NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB9 and HB 2

SOURCES OF INFORMATION

LFC files

Health Policy Commission

Human Services Department

SUMMARY

Synopsis of Bill

SB 33 directs every county to increase their contributions to the county supported medicaid fund by an amount equal to one-sixty-fourth of one percent of taxable gross receipts reported during the prior fiscal year. Counties may finance the additional contribution from any existing authorized county revenue source.

The bill reduces the percentage of county supported medicaid funds earmarked for primary care health services from 9 percent to 7 percent. It also reduces the percentage of county supported medicaid funds that may be expended for medicaid administrative costs from 3 percent to 2.5 percent.

The provisions of the bill would become effective on July 1, 2000 or the first quarter after the secretary of human services receives approval from the United States health and human services department and begins implementation of an amendment to the state medicaid plan making eligible parents with children whose family income does not exceed 75 percent of federal poverty guidelines.

The bill carries an emergency clause.

FISCAL IMPLICATIONS

The required increase in county contributions to the county supported medicaid plan would raise approximately $4.3 million from the counties. (The $4.3 million estimate is equal to one-fourth of FY 99 contribution to the county supported medicaid fund at one sixteenth of one percent.) The medicaid program would be able to leverage an additional $12.2 million in federal funds. Thus, the total available to expand medicaid coverage to working-poor parents would be $16.5 million.

The changes in the percentages earmarked for primary health care and medicaid administration have no fiscal impact given the larger base that would result if the changes proposed in the bill are adopted. The percentage changes were designed to hold the dollar amounts flowing to these uses constant.

Although counties will be required to increase their contributions to County Supported Medicaid Fund by $4.3 million, the overall fiscal impact should be positive for most counties. Nearly all counties currently provide health care financial assistance to their indigent populations using county indigency funds. Expanding medicaid coverage to adults with children whose family income does not exceed 75 percent of federal poverty guidelines, will relieve counties from supporting much of that caseload.

ADMINISTRATIVE IMPACT

During the regular session, HSD reported on identical legislation, that there would be additional administrative costs, but the percentage allowed for administration is decreased. However, it is important to recognize that the decrease in the percentage allowed for administration was developed to keep the dollars available for administration constant, not reduce them.

OTHER SUBSTANTIVE ISSUES

Coverage Estimates. This legislation is part of a broader plan to expand medicaid coverage for adults with children. Both general appropriation acts (SB9 and HB2) include $4.9 million of general fund to support this expansion. Thus, altogether the state would spend $9.2 million, and would leverage approximately $26.2 million in federal funds to expand the Medicaid program to cover working, low-income adults with children. If funding was available from both this legislation and the appropriation act, there would be sufficient funds to cover low-income parents to 75 percent of the federal poverty line. If only one of the funding sources were available, funding would be sufficient to cover low-income parents to 60 percent of the federal poverty level.

Estimating the cost of expanding medicaid to the working poor depend on the following factors:

• The number of persons newly eligible for the program.
• The number of eligible persons without other health coverage.
• The percentage of uninsured, newly eligible persons that can be expected to participate (enroll) in the program.
• The average cost per person added to the program.




The following tables demonstrates the expected cost of the program for different levels of poverty under different assumptions about the percentage of newly eligibles participating in the program.

Fifty Percent Participation Rate




Poverty Level	Adults with Kids	Currently Eligible	% Uninsured	Cost Per Adult	Total Cost	State Cost
60%	40,821	28,000	80%	$2,592	$13.3	$3.4
75%	62,897	28,000	75%	$2,592	$33.9	$8.6
100%	97,000	28,000	70%	$2,592	$62.6	$15.9




Sixty-five Percent Participation Rate




Poverty Level	Adults with Kids	Currently Eligible	% Uninsured	Cost Per Adult	Total Cost	State Cost
60%	40,821	28,000	80%	$2,592	$17.3	$4.4
75%	62,897	28,000	75%	$2,592	$44.1	$11.2
100%	97,000	28,000	70%	$2,592	$81.4	$20.7





The estimated number of adults with children was provided by the Taxation and Revenue Department based on Low Income Tax Rebate files. The number of adults that are already eligible is an estimate. The latest Human Services Department statistical report (February 2000 data) indicates that there are 23,000 adults in the TANF program receiving Medicaid; the number is increased by 5,000 to reflect the current eligibility of low-income pregnant women not on TANF and persons eligible for transitional Medicaid (An unknown number of which are not-enrolled). The percentage that are assumed to be uninsured is loosely based on a Health Policy Commission survey. The cost estimate comes from the Human Services Department. The state cost number is 25.4 percent of the total cost. The 50 and 65 percent participation rates are shown for illustrative purposes. While, several states have recently expanded their Medicaid programs to enroll low-income adults, participation rates are not yet available. Other states' estimates commonly assumed similar participation rates. The fifty percent rate may be more realistic in the first year as it takes time for eligibility information to be disseminated to providers and the eligible population.





Economic Impact. The health policy commission has estimated the economic impact of expanding coverage to 75 percent of adults with children for all counties under two scenarios. The first scenario assumes all persons eligible for the program actually enroll; the second is based on the LFC assumption of a 50 percent participation rate in the first year of implementation. The health policy commission attachments are included as attachments to the FIR.





BT/njw

Attachment