Politics

January 21

Analyst questions Maine consultant’s report on Medicaid expansion

She says the cost study has several flaws, including what appears to be a $575 million calculation error.

By Steve Mistler smistler@pressherald.com
Staff Writer

A national health-care analyst is questioning the findings of a study of Medicaid expansion commissioned by the LePage administration, including what she says is a miscalculation that produced a $575 million error.

A national health-care analyst is questioning the findings of a study of Medicaid expansion commissioned by the LePage administration, including what she says is a miscalculation that produced a $575 million error. Above, Gary D. Alexander, the study's architect.

Photo courtesy PhillyLive.com

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Kathy Gifford, a Medicaid analyst for Indianapolis-based Health Management Associates, reviewed the study by the Alexander Group, part of a $925,000, taxpayer-funded review of Maine’s public welfare system.

The LePage administration has touted the study’s recommendation that lawmakers reject expansion of MaineCare – the state’s Medicaid program – because it would add 124,000 recipients and increase the program’s cost by $807 million over 10 years. Opponents of expansion have cited the report extensively since it was released Jan. 10.

But Gifford said the report has several shortcomings, including a miscalculation that could significantly overstate the cost of the program and expansion. Gifford reviewed the study for AARP, which favors Medicaid expansion.

She said Monday that the Alexander Group apparently used a lower federal reimbursement rate for its calculations than it cited in the text, effectively inflating Maine’s share of the cost.

Gifford’s comments raise new questions about the report, which had already been assailed as a taxpayer-funded document to validate the LePage administration’s policy positions on welfare and its refusal to expand MaineCare to an estimated 60,000 to 70,000 Mainers.

Critics have said the study of MaineCare exaggerates the state’s costs because it assumes an unsubstantiated growth in Maine’s poverty rate and omits savings from expanded coverage that have been included in cost-benefit analyses in other states.

The report’s author, Gary Alexander, is a former public welfare chief in Pennsylvania who was scrutinized for reforms that prompted an investigation by that state’s auditor general.

The LePage administration defended the report against earlier criticism, saying the recommendations are valid. The findings will likely be debated Wednesday, when lawmakers take up a bill to expand MaineCare. Proponents of that bill hope to build enough support to override a veto by Gov. Paul LePage.

The Portland Press Herald made multiple inquiries to the administration Friday about the federal reimbursement rate in the report, but a spokesman for the Department of Health and Human Services did not respond. State offices were closed Monday in observance of the Martin Luther King Jr. holiday. A spokeswoman for LePage did not respond to a request to explain any discrepancy.

CALCULATIONS NEED CLARIFICATION

The question raised by Gifford focuses on the percentage of MaineCare costs paid by the federal government, and the percentage paid by the state.

In several instances, Alexander wrote in his report that he used a federal reimbursement rate of 61.55 percent to determine the state’s cost of maintaining its current program, referred to in the report as the baseline.

Alexander wrote that the assumption of 61.55 percent is based on the current federal reimbursement rate for Maine. The rate can change annually because it’s based on a state’s average per-capita income relative to the national average.

That annual cost of Maine’s Medicaid program is now $2.7 billion, of which the state pays $1.1 billion. Alexander’s report says the annual cost will grow to $4.6 billion by 2024, of which $1.8 billion will come from the state.

However, Gifford’s calculations show that Alexander used a 60 percent federal reimbursement rate. The 1.55 percentage-point difference is significant, she noted, because it overstates Maine’s cost of the program by $575 million over 10 years.

In a memo to the Legislature’s Health and Human Services Committee, Gifford wrote that the error is in the current cost for the program, and it’s not clear whether Alexander used the same calculations in his projection for an expanded program, which would include various eligibility categories that qualify for varying reimbursement rates.

Gifford said it’s hard to assess how such an error would affect the findings, without an explanation of Alexander’s calculations. For example, if he used a 60 percent federal reimbursement rate for his expansion analysis, she said, the actual cost to Maine could be significantly lower than Alexander’s projection of $807 million over 10 years.

“Even if (Alexander) corrects the report, I don’t know if that’s a cost difference that will persuade opponents of Medicaid expansion to vote for it,” she said.

Gifford said policymakers should ask Alexander and the DHHS more questions about the calculations.

The federal government said it would fully fund expansion for three years, before gradually drawing down to 90 percent reimbursement by 2020.

FODDER FOR EXPANSION OPPONENTS

That potential error did not come up last week during a briefing on the report to the Health and Human Services Committee, or during a public hearing on a bill that would authorize Medicaid expansion, said Rep. Drew Gattine, D-Westbrook.

“It’s very concerning,” he said. “I think the report has already been discredited, at least from my perspective. The people of Maine paid a lot of money for this study and what we found is that, at the least, its findings are tremendously incomplete.”

Gattine described the report as an advocacy document, not an independent analysis.

Many Republican lawmakers, whose votes are needed to override a certain veto by LePage, have vowed to oppose expansion. In a release last week, Senate Minority Leader Michael Thibodeau, R-Winterport, cited the report, saying MaineCare has driven decades of cost overruns in the state budget and crowded out funding for other programs.

“Maine ranks third in the nation in terms of percentage of budget spent on the program,” Thibodeau said. “Expanding this program that is already stretched to the limit and causing massive cost overruns would be a disaster.”

Gifford, whose firm’s clients include the Kaiser Family Foundation, hospital associations and state and local governments, said there are other, more compelling issues that cast doubt on the Alexander report’s findings.

She questioned Alexander’s forecast that nearly 100,000 people would be added to the current total of about 320,000 in the first year of expansion. Other analyses have projected an increase of 60,000 to 70,000.

Alexander attributed the increase to a range of factors, including businesses shedding health care coverage and a migration from private insurance to Medicaid. But Gifford said the projection assumes that everyone who qualifies for Medicaid will enroll, something that has not historically happened in means-tested programs.

Gifford also noted that, unlike independent analyses of Medicaid expansion in other states, Alexander’s omitted any savings from expanding the program. The savings are generated largely by migration from programs in which the state pays most of the cost, to Medicaid, in which various federal reimbursement rates are higher.

Other states have used such analyses to determine whether they want to expand their Medicaid programs.

“I don’t think anybody believes that there isn’t going to be cost associated with expansion,” Gifford said. “But some states have been able to get to zero by factoring savings from other initiatives. Every state is different.”

Asked last week why the savings weren’t included in Alexander’s analysis, members of his team said they didn’t want to complicate the study.

Steve Mistler can be contacted at 791-6345 or at:

smistler@pressherald.com

Twitter: @stevemistler

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