Medicaid Expansion in Tennessee – A potential windfall of $1.726 billion per year for each of the next six years.

In 2010 Congress enacted the Affordable Care Act.  One part of this legislation mandated that all States expand their Medicaid to all persons whose incomes are under 138% of the federal poverty level, which is less than $15,415 per year for a single person and less than $31,809 for a family of four.  In June 2012, the U.S. Supreme Court held that Medicaid Expansion could not be a mandate, making Medicaid Expansion optional for States.

This Fact Sheet explains why Medicaid Expansion will be a major source of new federal funds and a significant driver of Tennessee’s economy. That is why it is vitally in Tennessee’s economic interest to opt to provide for Medicaid Expansion.

Medicaid Expansion represents new federal dollars available to Tennessee.  These otherwise unavailable federal dollars will create jobs, provide new state tax revenue and stimulate the state economy. Hospitals, nursing homes, managed care organizations, medical supply firms, and physicians will directly benefit. Medicaid Expansion funds will create a major ripple effect throughout Tennessee’s economy, spurring job creation and benefitting both the public and private sectors.

1.  In Tennessee, there are about 459,000 people whose incomes are under 138% of the federal poverty level but who are not currently eligible for Medicaid for other reasons.[1] These people will be Medicaid eligible after Tennessee’s “Medicaid Expansion.”

2.  The Centers for Medicare and Medicaid Services (“CMS”), the federal agency that administers Medicaid, has reminded States that “while States have flexibility to start or stop the expansion, the applicable federal match rates [for the Medicaid Expansion] … are tied by law [Congress] to specific calendar years…; States will receive

• 100 percent [federal financial assistance] … in 2014, 2015 and 2016;
• 95 percent in 2017,
• 94 percent in 2018,
• 93 percent in 2019, and
• 90 percent by 2020, remaining at that level thereafter.”[2]

3.  This means the federal government will pay for all the Medicaid costs for the 459,000 people under 138% of the federal poverty level in Tennessee between 2014 and 2016 — the entire 100% of their Medicaid.  Yes, it will be an enormous influx of federal funds with no Tennessee match.  Between 2017 through 2019, the federal reimbursement will decrease a little, but never fall below 90 percent.

4.  Contrast these federal reimbursements for Medicaid Expansion with what the federal government presently matches Tennessee for the 1,050,500 people who already receive Medicaid.[3] The present federal reimbursement rate is only 66.4% and Tennessee pays the remaining 32.5%,[4] as compared to the 90 – 100% federal reimbursement rate for Medicaid Expansion!

5.  What if Congress in a few years changes its mind or changes these percentages?  Is Tennessee stuck with the expansion?  CMS was asked “if a State accepts the [federal] expansion [funds], can a state later drop out of the expansion program?” CMS responded “Yes. A State may choose whether and when to expand [coverage], and if a state covers the expansion group, it may decide later to drop the coverage.”[5]

6.  Is it administratively difficult or time-consuming for a State to enter the Medicaid Expansion program? As with other parts of a Medicaid State plan, it’s easy for States to sign up.  A State need only notify CMS that it has amended its Medicaid State Plan to include persons whose incomes are under 138% of the federal poverty level. This is a very simple process which can be done on-line or by letter. Similarly, “if a state later chooses to discontinue coverage …, it would submit another state plan amendment to CMS” notifying CMS it no longer will cover the group under 138% of the federal poverty level.[6]

7.  Let’s take a six year view for Tennessee. From 2014 through 2019, the federal dollars for the Medicaid Expansion will come to about $11.072billion. [7] Those federal dollars will cost Tennessee $716 million over the six years as a match.  [8]

8.  That’s a 21.90 to 1 federal to state match! Is there any business in Tennessee which would not put up one dollar to receive 21.90 dollars? It’s hard to imagine a business that would refuse such a rate of return, especially if the business could always drop out of the Medicaid Expansion without any penalty or loss.

9.  It has been estimated that this $1.726 billion in new federal funds between 2014 and 2019 will only increase by 2.5% what Tennessee would have spent if it had not participated in this Medicaid Expansion.[9] Why would Tennessee NOT expand?

10.  Over the next six years that is a net gain of $10.356 billion dollars.  An average federal gain of $1.726 billion per year for Tennessee!!![10]  If you are interested in economic development and can kick in $1.726 billion per year into the State for anything, whether highway construction, foster care and adoption assistance, or Medicaid, that $1.726 billion is going to help the State.

 11.  If Tennessee does not enroll the 459,000 low-income people in Medicaid Expansion, the State will actually lose federal reimbursements it had previously received. When the Affordable Care Act was passed, Congress assumed every State would expand coverage to families whose incomes are less than 138% of the federal poverty level. Congress also reduced special hospital payments that had been providing a disproportionate share of reimbursements for hospital services to the lowest income residents.  Congress significantly reduced these special reimbursements because it assumed that the hospitals would be reimbursed under the regular Medicaid program for serving the Medicaid Expansion population.

12.  Therefore, if Tennessee does not agree to Medicaid Expansion, the State and hospitals will lose about $100 million in federal reimbursements per year[11] without receiving in its place the stream of reimbursements that Medicaid Expansion would have provided! That means jobs, as well as health care services.  Over the same six years, this loss of special hospital payments will amount to about $600 million.  Any way one cuts it, this loss is far more than what Tennessee would spend if it agreed to the Medicaid Expansion.

13.  It makes simple business sense to accept the $11.072billion in Medicaid Expansion, because Tennessee and its hospitals will lose $600 million over the six years regardless.  Why not come up with $716 million in state funds spread over 6 years to finance Medicaid Expansion which will then ensure and provide for the tremendous financial benefits to the hospitals?

14.  One could also look at potential increases in revenue for the health care industry.  For example, if Tennessee participates in the Medicaid Expansion, this will generate about $359,318,970 per year in new hospital revenues.[12] That means new jobs at all economic levels.

15.  Besides hospitals, other health-related industries will similarly benefit, including  pharmaceutical and managed care companies because there will be 459,000 new Medicaid recipients to use their services.

Medicaid Expansion is a win-win: it increases both health care access and the amount of federal funds put into Tennessee’s economy.

Fact Sheet prepared by Stephen F. Gold, Esq., 215-627-7100, ext 227.

For more information, citations, and data, contact stevegoldada1@gmail.com.

The 2012 Community Needs Evaluation is the fourth annual publication designed to provide social, demographic and socioeconomic data about residents of Davidson County.  It uses primary and secondary data to report on issues needs and trends, as well as evidence-based best practices that could enhance the quality of life for Nashvillians in need.

See what community leaders have said about the Community Needs Evaluations:

• “As Metropolitan  Nashville Public Schools continues to expand and improve upon the quality of services provided for students and their families, the Community Needs      Evaluation has been a valuable tool in helping us identify needs in the city of Nashville.  The value of this information is that it provides my staff access to data that realistically identifies the issues that may  be affecting the families of our students and the communities in which they live.”   (Tony R. Majors, Assistant Superintendent, Metropolitan Nashville Public Schools)
• “The Community Needs  Assessment provides a comprehensive and up-to-date overview of trends in the level and patterning of poverty among Nashville’s diverse population,  and is a useful planning tool for identifying gaps in human services.”   (Dan Cornfield, Professor of Sociology, Vanderbilt University)
• The Career Solutions Staff at Goodwill Industries of Middle Tennessee, Inc. uses the information provided by Metro’s Community Needs Assessment to better understand not only the demographics of the changing populations in      Davidson County but also the needs or gaps that exist in the areas of workforce development and employment.  Our goal is to fill those gaps by preparing unemployed and underemployed adults to train for and obtain meaningful employment.”  (Betty Johnson, Vice President/Chief People Officer, Goodwill Industries of Middle Tennessee,  Inc.)
• “The Community Needs  Assessment contains a wealth of data on the status of our community and programs that affect our community.  It’s an excellent resource for  learning more about our neighbors.  My social work, sociology, and urban studies faculty members can use this kind of information to target  service learning opportunities for our students, and demonstrate need for  and design projects to help improve our community.”     (Oscar Miller, Ph.D., Professor of Sociology and Department Head,  Tennessee State University)

Many profit-making companies use market research to learn about customer preferences, unmet needs and the changing environment.  While this information helps them develop the most effective and cost-efficient ways to provide goods and services for their customers, nonprofit and government organizations usually lack the information they need to refine, improve or realign their services to best meet needs in the community.

In an effort to provide this type of market research, Metropolitan Social Services-Planning & Coordination’s 2012 Community Needs Evaluation provides a variety of data for service providers about the needs and characteristics of their customers/clients.  In addition to the general population data (by Davidson County, Metropolitan Council Districts and Census Tracts), there is specific information about these areas:

1. 1.      Food and Nutrition
2. 2.      Health and Human Development
3. 3.      Housing and Neighborhoods
4. 4.      Long-Term Supports and Services
5. 5.      Workforce and Economic Opportunity

Evidence-based decisions on service design and delivery are based on the data that is available, using methodology that has been proven effective.  It is important that service providers have information about programs and services that have been very effective in other places, which could be replicated in Davidson County.  Like the 2011 edition, the 2012 Community Needs Evaluation provides examples of best practices for all of these issue areas.  (A separate future event will address the increasing need for Long-Term Supports and Services, also known as Home and Community Based Services for Seniors/Adults.)

The best practices described in the 2011 Community Needs Evaluation (located at the end of each topical section) remain models of how services could most effectively meet the continuing and escalating needs.  In 2012, the best practices are grouped together and are located near the end of the document.

As noted in the 2011 edition, “Good quality, relevant data can guide policy makers, advocate and others toward better decisions, especially in tight economic times.”  While the economy shows signs of gradual recovery, better decisions, based on information and evidence, are essential for improvement.