States Battling Opioid Epidemic Will Face Tougher Times if Medicaid is Cut

As readers of SayAhhh! already know, the bill passed by House Republicans and currently under secret consideration by Senate Republicans – the American Health Care Act (AHCA) – would limit federal funding to states for Medicaid. The funding limits, known as a per capita cap, would shift all of the risk inherent in health insurance to states – whether from an economic downturn, lower revenue, higher costs, natural disasters, you name it, the burden would fall squarely on states. As my colleague Andy Schneider has written, research shows that some states are in a worse position to handle this added risk than others, though it’s a losing battle for all 50 states and DC over time.

A new report by Jeanne Lambrew at The Century Foundation identifies three related risks that would make it even harder for states to manage federal funding cuts. First, states battling the opioid epidemic will experience higher than average per person costs, making it harder to keep up with less money. Second, states with a growing number of premature babies – due in part to opioid-addicted mothers – would face higher per person costs for medical treatment and, more broadly, social services and special education. Third, states with a growing demand for organ transplants – also due in part to the opioid epidemic – would have far higher per person costs than the proposed federal formula could absorb. These three factors add up to a likely scenario where certain states are even worse off than their peers under AHCA – forever unable to keep up with patient’s needs and costs.

Here at CCF, we’ve been looking to learn more about the impact of the opioid epidemic on children. Some alarming news stories have highlighted the related rise in childhood neglect and trauma, and we know toxic stress derails healthy development. Lambrew’s new piece brings another related issue to the forefront – preterm births. Babies born early are at higher risk for developmental delays and disabling conditions like cerebral palsy. And according to Lambrew, the number of preterm births rose for the first time in eight years in 2015 – affecting about 1 in 10 infants.

Several different factors increase the risk of preterm births, including maternal high blood pressure and diabetes – and these conditions are on the rise. But of growing concern is maternal opioid addiction. As more people suffer from opioid addiction, more babies are likely to be born prematurely, and babies born prematurely cost more. Medicaid covers nearly half of all births in the US, so any increase in delivery costs disproportionately affects the program, and in turn, state budgets. In 2011, the average cost of a preterm birth was $21,500, almost 9 times the average cost of covering a child in Medicaid for an entire year ($2,463). The cost to treat a newborn suffering from opioid withdrawal is even higher – $150,000 on average.

It is clear that states will have to spend more per premature child than the AHCA would allow. And even if states take every action possible to reduce the number of preterm births, the magnitude of the price difference is such that even a small number of preterm births could lead to serious Medicaid funding shortfalls. Not to mention that some of these trends cannot be easily controlled – there isn’t a silver bullet to end the opioid addiction and reverse national trends in diabetes and high blood pressure.

The increased costs mentioned here are just the beginning of the story. The societal costs of preterm births extend far beyond the costs of labor, delivery, and detox. The Institute of Medicine found that preterm births also increase costs for early intervention services to help mitigate developmental delays and special education services to help children learn, and they lead to lower revenues from lost work and pay. In 2005, these costs added up to $26.2 billion each year.

Does your state face a bigger risk under a Medicaid cap due to the rise in preterm births? Lambrew finds that the 15 states that rank the highest in preterm births are Louisiana, Mississippi, Utah, Texas, Alabama, District of Columbia, Alaska, Arkansas, Oklahoma, Nebraska, Georgia, Kentucky, Tennessee, Hawaii, and South Carolina. And if you add in the states most affected by the opioid epidemic, you can expect these states to see increases in preterm births down the road: West Virginia, New Hampshire, Ohio, Rhode Island, Massachusetts, Maine, Connecticut, New Mexico, Maryland, Delaware, and Nevada.

Today, the Medicaid financing structure would require the federal government to share the burden of these increasing costs with states. But under the AHCA, states will be on their own. How would your state manage the risk?

Kelly Whitener is an Associate Professor of the Practice at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.