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Governor Proposes Medicaid Expansion Alternative

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Medicaid Expansion got a new number (Senate File 296) when it came out of committee this week (beating the funnel).  The bill expands Medicaid to individuals earning up to 138% of the federal poverty level regardless of whether they have children  (that's $25,571 for a family of three). It also sets up a new model of care, where services are integrated and the focus is on making sure the person stays healthy and gets the services they need, when they need them.  Providers are then rewarded for improving the health of their patients.  The state's limited benefit IowaCare plan would expire on December 31, with the expansion taking its place on January 1, 2014.  The federal government has already appropriated the funds needed to pay for 100% of this expansion, which will eventually phase down to 90% federal share in 2020 and thereafter.  

Republicans have been uncommitted as they waited to hear what alternative the Governor might propose.  Many share the Governor's concerns that just expanding Medicaid doesn't mean Iowans will get healthier.  They would like to include some element of personal responsibility (co-payments and deductibles), and wants to make sure the program improves health not just pays for the "cadillac of services." 

The Governor proposed his Medicaid expansion alternative this week - called the Healthy Iowa Plan.  it would replace the current IowaCare waiver, but still requires federal approval and an additional federal appropriation (while the Medicaid expansion is paid for already, this waiver would be a traditional split with the federal government picking up only 58% of the cost).  The Governor would continue to limit benefits, and would require copays and deductibles that would be waived if a person agrees to certain prevention measures (like an annual health assessment).  The cost to the state is $160 million - and the cost to the federal government is $227 million.  Again, the federal government would have to approve the waiver, and then appropriate the new money requested (which opponents of his plan say adds to the national deficit).

The Governor's plan is paid for with $160 million from several new and existing appropriations:

  • $42 million Broadlawns Polk County property tax levy
  • $43 million county mental health property tax levies 
  • $12 million state appropriation now going to the University of Iowa Hospitals & Clinics
  • $24 million new general fund appropriations
  • $34 million in Medicaid "savings" reinvested in the program
  • $7 million in participant premiums reinvested in the program

The Governor plans to use one-third of the existing $125 million of MH/DS levies, but the mental health benefits in the plan would likely be limited.  Counties were quick to point out that they need every bit of their levies to pay for the existing demand for services, and are in the middle of a major redesign of service delivery.  In addition, many county levies pay for services delivered to people earning from 150%-200% of the federal poverty level (whereas the Governor's plan only goes up to 100% of the federal poverty level).  On the other side, Medicaid expansion is estimated to result in $40-60 million in savings to counties/regions when some of those receiving non-Medicaid services become eligible for Medicaid services.   

We don't know if the program would be capped (that is, would only be available until funds ran out). So the Legislature is faced with the following choice:

  1. Expand Medicaid to those earning up to 138% of the federal poverty level, which covers as many as 150,000 Iowans at no cost to the state (and limited costs after the first three years).  This option would include mental health and substance use treatment funding, and is already paid for by the federal government.

  2. Request the federal government approve the Healthy Iowa Plan waiver proposed by the Governor, which covers half the people (89,000) at a state cost of $160 million. The plan includes a limited benefit package that may include some mental health services, and takes $43 million away from the ongoing redesign of the mental health and disability services system.  The plan would be subject to federal approval, and would require an additional federal appropriation of $227 million (adding to the federal deficit).

You can see a side-by-side comparison of the two plans here.  You can find more resources on this issue here.  Look soon for the ID Action network's next issue of Perspectives in Policy, which will include a more detailed analysis of the state's options in Medicaid expansion.