Assessing the Fiscal Impact of Medicaid Expansion in Mississippi

Health Highlights

Editor’s Note: Since 2014, states have had the option to expand Medicaid eligibility to adults with incomes under 138 percent of the federal poverty level. Under this option, the federal government covers 90 percent of the cost of the expansion eligibility, a significantly higher rate than it covers for most Medicaid populations and services. These financial terms were further enhanced by the American Rescue Plan Act of 2021 (ARP), which provides newly expanding states with a significant increase in Medicaid funding for most other Medicaid populations.

In a new white paper, prepared in partnership with the Robert Wood Johnson Foundation and The Commonwealth Fund, Manatt Health estimates the five-year fiscal impact in Mississippi if the state were to expand Medicaid beginning in State Fiscal Year (SFY) 2023. The white paper, summarized below, examines projected costs and savings associated with the expansion, including the added funding available through ARP. Click here to download a free copy of the full paper, including additional detail on our methodology and full citations.


Access to Coverage and Care in Mississippi

Viewed from a range of different measures, low-income residents of Mississippi are particularly disadvantaged with respect to their access to health insurance and health care services. In 2019, approximately 370,000 residents were uninsured, and the state had the fifth-highest uninsured rate in the country at 12.9 percent.1 According to The Commonwealth Fund, Mississippi’s health care system ranks last among all states across 49 measures of access to health care, quality of care, service use and costs of care, health outcomes and income-based health care disparities.2 Mississippi is also one of the poorest states in the country, with nearly one in five residents falling below the federal poverty level (FPL).3

Current Mississippi Medicaid Program

As of July 2021, approximately 797,000 Mississippians were enrolled in Medicaid or the Children’s Health Insurance Program (CHIP).4 Approximately 88 percent of enrollees are children or individuals who are elderly, blind or disabled. The remaining 12 percent are parents with incomes at or below 21 percent of the FPL, pregnant individuals, and a small number of others. Mississippi does not provide coverage for parents with incomes above 21 percent of the FPL or nondisabled, childless adults under age 65, regardless of income level. This “coverage gap” is a consequence of the state having not expanded Medicaid.5

In Fiscal Year (FY) 2019, total Medicaid benefit expenditures in Mississippi were approximately $5.5 billion. The federal government financed approximately 76 percent of these expenditures, with Mississippi covering the remaining 24 percent. The state also spent approximately $175 million on Medicaid administration, approximately 69 percent of which was covered by the federal government.6

Expansion Costs

In total, we estimate that before considering significant offsets, the total cost of the Medicaid expansion would be approximately $1 billion in SFY 2023 and $9 billion over five years. The federal government would finance approximately 90 percent of these costs ($893 million in 2023 and $8.1 billion over five years), with the state financing the remaining 10 percent share ($106 million in 2023 and $956 million over five years). These state costs will likely be offset entirely by the ARP federal medical assistance percentage (FMAP) increase and other offsets (see below for additional detail).

These costs would primarily be driven by service costs associated with new enrollees. We estimate that approximately 229,000 adults would enroll in the Medicaid expansion by the third year (for purposes of this analysis, we assume this would be SFY 2025) before growth stabilizes in the following years. Based on these enrollment figures, we estimate that total benefit expenditures on the expansion group would be approximately $973 million in SFY 2023 and $8.8 billion over five years, with the federal government covering 90 percent of these costs and the state covering the remaining 10 percent share ($97 million in SFY 2023 and $878 million over five years).

If Mississippi were to expand Medicaid, it would also likely see increased administrative costs as the size and responsibilities of the Medicaid program grow. We estimate that expansion would lead to a proportionate increase in administrative expenditures, or $27 million in SFY 2023 and $236 million over five years, with the federal government covering approximately 67 percent of these costs.

Expansion Cost Offsets

Mississippi could expect to offset a substantial portion of the state’s share of expansion costs through several different mechanisms. These include the two-year, five-percentage-point increase in the non-expansion federal matching rate under ARP; reduced enrollment among certain currently Medicaid-eligible populations who instead would be covered under the expansion group; and replacing unmatched state expenditures on services for the uninsured with matched Medicaid spending. In total, we estimate approximately $1.2 billion in cost offsets over five years.

ARP FMAP Increase

ARP provides states that implement a Medicaid expansion after March 11, 2021, with a two-year, five-percentage-point increase in the FMAP that applies to traditional Medicaid enrollees and services (though it does not apply to the expansion FMAP).7 The FMAP increase is available for a full two years, regardless of when a state adopts expansion, and applies to expenditures associated with most non-expansion eligibility groups, including Medicaid-financed children, parents and caretaker relatives; individuals who are aged, blind or disabled; and pregnant individuals. In total, we project that the ARP FMAP increase would bring an additional $747 million in federal dollars to the state.

Savings on Traditional Medicaid Eligibility Groups

The experience of other states has shown that Mississippi can expect reduced enrollment and costs in certain non-expansion eligibility groups following expansion. Under federal rules, individuals who become pregnant while enrolled in the expansion group generally remain in that group until their next eligibility renewal, allowing the state to claim the enhanced matching rate during the time the individual is enrolled in the expansion group. We estimate that the state would see approximately $161 million in reduced state spending over five years on this group. Expansion would also allow people who now qualify for Medicaid based on their disability status to instead qualify under the expansion group based on their income alone. As a result, we estimate that the state would see a reduction in enrollment of approximately 2.7 percent by the third year of expansion and $160 million in reduced state expenditures. We also project that Mississippi would see a $12 million reduction in state spending over five years on the family planning eligibility group as many of these individuals shift into the expansion group.

Savings on Hospitalizations for Incarcerated Individuals

States are permitted to access federal Medicaid funding for community-based hospital care delivered to inmates of public institutions as long as the individual is eligible for Medicaid. However, non-expansion states like Mississippi typically bear the full cost of these inpatient stays for most incarcerated individuals because most are childless adults who would not be eligible for Medicaid outside of prison. Following the adoption of expansion, many states have reported significant savings on prison health care expenditures by accessing significant new federal Medicaid dollars.8 Based on an assessment of Mississippi’s current corrections spending, we estimate that Medicaid expansion would generate $88 million in new federal dollars over five years.

Additional Funding for State Mental Health and SUD Programs

Many states have also seen significant savings on state-funded mental health and substance use disorder (SUD) treatment programs after the implementation of Medicaid expansion by replacing state funding with matched Medicaid spending.9 Based on current spending on these programs in Mississippi, we estimate that the state could expect to generate approximately $14 million in federal matching funds in SFY 2023 and nearly $100 million over five years, freeing up an equivalent amount of state dollars that could be reinvested in these programs. These additional federal dollars could be viewed as offsetting the cost of expansion if Mississippi reduced its state spending on behavioral health accordingly. However, given the need for behavioral health services in the state, we do not assume that Mississippi will reduce its spending on these programs.

Conclusion

We project that Medicaid expansion in Mississippi would cover over 200,000 low-income residents of the state at no cost to the state for at least five years. Specifically, we project that expansion would generate $1.2 billion in cost reductions compared to $956 million in new state costs over this time period. While not accounted for as part of this analysis, Mississippi would also likely experience significant economic benefits as a result of substantial new federal dollars flowing through the state and reductions in uncompensated care.


1 Kaiser Family Foundation. Health Insurance Coverage of the Total Population. 2019. Available here.

2 D. C. Radley, S. R. Collins, J. C. Baumgartner. 2020 Scorecard on State Health System Performance. The Commonwealth Fund. September 2020. Available here.

3 Kaiser Family Foundation. Distribution of Total Population by Federal Poverty Level. 2019. Available here.

4 Mississippi Division of Medicaid. Enrollment Reports 2021. July 2021. Available here.

5 Centers for Medicare & Medicaid Services. Medicaid, CHIP, & Basic Health Program Eligibility Levels. July 2021. Available here.

6 Centers for Medicare & Medicaid Services. Expenditure Reports from MBES/CBES. FY 2019. Available here.

7 American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 9814, 135 Stat. 4, 215.

8 D. Bachrach, P. Boozang, A. Herring, D. Reyneri. States Expanding Medicaid See Significant Budget Savings and Revenue Gains. Robert Wood Johnson Foundation and Manatt Health. March 2016. Available here.

9 B. Ward. The Impact of Medicaid Expansion on States’ Budgets. The Commonwealth Fund. May 2020. Available here.

 

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2022 Manatt, Phelps & Phillips, LLP.

All rights reserved