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Missouri Health Reform Report

Email Alert
By Chad Moore and Mark Van Blaricum*
June 19, 2009

Governor's Budget Recommendations

Missouri elected a new governor in 2008, Jay Nixon (D), the incumbent four-term Attorney General, who had run a campaign focused closely on health reform. The centerpiece of his health reform efforts was aimed at restoring Medicaid eligibility and benefit cuts that passed the Missouri Legislature in 2005.

Governor Nixon's (Governor) efforts with health reform this year were curtailed by a worsening budget situation and a Republican-lead legislature that was leery of expending public programs.

The Governor's budget recommendations included the following items aimed at health reform:

  • Use $14 million in state General Revenue funding and $37 million in hospital Federal Reimbursement Allowance (FRA) funding to draw down $91.7 million in federal funds to restore eligibility for Medicaid for low-income parents. Move from 20% of the Federal Poverty Level (FPL), or $292 per month for a family of three, to 50% FPL, or an income of approximately $763 per month for a family of three. This increase in eligibility would have benefited an estimated 34,000 very-low-income parents. The Senate approved this item, though the House narrowly defeated it.
  • Use $22.7 million in state general revenue and $474,000 in other funding to draw down $58.5 million in federal funds for children's healthcare, or those in the State Children's Health Insurance Program (SCHIP) program. The funding would support the healthcare needs of an estimated 27,000 children by eliminating premiums for children in families between 150—225% FPL and reducing premiums for children in families with incomes from 226—300% FPL. In addition, a portion of the funding would have been utilized to conduct outreach to enroll children who are currently eligible for Medicaid or SCHIP, but who remain un-enrolled and thus uninsured. Neither the House nor the Senate approved this item.
  • Recommended using $3.3 million in state general revenue, generating $9.8 million in federal funding, to support Rural Health Clinics (RHC) and Federally Qualified Health Centers (FQHC) to implement presumptive eligibility for children's health insurance. Neither the House nor the Senate approved this item.

House Bill 11

The Missouri House rejected HB 11 largely because of the Governor's and Senate recommendation of the appropriation for the Department of Social Services to expand eligibility for low-income parents up to 50% of the FPL. The Governor and the Missouri Hospital Association had worked out an agreement to use FRA funds (not general revenue) to support the expansion; however, the House would not pass HB 11. HB 11 finally passed when the expansion was stripped out, with the agreement that the Legislature would work on SB 306 (the Show Me Health Coverage Plan) as the vehicle to expand coverage to low-income parents during the last week of the legislative session.

Senate Bill 306 (Show Me Health Coverage Plan)

SB 306 proposed the Show-Me Health Coverage Plan that would have created a framework to expand coverage to individuals who met the eligibility criteria in years in which the General Assembly appropriates necessary funding. Modeled on the Healthy Indiana plan, it required participants to enroll in high-deductible health plans and contribute to health savings accounts.

The bill provides coverage for individuals with incomes up to 50% of the FPL without regard to type of income, and for custodial parents with earned income up to 100% of the FPL. There are caps for income disregards for child support, a child's old-age survivors or disability insurance (OASDI) benefit, and unemployment benefits for persons with earned income for those with earned income between 50% and 225% FPL, subject to appropriation.

Under the plan, a healthcare account would be established for each individual, except for the custodial parent population under the state plan amendment; payments for his or her participation could be made by the individual, an employer, the state, or any philanthropic or other charitable contributor.

The House in its committee work significantly modified the SB 306. Essentially, the House objected to expanding coverage to any parent with incomes up to 50% FPL, preferring instead to cover only those individuals who were uninsurable because of pre-existing conditions and who also met certain income eligibility guidelines. This decreased the number of eligible participants for this program from 35,200 to about 21,000. Ultimately, the two chambers could not come to an agreement and SB 306 did not pass.

Federal Stimulus Dollars Help Stabilize Medicaid Program

Budget Stabilization Funds

As part of the American Recovery and Reinvestment Act (ARRA), Congress set aside 10% of the overall bill's funding for states to use as "Budget Stabilization Funds" to prevent cuts in essential government services that would deepen the recession and slow or prevent a recovery. The Budget Stabilization Funds were disbursed to the states through (1) Education Funds and (2) Medicaid Reimbursements.

Medicaid Reimbursements

As Congress did in 2003, ARRA includes Budget Stabilization Funds delivered to the states through temporary increases in the Federal Medicaid Assistance Percentage (FMAP). States spend their own money on Medicaid services and are reimbursed by the federal government based upon percentages that change each year to reflect the relative costs of each state's low-income healthcare needs. Missouri's Medicaid reimbursement percentage is approximately 64%, i.e., for every $100 Missouri spends on Medicaid services, the federal government reimburses the state $64.

Under ARRA, states will receive a special increase to their FMAP rate of 6.2% points. Depending on the state's unemployment rate, some states might receive an even greater increase in the matching rate to help stabilize Medicaid budgets hit by declining state revenues and increasing Medicaid enrollment. The time period for the FMAP increase is October 1, 2008, to December 31, 2010.

For Missouri, this means an additional $1.6 billion for its Medicaid programs for the time period above, with $270 million of those funds already received by the state.

Healthcare Provider Taxes

The Missouri Legislature did pass a number of bills (HB 740 and HB 395) relating to healthcare provider taxes. Some of these were extensions of existing taxes; others created new taxes for certain types of providers. The following are the taxes that the Legislature passed:

  • A two-year extension on the expiration date of the hospital Federal Reimbursement Allowance and several other provider taxes, such as the Medicaid managed care provider tax, and pharmacy tax. However, because of the Deficit Reduction Act of 2005, the Medicaid managed care organization provider tax is set to expire October 1, 2009.
  • Authorized a provider tax for in-home services. The bill requires each MO HealthNet in-home services provider to pay an in-home services gross receipts tax based on a formula established by the Department of Social Services, not to exceed 6.5% of its gross receipts. The tax would be subject to federal approval, and the proceeds would be used to increase payments for in-home services.
  • SB 307 authorizes an ambulance service reimbursement allowance tax for ground ambulance services. Each ambulance service, except state-owned and -operated ambulances, will be required to pay a tax based on a formula established by the Department of Social Services, not to exceed 6% per annum of gross receipts.
  • SB 307 also authorizes, beginning July 1, 2009, that certain mental health providers be subject to a certification fee including publicly and privately operated programs that have been certified to meet the Department of Mental Health's certification standards for providing residential habilitation, individualized supported living, or day habilitation services to developmentally disabled individuals.

*AHLA wishes to thank Chad Moore, Esquire, and Mark A. Van Blaricum, Esquire (Children's Mercy Family Health Partners, Kansas City, MO) for providing this alert.

The Healthcare Reform Educational Task Force is a joint endeavor of the Healthcare Liability and Litigation; Hospitals and Health Systems; In-House Counsel; Payors, Plans, and Managed Care; Physician Organizations; Regulation, Accreditation, and Payment; and Teaching Hospitals and Academic Medical Centers Practice Groups.
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