The passage of the recently enacted tax and budget law (HR1) will have major implications for state budgets, but the impact will be disproportionate. For example, Medicaid, expansion states (plus Wisconsin and Georgia) will be required to implement work requirements, increasing administrative costs while putting up barriers to enrollment and retention. Other states will be spared this administrative burden but may be impacted by other provisions such as provider tax restrictions. New or increased provider taxes are prohibited across all states, and many existing provider taxes must be phased down, but how are advocates and individuals to know what their state expects?
Transparency beckons.
If they haven’t already, states should make public data needed to help plan and monitor the impact of the new law. Information on Medicaid state directed payments (SDPs), or payments from managed care organizations to various provider types, continues to be limited and CMS’ postings of SDP approvals are difficult to parse. However, the Illinois Medicaid department posts its state directed payments publicly. Beyond the approved SDP percentages posted by CMS, the lists posted by Illinois include dollar values paid to specific providers, allowing for more detailed budgetary analyses. Publishing information of this type can assist providers, stakeholders, legislators, and researchers in knowing a state’s baseline for given Medicaid policy and financing changes.
Next, states should perform independent analyses of expected budget impacts of HR1, building on any analyses completed for the respective House- and Senate-passed bills. Less than three weeks after HR1 was signed, Michigan’s House Fiscal Agency published a fiscal brief of the new reconciliation law’s state budget impacts. Though considered preliminary, this is a helpful resource for bringing clarity on multiple fronts and communicating the direct fiscal changes brought on by each provision. For example, Michigan’s analysis states that community engagement requirements, otherwise known as work reporting requirements, will result in a federal funding loss of $1.9 billion in ten years, a full 25% of the state’s budget hit resulting from HR1.
Another useful application of this type of fiscal analysis is that it can help inform providers and other stakeholders of specific changes to expect. Provider taxes in Medicaid, an important way that states raise revenues for their share of Medicaid costs, are confusing and not well understood in the field, but are explained by my colleague Edwin Park here. KFF posts high-level data on provider taxes by state, like the number of taxes per state and their percentage ranges, but more details will be needed to understand the impact of the law’s provider tax-related provisions. HR1 has a prohibition on existing provider taxes with “uniformity waivers,” or exemptions on the requirement for provider taxes to be broad-based and uniform across a given provider type. This provision went into effect upon enactment, so it is especially beneficial for states to get information out quickly to ensure understanding of its consequences. Michigan’s fiscal analysis brings to light that the state’s IPA [insurance provider tax] tax is not uniform and will need to be addressed immediately, while the long-term care QAAP [quality assurance assessment program] tax does not conflict with the new federal provisions and will continue unchanged. In addition to bringing needed transparency to Medicaid provider taxes, publishing this information is helpful for providers in these respective classes to know whether the state is anticipating changes to their taxes under the new law.
While Michigan is ahead of the curve, New Jersey has plans to catch up, with Governor Phil Murphy signing an Executive Order directing state agencies to evaluate the impacts of HR1 on “their budgets, operations, and programs,” and submit their preliminary assessments by October 1 of this year.
Advocates and other stakeholders have several avenues for encouraging this type of transparency from their state agencies, including executive orders, directive legislation, and information requests, such as via the state Medicaid Advisory Committee (MAC). State transparency, engagement, and communication are important for advocates and stakeholders looking to minimize the negative impacts that their state programs will face over the next ten years of HR1 implementation, especially as many state legislatures head into special sessions regarding new costs being shifted from the federal government onto states.
Is your state planning to issue a public analysis of the impacts of HR1? If you know of any planned or recently released analyses, please send them to childhealth@georgetown.edu.