October 27,2015

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Aaron Fobes, Julia Lawless (202)224-4515

Hatch, Upton Press CMS On Jump In Costs of Newly-Eligible Adults in Medicaid

Leaders Concerned with CMS Oversight as Federal Government Footing Bill for Most of Newly Eligible Costs – Costs Estimated at $430 Billion through 2023

 WASHINGTON, DC – House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Senate Finance Committee Chairman Orrin Hatch (R-UT) today wrote to the Centers for Medicare & Medicaid Services (CMS) Acting Administrator Andy Slavitt on the costs of newly–eligible adults in Medicaid. The CMS Office of the Actuary recently found that expenditures for the newly eligible were nearly 20 percent higher than for non-newly eligible adults. The bicameral leaders want to better understand the degree to which CMS is conducting robust oversight over federal dollars and that payment rates for the newly eligible are appropriate and states are not shifting costs to the federal government.

According to the 2014 Actuarial Report on the Financial Outlook for Medicaid, “Newly eligible adults are estimated to have had average benefit costs of $5,517 in 2014, 19 percent greater than non-newly eligible adults’ average benefit costs of $4,650. These estimates are significantly different from those in previous reports, in which average benefit costs for newly-eligible adults in 2014 were estimated to be 1 percent lower than those of non-newly eligible adults.”

In the letter to CMS, Upton and Hatch write, “While the increase in estimated costs for the newly eligible may be explained by incorrect assumptions in the original modeling, the double-digit increase in costs is potentially concerning.  Under the current matching rate, States effectively lack economic incentives to be prudent purchasers for the newly-eligible population, because the federal government pays 100 percent of the cost of care for this population. Under current law, the lack of incentive is only slightly diminished over time since the federal government is still on track to pay for at least 90 percent of the costs associated with this population for the foreseeable future.”

The leaders are seeking to learn what steps CMS took to ensure that 2014 capitation rates for the newly-eligible adults were appropriate. They are also asking how CMS ensured that States were not shifting costs to the federal government by making generous assumptions and setting higher payment rates for newly eligible adults while offering lower rates for the non-newly eligible.  The leaders request CMS respond within 45 days.

Read the full letter online HERE.