Health Care Law’s Medicaid Expansion Costs Worry State Officials, GAO Finds

Health Care Law’s Medicaid Expansion Costs Worry State Officials, GAO Finds

By Jane Norman, CQ HealthBeat Associate Editor 

State budget directors are concerned about the cost and complexity of the Medicaid expansion included in the health care law, according to a Government Accountability Office report released Wednesday. 

The GAO, in response to a request from Sen. Charles E. Grassley, R-Iowa, surveyed states on how, by Jan. 1, 2014, they plan to implement the expansion of the joint federal-state Medicaid program to childless adults earning less than 138 percent of the federal poverty level. 

Grassley’s request and the GAO survey came prior to a decision by the Supreme Court that upheld the law (PL 111-148, PL 111-152) but allowed states to choose to opt out of the expansion. Even before the ruling, state officials were concerned about the fiscal details of the expansion, GAO found, which may account for why some governors have been reluctant to commit to participating in it in the wake of the ruling. 

To comply with the expansion, states will need to make major changes in the way they determine Medicaid eligibility for individuals and families, said GAO. States will also need to develop streamlined eligibility and enrollment systems that allow for the coordination of Medicaid, the Children’s Health Insurance Program and insurance offered through state exchanges, the report said. And they will need to deal with some of the costs of doing so, though the federal government will fund 100 percent of the costs of the expansion initially before scaling down to 90 percent. 

To figure out the views of state budget directors, the GAO conducted a web-based survey of them and received a 76 percent return rate. The budget directors’ worries about costs centered on three areas. They said they’re concerned about the administrative costs of managing enrollment, the price tag of new information technology and the cost of enrolling people in Medicaid who had been eligible in the past but hadn’t applied.

“Further, most state budget directors reported that their fiscal capacity and the state’s share of Medicaid expenditures create challenges for implementing the Medicaid expansion,” said GAO. 

Budget directors also are looking for more guidance from the Centers for Medicare and Medicaid Services, GAO said. “CMS issued regulations and guidance on a range of topics regarding Medicaid expansion and has indicated that additional guidance will be forthcoming,” said GAO. “Concerted and cooperative efforts on the part of CMS and the states will be critical to meeting the implementation deadlines for the Medicaid expansion.”

GAO also picked out six states and asked what they are doing to implement the expansion. Colorado, Georgia, Iowa, Minnesota, New York andVirginia said they are taking steps to get going on it, including assessing changes that need to be made in determining eligibility. They also are replacing or upgrading their information technology systems, said the report.

“At the same time, state officials reported challenges to implementing [the Affordable Care Act’s] Medicaid expansion requirements, including the need for additional federal regulations and guidance in a number of areas,” said GAO. One in particular was how they will use new methodologies to determine applicants’ income. 

“States also reported operational challenges that could affect their ability to meet Medicaid expansion and system development deadlines, such as lengthy state procurement processes, the complexities of developing new systems, coordination of multiple programs and systems, and resource limitations,” said GAO.