Health Care

State health care expenditures. Medicaid’s growing share of the budget is clearly evident in table 8. Table 11 shows that enrollment in the program continues to grow, both in absolute numbers and as a share of Florida’s population. Enrollment in 2011 topped 3.8 million, and more than 20 percent of all Floridians were recipients of Medicaid, compared with under 15 percent in 2000. The program’s costs have risen by more than a third solely because of the increase in enrollment since 2000. While the increase in enrollment could be viewed as a positive development because Medicaid is extending health care coverage to a larger percentage of Floridians, the burden that it places on the state budget makes it an obvious target when looking for ways to control spending.

The federal government covers more than half the cost of the Medicaid program. Setting aside the decrease in the state’s share during the recession that began in 2008, the state’s share appears to be slightly above 40 percent of the total cost of the program. The federal share has been an issue recently, when the Affordable Care Act (ACA) offered states the opportunity to expand their Medicaid programs with the federal government temporarily picking up the additional cost.

Medicaid under the Affordable Care Act. One provision of the ACA allowed states to expand their Medicaid coverage to low-income adults, with the expansion fully funded by the federal government for three years and then 90 percent funded until 2022.^[1] The Florida legislature voted not to implement this expansion because of the increased costs it would impose on the state once the federal funding was scaled back. Shortsighted legislators would have taken the money now, knowing they will reach their term limits, and leave the legislature in 2022 to deal with the long-term costs—so it is worth a remark that Florida’s legislature took a fiscally responsible position to shield future legislatures from having to deal with funding those costs. Supporters of the ACA’s Medicaid expansion cited a White House study saying that implementing it would create 63,800 jobs and extend health care to 848,000 people.^[2] With Florida’s population now just shy of 20 million, the White House projection was that an additional 4 percent of Florida’s population would end up on Medicaid should Florida implement the expansion.

In 2011 Florida’s total Medicaid enrollment was 3.8 million, an increase of 58 percent over its enrollment of 2.4 million in 2006. Assume that Medicaid enrollment grows by another 58 percent by 2022. In that case, the projected 848,000 enrollment increase from the Medicaid expansion will make Medicaid enrollment 14 percent larger. Assuming the new enrollees have about average costs, they will increase the program’s cost by 14 percent.^[3] If enrollment does not expand except for the new ACA enrollees by 2022 (an unrealistic assumption), the projected 848,000 new enrollees will increase the program’s participants and cost by 22 percent. Thus, it seems reasonable for a fiscally prudent legislature to reject the expansion, which could add 14–22 percent to the state’s Medicaid expenditures.

Medicaid managed care. In 2011, the Florida legislature passed legislation that allowed the state to expand a pilot program to move Medicaid enrollees to managed care. The program began in five of Florida’s 67 counties and required a federal waiver to extend it to the rest of the state. That approval came in June 2013.^[4] The primary motivation for shifting Medicaid enrollees to managed care was to save costs. As the figures in table 11 show, Medicaid has been consuming an increasingly large share of Florida’s budget.

Under the former system, people covered by Medicaid went to a health care provider, and the provider was reimbursed by the state for the services provided. Under the new managed care system, the state contracts with health maintenance organizations and pays those organizations a fixed fee for the covered Medicaid recipients. The cost for recipients is fixed ahead of time, and any risks due to higher costs are borne by the managed care provider; likewise, reductions in cost go to the provider. This arrangement provides an incentive for a provider to control its costs, and lower costs can save the state money when it negotiates rates with the managed care providers.

As of July 2014, the shift to managed care had been completed in 54 of Florida’s 67 counties. While Florida is not unique in utilizing managed care for Medicaid enrollees, it is among the pioneers in moving in that direction.^[5] Critics have argued that the shift toward managed care will lower the quality of care while supporters have argued that managed care providers have an incentive to provide better care at lower cost. Because the shift to managed care is so new in Florida, it is too early to assess its results, but other states will undoubtedly be looking at Florida’s Medicaid reforms to see whether they live up to their promises.

^[1] Guide to State Requirements and Policy Choices in the Affordable Care Act, Center for Healthcare Research & Transformation, April 28, 2011, www.chrt.org/publication/guide-state-requirements-policy-choices-afford….

^[2] See Alex Leary, “White House: Blocking Medicaid Expansion Would Cost Florida 63,000 Jobs,” Tampa Bay Times, July 2, 2014, www.tampabay.com/news/politics/stateroundup/white-house-report-medicaid….

^[3] This is calculated by taking the projected 50 percent increase, which would imply an enrollment of 4.95 million, and calculating that an additional 848,000 enrollees projected by the White House is a 17 percent increase in enrollment.

^[4] Gary Fineout and Kelli Kennedy, “Florida Gets Final OK for Medicaid Privatization,” Moderncare Healthcare website, accessed July 3, 2014, www.modernhealthcare.com/article/20130614/INFO/306149984#.

^[5] See “Florida Medicaid Privatization Underway Statewide,” CBS Miami, July 2, 2014, http://cbsloc.al/1CJhV0B.