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Medicaid Buy-In

 

The Problem

The Affordable Care Act left the employer coverage market intact, focusing largely on coverage expansions and reforms in the individual market and Medicaid. Despite incredible progress in recent years, 190,000 New Mexicans are still uninsured. When people sign up for health coverage, they have a regular source of care, are able to catch and manage health problems before they get serious, and have better financial security. Actions at the federal level have caused health care costs to spike for working families. Many individuals who remain uninsured qualify for financial assistance under these programs, capping how much they have to pay for coverage based on their income in the individual market and, in New Mexico and most other states, covering all costs for Medicaid patients. While getting individuals who are eligible signed up for health coverage is an issue to continually address, further glaring holes exist for the estimated 100,000 people who don’t qualify for financial assistance, public programs, or affordable employer insurance.

The Solution 

A Medicaid Buy-In allows people to use their own dollars to purchase quality coverage that fits their budget. The program will use Medicaid’s administrative infrastructure and purchasing power to keep costs under control and provide meaningful oversight. The plan will cover a comprehensive set of benefits and consumer costs will be adjusted based on income to ensure affordability.

The goals of this plan include:

  1. Expand health coverage to more people

  2. Create a more affordable coverage option

  3. Simplify the healthcare system for patients

  4. Improve the integrity of the existing Medicaid program as it is expanded

  5. Maximize federal dollars wherever possible

How it Works


A multi-phase study being conducted by Mannat has reviewed four possible options for implementing a Medicaid Buy-In system:

Option 1: The Targeted Medicaid Buy-In

The Targeted Medicaid Buy-in model would provide a new coverage option to those who aren’t eligible for federal financial assistance. This includes people who earn too much to qualify for assistance, residents of New Mexico who are undocumented, and the spouses of workers who fall into what is known as the “family glitch.” Individuals and families who meet these criteria and earn less than 200% FPL would be eligible for income-adjusted premiums and cost sharing, similar to the ACA’s. The state would have the authority to extend that assistance higher up the income scale if needed. The plan would cover, at a minimum, the ACA’s Essential Health Benefits.

There are a couple big upsides to this approach. First, it largely reaches individuals who are uninsured and don’t have any other affordable option. That means lower uncompensated care for providers, minimal disruption to the rest of the system, and most importantly, better financial security and access to care for more people in New Mexico. Second, this option wouldn’t require a waiver from the federal government because it is fully operated by the state and doesn’t require federal dollars. That means we could roll the plan out as soon as the state is ready.

Of course, this also comes with trade-offs. People purchasing the plan and the state would have to jointly finance the coverage, without help from the federal government. Perhaps the best analogy for this type of arrangement is state employee coverage, in which state workers and the state jointly pitch-in for coverage. However, the Medicaid Buy-in would leverage the purchasing power and administrative infrastructure of the Medicaid program, reducing the cost of the coverage while maintaining a quality coverage option.

As designed in legislation, this model would exist as a standalone health coverage option outside the individual market. While NMT4HC initially considered including the option as an individual market product, a few critical factors led to the decision to create a standalone within the Medicaid program. 

  1. “Silver loading” which artificially increases the cost of premiums in the individual market, has major fiscal implications for the state both on the direct cost of the plan as well as risk adjustment transfers. 

  2. Risk adjustment transfers, which transfer money from plans with a population that has fewer health care needs to plans that cover people with greater health care needs, could put the state at additional financial risk. 

  3. The plan would be subject to Healthcare.gov’s high user fee, which the Buy-in plan would not benefit from and the state would have to pay for on a per-member basis. 

  4. To ensure that the option is targeted to people who are uninsured or face exorbitant premiums, a standalone plan allows the state to establish the specific eligibility criteria for the program, whereas individual market rules require all Qualified Health Plans (QHPs) to sell to all willing participants. With this option, our intention is not to pull individuals who qualify for financial assistance away from the individual market, so limiting the option to a particular population who are uninsured and currently ineligible is important.

The Targeted Medicaid Buy-in is a good option if the state is looking to provide more affordable coverage for people whose costs aren’t in some way capped or limited by the ACA.

As part of Manatt’s study, Wakely Consulting Group provided estimates of eligibility and a range of uptake scenarios in the first year the plan is offered. The projections can be found below.

Medicaid Buy-in Eligibility & Year 1 Enrollment Projections

Population

Eligible

High Year 1 Enrollment

Medium Year 1 Enrollment

Low Year 1 Enrollment

Very Low Year 1 Enrollment

Spouses and children of workers who cannot afford family coverage through their employer

25,000

13,000*

13,000*

9,000*

9,000*

Uninsured immigrants who are residents of New Mexico under 200% FPL

17,000

7,100

3,200

1,600

800

Individuals over 400% FPL who don’t have employer coverage

36,000

6,000

4,500

4,400

4,100

Total Year 1

78,000

26,100

20,700

15,000

13,900

Source: Wakely Consulting Group

* Projections for spouses and children of workers who cannot afford family coverage through their employer assume income-adjusted premiums are available up to 400% FPL.

  

Option 2: A Marketplace Public Option

Option 2 would establish a Medicaid public option on the Health Insurance Exchange. An important consideration with this model is that the option would still have to operate within the dynamics of the private insurance marketplace. Simply putting a Medicaid public option on the exchange would not guarantee that costs for subsidized consumers would be lower than they currently are. That’s because the ACA caps premiums based on income and based on the cost of the second lowest cost Silver plan. 

So what happens if a lower cost option is introduced? The previously lowest-cost option becomes the benchmark, reducing costs to the federal government without necessarily changing the cost to the individual. 

One way to avoid getting trapped by current market dynamics is to apply for a federal 1332 waiver in conjunction with a Medicaid Buy-in and capture any savings that are produced by the Buy-in to reduce costs for consumers. Let’s say the Medicaid Buy-in lowers the cost of the benchmark plan by 20% by leveraging the programs administrative infrastructure and purchasing power, reducing the cost of Advance Premium Tax Credits (APTCs) by 20%. Instead of giving that money back to the federal government, states could capture those dollars by applying for a 1332 waiver and repurposing them to reduce consumer costs. For example, a state could cap premiums and cost sharing at lower levels, expand eligibility for assistance to new populations or up the income ladder, or add wraparound benefits, like dental and vision, to subsidized coverage. 

There’s a catch to this approach. Section 1332 waivers must meet four guardrails to be approved (courtesy of Families USA):

1) Provide coverage that is at least as comprehensive as that required for marketplace plans. Without this protection, benefit packages could exclude services needed by people with serious health conditions or cover only a small portion of their costs. People could find themselves unprotected when an accident or illness strikes.

2) Provide coverage and cost-sharing protections against excessive out-of-pocket spending that are at least as affordable as the ACA provides. This keeps premiums and cost sharing from rising for families that now get premium tax credits and financial assistance with their out-of-pocket costs. It also protects all consumers from waivers that might otherwise increase their costs.

3) Provide coverage to at least a comparable number of state residents as would have coverage without the waiver.  This keeps federal funds from being diverted for another purpose that does not help as many consumers.

4) Not increase the federal deficit.Though not a consumer protection, this guardrail assures federal policymakers that a waiver will not strain the federal budget.”

The last guardrail is the one that limits the impact of this approach. If a Medicaid Buy-in successfully reduces the amount that must be spent to subsidize coverage and those savings are transferred to consumers through lower premiums, there is likely to be an uptick in enrollment. More affordable coverage will likely boost enrollment. The problem is that deficit neutrality essentially freezes total APTC expenditures to current spending levels, which are a reflection of current enrollment. When you increase enrollment, you run the risk of exceeding the limits imposed by deficits neutrality. One way a state could take this on would be to incur the costs that go beyond current spending. However, states can implement strategies to reduce the risk of exceeding the spending limit by boosting their funding baseline prior to the introduction of a Medicaid Buy-in. Strategies include: 

  • Invest in outreach and enrollment assistance to boost enrollment in the private marketplace
  • Provide supplemental financial assistance to induce enrollment prior to a 1332 application
  • Set the minimum actuarial value of Silver plans to 72% to maximize federal funds
  • Use the tax system to identify and enroll uninsured New Mexicans in health coverage
  • Adopt an individual mandate or a policy that will have a comparable impact on Marketplace enrollment

Another positive aspect of this approach is that it creates the conditions for a healthier marketplace while the state waits out the Trump administration. The current administration appears unlikely to approve such a waiver given their current stance on the types of waivers they want to see states submit.

Option 3: The Basic Health Plan

The Affordable Care Act gives states the ability to establish a program that leverages Medicaid to reduce consumer costs and improve continuity of coverage for Marketplace eligible individuals under 200% FPL. Minnesota and New York have taken advantage of the Basic Health Plan and those who qualify have benefited enormously. Below is a chart showing how these states have leveraged Medicaid to improve affordability. Note that the ACA’s premiums between 139-200% FPL range from $42-132 a month and cost sharing is 94% Actuarial Value (AV) under 150% FPL and 87% AV between 151-200% FPL with no guarantee of zero deductible options.

Overview of BHP Programs in New York and Minnesota

 

Minnesota

New York

Affordable Care Act

Monthly Premiums

Sliding scale $4-$80 from 35%-200% FPL 

$0 up to 150% FPL

$20 flat fee up to 200% FPL

Sliding scale from $42-$132 from 139%-200% FPL; capped at 2% income under 138% FPL

Cost Sharing

No deductibles; modest cost sharing; 94% AV for all enrollees > 100% FPL

No deductibles; modest cost sharing

94% AV under 150% FPL; 87% AV between 151-200% FPL

Benefits Package

Essential Health Benefits + dental, vision, enhanced behavioral health

Varies by eligibility category; EHB + option to purchase dental/vision

EHB + option to purchase dental/vision

Health Plan Contracting

Plans contracted via Medicaid procurement process

13 plans offer EHB; state issues invitation to participate

Offered by private plans

Source of Funding

68% federal; 26% state; 6% consumer premiums

85% federal; 15% state/consumer

Average under 200% FPL: 80% federal; 20% consumer

 

In addition, to improve affordability and benefits, the BHP also allows states to establish year-round enrollment and take consumers out of the process of reconciling tax credits if they incorrectly estimate their income. All of these benefits come together to encourage enrollment in quality health coverage. Minnesota had a BHP-like plan for years before the ACA, but New York added their plan in 2016, two years after ACA took effect. New York provides a natural experiment to see how the BHP provisions affect enrollment, and so far they seem quite substantial. In 2015, before the BHP, about 166,000 New Yorkers between 138-200% FPL enrolled in ACA coverage. According to data compiled by Stan Dorn, Director of the National Center for Coverage Innovation and Senior Fellow at Families USA and at The Urban Institute, when the BHP was introduced in 2016, enrollment grew to 224,000 and then swelled to 386,000 in 2017 and all the way to 436,000 by 2018. Meanwhile, enrollment in other income categories remained virtually flat during the same period. Improving affordability can go a long way towards boosting enrollment and federal health care investments.

Note: PTC = Premium Tax Credit

As noted earlier in the Marketplace Public Option section, 1332 waivers have to be deficit neutral. The BHP does have a limit on federal spending, but it differs in an important way. Rather than capping spending in the aggregate, the BHP limits federal spending per person, based on 95% of what would otherwise be spent on marketplace QHP coverage. That gives states a lot more flexibility to pursue enrollment maximization under the program compared to a 1332 waiver.

As with all things in healthcare, this option comes with trade-offs. The BHP creates a risk pool separate from the marketplace, splitting the pool and potentially altering the stability of the marketplace for individuals above 200% FPL. The option may require state funds for program administration and additional assistance if the state decides to make investments in affordability and benefits. And while the option gives the federal government less discretion to disapprove of program establishment than a 1332 waiver, the Trump administration has been causing difficulties in Minnesota and New York by trying to pull funding that would otherwise be available through silver loading. The states have been able to reach an agreement with the federal government, though a new proposed rule could significantly cut payments and lead to additional lawsuits. However, that shouldn’t stop us from pursuing better healthcare for New Mexico residents.

HSD should explore mitigation strategies to address the problems identified by stakeholders. These include merging the individual and small group markets, jointly risk adjusting the QHP and BHP, providing additional premium and cost sharing assistance above 200% FPL, reinsurance, and other enrollment incentives. 

Option 4: Medicaid Buy-In for All

The other options of the Medicaid Buy-In have distinct populations who would be eligible for the program. The Medicaid Buy-In for All would allow any resident of New Mexico to purchase Medicaid as their main source of coverage. Exchange-eligible individuals could use their tax credits to purchase Medicaid, businesses could purchase Medicaid for their employees, and anyone else wishing to purchase the plan who lives in the state could buy the plan.

Option 4 represents a systemic reform that would require a coordinated effort over several years to roll out. The state would have to carefully balance the rollout of the plan with improvements in provider reimbursement to ensure payment adequacy. The Buy-in for All option could have some big benefits for state residents and New Mexico may be the state that is in the best position to implement such a plan.

First, because 40% of people in New Mexico are enrolled in Medicaid, any improvements in Medicaid rates would create a big positive ripple effect for providers. With a roughly 80% blended federal matching rate, every dollar that the state invests in improved rates brings back four federal dollars. And as mentioned before, New Mexico Medicaid pays, on average, about 89% of what Medicare pays across all services. Bringing those rates up to a level of payment adequacy is a much easier lift for a state like New Mexico than other states that have lower payments, less generous matching rates, and lower provider participation.

These rate improvements would come with opening up the program to paying customers, which providers may not like because they are losing commercially-insured patients. For years, providers have claimed that they have to increase prices on commercially-insured patients because of underpayment from public programs. Improving rates while opening up the program more broadly should help to provide a lower cost option to consumers while enhancing the program to also benefit providers.

Of course, there are many details to work out in this option, which would require federal waivers and partnerships to establish the program. But this could be a promising option for New Mexico and the campaign will continue to explore the viability of the plan in the future.

Policy Status

A coordinated campaign led by the NM Together for Healthcare Coalition has worked to get input from a wide variety of voices from around the state to identify the Medicaid Buy-In as the most viable option for ensuring every New Mexican has access to affordable care. Over the last two years, the campaign has had several major accomplishments towards the goal of implementing a Medicaid Buy-In system for the state:

  • Built a campaign with strong public support. A recent poll conducted by United States of Care showed that the Medicaid Buy-in is supported by 74% of New Mexicans
  • Passed House Memorial 9 and Senate Memorial 3 during the 2018 legislative session, which directed the NM Legislative Health and Human Services Committee (LHHS) to study and evaluate the feasibility of a Medicaid Buy-in option and its impact on patients, providers, and the state budget.
  • Secured funding and provided guidance for qualitative and quantitative studies conducted by Manatt Health on behalf of the LHHS during 2018.
  • Passed 10 resolutions in support of the Medicaid Buy-in from:
  •         Counties of McKinley, Doña Ana, Bernalillo and Santa Fe;
  •         Cities of Sunland Park, Anthony, Las Cruces and Albuquerque;
  •         All Pueblo Council of Governors and Navajo Nation
  • Engaged stakeholders in a robust input process throughout 2018.
  • Introduced the first-of-its-kind legislation during the 2019 legislative session.
  • Secured $142,000 in funding for administrative development and additional study from the 2019 legislature; secured authorization to pursue federal funding for a Medicaid Buy-in under Sections 1331 and 1332 of the Patient Protection and Affordable Care Act.


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for more information or to learn how to get involved. 

News and Resources

Committees buy in to Medicaid Buy-In:

https://nmpoliticalreport.com/2019/02/15/committees-buy-in-to-medicaid-buy-in-plan/