of expansion. If expansion supposedly will reduce UCC, then why do these escalate, unadjusted for these factors, by 18.5 percent? Note that the higher the budgeted total, the greater the “savings” that occur when the rate insuring themselves through Medicaid is adjusted upwards.

The Edwards Administration dropped the most recent baseline budget deficit for FY 2017 from around $745 million to $600 million largely as a result of the adjustment of the uninsured population that would seek Medicaid after expansion from 10.5 to 25 percent. If that does not pan out, the state will run a large mid-year deficit. Questionable assumptions made by Edwards’ DHH threaten such a scenario.

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