Summary of IHL Report on Medicaid Expansion

Mississippi Health Headlines


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Recently, the University Research Center at the Mississippi Institutions of Higher Learning (IHL) issued a report titled The Fiscal and Economic Impacts of Medicaid Expansion in Mississippi, 2014-2025. As the title suggests, the report analyzed the fiscal and economic impact of expanding the Medicaid program in Mississippi under the program’s current structure and policies to cover the newly eligible population described in the Patient Protection and Affordable Care Act (PPACA).

According to the report, three factors will significantly influence the costs of Medicaid expansion in Mississippi:

  1. the number of new Medicaid enrollees;
  2. the expenditures per new enrollee;
  3. the declining Federal Medical Assistance Percentage (FMAP).

Conclusions reached in the IHL report are that:

  • The target population (individuals aged 20-64) is not likely to change dramatically between 2014 and 2025, based on the target expansion population and projections for changes in that population during the time period.
  • Due to the struggling economy and other factors, Mississippi should expect a high participation rate (estimated at 95% of the eligible target population by 2016) for enrollment in the new Medicaid expansion category.
  • Expansion of the Medicaid program will increase the amount of federal dollars coming into the state which in turn will generate additional direct and indirect economic benefits, including additional revenue for the state’s General Fund.
  • The state’s administrative costs associated with Medicaid expansion are estimated to equal $251.9 million.
  • Medicaid expansion could exacerbate the physician shortfall in Mississippi by increasing demand for services. In 2012, 49 Mississippi counties with a total population of 1.6 million people have a physician shortage and need an additional 430 primary care physicians to meet the utilization requirements recommended by the Council on Graduate Medical Education.

IHL’s bottom line as to the expansion enrollment, costs to the state, and additional federal revenue is that:

  • With high enrollment participation between 2014 and 2025 (95% of eligible target population by 2016 with an average annual expenditure per new enrollee of $2,957), the cumulative net fiscal impact will be a $555.9 million deficit for the state.
  • With low participation (estimated at 75% of the eligible target population by 2016 with an average annual expenditure per new enrollee of $3,351), the cumulative net fiscal impact will be a $497 million deficit for the state.
  • In the long run (the next 30-40 years), the report acknowledges that the benefits of Medicaid expansion may outweigh the costs for the state due to more people accessing the system and thereby improving their overall health.
  • In the short run (from 2014-2025), the report concludes that the additional costs of Medicaid expansion outweigh the additional revenue.

Obviously, Medicaid expansion is just one part of a complex problem regarding how health care providers will be reimbursed for delivering services. With limited fiscal resources and the growing costs of other government programs, government payers (primarily Medicare and Medicaid) are reluctant to commit more taxpayer funds to expand beneficiary eligibility or to increase payments for health care services. These factors combined with upcoming decreases in the Medicare and Medicaid Disproportionate Share Hospital (DSH) payment programs create tremendous uncertainties for health care providers.

Rather than studying ways to redesign the health care delivery model for Mississippi, the IHL report’s purpose was limited to an analysis of the fiscal and economic impact of expanding Mississippi Medicaid pursuant to the PPACA. IHL’s findings, combined with decreases in reimbursement from government payers, beg the question as to how Mississippi plans to care for those individuals in our state who are unable to pay for their own health care. What changes to the health care delivery system must be made in order for health care providers to remain viable operationally, and what action is the state willing to take to ensure a sustainable, if not robust, health care delivery system for Mississippi? The challenges faced by payers, providers, and patients require a comprehensive strategy for system reform.