Access to affordable health insurance with adequate coverage of key benefits is essential to the ability of people with disabilities to seek and maintain employment. As their income fluctuates, people may migrate between Medicaid and Marketplace coverage, and because different rules apply in these two programs, they may face changes in their benefits and out-of-pocket responsibilities as a consequence. This issue brief uses hypothetical examples of working people with disabilities to illustrate the experiences they might have with Medicaid and Marketplace coverage in four states (California, Kentucky, New Jersey, and Ohio), with a focus on benefits that are typically important to people with disabilities.

The profiles include:

• Susan, a 21 year old woman, with mild cerebral palsy (CP) who is working part-time while completing her Bachelor’s degree;
• John, a 35 year old construction worker, with clinical depression; and
• Mary, a 40 year old woman who works at a fast food restaurant and recently was diagnosed with multiple sclerosis.

Key themes emerging from this analysis include the following:

• Due to mental health parity requirements, Medicaid benefits for newly eligible adults may include more extensive mental health and substance use treatment services, unless states also modify their Medicaid state plan benefits to reflect the full extent of required coverage for new adults. These differences are likely to affect John as he seeks treatment for clinical depression. For example, while outpatient mental health, clinic, and case management services are available under both New Jersey’s Medicaid state plan and its new adult alternative benefit plan (ABP), New Jersey’s ABP also has more extensive mental health and substance use treatment services and includes more intensive care coordination and treatment services, such behavioral health homes and program of assertive community treatment services, which might be appropriate for John, depending on his needs.
• Prescription drug coverage is likely to vary between Medicaid and Marketplace Qualified Health Plans (QHPs) as well as among QHPs within a state. Because Susan takes prescription drugs to control the muscle spasticity resulting from CP, she will want to carefully evaluate the different Marketplace QHP formularies to see if the drugs that she currently is prescribed are covered when she takes a higher paying job and transitions from Medicaid to Marketplace coverage.
• Within a benefit category, Marketplace QHP coverage of specific services, such as rehabilitative and habilitative services, may differ from Medicaid coverage and may be subject to different utilization limits than apply in Medicaid in some states. Coverage of specific services also may vary among QHPs within a state. For example, if Mary seeks physical therapy services to address the effects of MS, she would have similar coverage under Ohio’s new adult ABP and state plan benefits, which both cover 30 physical therapy visits per year, with additional visits approved through prior authorization. After Mary transitions to Marketplace coverage when her earnings increase, she would have somewhat less generous coverage under the Ohio benchmark QHP, which covers 20 physical therapy visits per year.
• Coverage of long-term services and supports may be more extensive in Medicaid than in Marketplace QHPs. For example, while personal care services are optional in Medicaid, New Jersey includes them in its Medicaid state plan and new adult ABP. Once Susan transitions to Marketplace coverage, personal care services are not included in New Jersey’s benchmark QHP.
• Provider networks may differ between Medicaid and Marketplace QHPs.  If it is important for John to remain with the same psychiatrist who has been treating him, then he will want to choose a QHP in which that physician participates when he moves from Medicaid to Marketplace coverage.
• Beneficiaries are likely to experience higher out-of-pocket costs in Marketplace QHPs than in Medicaid. While Medicaid premiums and cost-sharing are imposed at state option and limited to certain populations, Marketplace QHPs have premiums that are limited based on income, ranging from 2% of income for those with incomes up to 133% FPL to 9.5% of income for those with incomes from 300-400% FPL in 2014. California has standardized cost-sharing amounts for all its Marketplace plans in the same metal tier, while cost-sharing varies among QHPs in the other states in this analysis.

Looking ahead, Medicaid is likely to remain an important source of coverage for working people with disabilities, and the ACA’s Medicaid expansion and new Marketplace QHPs will provide greater access to affordable coverage for this population as their incomes increase. Understanding experiences that working people with various disabilities are likely to encounter can help inform policymakers’ choices in designing Medicaid and Marketplace benefit packages and cost-sharing rules.

Nearly 27% of working-age people with disabilities were employed in 2013, and an additional almost 15% were unemployed but actively seeking work.¹  Programs such as the Social Security Administration’s Ticket to Work²  for people who receive Social Security Disability Insurance or Supplemental Security Income benefits, as well as state vocational rehabilitation agencies,³  offer job search, training, and other services to support the employment of people with disabilities. However, access to affordable health insurance that meets their needs for medical and long-term services and supports (LTSS) remains essential to the ability of people with disabilities to seek and maintain employment.

Medicaid has long been an important source of health insurance for people with disabilities. The Affordable Care Act (ACA) created new coverage options, effective January 1, 2014, that benefit people with and without disabilities.⁴  The health reform law expanded Medicaid to adults with incomes up to 138% of the federal poverty level (FPL, $16,105 per year for an individual in 2014), many of whom previously were ineligible for coverage. (Due to the Supreme Court’s ruling on the ACA, the Medicaid expansion is effectively a state option.⁵ ) The Medicaid expansion establishes a uniform level of financial eligibility, which promotes continuity of coverage when workers change jobs or move interstate, to the extent that states have expanded coverage. In addition, there are several optional coverage groups that allow working people with disabilities to buy in to Medicaid coverage by paying a premium.

The ACA also provides for qualified health plans (QHPs) that people without access to employer-sponsored or other coverage that meets federal minimum standards can purchase through new health insurance Marketplaces. QHP benefit packages are based on a benchmark commercial insurance plan and therefore are similar to employer-sponsored insurance. To make Marketplace coverage more affordable, the ACA provides for premium tax credits for people with incomes from 100% to 400% FPL ($11,670 to $46,680 per year for an individual in 2014) and cost-sharing reductions for people with incomes from 100% to 250% FPL ($11,670 to $29,175 per year for an individual in 2014). In addition, the ACA includes private insurance market reforms that improve access to coverage for people with disabilities. These include a provision for guaranteed issue, which prevents health insurers from denying coverage to people for any reason, including pre-existing conditions, and a provision requiring community rating, which allows health plans to vary premiums based only on age, geographic area, tobacco use, and number of family members, and thereby prohibits plans from charging higher premiums based on health status or gender.

As people’s incomes fluctuate, they may move between Medicaid and Marketplace coverage and, because different rules apply to the two programs, face changes in their benefits and out-of-pocket costs as a consequence. This issue brief uses hypothetical examples of working people with disabilities to illustrate the kinds of experiences they are likely to have with Medicaid and Marketplace coverage in four states – California, Kentucky, New Jersey, and Ohio – with a focus on benefits typically important to people with disabilities, including mental health and substance use treatment services, prescription drugs, rehabilitative and habilitative services and devices, and LTSS. All four states have implemented the ACA’s Medicaid expansion. However, they have made different decisions about how to design their Medicaid benefit packages for newly eligible adults, and how to set up and administer the Marketplace that serves their state. Key themes identified from this analysis reveal the potential impact of various state and plan decisions on working people with disabilities and can help inform policymakers’ future choices in designing Medicaid and Marketplace benefit packages and cost-sharing rules.

Medicaid and Marketplace Benefits

Federal law requires all states that participate in the Medicaid program to cover certain benefits and also allows states to cover additional optional benefits.⁶  Examples of mandatory state plan benefits include inpatient hospitalization and outpatient physician services; examples of optional state plan benefits include prescription drugs (which all states currently cover) and many LTSS important to people with disabilities, such as personal care services. As a result of the broad state flexibility to define Medicaid benefits under federal law, the specific services that states cover (outside the federally required services) vary widely.

Under federal law, states also have the flexibility to offer different Medicaid benefit packages to different populations, provided that certain minimum benefits are covered. This is accomplished by designing an alternative benefit plan (ABP, previously called “benchmark coverage”) based on one of several commercial insurance plans or on a benefit package approved by the Health and Human Services Secretary.⁷  Prior to the ACA, only a few states took up the ABP option. However, the ACA requires that adults newly eligible through the Medicaid expansion receive an ABP. An exception to this rule is that beneficiaries who are considered medically frail must have access to all the benefits contained in the Medicaid state plan package, to the extent that it differs from the new adult ABP. Unlike Medicaid state plan benefits, ABPs must cover the 10 categories of essential health benefits (EHBs) set out in the ACA. ABPs also must provide parity in coverage of physical and mental health benefits and include certain traditional Medicaid services, such as non-emergency medical transportation and federally qualified health center services.

Beyond these minimum requirements, states can choose the underlying benchmark plan on which an ABP is based and decide whether to align the contents of their new adult ABP with their Medicaid state plan benefit package. If the state plan and new adult ABP benefits are fully aligned, all Medicaid beneficiaries in the state have access to the same set of benefits. If states do not align the two benefit packages, then beneficiaries may have access to different sets of services if they shift from the new adult group to a pre-ACA coverage group or vice versa when their income changes. For example, certain LTSS may be available through the Medicaid state plan benefit package but not included in the new adult ABP, depending on the state’s choices. At the same time, even if states base their new adult ABP on their state plan benefit package, the new adult ABP may include more benefits, such as additional behavioral health and preventive services, unless states also add these services to their state plan benefit packages. This result could arise because the ACA’s EHB and mental health parity requirements apply to ABPs but not to Medicaid state plan benefits. (However, if a state opts to deliver Medicaid state plan benefits through managed care organizations (MCOs), mental health parity is required for Medicaid MCOs, to the extent that the MCO’s benefit package includes both physical and mental health services.)

Marketplace QHP and Medicaid new adult ABP benefit packages both must include the 10 categories of EHBs. However, the specific services that QHPs cover within an EHB category may differ from those covered under the new adult ABP because the ACA allows states to base their QHPs and new adult ABP on different underlying benchmark plans. The ACA also allows for benefit substitution within an EHB category as long as the substitute benefits are actuarially equivalent to those they replaced. Thus, there are likely to be differences in the coverage of specific services among different QHPs, and also between QHPs and Medicaid. Key differences between Medicaid state plans, ABPs, and Marketplace QHPs in coverage of benefits that are important to people with disabilities are summarized in Table 1 below.

Medicaid and Marketplace Cost-Sharing

Federal law permits states to impose premiums and cost-sharing on certain Medicaid beneficiaries subject to specified limits and exemptions.⁸  Medicaid premiums and cost-sharing are limited to 5% of family income, calculated on a quarterly or monthly basis, at state option. Premiums generally are not permitted for Medicaid beneficiaries with incomes below 150% FPL ($17,505 for an individual in 2014), but can be imposed at state option on some populations with incomes above that level. There also are several optional Medicaid eligibility groups for working people with disabilities that enable such individuals to “buy in” to Medicaid coverage by paying a sliding-scale premium based on income.

Medicaid co-payments also are permitted for some populations at state option. Co-payments must be “nominal” for beneficiaries with incomes below the federal poverty level and are subject to federal maximums for beneficiaries with higher incomes. For example, in 2014, the maximum co-payment for an outpatient service for people with income at or below poverty is $4, and co-payments for outpatient services are limited to 10% of the agency’s cost for those with incomes between 101-150% FPL, and to 20% of the agency’s cost for those with more income. The maximum co-payment for preferred prescription drugs for all beneficiaries in 2014 is $4; for non-preferred drugs, the maximum co-payment is $8 for people with incomes at or below 150% FPL, and 20% of the agency’s cost for those with more income. State Medicaid programs must cover preventive services without cost-sharing, and providers cannot deny services for Medicaid beneficiaries’ failure to pay a co-payment for people with incomes below poverty.

In the Marketplace, the ACA limits QHP premium costs, ranging from 2% of enrollee income for those up to 133% FPL to 9.5% of income for those from 300-400% FPL in 2014. Marketplace enrollees with incomes between 100% and 400% FPL qualify for advance payment of tax credits to subsidize premium costs that exceed this limit. In addition to premiums, QHPs can charge deductibles and co-payments. Enrollees with incomes between 100% and 250% FPL qualify for cost-sharing reductions to limit their out-of-pocket costs. As in Medicaid, Marketplace QHPs must cover preventive services without cost-sharing. Key differences in cost-sharing between Medicaid state plans, ABPs, and Marketplace QHPs are summarized in Table 2 below.

Marketplace Structure and Administration

The ACA gives states the option to establish their own Marketplace. State-based Marketplaces can be active purchasers of QHPs, regulating which plans can be offered for purchase. Alternatively, state-based Marketplaces can act simply as clearinghouses, allowing any issuer that wishes to offer a plan on the Marketplace to do so.

The ACA provides for a federally facilitated Marketplace (FFM) as a default in states that elect not to establish their own Marketplace. States also may choose to administer a Marketplace in partnership with the federal government by assuming control over the QHP administration and/or consumer assistance functions.

 

Project Overview

In light of the varied requirements and flexibilities pertaining to the design of benefit packages and to cost-sharing amounts in Medicaid and the Marketplace, and to illustrate the impact of different state policy choices on working people with disabilities, this issue brief considers the rules as they might affect representative individuals in different situations. The rest of this paper presents three profiles of hypothetical working people with disabilities and examines how their benefits and cost-sharing obligations may differ as they move between Medicaid state plan and new adult ABP coverage and between Medicaid and Marketplace QHPs. The analysis focuses on selected categories of benefits that are important to many people with disabilities, including mental health and substance use treatment services, prescription drugs, rehabilitative and habilitative services and devices, and LTSS.

The analysis considers the benefits and cost-sharing rules that apply to newly eligible adults in Medicaid programs in four selected states. It is important to note that if an individual who is eligible under the ACA’s expansion meets the definition of “medically frail” or also qualifies for Medicaid through a disability-related (non-MAGI) eligibility pathway, that individual must have access to all Medicaid state plan benefits, to the extent that state plan benefits may differ from those in the state’s new adult ABP. The analysis also considers the benefits and cost-sharing rules in representative QHPs in the four states’ Marketplaces.

The states included in this analysis are California, Kentucky, New Jersey, and Ohio. These states, all of which are implementing the ACA’s Medicaid expansion in 2014, were selected to illustrate different state policy choices about aligning Medicaid state plan benefits and new adult ABPs and about whether to operate a state-based or partnership Marketplace or to default to the FFM. This brief relies on Medicaid benefit and cost-sharing information from current state plans or applicable § 1115 demonstration waivers, and on states’ new adult ABP state plan amendments as approved by CMS. Benefit information for Marketplace QHPs is based on the summary of benefits for the Marketplace benchmark plan selected by the state. All QHPs must have benefit packages that are actuarially equivalent to the benchmark plan, so the benchmark plan coverage can be considered representative of what a person would find in a Marketplace QHP. Cost-sharing information for Marketplace QHPs is based on an actual 2014 silver-level plan considered to be representative in each state, with premium tax credits determined using the Kaiser Family Foundation’s subsidy calculator.⁹ 

It also is important to note that the actual coverage of specific services depends on an individual’s health condition, the recommendation(s) of a treating provider, and the state’s Medicaid medical necessity criteria or the applicable QHP coverage criteria. Also, this analysis is based on general language about covered categories of benefits in the sources described above; often, it is not possible to determine whether a specific service or item is covered by a plan until an actual claim is submitted. While the QHP benchmark plan used in this analysis is representative of what Marketplace QHPs cover, as noted above, plans may substitute actuarially equivalent benefits within the same EHB category. Therefore, the QHP coverage described in this brief is illustrative and not necessarily exactly what is available in all Marketplace QHPs in that state.

Table 3 summarizes the key Medicaid state plan and ABP benefits and Marketplace design choices among the states selected for this analysis. More detailed information about benefits and cost-sharing in each state’s Medicaid state plan and new adult ABP and representative Marketplace QHP is included in Appendix 1 and the methodology used to select the QHPs for the cost-sharing comparisons is included in Appendix 2.

Profile Summaries

Summaries of the three hypothetical profiles of working people with disabilities used in this analysis are presented below. The full profiles are included in Appendix 3.

Hypothetical 1: Susan, age 21, Diagnosed with mild cerebral palsy (CP)

Susan recently completed community college and transferred to a four-year college to complete her Bachelor’s degree. She lives on her own and works 25 hours per week as a cashier, earning $8.25 per hour. Her state has implemented the ACA’s Medicaid expansion, and her annual earnings of $10,725, or about 92% of the federal poverty level for a single adult in 2014, make her eligible for Medicaid in 2014. Susan is subsequently offered a job as a bookkeeper during her senior year of college. When she changes jobs, she continues working 25 hours per week, but earns $13 per hour. Her new annual earnings of $16,900, or approximately 145% FPL in 2014, make her eligible for Marketplace coverage with premium tax credits and cost-sharing reductions.

Susan’s needs for acute physical health and preventive services are the same as those of other, healthy young adults. She also has some additional medical needs associated with her CP diagnosis. Susan is able to walk but uses crutches or a power scooter when she travels significant distances, including getting around campus. Because Susan’s fine motor skills are mildly impaired, her family sometimes helped her button or tie clothing, prepare meals and do laundry when she was living at home. Susan had no plan for seeking assistance with her personal care needs when she went away to college, so they will likely be unmet, or performed to the best of her ability, without formal personal care services in place. She receives physical therapy twice a month to manage contractures stemming from muscle spasticity, and her physician believes she would benefit from weekly physical therapy and monthly occupational therapy to improve her fine motor skills. She takes prescription medication to control muscle spasticity, which is a common condition secondary to CP. While she is not currently in treatment for mental health issues, Susan was bullied in school because of her gait and use of crutches. She may have undiagnosed mild depression and/or anxiety as a result and might benefit from mental health diagnostic services, and if warranted, treatment.

Hypothetical 2: John, age 35, Diagnosed with clinical depression

John is a high school graduate with a limited work history as a seasonal day laborer for a local construction company. In three of the last five years, he earned approximately $15,000 per year, or about 129% FPL for a single adult in 2014. John’s state has implemented the ACA’s Medicaid expansion, and he is eligible for Medicaid in 2014. John was recently offered a year-round job as an assistant to an auto mechanic, earning $8.15/hour for a 40-hour work week. If he takes this job, John would make $16,952 a year, or about 145% FPL in 2014 and will become eligible for Marketplace coverage with premium tax credits and cost-sharing reductions.

John was first diagnosed with depression after a failed suicide attempt at age 32 when he was taken to the emergency department and involuntarily committed to inpatient treatment. John needs regular doctor appointments and takes a prescription anti-depressant medication.   John’s doctor has encouraged him to seek individual and group therapy, but he has been unable to follow up on this recommendation because he previously was uninsured and unable to pay out-of-pocket. He also could benefit from regular preventive health care services.

Hypothetical 3: Mary, age 40, Diagnosed with multiple sclerosis

Mary finished high school but never went to college and currently works at a fast food restaurant. Mary works 30 hours a week at $8.25 per hour, with annual earnings of approximately $12,870, or about 110% FPL for a single adult in 2014. Her state has implemented the ACA’s Medicaid expansion, and she is eligible for Medicaid in 2014. Mary then decides to take a job selling tickets at a movie theater on the weekends, where she will earn $8.50 per hour. She will work 9 hours per week, earning$3,978 per year and bringing her total annual income to $16,848, or nearly 145% FPL in 2014. Once Mary takes her second job, she will become eligible for Marketplace coverage with tax credits and cost-sharing reductions.

Mary’s lack of health insurance and limited income have made it difficult for her to afford basic preventive health care, such as annual physical examinations. In January 2014, she visited the emergency department after experiencing an extended bout of blurred vision and muscle weakness and subsequently was diagnosed with multiple sclerosis. Mary now sees a neurologist, who recommended that she begin receiving regular doses of an injectable drug to slow the progression of the disease. He also referred her to a physical therapist for regular treatment of her muscular weakness and ordered some additional tests to assess the extent of impairment in her vision and fine motor functioning.

Some common themes emerge from the analysis of Susan, John, and Mary’s potential experiences as working people with disabilities seeking coverage under Medicaid and the Marketplace in selected states. As background, when analyzing the scope of benefits available through Medicaid in various states, it is important to remember that differences between Medicaid state plan and new adult ABP benefits reflect state choices about which optional Medicaid benefits to cover in their state plans and about whether to fully align their new adult ABP and their state plan benefits. In addition, determining the specifics about coverage of particular services in Marketplace QHPs is difficult without actually submitting a claim to the plan, as little detailed information is readily available from public sources. The key themes in this analysis include the following:

Mental Health and Substance Use Disorder Treatment Services

• Because mental health parity requirements apply to Medicaid new adult ABPs, these plans may offer more extensive coverage of mental health and substance use treatment services than Medicaid state plan benefits do, unless states also modify their Medicaid state plan benefits to reflect the full extent of new adult ABP coverage (and unless state plan benefits are delivered through Medicaid MCOs, which must provide parity if both physical and mental health benefits are covered).

Example: Susan’s Potential Experience in California and New Jersey

Susan might seek mental health diagnostic and treatment services for possible depression and/or anxiety stemming from the bullying she experienced as a result of her physical disabilities. If Susan lives in California, she has access to the same package of Medicaid mental health services regardless of whether she receives state plan benefits as a previously eligible adult or the ABP as a newly eligible adult. This is because California has elected to align its new adult ABP with its state plan benefits, both of which include outpatient mental health services, such as evaluation, therapy, and psychological testing. (Table 4)

Even though New Jersey has chosen not to align its Medicaid state plan benefits and its new adult ABP, Susan should be able to access the outpatient mental health services or mental health clinic services she might need through both the Medicaid state plan benefits package and the new adult ABP. Due to the mental health parity rules that apply to ABPs, New Jersey’s new adult ABP has more extensive mental health and substance use treatment services than are covered in the Medicaid state plan. However, the additional services included in New Jersey’s new adult ABP, such as behavioral health homes, mental health adult rehabilitation services (group homes), and program of assertive community treatment services, appear to be beyond what Susan might need at this time. (Table 8)

Once Susan accepts the position as a bookkeeper and her income increases, she would have access to outpatient mental health services through a Marketplace QHP. Based on the available information about QHP benefits, it is difficult to determine whether, in California and New Jersey, Marketplace coverage of mental health services would be more or less generous than, or comparable to, Medicaid coverage. California requires QHPs to cover outpatient mental health services for “severe mental illness” (Table 4), and a New Jersey state mandate requires insurers to cover services for “biologically based mental illness.” (Table 8)

Example: John’s Potential Experience in New Jersey and Ohio

Given John’s primary diagnosis of clinical depression, mental health treatment services will be important to support his ability to work. In contrast to Susan, John will likely be affected by the benefit differences between New Jersey’s Medicaid state plan and its new adult ABP, because his mental health treatment needs are more intensive. As noted earlier, New Jersey has chosen not to align its Medicaid state plan benefits with its new adult ABP, with the result that the new adult ABP has more extensive mental health and substance use treatment services (due to the mental health parity requirements). Outpatient mental health, clinic, and case management services are available under both New Jersey’s Medicaid state plan and the new adult ABP. In addition, New Jersey’s ABP includes more intensive care coordination and treatment services, such behavioral health homes and program of assertive community treatment services, which might be appropriate for John, depending on his needs. (Table 8)

If John lived in Ohio, he would have access to the same categories of mental health treatment services regardless of his Medicaid coverage group because the state has chosen to include all of its Medicaid state plan services in its new adult ABP. The mental health benefits in both packages include psychologist services, psychiatric clinical nurse specialists, behavioral health clinic services (including counseling, therapy, mental health assessment, pharmacologic management, partial hospitalization, crisis intervention, community psychiatric supportive treatment), and case management services. Ohio also has opted to include behavioral health home services for people with serious mental illness in both Medicaid packages. However, due to the mental health parity rules that apply to ABPs, Ohio has removed the Medicaid state plan utilization limits on mental health services from the ABP. Examples of utilization limits under Ohio’s state plan Medicaid benefits that do not apply to the ABP include a maximum of 52 hours per year of behavioral health counseling and therapy and a maximum of 30 cumulative hours per week of group and individual counseling and medical/somatic services. (Table 10)

Like Susan, when John moves from the new adult ABP to Marketplace coverage, he would continue to have access to mental health outpatient services through a QHP in Ohio. However, he would be subject to different utilization limits, as the benchmark plan for Ohio’s QHPs limits outpatient mental health services to 30 visits per year. (Table 10)

Prescription Drugs

• Prescription drug coverage is likely to differ between Medicaid and Marketplace plans. State Medicaid programs must cover must cover all FDA-approved drugs whose manufacturers have entered into a rebate agreement with the state. By contrast, the EHB provisions of the ACA only require Marketplace QHPs’ formularies to include at least one drug per class. All four states included in this analysis chose to use the same prescription drug formulary for their Medicaid state plan and new adult ABP. It is likely that QHPs will cover fewer drugs than Medicaid because of the different rules for QHPs. In addition, QHPs may have different preferred drug lists than state Medicaid programs do. Finally, prescription drug coverage is likely to vary among QHPs.

Example: Susan, John and Mary’s Potential Experiences

Prescription drug coverage is important to all three representative people with disabilities, as Susan takes medication to help control the muscle spasticity that results from her cerebral palsy, John takes medication to treat his depression, and Mary relies on medication to address the effects of MS. California, Kentucky, New Jersey, and Ohio all have chosen to cover the same prescription drugs in their Medicaid state plan and new adult ABP, so if beneficiaries transition between Medicaid coverage groups in these states, their prescription drug coverage should not change. Kentucky and Ohio’s Medicaid programs use a preferred drug list, and some drugs may require prior authorization. (Tables 4, 6, 8, 10)

When Susan, John, or Mary transitions to a Marketplace QHP, they will want to carefully evaluate the different plan formularies to see if the drugs that they are currently prescribed are covered. Prescription drug coverage is likely to be an area of difference between Medicaid and the Marketplace because state Medicaid programs must cover must cover all FDA-approved drugs whose manufacturers have entered into a rebate agreement, while Marketplace QHPs must cover at least one drug per class. In addition, coverage of specific drugs may vary among QHPs. As long as one drug per class is covered, not all drugs may be covered by a particular QHP. In addition, QHPs may assign drugs to different formulary tiers (e.g., preferred vs. non-preferred brand), which could affect out-of-pocket cost-sharing. (Tables 4, 6, 8, 10)

Rehabilitative and Habilitative Services and Devices

• Marketplace QHP coverage of specific benefits within an EHB category, such as rehabilitative and habilitative services, may differ from Medicaid coverage of these services and may be subject to different utilization limits than under Medicaid in some states. Coverage of specific services also may vary among QHPs in the same state.

Example: Susan’s Potential Experience in California and New Jersey

Durable Medical Equipment

Because Susan relies on crutches to ambulate short distances and a power scooter for longer distances as a result of cerebral palsy, her plan’s coverage of durable medical equipment will be important. As noted above, California has chosen to align its Medicaid state plan benefits with its new adult ABP, and durable medical equipment is covered under both, subject to prior authorization. Susan would need to look into whether the specific equipment that she needs would be covered, likely by submitting a claim. (Table 4)

By contrast, New Jersey’s Medicaid state plan benefits include durable medical equipment, but New Jersey’s new adult ABP does not, so this would be an area of difference in coverage for Susan, if she was eligible for Medicaid as a new adult, unless she meets the definition of “medically frail” in which case she could access the state plan benefits as a newly eligible adult. (Table 8)

Marketplace QHPs in both California and New Jersey cover durable medical equipment, subject to prior authorization (durable medical equipment also is a state mandated benefit for insurers in New Jersey). Again, Susan would need to submit a claim to determine whether the specific equipment she needs would be covered by her particular QHP. (Tables 4 and 8)

Physical and occupational therapy

If Susan decides to continue or increase the physical and/or occupational therapy recommended by her doctor to address the effects of cerebral palsy, it appears that she would have access to these services in Medicaid and the Marketplace in both California and New Jersey, although perhaps subject to different utilization limits. Again, California’s Medicaid state plan and new adult ABP services are aligned, and both include physical and occupational therapy services. In New Jersey, the Medicaid state plan benefit package includes physical and occupational therapy as rehabilitative services, while the new adult ABP covers these services for both rehabilitative and habilitative purposes. (Tables 4 and 8)

California Marketplace QHPs cover physical and occupational therapy as outpatient rehabilitative services, and they also cover habilitative services (which also are a state-mandated benefit in California). The New Jersey Marketplace benchmark QHP used in this analysis covers physical and occupational therapy for both rehabilitative and habilitative purposes but also includes a utilization limit of 30 visits per year. The coverage of physical and occupational therapy for habilitative purposes, as distinct from rehabilitative purposes, may be significant for Susan as rehabilitative services generally are provided to help people regain lost skills, while habilitative services focus on the acquisition of skills which are missing due to a disabling condition. (Tables 4 and 8)

Example: Mary’s Potential Experience in Kentucky and Ohio

Mary may seek physical therapy services to address the effects of MS. Kentucky has opted to align its new adult ABP with its Medicaid state plan benefits. Physical therapy is covered under both, limited to 20 visits per year, with prior authorization. In Ohio, Mary would have similar physical therapy coverage under that state’s Medicaid program under the state plan or new adult ABP, although with different utilization limits as compared to Kentucky. Ohio’s Medicaid state plan and new adult ABP both cover physical therapy at 30 visits per year, with additional visits approved through prior authorization. (Tables 6 and 10)

After Mary transitions to the Marketplace, Kentucky’s QHP benchmark coverage for physical therapy is the same as under its Medicaid program, limited to 20 outpatient visits per year. The benchmark QHP plan for Ohio covers 20 physical therapy visits per year, so under that plan in the Marketplace, Mary would have somewhat less generous coverage than under Ohio Medicaid. (Tables 6 and 10)

Long-term Services and Supports

• Coverage of LTSS may be more extensive in Medicaid than in Marketplace QHPs.

Example: Susan’s Potential Experience in California and New Jersey

If Susan decides to pursue personal care services for assistance with dressing and household activities once she is living alone, she might encounter coverage differences when she moves from Medicaid to the Marketplace. Personal care services are optional in Medicaid, but both California and New Jersey have chosen to include them in their Medicaid state plans and their new adult ABPs, along with the option for beneficiaries to self-direct these services. As with any other Medicaid service, Susan will have to meet each state’s medical necessity criteria to qualify for personal care services. In addition, in California, Susan also will have to meet the medically frail criteria to qualify for personal care services in the new adult ABP. California’s Medicaid program also covers attendant care services and supports through the ACA’s new Community First Choice state plan option. Once Susan transitions to Marketplace coverage, personal care services are not included in either state’s benchmark QHP, although both cover home health care services. (Tables 4 and 8)

Provider Networks

• Provider networks may differ between Medicaid and Marketplace coverage. Medicaid beneficiaries are limited to the providers who choose to participate in a state’s Medicaid program, while QHP enrollees are limited to the providers included in the plan’s network.

Example: Susan, John, and Mary’s experiences

Susan, John, and Mary all will need to see a primary care doctor for preventive care as well as specialists (an orthopedist for Susan, a psychiatrist for John, and a neurologist for Mary). In Medicaid, they will be limited to the providers who choose to participate in each state’s program, and in the Marketplace, they will be limited to the network of physicians covered by the QHP that they select. If it is important for Susan to remain with the same orthopedist who has cared for her throughout her life, then she will want to choose a QHP in which that physician participates. John and Mary also will want to consider which providers participate in each QHP’s network when selecting a plan.

Cost-sharing

• Beneficiaries are likely to experience higher out-of-pocket costs in Marketplace QHPs than in Medicaid. Premiums are generally not permitted in Medicaid for people with incomes below 150% FPL. None of the states used in this analysis included premiums for people above 150% FPL or deductibles, and some included limited co-payments in their Medicaid programs. By contrast, Marketplace QHP enrollees with incomes between 100-133% FPL will have premium costs of 2% of income in 2014, as well as deductibles, co-insurance, and/or co-payments; those from 133-150% FPL will have premium costs of 3% of income in 2014. While Marketplace cost-sharing reductions contribute to making coverage more affordable, as illustrated in Kentucky, the deductibles and co-payments in QHPs still exceed the limits in Medicaid. In addition, Marketplace premium and cost-sharing amounts vary among states, as the ACA allows variation based on geographic region.

Example: Susan’s Potential Experience in California and New Jersey

Medicaid premiums and cost-sharing are imposed at state option, and it does not appear that Susan will be subject to any out-of-pocket costs when she is covered by the Medicaid state plan or the new adult ABP in California or New Jersey. (Tables 5 and 9)

When Susan transitions to Marketplace coverage, her income will have increased, but her out-of-pocket health care costs will increase as well. Marketplace plans have premiums that are limited to 2% of enrollee income for those from 100-133% FPL and 3% of income for those from 133-150% FPL in 2014. Pursuant to the ACA’s community rating provision, plans can vary premiums based only on age, geographic area, tobacco use, and number of family members. In the QHP selected for this analysis, Susan will pay $108 per month in premiums and receive a premium subsidy of $137 per month if she is earning 145% FPL. California has chosen to standardize cost-sharing amounts for all Marketplace plans in the same metal tier. For the representative California silver level plan used in this analysis, Susan will have an annual deductible of $1,500 for medical services and $250 for prescription drugs, and her out-of-pocket costs will be capped at $5,200. She also will have co-payments, such as $40 for a primary care visit, $50 for a specialist visit, and $19 for a generic drug. These amounts include the ACA’s cost-sharing reductions. (Table 5)

Premiums and cost-sharing vary among QHPs in New Jersey’s FFM. In the representative QHP selected for this analysis, with earnings of 145% FPL, Susan will have monthly premiums of $48 and qualify for a premium subsidy of $256 per month. She also would have a $100 annual deductible, with out-of-pocket costs limited to $750. And, she would have co-payments, such as $15 for a primary care visit and $30 for a specialist visit after her deductible is met, and $7 for a generic drug. These amounts include the ACA’s cost-sharing reductions. (Table 9)

Example: John’s Potential Experience in Ohio

Like Susan, John’s out-of-pocket costs will vary depending on his coverage source. Ohio’s Medicaid program has co-payments for prescription drugs ($3 for non-preferred drugs and $2 for selected single-source drugs) that apply in its Medicaid state plan and new adult ABP.

When John transitions to Marketplace coverage in Ohio, he will have additional out-of-pocket costs. The representative QHP in Ohio has an annual deductible of $100, with an out-of-pocket maximum of $2,250. After the plan deductible is met, primary care and specialists visits are subject to 5% coinsurance, and there are $5 co-payments for generic drugs. At 145% FPL, John would have monthly QHP premiums of $49, with a premium subsidy of $186 in Ohio. These amounts include the ACA’s cost-sharing reductions. (Table 11)

Example: Mary’s Potential Experience in Kentucky

As in other states, Mary’s out-of-pocket costs will differ as she moves between Medicaid and Marketplace coverage in Kentucky. Kentucky’s Medicaid program does not charge premiums, but it does include co-payments for certain services under both its state plan and the new adult ABP. For example, Mary would have to pay $3 for a doctor’s office visit or a physical therapy session, $1 for generic drugs, $4 for preferred brand-name drugs, and $8 for non-preferred brand name drugs.

Once Mary transitions to a Marketplace QHP in Kentucky, she would qualify for cost-sharing reductions wither her income of 145% FPL. The information available about Kentucky’s representative QHP illustrates the significant role that the ACA’s cost-sharing reductions play in helping make Marketplace coverage more affordable for people with incomes between 100-250% FPL. For example, Mary’s annual deductible in the representative Kentucky QHP in 2014 is $200 with cost-sharing reductions but $2,500 without cost-sharing reductions. Similarly, her out-of-pocket maximum is $600 with cost-sharing reductions but $6,350 without cost-sharing reductions. Mary’s co-payments for certain services also would vary in the representative Kentucky QHP with and without cost-sharing reductions. For example, with cost-sharing reductions, a primary care doctor’s visit has a $10 co-payment for the first three visits, which are not subject to the deductible. After the deductible is met, Mary’s co-insurance is 10% for additional visits. Without cost-sharing reductions, the co-payment for the first three doctor’s visits is $40. Generic drug co-payments are $10 with cost-sharing reductions and $15 without cost-sharing reductions. (Table 7)

Medicaid is likely to remain an important source of coverage for working people with disabilities, and the ACA’s Medicaid expansion and new Marketplace QHPs will provide greater access to affordable coverage for this population across the income spectrum. Given the state flexibilities provided in federal law, there is wide variation in Medicaid benefits and cost-sharing across states. Because of the additional flexibility that states have in designing their new adult ABPs, working people with disabilities who are covered as newly eligible adults may experience some changes in their benefits and cost-sharing if they move between different Medicaid coverage groups due to changes in their income and/or their health status (i.e., medical frailty). Most states have chosen to minimize any differences, but where they exist, newly eligible adults might have broader mental health and substance use treatment coverage and more limited LTSS coverage than other Medicaid adults in their state. Differences in benefits and cost-sharing are likely to be more significant when working people with disabilities move between Medicaid and Marketplace coverage, given the different rules that apply to each program. Understanding how these differences may affect working people with diverse disabilities can help inform future policy-making related to benefits and cost-sharing under the ACA’s new coverage options.

• Table 4: Selected Benefits Covered Through Medicaid and the Marketplace in California
• Table 5: Cost-Sharing in Medicaid and the Marketplace in California
• Table 6: Selected Benefits Covered Through Medicaid and the Marketplace in Kentucky
• Table 7: Cost-Sharing in Medicaid and the Marketplace in Kentucky
• Table 8: Selected Benefits Covered Through Medicaid and the Marketplace in New Jersey
• Table 9: Cost-Sharing in Medicaid and the Marketplace in New Jersey
• Table 10: Selected Benefits Covered Through Medicaid and the Marketplace in Ohio
• Table 11: Cost-Sharing in Medicaid and the Marketplace in Ohio

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Hypothetical 1: Susan, age 21, Diagnosed with mild cerebral palsy (CP)

Education and Work History: After graduating from high school, Susan enrolled in a local community college.   She received her Associate’s degree and then transferred to a four-year college to complete her Bachelor’s degree. At that point, she moved out of her parents’ house to attend school and live on her own.

While attending community college, Susan worked as a cashier at a retail clothing store in a local mall. She worked 25 hours per week, earning $8.25 per hour, with annual earnings of $10,725, or about 92% of the federal poverty level for a single adult in 2014. She continued this job during her junior year of college to cover her living expenses and tuition costs that were not covered by grants and student loans.

In her senior year of college, Susan was offered a job as a bookkeeper. She continued working 25 hours per week, but earned $13 per hour in her new job, with annual earnings of $16,900, or approximately 145% FPL in 2014.

Health Insurance Coverage: While living with her parents, Susan was covered under a family health insurance policy that her parents purchased in the individual market, and her parents paid out-of-pocket for all of her disability-related expenses that were not covered by the policy. Susan’s parents now receive employer-sponsored health insurance through their respective jobs. Neither of their policies offers coverage for dependent family members, so Susan was unable to maintain coverage through her parents’ insurance.

Susan’s state expanded Medicaid as of January 2014. While working as a cashier, Susan qualified for Medicaid as a newly eligible adult with earnings below 138% FPL. When she changed jobs and started working as a bookkeeper, Susan became eligible for Marketplace coverage with premium tax credits and cost-sharing reductions.

Health History: Susan’s needs for acute physical health and preventive services are the same as those of other, healthy young adults. She also has some additional medical needs associated with her CP diagnosis. A common symptom of CP is paralysis, which varies significantly across individuals. Susan is able to walk but uses crutches or a power scooter when she travels significant distances, including getting around campus. She takes prescription medication to control muscle spasticity, which is a common condition secondary to CP. The muscle spasticity results in lack of fine motor control, which makes brushing her teeth difficult, and she also has dental issues related to tooth grinding, another complication of muscle spasticity. Because her vision is affected by her CP, she wears prescription eyeglasses.

Susan receives physical therapy twice a month to manage contractures stemming from muscle spasticity. Her physician believes she would benefit from weekly physical therapy and monthly occupational therapy to improve her fine motor skills. However, her coverage for these services was limited to 20 visits per year under her family’s health insurance policy, so she has not received more frequent visits. Since she is relatively young, she has not yet experienced additional complications from her abnormal gait, but she is at risk for developing chronic joint pain and degeneration from the additional strain on her legs due to her gait and on her shoulders due to long-term use of crutches, which could require additional physical therapy.

Because Susan’s fine motor skills are mildly impaired, her family sometimes helped her button or tie clothing, prepare meals and do laundry. Susan had no plan for seeking assistance with these needs when she went away to college, so they will likely be unmet, or performed to the best of her ability, without formal personal care services in place.

While she is not currently in treatment for mental health issues, Susan was bullied in school because of her gait and use of crutches. She may have undiagnosed mild depression and/or anxiety as a result and might benefit from mental health diagnostic services, and if warranted, treatment.

Hypothetical 2: John, age 35, Diagnosed with clinical depression

Education and Work History: John is a high school graduate with a limited work history as a day laborer for a local construction company. The company has employed John seasonally, and in three of the last five years, he earned approximately $15,000 per year, or about 129% FPL for a single adult in 2014. In two of the last five years, due to the economic downturn and bad weather, John’s earnings have been as low as $9,000 per year, or about 77% FPL in 2014.

John was recently offered a year-round job as an assistant to an auto mechanic. The position pays $8.15/hour for a 40-hour work week.. If he takes this job, John would make $16,952 a year, or about 145% FPL in 2014. John prefers working outdoors and feels better when he is not inside all day, but the consistent schedule and regular pay offered by the auto mechanic job is appealing to him.

Health Insurance Coverage: None of John’s past jobs have offered health insurance, and as a single adult without dependent children, he did not qualify for Medicaid before his state implemented the ACA’s Medicaid expansion in January 2014. Based on his current earnings of 129% FPL, he is eligible for Medicaid in 2014. If he accepts the auto mechanic job, John will become eligible for Marketplace coverage with premium tax credits and cost-sharing reductions.

Health History: John was first diagnosed with depression after a failed suicide attempt at age 32 when he was taken to the emergency department and involuntarily committed to inpatient treatment. The hospital released him after 72 hours of observation when the psychiatric staff determined that he was no longer a danger to himself.

John needs regular doctor appointments and takes a prescription anti-depressant medication.   When he was uninsured (prior to becoming eligible for Medicaid through the expansion), John was unable to take his medication consistently, because it is expensive for him to afford out-of-pocket. John’s doctor has encouraged him to seek individual and group therapy, but he has been unable to follow up on this recommendation because he was uninsured and unable to pay out-of-pocket. .

While uninsured, John visited the doctor when he is physically ill and paid out-of-pocket when he had the resources. Otherwise, his health care-related expenses went unmet. He also could benefit from regular preventive health care services.

Hypothetical 3: Mary, age 40, Diagnosed with multiple sclerosis (MS)

Education and Work History: Mary finished high school but never went to college. She recently divorced and has no children. She currently rents a two-bedroom apartment with a friend. Most of her jobs have been in food preparation, and she currently works at a fast-food restaurant. Mary works 30 hours a week at $8.25 per hour, with annual earnings of approximately $12,870, or about 110% FPL for a single adult in 2014. She has not been able to find full-time work.

Mary recently began looking for a second job since her current employer is unable to give her any additional hours. She decided to take a job selling tickets at a movie theater on the weekends, where she will earn $8.50 per hour. She will work 9 hours per week, earning$3,978 per year and bringing her total annual income to $16,848, or nearly 145% FPL in 2014.

Health Insurance Coverage: Mary has been uninsured all of her adult life. When she recently was admitted to the hospital, a social worker helped her apply for health insurance. Because her state implemented the ACA’s expansion, she is eligible for Medicaid while she is working at the fast-food restaurant. However, once Mary takes her second job, she will become eligible for Marketplace coverage with tax credits and cost-sharing reductions.

Health History: Mary’s lack of health insurance and limited income have made it difficult for her to afford basic preventive health care, such as annual physical examinations. She only seeks medical care when the need is critical, and she does not have a regular primary care provider.

In January 2014, she visited the emergency department after experiencing an extended bout of blurred vision and muscle weakness. She previously noticed these symptoms, but they typically lasted less than a day. With recurring symptoms and a marked reduction in her ability to lift her left arm, Mary decided to seek medical care. She was admitted to the hospital for additional evaluation, including a visit from a neurologist. During the hospital stay, the neurologist conducted a battery of tests, including an MRI. Although her symptoms resolved by the time she was released from the hospital, the tests revealed that she had multiple sclerosis, and the neurologist gave her the formal diagnosis.

After her discharge, she followed up with the neurologist as an outpatient. The neurologist recommended that she begin receiving regular doses of an injectable drug to slow the progression of the disease. He also referred her to a physical therapist for regular treatment of her muscular weakness and ordered some additional tests to assess the extent of impairment in her vision and fine motor functioning.

Mary does not currently need assistance with activities of daily living as her symptoms of muscle weakness and blurred vision typically do not interfere with her ability to work and take care of herself at home. However, if her symptoms worsen, they are likely to interfere with her ability to continue to work.

 

1. U.S. Dep’t of Labor, Bureau of Labor Statistics, Persons with a Disability: Labor Force Characteristics Summary, Table A (June 11, 2014) (includes non-institutionalized people ages 16-64), available at http://www.bls.gov/news.release/disabl.nr0.htm. ↩︎
2. Social Security Administration, The Work Site, Ticket Program Information, available at http://www.ssa.gov/work/home.html. ↩︎
3. U.S. Dep’t of Labor, Office of Disability Employment Policy, Job Accommodation Network, Vocational Rehabilitation Agencies, available at http://askjan.org/cgi-win/TypeQuery.exe?902. ↩︎
4. Kaiser Commission on Medicaid and the Uninsured, The Affordable Care Act’s Impact on Medicaid Eligibility, Enrollment, and Benefits for People with Disabilities (April 2014), available at https://modern.kff.org/health-reform/issue-brief/the-affordable-care-acts-impact-on-medicaid-eligibility-enrollment-and-benefits-for-people-with-disabilities/. ↩︎
5. Kaiser Commission on Medicaid and the Uninsured, A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion (Aug. 2012), available at https://modern.kff.org/health-reform/issue-brief/a-guide-to-the-supreme-courts-decision/. ↩︎
6. Kaiser Commission on Medicaid and the Uninsured, Medicaid Enrollment and Expenditures by Federal Core Requirements and State Options (Jan. 2012), available at https://modern.kff.org/medicaid/issue-brief/medicaid-enrollment-and-expenditures-by-federal-core/. ↩︎
7. 42 U.S.C. § 1396a(k)(1); 42 C.F.R. § § 440.300-440.390. ↩︎
8. Kaiser Commission on Medicaid and the Uninsured, Premiums and Cost-Sharing in Medicaid (Feb. 2013), available at https://modern.kff.org/medicaid/issue-brief/premiums-and-cost-sharing-in-medicaid/; see also 42 C.F.R. § § 447.50-447.88. ↩︎
9. Kaiser Family Foundation Subsidy Calculator, available at https://modern.kff.org/interactive/subsidy-calculator/. ↩︎

Medicaid spending and enrollment growth are affected by both the economy and policy decisions determining who is covered under the program, the services provided and payments for care. For more than a decade, economic conditions, including two major recessions, were the primary driver of changes in Medicaid spending and enrollment. In FY 2014 and in budgets adopted for FY 2015, enrollment and spending have grown with implementation of the major coverage provisions in the Affordable Care Act (ACA), including the federally financed Medicaid expansion. This report provides an overview of Medicaid spending and enrollment growth with a focus on state fiscal years 2014 and 2015 (FY 2014 and FY 2015) and an overview of Medicaid financing. Findings are based on interviews and data provided by state Medicaid directors as part of the 14^th annual survey of Medicaid directors in all 50 states and the District of Columbia conducted by the Kaiser Commission on Medicaid and the Uninsured (KCMU) with Health Management Associates (HMA). Findings examine changes in overall enrollment and spending growth and compare expansion and non-expansion states.

All States

Implementation of the coverage expansions in the ACA are resulting in higher enrollment and total overall spending growth in Medicaid in FY 2014 and FY 2015. However, with full federal government financing of the Medicaid expansion population, state Medicaid spending is growing more slowly than total spending. In FY 2014, enrollment increased on average by 8.3 percent, faster than FY 2012 and FY 2013. Enrollment growth is due to the ACA expansions of coverage in states implementing the Medicaid expansion and increases in participation among individuals eligible under rules in place before the ACA across all states. Medicaid is jointly financed by states and the federal government. Based on a formula set in statute, the federal share ranges from a floor of 50 percent to a high of 73.6 percent in FFY 2015, with the federal government paying a higher share in poorer states. For states that implement the ACA Medicaid expansion up to 138 percent of poverty (a requirement that was effectively made optional by the Supreme Court decision) the federal government will pay 100 percent of the costs of those newly eligible from 2014-2016; that rate phases down to 90 percent in 2020 and beyond. In FY 2014, new coverage and spending at the enhanced match rate contributed to overall Medicaid spending growth of 10.2 percent, but resulted in slower state Medicaid spending across all states (6.4 percent). Total and state spending for Medicaid generally grow at similar rates when there are no changes in the federal match.  The coverage provisions of the ACA went into effect in January 2014, mid-way through the state fiscal year which begins on July 1 in most states.  The effect of the ACA is more pronounced in FY 2015 when the law is in effect for the entire state fiscal year. (Figure 1)

Expansion States

As anticipated, states implementing the Medicaid expansion are experiencing higher rates of enrollment growth and total spending growth in FY 2014 and FY 2015 due to higher coverage levels and access to enhanced federal matching funds. Across all states implementing the ACA Medicaid expansion in FY 2014 and FY 2015, enrollment growth averaged 12.2 percent and 18.0 percent, respectively, well above national averages. Expansion states also reported higher total spending growth relative to the national average in both years. The enhanced federal funds available to states implementing the Medicaid expansion results in large differences between total spending and state spending growth. The effects on enrollment and spending are more pronounced in FY 2015 when the ACA is in effect for the entire state fiscal year. In addition, the number of states implementing the Medicaid expansion increases from 26 to 28 as New Hampshire and Pennsylvania implement in FY 2015. (Figure 2)

Non-Expansion States

States not implementing the Medicaid expansion report lower enrollment growth compared to expansion states with total and state spending growing at similar rates. In FY 2014, across all states not implementing the ACA Medicaid expansion, enrollment growth averaged 2.8 percent. States reported that this relatively low rate of enrollment growth reflected an improving economy as well as processing backlogs due to problems with enrollment systems and account transfers. For FY 2015, enrollment growth is projected to average 5.2 percent across non-expansion states, as system issues are resolved and these states (like expansion states) experience increased participation among individuals eligible under pre-ACA rules. Without the effect of the enhanced ACA match rate, total and state spending on Medicaid are growing at similar rates in FY 2014 and FY 2015. (Figure 3)

Looking ahead beyond 2015. The economy, ACA implementation and other Medicaid policy changes (such as major payment and delivery system reform efforts) are expected to have a significant effect on Medicaid spending and enrollment trends across all states.

Medicaid Enrollment and Spending Growth

Trends Affecting Medicaid Enrollment and Spending Growth

Economic Conditions

Over the past 15 years, Medicaid enrollment increased substantially during two major recessions, with annual growth peaking in FY 2001 at over 9 percent, and again at nearly 8 percent in FY 2009. During economic downturns, individuals lose jobs, incomes decline and more people qualify and enroll in Medicaid which increases program spending. At the same time, economic downturns negatively affect state tax revenues. This places additional pressure on state budgets as demand for other forms of assistance (i.e. food stamps and unemployment benefits) also increases. During economic downturns, states face difficulty balancing these pressures and affording their share of Medicaid spending increases.

In response, Congress has twice passed temporary increases to the FMAP rates to help support states during economic downturns, most recently in 2009 as part of the American Recovery and Reinvestment Act (ARRA.)  The most significant source of fiscal relief to states in ARRA was a temporary increase in the federal share of Medicaid costs. To be eligible for ARRA funds, states could not restrict eligibility or tighten enrollment procedures in Medicaid or CHIP. The ARRA-enhanced match rates provided states with over $100 billion in additional federal funds over 11 quarters, ending in June 2011, as states were on the threshold of FY 2012.

State economies have demonstrated slow but sustained improvement following the worst recession since the Great Depression. Gross State Product (GSP,) a measure of state economic activity, grew by 1.8 percent from 2012 to 2013 at the national level, slightly slower than the previous year, but the fourth year of consecutive growth at the national level. All but two states (Alaska and DC) experienced positive GSP growth from 2012 to 2013, ranging up to 9.7 percent.

At the same time, the national unemployment rate has continued to decline, falling to 5.9 percent in September 2014, the lowest rate since July 2008.¹  The declining rate of unemployment was related both to a reduction in the labor force participation rate and to continued job growth.²  After 55 months of private-sector job growth, there were 1.6 million more private sector jobs in August 2014 than before the recession.³  From February 2010 to August 2014, private sector job growth increased by an average pace of 188,000 jobs a month, with the pace picking up during the last seven months (227,000 jobs a month). Despite the improving economy, an estimated 9.3 million people remain unemployed, over 30 percent of whom are long-term unemployed (those actively looking for work for 27+ weeks.⁴ ) While unemployment has declined, 11 states (including DC) had rates at or above seven percent in August 2014. (Figure 4)

On the whole, state revenue collections have also improved. After experiencing the sharpest decline in state tax revenues on record during the Great Recession, states had seen sixteen consecutive quarters of tax revenue growth before declining slightly in the first and second quarters of 2014 (-0.3 percent and -0.5 percent.) (Figure 5) These declines in 2014 were primarily driven by federal tax policy changes that went into effect in 2013 as well as changes in tax policy in some states largely affecting personal income tax collections. Other sources of tax revenues, such as sales taxes, showed continued growth.⁵ 

With the economy continuing to improve, Medicaid enrollment growth across the country slowed considerably in FY 2012 and FY 2013. Over those two years, average spending also slowed, but the end of the ARRA enhanced match rates at the end of SFY 2011 shifted state spending patterns as states tried to mitigate the loss of federal dollars in SFY 2012 resulting in a dip in spending in SFY 2012. With economic conditions improving, the largest driver of Medicaid enrollment and spending growth during fiscal years 2014 and 2015 has been related to the implementation of the ACA. (Figure 6)

The Affordable Care Act (ACA)

As enacted, the ACA broadened Medicaid’s role, making it the foundation of coverage for nearly all low-income Americans with incomes up to 138 percent of the federal poverty level (FPL) ($16,105 per year for an individual in 2014). However, the Supreme Court ruling on the ACA effectively made the decision to implement the Medicaid expansion an option for states. For states that expand Medicaid, the federal government will pay 100 percent of Medicaid costs of those newly eligible for Medicaid for up to three calendar years from 2014 to 2016. The federal share phases down to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020 and remains at 90 percent thereafter, well above traditional FMAP rates in every state. (See Appendix for more information on Medicaid financing).

While nearly all states saw enrollment increases due to changes in enrollment systems and increased outreach, much of the enrollment growth (and related spending growth) nationally was driven by states adopting the Medicaid expansion, which states could implement starting January 1, 2014, halfway through FY 2014 for most states.

During FY 2014, 26 states (including DC) implemented the ACA Medicaid expansion. In FY 2015, two additional states are implementing the Medicaid expansion – New Hampshire in July 2014 and Pennsylvania in January 2015 – bringing the total to 28 states. Other states continue to discuss the opportunity to extend Medicaid under the financial terms spelled out in the ACA, including state-specific approaches. Indiana has submitted a waiver proposal to expand Medicaid through the “Healthy Indiana 2.0” plan in 2015 and Utah is in active negotiations with CMS to use an alternative approach for the Medicaid expansion. Other states expect to consider the issue in legislative sessions in 2015. (Figure 7)

Medicaid Enrollment Growth FY 2014-FY 2015

Medicaid enrollment increased on average by 8.3 percent in FY 2014 across all states, slightly less than the 8.8 percent growth states had projected on average at the beginning of the fiscal year.⁶  These slightly slower rates could be partially due to enrollment system problems, particularly with Healthcare.gov in the earlier months of open enrollment for coverage in the Marketplace. Enrollment growth in FY 2014 was faster than FY 2012 and FY 2013 due to the implementation of the ACA mid-way through state fiscal year 2014. All states, regardless of their decisions to implement the Medicaid expansion, attributed enrollment growth to higher take up among those already eligible, due to referrals from the health insurance Marketplaces and greater awareness of Medicaid due to outreach and publicity surrounding the ACA coverage expansions. The ACA Medicaid expansion was a driver of significant enrollment growth in states that implemented it, driving up the national average as well. Already, higher enrollment in Medicaid in 2014 has contributed to recent declines in the number of non-elderly adults who are uninsured.^7 ,8 

States with the largest increases in Medicaid coverage in FY 2014 were those that implemented the ACA Medicaid expansion. States expanding Medicaid averaged enrollment growth of 12.2 percent in FY 2014, compared to growth among states not expanding that averaged 2.8 percent. (Figure 11) A total of seven expansion states experienced annual Medicaid enrollment growth in FY 2014 exceeding 20 percent (Arkansas, Colorado, Kentucky, Maryland, Nevada, Oregon and West Virginia.) Only four states (all non-expansion states) reported declines in Medicaid enrollment in FY 2014 (Louisiana, Missouri, Nebraska and Oklahoma).

In FY 2015, Medicaid enrollment is projected to increase across all states at a higher rate (12.2%) than in FY 2014 (8.3%), reflecting the first full year’s impact of the eligibility and enrollment changes in the ACA. This rate of growth is driven by continued increases in enrollment primarily in states adopting the ACA Medicaid expansion. Across the 28 states implementing the Medicaid expansion in FY 2015, the number of persons enrolled in Medicaid is expected to increase on average by 18.0 percent while enrollment growth across the 23 non-expansion states is projected to average 5.2 percent. (Figure 8)

States that implemented the Medicaid expansion estimated the portion of their total enrollment growth that was attributable to newly eligible individuals. The median estimate was that approximately 80 percent of the observed growth in enrollment was attributable to newly eligible enrollees, and 20 percent was attributable to those already eligible but not previously enrolled. A few states that had expanded coverage to adults before the ACA (e.g. Massachusetts, Minnesota, and New York) noted a much smaller share of enrollment growth attributable to the Medicaid expansion. Both expansion and non-expansion states noted higher take-up rates among persons who were eligible under pre-ACA eligibility rules, as individuals were referred to Medicaid from the new health insurance marketplaces, or responded to widespread publicity about the implementation of the ACA coverage options. A small number of states noted that without the ACA Medicaid expansion, enrollment might have declined due to the improving economy.

TOTAL SPENDING GROWTH FY 2014-FY 2015

Total Medicaid spending growth in FY 2014 increased across all states on average by 10.2 percent, virtually identical to the 10.3 percent originally appropriated by state legislatures. The primary factor listed by state officials as contributing to this growth in spending was enrollment growth driven by the ACA-related eligibility changes. While total spending growth increased at higher rates than previous years across all states due to increased enrollment, states that implemented the ACA Medicaid expansion reported significantly higher rates of growth in total spending (13.1%) than states that did not implement the Medicaid expansion (5.6%). (Figure 9) Total spending growth was right on target with state projections in the states that expanded in FY 2014; total spending growth for states that did not expand was substantially lower than original projections (5.6% growth reported compared to 6.8% projected).⁹   The coverage provisions of the ACA went into effect in January 2014, mid-way through the state fiscal year which begins on July 1 in most states.

In FY 2015 across all states, total Medicaid spending is projected to grow on average by 14.3 percent based on adopted budgets for FY 2015. Looking specifically at the 28 states that are implementing the ACA Medicaid expansion, total Medicaid spending was appropriated to increase on average by 18.3 percent. In comparison, across the 23 states not implementing the ACA Medicaid expansion at this time, spending growth was appropriated to increase on average by 6.5 percent. (Figure 9) The larger differential between growth rates for expanding and non-expanding states in FY 2015 was expected as it reflects the first full year of the Medicaid expansion.

Medicaid officials in the majority of states believed that the amount of funding legislatively appropriated for their Medicaid program for FY 2015 would be adequate. In only about one-quarter of states did officials believe that a Medicaid shortfall was likely. This is the second consecutive year in which the majority of Medicaid officials expressed confidence in the adequacy of the original legislative authorization for the upcoming year, which is a turnaround from the Medicaid experience during the recent recession when a majority of Medicaid officials expected a Medicaid budget shortfall at the start of each fiscal year.

State Spending for Medicaid

Historically, state and federal Medicaid spending have increased at similar rates. Differences between total and state spending growth are usually related to factors such as annual changes in the state-specific FMAPs, changes in contributions from local governments, special financing arrangements, or provider taxes. During the last two recessions, Congress enacted temporary enhancements to the FMAP to provide fiscal relief to states by reducing the state share of Medicaid spending. Due to this relief, there was a historic decline in state spending for Medicaid in FY 2009 and FY 2010 followed by substantial increases in FYs 2011 and 2012 due to the expiration of the enhanced-match rate. For FY 2014, state fund spending for Medicaid increased on average by 6.4 percent across all states compared to total spending growth of 10.2 percent. For FY 2015, state fund spending is projected to grow on average across all states by 5.2 percent, compared to total spending growth of 14.3 percent. The large gap between total and state spending growth is attributable to the higher FMAP available in states implementing the ACA Medicaid expansion. (Figure 10)

For expanding states, total Medicaid spending generally will grow at a rate similar to enrollment growth; state spending for Medicaid will grow more slowly due to the higher federal match for newly eligible individuals. In FY 2014, across states implementing the Medicaid expansion, total Medicaid spending increased on average by 13.1 percent, nearly double the rate of state spending growth of 6.6 percent. This pattern continues into FY 2015, but is more dramatic with the enhanced 100 percent federal match rate in effect for the entire fiscal year in most of the expansion states. States expanding Medicaid are expecting total Medicaid spending growth of 18.3 percent on average in FY 2015 –more than four times the rate of growth of state Medicaid spending in these states (4.4%). (Figure 11) Some states implementing the Medicaid expansion also noted they will see savings of state dollars in their Medicaid budget when individuals previously enrolled in limited-benefit, regular FMAP state Medicaid programs now gain full Medicaid coverage and thereby qualify for the “newly-eligible 100 percent match rate.”

States not implementing the expansion saw total Medicaid spending in FY 2014 increase by 5.6 percent and state spending increase on average by 6.1 percent – somewhat similar rates of growth, particularly in comparison to the rates of spending growth seen in expansion states. Both total and state spending growth rates for non-expanding states exceeded enrollment growth of 2.8 percent. Total and state spending for non-expanding states are expected to continue growth in FY 2015, again at similar rates (6.5 percent for total spending and 6.8 percent for state spending) as enrollment growth is expected to increase on average by 5.2 percent. (Figure 12)  Beyond the ACA changes such as the MAGI eligibility rules, increased publicity and the interface with the new Marketplaces, another important factor affecting state spending in FY 2014 and FY 2015 were changes in state FMAP rates due to annual updates to the formula.¹⁰  These factors contribute to differences between total and state spending growth across all states, but are primarily evident across states not adopting the ACA Medicaid expansion in FY 2014 and FY 2015.

In addition to increases in health coverage and reductions in the number of uninsured, state decisions about the Medicaid expansions have important fiscal implications due in part to the increase in federal funds to the state that support health care providers including hospitals, health centers, and nursing facilities, and other businesses, and have positive effects on jobs, household spending, and state and local tax collections.¹¹ 

In this year’s survey, states expanding Medicaid also typically cited net state budget savings beyond Medicaid. States reported that expanded coverage through Medicaid could allow for reductions in state spending for services such as mental health, correctional health, state-funded programs for the uninsured and uncompensated care. These savings are outside the Medicaid program and Medicaid spending and enrollment data included in this report. States also referenced studies that projected drops in the number of uninsured and increases in state economic activity.¹²  (Figure 13)

Looking Ahead

Medicaid enrollment and spending trends have been largely driven by economic conditions, including two major recessions since 2000. In FYs 2012 and 2013, as economic conditions increasingly showed signs of improvement, states saw Medicaid enrollment growth slow. As anticipated, in FY 2014 and in budgets adopted for FY 2015, spending and enrollment have increased at a faster pace largely due to the implementation of the ACA’s major coverage provisions. Widespread outreach efforts and simplified enrollment procedures contributed to enrollment growth across all states. However, states that implemented the Medicaid expansion experienced substantially higher growth in enrollment compared to states that did not implement the ACA expansion in 2014. Total Medicaid spending also increased substantially, driven by increases in states implementing the Medicaid expansion, although the growth in these states was primarily driven by enrollment of the fully-federally-funded, newly eligible population. Medicaid spending from state funds increased at far lower rates than total Medicaid spending in states that implemented the Medicaid expansion. Looking ahead, the economy, ACA implementation and other Medicaid policy changes (such as major payment and delivery system reform efforts) are expected to continue to have a significant effect on future Medicaid spending and enrollment trends.

Definition of Medicaid Spending. Total Medicaid spending includes all payments to Medicaid providers for Medicaid covered services provided to enrolled Medicaid beneficiaries. In addition, total Medicaid spending includes special payments to “disproportionate share hospitals” (“DSH payments”) that subsidize uncompensated care for persons who are uninsured and unreimbursed costs related to care for persons on Medicaid. Not included in total Medicaid spending are Medicaid administrative costs, costs for the Children’s Health Insurance Program (CHIP), and federally mandated state “Clawback” payments to Medicare (to help finance the Medicare Part D prescription drug benefit for beneficiaries who are dually enrolled in both Medicare and Medicaid.) Total Medicaid spending includes payments financed from all sources, including state funds, local contributions and federal match funds.

Methdology. The Kaiser Commission on Medicaid and the Uninsured (KCMU) commissioned Health Management Associates (HMA) to survey Medicaid directors in all 50 states and the District of Columbia to identify and track trends in Medicaid spending, enrollment and policy making. This was the fourteenth annual survey, conducted at the beginning of each state fiscal year from FY 2002 through FY 2015.

The KCMU/HMA Medicaid survey on which this report is based was conducted from June through August 2014. Medicaid directors and staff provided data for this report in response to a written survey and a follow-up telephone interview. The survey was sent to each Medicaid director in June 2014. All 50 states and DC completed surveys and participated in telephone interview discussions in June, July and August 2014. The telephone discussions are an integral part of the survey to ensure complete and accurate responses and to record the complexities of state actions.

Annual rates of growth for Medicaid spending and enrollment were calculated as weighted averages across all states, and for states based on state decisions to implement the ACA Medicaid expansion in 2014 or 2015. For FYs 2014 and 2015, average annual Medicaid spending growth was calculated using weights derived from the most recent state Medicaid expenditure data for fiscal year 2013, based on estimates prepared for KCMU by the Urban Institute using CMS Form 64 reports, adjusted for state fiscal years. These data were also used for historic Medicaid spending. Medicaid enrollment average annual growth rates were calculated using weights based on state enrollment data for June 2013.¹³ 

Because the data reported here for FYs 2014 and 2015 are weighted averages derived from Medicaid spending and enrollment, data reported for states with larger spending and enrollment have a larger effect on the national average. These effects are further amplified when looking at smaller groups of states, such as states implementing the Medicaid expansion and those that have not.

Additional information collected in the survey on policy actions taken during FY 2014 and FY 2015 can be found in the following report: https://www.kff.org/medicaid/report/medicaid-in-an-era-of-health-delivery-system-reform-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2014-and-2015

 

Appendix:  Background on Medicaid Financing

Medicaid Financing Structure

The Medicaid program is jointly funded by states and the federal government. The federal government guarantees match funds to states for qualifying Medicaid expenditures (payments states make for covered Medicaid services provided by qualified providers to eligible Medicaid enrollees.) The federal match rate (Federal Medical Assistance Percentage or FMAP) is calculated annually for each state using a formula set in the Social Security Act which is based on a state’s average personal income relative to the national average; poorer states have higher FMAPs. Personal income data are lagged, so data used for FFY 2015 FMAPs are from the three years of 2010 to 2012. According to the formula, the FMAP in FFY 2015 varies across states from a floor of 50 percent to a high of 73.6 percent. (Figure 14)  This means every $1 of state spending on Medicaid is matched with at least $1 of federal funds.¹⁴ 

Medicaid’s Role in State Budgets

Medicaid has a unique role in state budgets because it is both an expenditure item and a source of federal revenue for states. In FY 2012, Medicaid accounted for 23.7 percent of total spending, but only 18.1 percent of all state general fund spending, a far second to spending on K-12 education (35.3 percent of state general fund spending.)¹⁵  Due to the federal match structure for Medicaid, the program is the largest source of federal funds for states, accounting 44.2 percent of all federal funds for states in FY 2012. Over the last decade, shares of general fund spending for Medicaid and K-12 education have remained fairly constant with an uptick in the share of general fund spending on Medicaid since 2010 in part due to the June 2011 expiration of the enhanced FMAP provided by under the American Recovery and Reinvestment Act (ARRA). (Figures 15 and 16)

1. Bureau of Labor Statistics, The Employment Situation – September 2014. (Washington, DC: Bureau of Labor Statistics,) October 3, 2014. http://www.bls.gov/cps/. ↩︎
2. While the share of the population over 16 participating in the labor force (labor force participation rate) did not decline over the past year, it is at a level (62.7 percent in September 2014) last seen in 1978. A portion of this decline in the labor force participation rate is due to increasing numbers of baby-boomers retiring. Chad Stone, Statement by Chad Stone, Chief Economist, on the August Employment Report, (Washington, DC: Center on Budget and Policy Priorities,) September 5, 2014. http://www.cbpp.org/cms/index.cfm?fa=view&id=4195. ↩︎
3. Bureau of Labor Statistics, The Employment Situation – September 2014. (Washington, DC: Bureau of Labor Statistics,) October 3, 2014. http://www.bls.gov/cps/. ↩︎
4. Ibid. ↩︎
5. The first two quarters of tax revenue growth were driven by significant increases in personal income tax revenue growth; experts noted that this significant growth appeared to be artificially driven by changes in federal tax policy. While personal income tax growth slowed in the third and fourth quarters of 2013, sales tax revenue growth has remained fairly constant (over 5% each quarter) during the 2013 calendar year. Lucy Dadayan and Donald J. Boyd, State Tax Revenues Slip Back to Slower Growth, (Albany, NY: The Nelson A. Rockefeller Institute of Government,) March 11, 2014. http://www.rockinst.org/pdf/government_finance/state_revenue_report/2014-03-11_Data_Alertv3.pdf. Lucy Dadayan and Donald J. Boyd, “April Surprises” Left Many States with Bad News, (Albany, NY: The Nelson A. Rockefeller Institute of Government,) September 17, 2014.http://www.rockinst.org/pdf/government_finance/state_revenue_report/2014-09-17_Data_Alert.pdf. ↩︎
6. Kaiser Commission on Medicaid and the Uninsured, Medicaid in a Historic Time of Transformation: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2013 and 2014, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured), October 2013. https://modern.kff.org/medicaid/report/medicaid-in-a-historic-time-of-transformation-results-from-a-50-state-medicaid-budget-survey-for-state-fiscal-years-2013-and-2014/. ↩︎
7. National Health Interview Survey Early Release Program. “Health Insurance Coverage:  Early Relase of Estimates from the National Health Interview Survey, January – March 2014. Released September 16, 2014. http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201409.pdf ↩︎
8. Kaiser Family Foundation, Measuring Changes in Insurance Coverage Under the Affordable Care Act, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured), October 2013. https://modern.kff.org/health-reform/issue-brief/measuring-changes-in-insurance-coverage-under-the-affordable-care-act/. ↩︎
9. Figures for expansion state spending and enrollment growth from last year’s survey included 25 states; after the survey data was collected for last year’s report, Ohio decided to move forward and implement the Medicaid expansion as of January 1, 2014. When collecting data for this year’s report, Ohio included spending and enrollment figures that reflected expanding as of January 1, 2014 and therefore were included in the expansion group. ↩︎
10. Because the data reported here are a weighted average across all non-expansion states, the FMAP declines in larger states, such as Texas, have a larger effect on the state and total spending averages for this group. ↩︎
11. Kaiser Family Foundation, The Role of Medicaid in State Economies and the ACA, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured), November 2013. https://modern.kff.org/medicaid/issue-brief/the-role-of-medicaid-in-state-economies-and-the-aca/. Sherry Glied and Stephanie Ma, How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion. (New York City, NY: The Commonwealth Fund,) December 2013. http://www.commonwealthfund.org/Publications/Issue-Briefs/2013/Dec/Federal-Funds-Medicaid-Expansion.aspx. ↩︎
12. National Health Interview Survey Early Release Program. “Health Insurance Coverage:  Early Release of Estimates from the National Health Interview Survey, January – March 2014. Released September 16, 2014. http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201409.pdf Kaiser Family Foundation, Measuring Changes in Insurance Coverage Under the Affordable Care Act, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured), October 2013. https://modern.kff.org/health-reform/issue-brief/measuring-changes-in-insurance-coverage-under-the-affordable-care-act/. ↩︎
13. Kaiser Commission on Medicaid and the Uninsured, Medicaid Enrollment: June 2013 Data Snapshot, (Washington, DC: Kaiser Commission on Medicaid and the Uninsured), January 29, 2014. https://modern.kff.org/medicaid/issue-brief/medicaid-enrollment-june-2013-data-snapshot/. ↩︎
14. State Health Facts, Federal Medical Assistance percentage (FMAP) for Medicaid and Multiplier, (Washington, DC: Kaiser Family Foundation,) downloaded March 2014. https://modern.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/. ↩︎
15. Kaiser Commission on Medicaid and the Uninsured estimates based on the NASBO’s November 2013 State Expenditure Report (data for Actual FY 2012.) ↩︎