How Much Will This Cost Us? Key Questions to Ask About State Estimates on Health Reform Costs – Say Ahhh! A Children’s Health Policy Blog

Throughout the debate on health reform, states have
asked, “how much will this cost us?” Now that health reform is the law of the
land, several have put out their own estimates.
However, as there is no agreed upon independent arbiter to tell us what states
will be spending – sadly, CBO doesn’t look at state-by-state spending (although
they did suggest that state spending on Medicaid/CHIP would increase by $20
billion over ten years
and we’ve heard through the grapevine that they assume
about a 50% participation rate) – there is no consistent set of rules and
assumptions in developing these estimates.

As some of the estimates that have been publicized have
serious flaws, it’s even more important to know where the numbers came from and
how they were calculated. Here are a few key questions to ask as state
governments and other interested parties put out their “official” numbers.

1. What participation rate are they using for Medicaid
enrollment? Does this make sense in terms of historical enrollment and
enrollment in other programs (even with accounting for the mandate)? For some
context, a recent study found an
81% participation rate among children in Medicaid and CHIP.

2. Are there different participation rates for the
newly-eligible population compared to those already eligible, but unenrolled in
coverage? Are they taking into account the “welcome mat” effect?

3. In terms of enrollment increases, CBO estimates that
16 million more people will enroll in Medicaid/CHIP over the next ten years.
Does the enrollment increase in your state fit within this larger context?

4. In estimating the cost, which per capita cost are they
using? Are they using an average across all populations or applying a different
per capita estimate for each population (e.g., one for the elderly and disabled
population, another for the child population)?

5. The $20 billion figure from CBO will not be evenly
distributed amongst the states, but it’s highly unlikely that one state would
account for the vast majority of spending. Again, does the share of spending in
your state fit within this larger context?

6. What federal matching rate (FMAP) are they applying to
a particular population in each fiscal year? FMAPs vary depending upon the
population, the fiscal year, and the state, so it’s important to apply the
correct match rate.

7. How are they (if at all) accounting for administrative

8. Are they including costs they shouldn’t (for example,
the increase in Medicaid primary care provider rates is 100% federally funded)?
Are they including any savings (for example, a decline in uncompensated care)?

There may not necessarily be “right” answers for all of
these questions – it may depend upon what data are available and the particular
circumstances of the state. However, when evaluating the accuracy of the
estimates, it’s vital to know what the underlying assumptions are – otherwise,
we really can’t evaluate what the true costs might be.

As for us at CCF, we’re still working on fully absorbing the impact of health reform on the states (after all – it’s a pretty big question!).  This is a good place to start thinking and we’ll continue to share our thoughts on the topic of cost.  

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