Tuesday, March 19, 2013

DHS issues correction on projections; bottom line unchanged

Posted By on Tue, Mar 19, 2013 at 4:07 PM

DHS issued a correction to reporters today — the per-person, per-year numbers provided to reporters yesterday for Medicaid expansion are not accurate.

The numbers related to the percentage differential between the cost of providing insurance for the expansion pool via the "private option" as opposed to Medicaid expansion remains the same: 13 to 14 percent. The total per-year incremental rise in cost also remains the same—somewhere around $100 to $120 million. The headline that DHS projects little to no increase in cost to the feds remains the same.

The error: Reporters were told that the per-person-per-year (PPPY) cost of offering coverage via the "private option" was projected to be $5,975 and the PPPY cost of offering coverage via Medicaid expansion was $5,200. These figures are not accurate and in fact DHS was not immediately able to give me an average PPPY for the entire expansion population.

Healthy adults who are not medically frail make up around 90 percent of the total expansion pool. The PPPY cost of just these non-medically frail, healthy adults would be $4,392 for Medicaid expansion in FY 2014. The PPPY cost for the same population via "private option" in FY 2014 would be $5,256. If you get out your calculator, you'll see that the difference is 20 percent, not 13-14. The issue is that the more expensive outlier populations (around 10 percent of the total pool) will be covered by Medicaid either way, so there is no price differential there. There are also different match rates for transfer populations that get missed if you simply compare the PPPY cost of a health adult in Medicaid versus the "private option."

DHS found that the total extra cost to covering the expansion pool via Medicaid would be $177 million (calculating with the old numbers yielded $193 million). That would represent 13.6 percent of the total projected spending under traditional Medicaid expansion in 2014 ($1.3 billion). If we subtract $70 million in projected savings from the 138-400 FPL group on the exchange (lower premiums so less subsidies needed from the government), we're at $107 million. DHS argues that when you also include the fact that Medicaid itself would likely have higher PPPY numbers under expansion than reported above because of access pressure, as well as offsetting tax revenues, the number could get close to zero.

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