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November/December 2015 St@teside

Savings for States Expanding Medicaid

In a series of recent reports, Manatt Health Solutions, with support from the State Health Reform Assistance Network (State Network), has examined the fiscal implications of Medicaid expansion. Thefirst and second reports explored state budget savings and revenue gains associated with expansion, and the third report examined the impact on uncompensated care spending and related state budget implications. Last month, Manatt released the fourth and fifth reports in the series, focusing on cost savings related to justice-involved individuals and proposed additional funding for services provided to American Indians and Alaskan Natives. These briefs offer another look into the effects of Medicaid expansion not only on low-income populations but on state budgets.

Medicaid Expansion and Criminal Justice Costs
The expansion of Medicaid under the ACA in many states has generated substantial interest in the potential role that Medicaid may play in tackling pressing criminal justice issues. Generally, states and localities are responsible for financing the health care provided to people who are incarcerated, and federal rules prohibit Medicaid from paying for care for inmates. However, payment for services is allowed if an individual has an inpatient stay outside of prison or jail for at least 24 hours, as well as for services provided while the individual resides in the community (either before incarceration or after release).

Most immediately, states have recognized savings through reimbursement for care provided to inmates because federal funds may now be used in lieu of state funds to pay for inpatient hospitalizations. For instance, Colorado, Michigan, and Ohio have saved between $5 and $13 million per since 2014.

Perhaps more significantly, the availability of Medicaid coverage allows justice-involved individuals to be more stable in the community upon release through increased access to substance use and mental health treatment services. Additionally, states are working to connect justice-involved individuals to the Medicaid program while they are still in jail so that they have immediate access to coverage once they are released. By ensuring access to coverage, former inmates may be more likely receive necessary treatment and avoid recidivism. Similarly, access to behavioral health services may prevent individuals from being arrested or incarcerated in the first place.

Medicaid and the Indian Health Service
As another source of state savings related to Medicaid, the Centers for Medicare and Medicaid Services (CMS) recently announced plans to provide 100 percent federal match for more services provided by Indian Health Services (IHS). The proposal, which will effectively reduce states’ cost for Medicaid expansion and buffer the impending decrease in the federal matching rate for newly eligible adults after 2016, may be of particular interest to states with a significant American Indian and Alaskan Native (AI/AN) population. States with the highest proportion of AI/AN individuals include Alaska, New Mexico, South Dakota, Oklahoma, and Montana.

When Medicaid-eligible AI/ANs receive services through an IHS facility, the federal government pays the full share, and the state is not required to cover any of the cost. Currently, the full federal payment only applies to services provided directly by an IHS facility. In a Request for Comment issued by CMS in October, the 100 percent federal match would be expanded to cover any services provided by IHS, including services like transportation, home health care, and other services that may be provided by a third party, as long as the Medicaid beneficiary is served as a patient of the IHS.

For information, check out the entire series on the State Network’s website: