Minnesota likely to avoid states' budget shock from ACA's 'welcome mat' effect

State spending on Medicaid programs could rise substantially, even for states that have opted out of the federal health care law's Medicaid expansion, according to a University of Minnesota study.

U of M researchers say several factors will encourage people who are eligible for Medicaid, but haven't enrolled before, to sign up. The study calls this the "welcome mat" effect. The factors include:

• The federal health care law's legal requirement to obtain health insurance

• Stepped up efforts by health care providers and community groups encouraging people to enroll in a health plan

• The requirement to include information about health insurance status on tax returns

• Streamlined Medicaid application processes

The analysis is based on the experience of Massachusetts, which in 2006 enacted a requirement to obtain health insurance similar to the "individual mandate" in the federal law, which requires all U.S. citizens (with a few exemptions) to have coverage starting January 1, 2014. Researchers found Massachusetts' Medicaid participation increased 19.4 percentage points for those without private coverage compared to a group of control states: New York, Maine, Vermont and Rhode Island.

Julie Sonier, deputy director at the State Health Access Data Assistance Center (SHADAC) at the University of Minnesota, said the size of the "welcome mat" effect will vary from state to state but the analysis does give states more information.

"Our goal was to generate some research evidence by looking at what happened in Massachusetts that [other] states could use to help estimate their own budget impact," said Sonier.

The findings could be valuable as states scramble to determine how the health care overhaul will affect their budgets. The federal government reimburses states a portion of their Medicaid costs. The payments range from 50 percent of expenses to 75 percent in states with lower per capita income.

The Affordable Care Act's Medicaid Expansion widens the eligibility net to include people at higher income levels. And federal dollars will pay 100 percent of the cost of care for people who are newly eligible under the law from 2014 through 2016.

But for new enrollees who were eligible for Medicaid absent the expansion, the lower federal matching rate remains in effect. Those are the people Sonier's research indicates will come off the sidelines and enroll in Medicaid once the federal mandate takes effect.

Sonier said two major factors keep eligible residents from signing up for government health coverage now -- they're not aware they qualify for the coverage, or the application process is so cumbersome they don't follow through or reapply.

Minnesota is likely to see a substantial increase in Medicaid enrollment, but that's partly due to policy changes the state enacted as well as the "welcome mat" effect.

The state has been preparing for a surge in enrollment since 2010, when the Affordable Care Act passed. Minnesota Department of Human Services Commissioner Lucinda Jesson said that year the state projected there would be a 15 percent increase in Medicaid enrollment and built that into the state budget forecast. The state raised that estimate another 9 percent after the legislature in the last budget year reduced red tape and made it easier both to enroll in and remain on Medicaid.

Jesson said between the "welcome mat" effect and the reduced red tape in Minnesota, the state's Medicaid enrollment is likely to grow by 200,000 people between 2014 and 2016.

"This won't all happen on day 1, "said Jesson. "Because we need to have outreach, we need to get the word out. But at least over the next couple of years, we think we'll have 63,000 more people on Medicaid simply because it will be easier to stay on our program."

The article is published in the Health Care Policy Journal, Health Affairs.

This story is part of a collaboration that includes MPR News, NPR and Kaiser Health News.

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