Medicaid at 50: Transforming Lives through Better Health

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1 Medicaid at 50: Transforming Lives through Better Health A Chartbook for Understanding What It Is, How It Works, and Why It s So Important July 2015

2 Section I Program Basics: What, Why, & Who 3 Section II Medical Coverage for Children 10 Section III Program Costs and Trends 16 Section IV Conclusion 23 For More Information 25 2

3 Section I Program Basics: What, Why, & Who 3

4 Medicaid is a critically important public health insurance program that helps lowincome people get needed health care. It was established by Congress 50 years ago, and today it is the source of health care coverage for about 3 million Illinois residents, most of them children. Medicaid is jointly funded by federal and state governments, with the federal government paying just over half of the costs in Illinois. Illinois Medicaid program is largely designed and administered by the state, but is subject to federal regulations and guidelines such as income eligibility standards and determining mandatory versus optional benefits. 4

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6 Medicaid and related programs provide critically important health insurance for about 3 million vulnerable Illinoisans. In Illinois, major eligibility groups include children, pregnant women, parents, seniors, adults with disabilities, and with the implementation of the Affordable Care Act (ACA) childless adults. 6

7 To receive Medicaid coverage, a person must fit into one of the categories of eligible populations and meet established income eligibility standards. For some eligibility groups, Medicaid income limits were revised under the Affordable Care Act. In Illinois, the family income limit for children to receive Medicaid coverage is now 147 percent of the federal poverty level, which is approximately $30,135 for a family of three. The Children s Health Insurance Program (CHIP) is a joint federal-state program that builds on Medicaid by offering coverage for children whose family income exceeds the Medicaid standards. The income eligibility limit for CHIP in Illinois is now 318 percent of the poverty level, which is approximately $64,000 for a family of three. Note: Recent Changes to Income Eligibility While several of the Medicaid income eligibility standards increased under the ACA, these changes don t result in more people being eligible for coverage. The ACA changed the method for computing household income, and the eligibility standards needed to be adjusted so all previously eligible participants would continue to be eligible under the new method. 7

8 In 2014, the Affordable Care Act enabled Illinois to fill a big gap in Medicaid coverage by expanding eligibility to non-elderly, non-disabled adults without dependent children. Extending coverage to this group is increasing access to care and improving financial security for more than 500,000 Illinoisans. With fewer people uninsured, Medicaid expansion also lowers the costs of uncompensated care care that patients can t pay for previously provided by hospitals, community health centers, and local health departments. The federal government is paying for this newly eligible group through The state responsibility will gradually increase to 10 percent in 2020 and subsequent years. Even then, every state dollar spent will yield ten dollars in health care services. 8

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10 Section II Medical Coverage for Children 10

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12 Studies have found that Medicaid coverage reduces infant mortality, low-birthweight, and asthma attacks. Research also shows that expanding health coverage for low-income children increases high school graduation rates, college attendance, and college completion, as well as earnings in adulthood. Kids benefit so much from Medicaid coverage because they receive comprehensive care through the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Program. This federally mandated coverage is more extensive than what is required for other eligibility groups, and includes access to medical, dental, vision, hearing, mental health, and developmental services. 12

13 Medicaid s comprehensive service coverage is especially important for children with disabilities or special health care needs. Many health problems are more common among children covered by Medicaid or CHIP than among those covered by private insurance. These conditions include asthma, developmental delays, autism, dental problems, and behavioral health issues. Private insurance coverage for some of these conditions is typically very limited, but Medicaid can help address them. Children in foster and other substitute care, as well as other children who have experienced abuse or neglect, often have significant and complex health care needs. Medical, dental, and behavioral health conditions are exceptionally prevalent among children entering foster care. All children who receive federal foster care or adoption assistance are eligible for Medicaid. The Affordable Care Act extended Medicaid coverage for former foster children until they reach age

14 In 2015, over half of all Illinois children 1.6 million are estimated to receive health care through Medicaid and related medical assistance programs, including the Children s Health Insurance Program (CHIP) and the All Kids expansion. The majority of these children more than 80 percent are insured through Medicaid. About 15 percent of children receiving medical assistance are covered through CHIP, which offers basically the same health coverage benefits to children from families with incomes above the Medicaid limits. Less than 4 percent of children receiving medical assistance are covered through the All Kids expansion, which is an entirely statefunded program that offers coverage for uninsured children who do not qualify for Medicaid or CHIP. 14

15 Medicaid and related programs in Illinois have significantly reduced the number of kids without health care coverage. As a result, Illinois has one of the lowest uninsured rates for kids in the U.S. The state s outreach efforts and streamlined application procedures for Medicaid and CHIP have been instrumental in helping children get the health care they need. For five consecutive years from 2009 to 2013, Illinois received performance bonuses from the federal government for successful enrollment and retention of eligible children in Medicaid and CHIP. Illinois has among the highest percentages of eligible children participating in its Medicaid and CHIP programs, with higher rates than the U.S. average and most states in the Midwest. 15

16 Section III Program Costs and Trends 16

17 In federal fiscal year 2011, Illinois spent $4,682 per Medicaid participant (counting only those eligible for full benefits). This is significantly less than the U.S. average of $6,502 per enrollee and is the lowest in the Midwest. Costs per person vary significantly across eligibility groups. Those with more complex health needs, such as the disabled and seniors, have higher costs per enrollee. For all major eligibility groups, Illinois Medicaid spending per enrollee is below the nationwide average. Medicaid costs per beneficiary nationwide are significantly lower than costs for private health insurance, because it has lower administrative costs, as well as lower payment rates for health care providers. 17

18 . In fiscal year 2013, spending for Medicaid and related programs in Illinois totaled about $9.6 billion (counting general funds spending across all state agencies). Because the federal share was just over 50 cents of every dollar for Medicaid spending and 65 cents of every dollar for CHIP spending, medical assistance spending from the state s own resources totaled only about $4.8 billion. This accounted for only 16 percent of general funds spending from the state s own resources. 18

19 Three primary factors determine overall Medicaid costs: the number of people enrolled, what services are covered and used by patients, and payment rates for service providers. Enrollment Medicaid program costs increase and decrease with changes in enrollment, which may be triggered by fluctuations in need, eligibility changes, or outreach efforts to help more people enroll. For example, enrollment and program costs increased between fiscal years 1999 and 2005 due primarily to growing poverty populations and policy changes that expanded eligibility for children, low-income parents, seniors, and disabled adults. Enrollment and costs continued to increase between fiscal years 2005 and 2011 because of increased economic need during the Great Recession, but both stabilized between 2011 and

20 Use of Services Covered by Medicaid Medicaid costs are also determined by what services are covered and used by enrollees. Seniors and disabled adults account for the majority of Medicaid costs because the services they need tend to be more extensive and expensive. Medicaid program costs for seniors are dominated by long-term care (both residential and community-based). Disabled adults are likely to have complex health care needs such as development disabilities, physical impairments, and other mental and behavioral health conditions that also are more costly. Payments to Service Providers Given federal eligibility and service coverage requirements, the primary way states can reduce costs in the short run is to reduce payments to providers. However, Illinois already has relatively low reimbursement rates for most service providers. Over the long term, Medicaid costs are also affected by the overall costs of health care. As health care costs increase, so does the cost of insurance both private and public. 20

21 Since 2000, total Medicaid spending nationwide increased because of growth in health care costs, policy changes that expanded eligibility, and growing economic need, as the number of people living in poverty grew 54 percent between 2000 and Over the same period of time, Medicaid spending, adjusted for inflation, grew at an average annual rate of 4.1 percent nationwide but only 2.4 percent in Illinois. On a per person basis, Medicaid spending nationwide grew more slowly than increases in private health insurance. Growth per person in Illinois was substantially below the U.S. average and was the lowest in the Midwest. 21

22 These same factors have affected overall Medicaid spending in Illinois. Both enrollment and spending increased from 2007 to 2012 because of the Great Recession, when the number of Illinois families with children in poverty increased by more than 20 percent. Because Congress increased federal Medicaid matching rates during , Illinois did not have to bear the full cost of this increased enrollment. As the economy improved and Illinois made various policy changes, Medicaid costs in Illinois began to stabilize in fiscal year These trends in program costs and enrollment illustrate Medicaid s responsiveness to changing needs. During an economic downturn, more people are struggling, so they enroll and costs rise. As the economy improves, fewer people are struggling, so enrollment goes down and costs decrease. 22

23 Section IV Conclusion 23

24 Over the past 50 years, Medicaid has transformed health care for low-income Illinoisans. Because of Medicaid, more babies get a healthy start; seniors receive services that help them live at home; and people with disabilities have access to a wide range of services to meet their complex health care needs. With the Affordable Care Act expansion, Medicaid is now also improving access to health care for working-age adults. The number of children without health insurance has fallen dramatically; use of preventive and primary care has increased; and hospitals have to provide less uncompensated care. Families have stronger financial security, and kids do better and go further in school and earn more as adults. As Medicaid evolves over the next half century, it s critical that federal and state policies safeguard improvements in health care and continue to generate the proven short- and long-term benefits of this transformative program. 24

25 For more information, contact: Larry Joseph Director of Research Voices for Illinois Children David Lloyd Director of Fiscal Policy Center Voices for Illinois Children