In an article published by the Community Living Policy Center, H. Stephen Kaye, Ph.D writes, Medicaid caps would severely impact spending on home and community-based services in Colorado, where more than 29,000 people rely on these services to remain in their homes, avoid institutionalization, and participate in their communities. The entire article is posted below. Download the article here.
June 26, 2017
Community Living Policy Center, University of California San Francisco
The Potential Impact of the Medicaid Caps on Home and Community-Based Services Spending in Colorado
H. Stephen Kaye, Ph.D.
Medicaid caps would severely impact spending on home and community-based services in Colorado, where more than 29,000 people rely on these services to remain in their homes, avoid institutionalization, and participate in their communities. • If Medicaid caps similar to those in the Republican healthcare bill had been enacted in the decade of the 2000s, Colorado would have seen annual Federal reimbursements reduced by about 18 percent after 9 years, or over $53 million per year. • The total drop in Federal Medicaid reimbursements over the 9-year period would have been nearly $246 million. • If Colorado had limited HCBS spending to the amount allowed under the cap, perenrollee spending would have dropped by $1,800 after 9 years. Background The decade of the 2000s saw rapid growth in state Medicaid spending on home and community-based services (HCBS). Part of the growth was due to increased numbers of beneficiaries receiving such services, and part was due to increased spending per enrollee, due to both program changes and inflation in healthcare and social service costs. Nearly all states increased HCBS spending during the period, and many did so rapidly over a few years, as they developed new programs, made infrastructure investments, or offered a more robust package of benefits to serve people with higher levels of need. As a result, there were large growth spurts in HCBS spending in Colorado and many other states, with perenrollee amounts increasing by about 50 percent or more over a short period. The Better Care Reconciliation Act (BCRA) proposes to cap Federal Medicaid reimbursements to the states on a per-enrollee basis, effectively limiting growth to a rate that at first only modestly exceeds the rate of inflation and then falls below inflation. The cap would be set according to each state’s 2016 per-enrollee spending, inflation-adjusted for each subsequent year. Caps would take effect in 2020. The inflation adjustment for 2016 to 2019 is the consumer price index for medical care (CPIMC) for all types of enrollees, including people with disabilities and seniors who receive HCBS. Between 2020 and 2024, adjustments depend on enrollment category: the adjustment for people with disabilities and seniors is set at CPI-MC plus 1 percentage point, and the adjustment for other enrollment categories is CPI-MC. Beginning in 2025, the inflation adjustment is greatly reduced to the Consumer Price Index for all items, which does not take into account the higher growth rate of healthcare costs. 1 Over the past ten years, the growth in the Consumer Price Index for all items averaged 1.8 percent per year, and the CPI-MC increased by an average of 3.3 percent per year. 1 This procedure reflects the author’s understanding of the provisions of the Senate “Discussion Draft” of the BCRA, released June 22, 2017. 2 For most people who receive HCBS, it is by far the largest component of their Medicaid spending. If the BCRA were to be enacted, it is reasonable to assume that most states would limit HCBS spending to the per-enrollee cap amount; otherwise, any excess comes entirely out of the state budget. Methods For this analysis, we used all publicly available data for 2001–2013 on state per-enrollee spending on 1915(c) waiver programs and state plan personal care services programs. Expenditure data come from the annual Truven Health Analytics reports,1 and number of participants in the two programs comes from the Kaiser Family Foundation and the University of California San Francisco. 2 The analysis includes all state spending on personal care services programs and 1915(c) waiver programs other than for people with intellectual or other developmental disabilities (I/DD). We developed two scenarios of the impact that hypothetical BCRA-like reimbursement caps might have had on Medicaid spending, under the assumption that states would not exceed their per-enrollee cap. In both scenarios, we treated 2001 as the baseline year (equivalent to 2016 in the BCRA), and 2005 as the year that caps would have been implemented (equivalent to 2020). Following the procedure proposed in the BCRA, caps were inflation-adjusted using the CPI-MC of the data years (i.e., we applied CPIMC to the base-year spending for 2002-04, CPIMC plus 1 percentage point for 2005–09, and CPI all items to 2010–13). In Scenario 1, per-enrollee spending in any year is the lower of actual spending or the cap amount. The impact of the cap is therefore assumed to be limited to the years in which the actual spending exceeded the cap. In Scenario 2, the state’s actual, year-to-year percent increase (or decrease) in per-enrollee spending is applied to the prior year’s spending, unless that change would have caused the perenrollee spending to exceed the cap. In that case, per-enrollee spending is set to the cap level, and the following year’s percent increase (or decrease) is applied to that amount. Thus, the impact of the cap extends to future years, because increases that were limited by the cap are not made up by additional increases in subsequent years. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Figure 1. Average annual HCBS spending per Colorado non-I/DD enrollee, 2001–13, actual and reduced as if BCRA caps had been in place Actual spending Spending adjusted to avoid exceeding state cap Annual change in spending adjusted to avoid exceeding state cap Base year Caps take effect –16% –18% 3 Results Colorado HCBS spending exceeded the hypothetical cap in every year. An immediate 2 percent reduction in expenditures would have been necessary (or the state would have had to make up the difference) in the first year of the caps, with the gap between actual and capped spending widening in subsequent years. The blue line in Figure 1 shows Colorado perenrollee HCBS spending, excluding I/DD programs. By 2013, spending under Scenarios 1 (green line) and Scenario 2 (red line) is 18 percent less than the actual level. Conclusions If per-enrollee caps like those proposed in the Better Care Reconciliation Act had been imposed in the mid-2000s, they would likely have caused Colorado, as well as many other states, to restrict HCBS spending to amounts far lower than spending under existing Medicaid reimbursement rules. States like Colorado that invested in HCBS infrastructure, expanded benefits to serve people with higher needs, or created new HCBS programs would probably have become far less ambitious had Federal match been capped. A capped reimbursement would have discouraged states from innovating in delivering the types and amounts of services that could meet people’s needs. The consequences would have been readily apparent: Without their long-term services and supports needs met, more people would have been institutionalized, and those remaining in their homes would have been more isolated, experienced worse health, and prevented from participating in their communities. The great success of HCBS program expansion in enabling people to continue living at home and promoting successful community integration would have been seriously jeopardized. References 1. Eiken S, Sredl K, Burwell B et al. Medicaid Expenditures for Long-Term Services and Supports (LTSS) in FY 2015. Cambridge, MA: Truven Health Analytics, 2017. 2. Ng T, Harrington C, Musumeci M et al. Medicaid Home and Community-Based Service Programs: 2013 Data update. Issue Paper. Washington, DC: Kaiser Commission on Medicaid and the Uninsured, 2016. Funding The Community Living Policy Center is funded by the National Institute on Disability, Independent Living, and Rehabilitation Research (grant H133B130034) and the Administration for Community Living, U.S. Department of Health and Human Services. Opinions are those of the author and not the funders.