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Thursday, July 10, 2014 |  Madison, WI: 66.0° F  Fair
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Walker's Medicaid gamble: Shrinking BadgerCare could cost Wisconsin in the long run

Eskrich: 'We're turning down so much money that would provide so much coverage.'
Eskrich: 'We're turning down so much money that would provide so much coverage.'
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Gov. Scott Walker's plan to shrink the state's BadgerCare program could end up costing the state about $250 million more by 2020, according to a Legislative Fiscal Bureau memo.

Walker announced last week that rather than expanding Medicaid in Wisconsin - as called for in the Patient Protection and Affordable Care Act (a.k.a. Obamacare) - he would reduce it.

President Obama has asked states to expand their Medicaid programs - in Wisconsin, it's called BadgerCare - to 138% of the poverty line, with the promise that the federal government would pay the full cost of newly eligible enrollees in the program for the first three years and 90% of the cost after that. (The federal government now pays 60% of current Medicaid enrollees, while the state pays 40%.)

But Wisconsin is distinct in that it already covers many people above the 100% poverty line. Parents and children at 200% of the poverty level can enroll in BadgerCare programs. Children up to 300% of the poverty level can get subsidized coverage, provided their parents pay some of the premium. And Wisconsin offers a barebones plan, called BadgerCare Plus Core, to childless adults up to 200% of the poverty level.

But the catch is that many of these programs are now closed to new adult enrollees, and there are long waiting lists. Expanding Medicaid would end those waiting lists and bring an estimated $4.4 billion in federal money into the state over the next six years, giving 175,000 more people health care.

But Walker argues that the federal government - with its massive deficit - would eventually cut funding for the program, leaving the state with the bill.

Instead, Walker proposes lowering BadgerCare's eligibility for adults to the poverty level, but ending the waiting list for anyone below it. This would bring about 82,000 more people who are below the poverty line into BadgerCare. On the other hand, it would also push 87,000 adults who are slightly above the poverty line off BadgerCare.

Those people would qualify for federal subsidies and, Walker argues, would be able to get coverage in the insurance exchange, which the federal government is setting up.

In announcing his decision to the Wisconsin Manufacturers & Commerce meeting at Monona Terrace on Feb. 13, Walker said: "Our goal in government should not be how many more people can we get on these programs. Our goal should be the opposite, how many people can we get off of them because we've empowered them to control their own lives, control their own destiny, and move themselves and their families forward."

The same day Walker made his announcement, the Legislative Fiscal Bureau put out a memo outlining the cost of the various options Walker could take. Although the details of Walker's plan were unknown until he released his budget this week, the option that most closely matched Walker's comments would cost the state more money, the Bureau found.

In the first six months, Walker's plan would initially save the state about $14 million, but then the cost begins to grow, to $28.4 million in 2015 and $72.8 million in 2020. It would cost the state an extra $320 million through 2020 - about $250 million more than the option to expand Medicaid.

David Riemer, senior fellow at Community Advocates Public Policy Institute in Milwaukee, says, "The governor has proposed a plan that reduces a program. Usually when you do that, you cost the state less money. But his plan increases costs for the state."

The problem, Riemer says, is the people who would be added to BadgerCare will cost more to insure than those who will be purged.

There are other costs to the state, Riemer argues. Companies with employees near the poverty line will be at risk of a special $3,000 tax for each employee who cannot afford the company's insurance plan. That tax could add up to $120 million a year, he says. However, if those employees "are eligible for BadgerCare, employers don't get taxed." So an expanded BadgerCare means fewer employers would be subject to the tax.

Riemer is urging the governor to take a middle path: reduce Medicaid coverage to 138% of the poverty line, sending those above that level to the federal exchanges. The Legislative Fiscal Bureau evaluated that option and found it would reduce state spending in the next budget by more than $90 million and would save the state $217 million by 2020.

"This scenario frees up money that could be used for whatever," Riemer says. "It could be used for tax cuts."

What does all this mean for people who are pushed out of BadgerCare into the private insurance exchanges? Will the coverage be as good?

Sara Eskrich, health care policy analyst with the Wisconsin Council on Children and Families, says the federal "benchmark" (PDF) for plans in the exchange moves "in the right direction in covering mental health and substance abuse treatment."

But, she adds, "One of the strengths of Medicaid is the simplicity in how it's administered."

Reducing the eligibility for BadgerCare could also end up costing county governments more, Eskrich says. County governments are responsible for paying for the emergency care of uninsured people in crisis situations.

"In an ideal world, they'd be on their meds and in therapy, so they wouldn't need that emergency care," says Eskrich, who laments: "We're turning down so much money that would provide so much coverage."

Shel Gross, director of public policy for Mental Health America of Wisconsin, says that county governments currently offer a range of community support services to the mentally ill through Medicaid. These include case management, help with daily living, help finding work, and help making sure people take their medications. "It's a host of services that help people live in the community and recover," he says.

The exchange plans are supposed to include these services, but the initial benchmark did not list them, Gross says.

"Counties are really the ones that have the responsibility for these services," he says. "To the degree that people who will lose their BadgerCare coverage were receiving services, the counties potentially take a hit."

Carrie Springer, a Dane County spokeswoman, says until county officials know specifics of the governor's plan, they won't know how the county will be affected.

There are many uncertainties, since the governor's plan would bring some new people into BadgerCare but kick others off it. "How those two things balance out, I don't know," Gross says. "There can be gains and losses for the counties, and how those offset each other is unclear."

Eskrich fears the governor's plan will push a vulnerable population into the confusing exchanges and add even more uncertainty to their lives. "People who are right at that poverty line are going to be moving back and forth between the exchange and Medicaid," she says.

Riemer agrees this will be difficult for some. For instance, many poor people who will be in the exchanges don't have bank accounts or credit cards. So even if they can afford a heavily subsidized plan, "the system doesn't allow you to stuff cash in an envelope and mail it someplace. So how do these people keep paying it each month?"

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