WI Premium Increase Proposal Would Not Achieve Real Savings

By Wesley Prater

A couple of months ago, Governor Scott Walker of Wisconsin introduced his biennium budget for 2011-13 which consisted of cuts of nearly $500 million to Wisconsin’s BadgerCare Plus, the state’s Medicaid program.   Additionally, the Governor’s Budget Repair Bill (yes, that same bill that would undermine collective bargaining rights) would give Wisconsin’s Department of Human Services the authority to make changes to the Medicaid program, which is traditionally done by the state legislature.   These changes could include raising premiums and/or other cost-sharing methods (i.e., premiums, copayments, deductibles, and coinsurance) for families in BadgerCare Plus.

Federal rules on cost-sharing strictly prohibit states from imposing premiums for families enrolled in Medicaid that are below 150% of the federal poverty level (FPL) and total cost-sharing charges are not allowed to exceed 5% of a family’s income.  There has been some discussion from Governor Walker’s administration as well as indication from a recent Legislative Fiscal Bureau Paper to the Joint Finance Committee that Wisconsin is considering expanding cost-sharing to low-income families.  Wisconsin already imposes premiums on families above 150% of the FPL but the state could attempt to impose new or increased premiums on families beginning at 100% of the FPL.  Given the federal cost-sharing rules, this would have to be approved by the Centers for Medicare and Medicaid Services (CMS) through a Section 1115 waiver.

Given the current premiums imposed on families in BadgerCare Plus and the cost-sharing rules capped at 5% of families’ income, Joan Alker, Martha Heberlein and I released a paper this week that examines the potential impact of premium increases on participation rates in BadgerCare Plus.  Wisconsin and other states that are focused on budget savings may falsely assume that the increased revenue from the premiums would lead to the budget savings.  However, the reality is that imposing premium increases on families with little to no disposable incomes would lead to children and families dropping out of the program because they couldn’t afford the increased premiums.  As these families fell into the ranks of the uninsured, costs of uncompensated care and ER visits for non-emergency care would likely increase and simply shift costs rather than achieve true health care savings.

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