“Expanding Illinois’ Medicaid program under the federal health-care reform law will cost the state $1.3 billion a year in 2020 and beyond, according to an analysis by the nonpartisan Rand Corp.
The annual cost is at least six times higher than what state officials have estimated since the federal Affordable Care Act became law in March 2010.
Until now, officials at Gov. Pat Quinn’s Illinois Department of Healthcare and Family Services have said the expansion of eligibility standards for the public insurance program, scheduled to take effect in 2014, would be financed almost entirely by the federal government.
HFS officials had said the expansion would cost Illinois almost nothing initially, and only about $200 million per year in 2020 and beyond.
But the study by Rand, a respected not-for-profit research institute based in California, indicates that Illinois will incur about $700 million in new Medicaid costs not covered by the federal government in 2016. The cost to Illinois taxpayers would ramp up to $1.3 billion annually by 2020 and total $6.2 billion between now and 2020.
The nonpartisan Council of State Governments commissioned the Rand study — which analyzed Medicaid expansion costs for Illinois, California, Texas, Connecticut and Montana — to provide more perspective than what had been available through the Congressional Budget Office, according to Chris Whatley, director of the council’s office in Washington, D.C.
Disputed costs
Even though the Quinn administration says Rand overestimates the potential new costs for Illinois, Rand’s numbers are sure to provide fuel for critics of the Affordable Care Act, because of the financial pressure Medicaid already puts on state budgets —especially in deficit-ridden Illinois.
“The theme of the Affordable Care Act is, ‘We can cover everyone, and it doesn’t cost more,’” said state Sen. Dale Righter, R-Mattoon. “If you can’t pay for it, it doesn’t matter if it’s worth it.”
Righter said Illinois “absolutely cannot” afford to add $1.3 billion to a Medicaid program that currently costs the state $14 billion a year and covers 2.8 million Illinoisans. Half of the current cost — $7 billion — is reimbursed by the federal government, with the rest coming from state coffers.
Some states, depending on their political leadership, are resisting the reform law’s implementation, challenging it in court or hoping the law will be repealed after the November 2012 elections. But in Illinois — the home of President Barack Obama and where Democrats control the legislative and executive branches — state officials are working to set up a health-insurance exchange that would route the uninsured and small businesses to affordable private insurance or Medicaid.
HFS Director Julie Hamos told The State Journal-Register in July that the expansion of Medicaid, which would add an estimated 600,000 to 700,000 people to the program, would lead to more timely health care, before diseases become advanced and more costly. She said the expansion also would mean less unpaid medical costs shifted to the rates paid by the insured.
“There will be a cost,” she said, “but it depends on whether we believe, and we do, that when people have access to health care, that ultimately saves money for society.”
Eligible, but not enrolled
Of the 32 million uninsured Americans expected to gain coverage through the Affordable Care Act by 2019, half of them — of 16 million — would be covered through Medicaid.
Medicaid eligibility will be expanded in 2014 to include non-disabled, childless adults with incomes below 138 percent of the federal poverty level, or less than $15,152 for an individual and $30,843 for a family of four.
But not all of the 16 million will be added in the new eligibility category. Some who will join the program are eligible now, but haven’t applied for some reason, according to David Auerbach, a Rand health economist and author of the five-state report.
These previously eligible individuals, both adults and children, are expected to be enrolled in Medicaid when they contact their state’s health-insurance exchange or apply because of the federal law’s mandate to get insurance, Auerbach said.
Rand’s study took this phenomenon into account, and for Illinois, Rand believes that 56 percent, or 428,000 of the 767,000 people who will be added to the Medicaid program, will have been previously eligible but not enrolled.
Even after 2014, the federal reimbursement for the 428,000 previously eligible people will cover 50 percent of their medical costs, not the 100 percent reimbursement that will be available for the other 339,000 in 2014. The federal reimbursement will gradually drop to 90 percent for the newly eligible in 2020 and beyond.
The 50 percent reimbursement for a majority of Illinois’ new Medicaid enrollees additional state costs that officials in many states worry about but couldn’t pinpoint until the Rand study was released in April, Whatley said.
Critics of the federal law can complain about the additional costs, he said, but the law’s supporters can highlight the “relatively modest” additional expense to the state for each of the 1.3 million uninsured Illinoisans who will gain health insurance coverage as a result of the federal law — either from Medicaid or from private insurance sold through the exchange.
Rand estimated Illinois’ per-person cost at $540 in 2016.
Economic security?
Michael Gelder, Quinn’s senior health policy adviser, told the newspaper in a written statement that based on a new, “Illinois-specific study” released Friday, “we believe the Rand study overestimates both the number of people who will be newly eligible for Medicaid as a result of federal health-care reform, as well as those that are currently eligible but have not enrolled in Medicaid.”
“In addition,” Gelder said, “as the ACA insures more people, we expect to see individuals move off Medicaid, as well as savings to the state and businesses from better overall health because of greater access to insurance.”
Jim Duffett, executive director of the Champaign-based Campaign for Better Health Care, said the additional cost to Illinois associated with the reform law is worth it and “not a major amount of money. Health care is economic security for people.”
The Rand analysis says the number of Illinoisans without health insurance would drop from 1.7 million currently, or 15 percent of the non-elderly population, to 390,000, or 3.5 percent, under the Affordable Care Act.
Dean Olsen can be reached at (217) 788-1543.
Some findings of the Rand Corp. report
*The proportion of Illinois residents with health insurance will increase from 85 percent currently to 97 percent, or by almost 1.3 million people.
* There will be little change in the number of people offered coverage through their employers, but about 90,000 employees will be covered through the exchange.
*By 2016, about 1.1 million people will have private coverage through the state’s health-insurance exchange, and about 686,000 of them will receive federal subsidies to buy coverage.
*Total state government spending on health care will be 10 percent higher for the combined 2011-2020 period because of the ACA — mostly because of increases in Medicaid costs. In 2020, state spending will be $1.3 billion higher than it would have been without the ACA.
To read more
Reports produced by Rand Corp. on Illinois and four other states are available online.