Citizens, health care providers, legislators, they all have the same question these days. How much with the newly-enacted health care reform bill cost Iowa? Despite efforts to get an answer from national organizations, members of Congress, the Department of Human Services, or any other source, there is no definitive answer currently available.
Each day brings a new discovery on how the federal bill will change health care in Iowa. The biggest area of potential change is from the federally-mandated revisions to the Medicaid program. Beginning in 2014, all states will raise Medicaid eligibility to 133 percent of poverty. For all new enrollees, the federal government will pick up 100 percent of cost until 2016, when the states will start assuming part of the expense. According to Federal Funds Information for States (FFIS), Iowa would see Medicaid expenses increasing by a total of $108 million over the next three years.
The expansion of Medicaid eligibility has a trap for states that Congress doesn’t mention. If a person is eligible for Medicaid, but does not sign up for it until they are required to in 2014, the current match arrangement applies. So, for these cases the state will pay one-third of the cost and the feds will pay the rest.
How much will that cost Iowa? Again, that is unknown. It is hard to currently identify the number of Iowans who are eligible but not signing up for Medicaid. Tennessee has attempted to quantify it. Governor Phil Bredesen has said that for his state, the fiscal impact would be $600 million.
The health care bill also increases Medicaid reimbursement rates for certain procedures to their Medicare level. But in order to trim costs from the bill, Congress only committed to paying for the increase in reimbursement for 2 years. After 2015, states are still required to pay the higher rate. Will Iowa have to pick up the cost? No one knows.
There is an additional problem with this. Congress is not increasing rates for every service, just some. In the past, Iowa has tried to implement rate changes equally for all providers over the years. It’s only fair that everyone is treated the same. If Iowa was to maintain this approach, the state would have to find the funds to pay for the increases not covered by Congress.
Another item that is likely to cost the state is the Cadillac tax. After reconciliation, Congress implemented a tax on high-value health plans beginning in 2018. These plans would have to pay a tax of 40 percent of the value above the tax thresholds. For a single person, that level is $10,200 while for family coverage, it is $27,500.
Why should Iowans be concerned about the Cadillac tax? As an employer, it is likely that the State of Iowa will be paying this tax on the health plans offered to state employees. The annual premium currently for the standard health plan offered to single state employees – known as Program 3 plus – is $7,718. If you factor in a 10 percent premium hike each year, the annual amount rises to $16,545 in 2018. That means the state would play a 40 percent tax on $6,345 above the threshold. With 3987 on Program 3 Plus as of July 1, 2009, that would amount to a tax of $10 million for the state. That’s just one plan covering single employees.
This is just the start of the spending list for Iowa. As people learn more about the bill, there will be a much bigger list of costs shifted to the state. While Congress promised that their health care bill would not raise the federal deficit, they also showed little concern for the budgets of the states.