Johnson Requests Data from CMS and State Governors on Medicaid Expansion’s Exploding Costs

WASHINGTON — U.S. Sen. Ron Johnson (R-Wis.), chairman of the Senate Homeland Security and Governmental Affairs Committee, sent letters Wednesday to the Centers for Medicare and Medicaid Services (CMS) Administrator and governors of eight states asking for information related to Medicaid expansion and the soaring costs that go far beyond initial projections.

“Federal Medicaid expenditures totaled $246 billion in fiscal year 2009, increased to $299 billion in fiscal year 2014 and are projected to rise 96 percent to $588 billion by 2025.  A primary cause of this increase is the ACA Medicaid expansion,” Johnson wrote in the letter. “Current CMS and other data show original Medicaid expansion per-enrollee spending and overall enrollment projections were significantly understated.  In 2014, CMS predicted per-enrollee spending on newly eligible adults in 2015 would be $4,281, but the actual amount was $6,365 (49 percent higher). Accordingly, CMS increased per-enrollee projections for fiscal year 2023 from $5,076 to $7,027 (38 percent higher).”  

Similar letters were sent to the following state governors:

California Governor Edmund Brown

West Virginia Governor Jim Justice

Illinois Governor Bruce Rauner

New York Governor Andrew Cuomo

Ohio Governor John Kasich

New Hampshire Governor Christopher Sununu

Michigan Governor Rick Snyder

Hawaii Governor David Ige

The letter to CMS can be found here and below:

September 27, 2017

The Honorable Seema Verma

Administrator

Centers for Medicare & Medicaid Services

200 Independence Avenue, SW

Washington, DC  20201

Dear Administrator Verma:

The Committee on Homeland Security and Governmental Affairs is continuing to examine the Patient Protection and Affordable Care Act’s (ACA) Medicaid expansion. As part of this inquiry, I write to request information from the Centers for Medicare & Medicaid Services (CMS).        

Federal Medicaid expenditures totaled $246 billion in fiscal year 2009, increased to $299 billion in fiscal year 2014 and are projected to rise 96 percent to $588 billion by 2025. A primary cause of this increase is the ACA Medicaid expansion. Current CMS and other data show original Medicaid expansion per-enrollee spending and overall enrollment projections were significantly understated.  In 2014, CMS predicted per-enrollee spending on newly eligible adults in 2015 would be $4,281,  but the actual amount was $6,365 (49 percent higher). Accordingly, CMS increased per-enrollee projections for fiscal year 2023 from $5,076 to $7,027 (38 percent higher).

In many expansion states, most notably California, enrollment has also significantly exceeded original estimates. CMS data show that enrollment for newly eligible enrollees in California rose 36 percent between 2014 and 2015, from 2.5 million to 3.5 million. By May 2016, California’s newly eligible enrollment was 322 percent over what had been projected. Costs per-enrollee are also surging in California, going from $4,526 in 2014 to $5,868 in 2015 – a 30 percent single-year increase. Similarly, costs per-enrollee are on the upswing in virtually every expansion state, including a 214 percent one-year jump in Illinois between 2014 and 2015. In Oregon, a spike in Medicaid expansion enrollment contributed to the state awarding Medicaid benefits to more than 37,000 ineligible people over the past year.

The escalating costs to federal taxpayers could stem from the Medicaid expansion’s reimbursement formula, which gives states a financial incentive to categorize people as newly eligible to obtain more federal money. I am seeking to better understand these rising costs, higher-than-expected enrollment and potential eligibility mistakes, especially in states where costs or enrollment are increasing especially quickly. Accordingly, I respectfully request that you please provide the following information and material:

1. Please explain CMS’s role in decisions to set payment rates for insurance companies under the ACA Medicaid expansion, both before the expansion took effect in 2014 and for each year since. What factors did CMS consider in any guidance it provided to states about setting these rates?

2. Please explain CMS’s methodology for determining the eligibility thresholds in states that have adopted the Medicaid expansion, including:

       1. How CMS verifies whether states are appropriately checking eligibility; and

       2, Whether there are financial repercussions if states enroll ineligible people as newly eligible Medicaid recipients. If so, what are those repercussions?

3. Please explain how CMS verifies the appropriateness of insurance and provider rates in the Medicaid expansion, including:

       1. Whether any states have been tardy in submitting information about their managed care rates; and

       2. If CMS has identified any concern about rates in any Medicaid expansion state—including, but not limited to, insurance and provider rates that are higher for the expansion population than the non-expansion population—please produce all documents and communications referring or relating to the rates in that state.

4. Please produce all draft and final copies of contracts between states that have adopted the ACA Medicaid expansion and insurance companies for the period January 1, 2013, to the present.

5. Please produce all documents and communications referring or relating to decisions to set payment rates for insurance companies under the ACA Medicaid expansion for the period January 1, 2013, to the present, between or among CMS officials and the following:

1. 1. Employees or contractors of other federal entities, including but not limited to the Department of Health and Human Services and the Executive Office of the President;
   2. Employees or contractors of state entities; and
   3. Employees or contractors of insurance companies.

6. Please provide all documents and communications referring or relating to the ACA Medicaid expansion, or the determination of individuals newly eligible under the expansion, for the period January 1, 2013 to the present, concerning the following states:

1. California;
2. Illinois;
3. New York;
4. Michigan;
5. New Hampshire;
6. Ohio;
7. West Virginia; and
8. Hawaii