Healthy Utah: Guv comes up with a plan
December 12, 2014
Last week, Governor Gary Herbert publicly unveiled his plan to expand Utahns’ access to health care insurance through the Medicaid expansion written into the Patient Protection and Affordable Care Act (PPACA, or, if you prefer, "Obamacare"). The plan, called Healthy Utah, was negotiated between the state and the federal government and would allow Utah to use the federal money that has been earmarked for it (hundreds of millions of dollars per year) and create a private-insurance-based program, rather than simply expanding Medicaid as PPACA intended.
Healthy Utah appears more costly to Utah taxpayers than straightforward Medicaid expansion would be and many of those living in or near poverty would have to pay more for health care than they would with the Medicaid expansion. It would also be an economic boon to the state, but unless you read the plan closely, you might not know it.
How we got here
Mandatory Medicaid expansion in the states, designed to provide health care insurance to those living beneath or near the poverty level, was originally built into PPACA. The U.S. Supreme Court struck down the mandatory element of the program, however, allowing states to opt out of the Medicaid expansion. The result? "Red" states opted out while "blue" states accepted the expansion. To date, 27 states have expanded their Medicaid programs.
Recent history shows that health care reform is inundated with partisan politics. Utah, which voted Republican more than any other state in the last presidential election, is on the anti-Obamacare side. The culmination of the absolutist opposition to the law was on full display in October of last year, when Utah’s U.S. Senator Mike Lee, along with Texas Senator Ted Cruz, took the lead in demanding that Democrats and the president defund (repeal, essentially) PPACA in exchange for the Republican Party’s cooperation in keeping the federal government operating.
The brinksmanship failed, and the White House’s Council of Economic Advisors estimated that the economic toll "may have resulted in 120,000 fewer private-sector jobs created during [the shutdown]." Utah’s national parks were shuttered and the surrounding communities that rely on park tourism were hit hard. Utah eventually reopened the parks with its own money, but the damage was done.
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After a disastrous first month of open enrollment marked by the federal government’s bug-filled Healthcare.gov website, PPACA seems to be working more or less as intended: tens of millions more Americans have access to affordable health care and overall U.S. spending on health care has slowed. It grew by only 3.6 percent last year, but health care spending always grows — 3.6 percent is the lowest spending has gone up in over 50 years.
Obamacare has, at the very least, not been the "train wreck" that its opponents virtually guaranteed ("Mr. President, it’s no secret that the so-called Affordable Care Act is a train wreck waiting to happen," U.S. Senator Orrin Hatch of Utah said on the Senate floor last year).
Republican governors now appear to be steadily accepting this reality. Last Tuesday, Wyoming Gov. Matt Mead announced that he wants to develop an expansion plan for his state. Herbert’s announcement was two days later. The day after that, Tennessee Gov. Bill Haslam announced he’ll have an expansion plan together by the end of the month. The politics of health care reform are shifting before our eyes.
Who’s it for?
"The people who would qualify are single mothers, they are low-income adults, they are families with children. Two out of every three of them are employed, many working more than one job to make ends meet. Of the other third, many are the medically frail, who have conditions that make it impossible for them to work. They are our neighbors, our friends and our family members," said Herbert when he announced the plan last week.
Healthy Utah would cover Utahns making less than 133 percent of the federal poverty level (FPL). FPLs differ by state and by family size — the FPL for an individual Utahn is $11,670; for a family of four it’s $23,850.
The existing Medicaid program in Utah already provides coverage for children and pregnant women earning up to 133 percent FPL. People with disabilities earning up to 100 FPL are also eligible. Adults with children are eligible if they earn less than 50 percent FPL.
Adults with children who are between 50 and 100 percent FPL are not eligible. Childless adults earning under 100 FPL are not eligible. Healthy Utah proposes to use Medicaid expansion funds to get those two groups onto private insurance plans.
The state projects that in Healthy Utah’s first year "approximately 95,000 Utahns will receive coverage." That projection swells to 133,000 in year two and 138,000 in year three.
The population of Utahns who would be newly eligible is 52 percent female with 58 percent under age 35.
What will it cost?
What will Healthy Utah cost Utahns? That’s not quite clear, based on the information the state has made available, but it looks like a lot more than the intended Medicaid expansion.
Per PPACA, the federal government is currently paying 100 percent of the cost of Medicaid expansion in states that did not opt out. That rate winnows down to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and, finally, 90 percent in 2020 and beyond. Those figures are locked in for those years and states that aren’t expanding their Medicaid programs are missing out on the years in which the states get the absolute best deals. Healthy Utah, if enacted into law in the upcoming legislative session, would go into effect in 2016.
For Utah’s existing Medicaid program, the federal government pays about 70 percent of the costs.
The state projects that Healthy Utah would cost $4.6 million in state funds in 2016. In 2017, that figure jumps to $25.8 million. In 2018, $45.6 million. The projections only manage to make it another six months — in the first half of 2019, the program is forecasted to cost $25.4 million.
For 2020 and beyond, when the program will be most expensive to Utah, there have been no projections released by the state. The Salt Lake Tribune reported that the cost could be "$80 million to $90 million per year by early in the 2020s."
Those numbers are eye popping when one considers how much a straightforward Medicaid expansion would cost the state. Last September, in a report titled Medicaid Expansion Options prepared by the state Department of Health for the governor, a straightforward Medicaid expansion was projected to cost the state $25-35 million per year after 2020.
That report discussed the option that is most similar to Healthy Utah, described then as the "Premium Subsidy plus Partial Expansion" option. "No formal study has been done to evaluate the cost of this option," the report stated. Still, it likened such a program to a full Medicaid expansion, forecasting a state cost of $34.7 million annually by 2023.
Don’t be mistaken that the high cost of Healthy Utah means a better deal for those it’s intended to insure. One of the features of the program that the plan boasts about is that adults between 100 and 133 FPL will have to pay both premiums and copays (typically, Medicaid premiums can only be charged to those above 150 FPL — Utah won a concession from the federal government for Healthy Utah). The plan projects those premiums to be "approximately 2% of their income." The idea is to promote "personal responsibility."
The secret economic windfall
"I’d like to emphasize an important aspect that should be central to the thinking in the current ongoing discussion: There are positive economic impacts in embracing the governor’s solution to expanding health care coverage in Utah." That’s a quote from Mark Miller in the "What Opinion Leaders are Saying" section at the end of the plan. The economic benefits aren’t being highly touted, but they’re everywhere.
The main reason opting out of Medicaid expansion doesn’t make sense is that our taxes are already paying for it. Utahns contribute their fair share in federal taxes, and those federal taxes are what pay for the expansion. "Utahns already pay higher taxes under the ACA but they are not getting the full benefit from those dollars," the plan states. "Utah’s taxes will not be reduced if the state turns back this funding," it adds.
It’s also the current situation, not just a future risk — Utah’s taxes are not being reduced so long as we continue to delay expansion.
Healthy Utah projects "Utahns’ ACA taxes returned to the State" as follows:
- 2016: $445.8 million
- 2017: $518 million
- 2018: $546.9 million
- First half of 2019: $283.2 million
Add it up and it looks to be more than $2 billion in the first four years alone.
Other economic benefits are sprinkled throughout the Healthy Utah plan:
- Utah hospitals and other care centers currently provide about $331 million annually in services that they never receive payment for — called uncompensated care. Healthy Utah projects that number to be reduced "by over $51 million per year."
- The state projects that it will save around $40 million on state services, including behavioral health and impatient services for prisoners, in the first three-and-a-half years of the program.
- "Will Healthy Utah shrink the private sector and slow economic growth in Utah?" one of the final FAQs in the plan’s appendix asks.
The answer, in full: "Exactly the opposite will happen when Healthy Utah is implemented; an infusion of over $400 million every year will improve the economic health of the healthcare industry and all supporting industries in Utah. Economists from major universities in Utah have predicted economic growth as a result of implementing Healthy Utah."
- Last year’s Medicaid Expansion Options report projected another attractive side effect for a plan like Healthy Utah: "$2.9 billion statewide in economic impact, creating over 4,160 jobs" over the first 10 years of the program. The Healthy Utah plan is silent as to job creation.
The Expansion Options report also projected, for a full Medicaid expansion, new revenues of $113 million in state taxes and $90 million in county taxes over the first 10 years of the program.
Individuals who are unemployed at the time they obtain health insurance via Healthy Utah would be "automatically enrolled in an integrated work program" (with certain exceptions — e.g., being "medically frail" or over age 60).
During the negotiations with the federal government, "Governor Herbert made several strong efforts to get the federal government to accept a work requirement in Utah’s proposal," according to the Healthy Utah plan. It was President Obama himself, the plan states, "who decided not to agree to conditioning receipt of a health benefit on maintaining employment."
Some of the statements in the plan make it appear that the president may have been pretty persuasive.
"Work provides its own incentive by increasing an individual’s income. Health coverage needs to be provided in a way that supports rather than hinders an individual’s desire to have more income." That’s from the appendices at the end of the Healthy Utah plan, not Obama.
"All but a small percentage of those who receive benefits under Healthy Utah will already be working or will be limited in their ability to work due to physical, mental or behavioral health conditions," it adds.
Who would provide coverage?
The plans offered by private insurers that participate in the federal Healthcare.gov marketplace would be the same plans Healthy Utah utilizes. There are different levels of benefits offered in those plans and Healthy Utah will provide coverage via "silver-level plans." The state’s online insurance exchange for small businesses, called Avenue H, would serve as the exchange for the Medicaid-funded plans.
There are six insurers providing plans in 2015. Three are nonprofits: Arches (a "consumer operated and oriented health plan," or CO-OP, based in Utah), Bridgespan (owned by Cambia Health Solutions in Oregon), and SelectHealth (part of Utah-based Intermountain Healthcare). Three are for-profit, private companies: Altius (part of the Connecticut-based Aetna group), Humana (a Kentucky-based insurer) and Molina Healthcare (a California insurer).
Healthy Utah "is designed to seamlessly transition individuals from private health plans supported by the State under Healthy Utah to the same or similar plan supported by federal subsidies if their income exceeds the plan’s limits," according to the plan.
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