Opting Out of Medicaid in New Hampshire

A Study of the Costs and Benefits Facing the Granite State in Choosing to Opt Out of the Federally-Matched Medicaid Program
PRS Briefs
PRS Policy Brief 1112-09
Monday, April 23, 2012

Given the large structural deficit of the State of New Hampshire and the significantly increased eligibility standards for Medicaid under the Patient Protection and Affordable Care Act (PPACA), the Rockefeller Center has been tasked with assessing the impact of the decision to opt-out of Medicaid in favor of a state-funded safety net. A comprehensive literature review was conducted to obtain an overall understanding of the current state of the New Hampshire Medicaid program, any legal precedent surrounding the ability to opt-out and the individual mandate, estimated costs and savings to the State General Funds under the Affordable Care Act, and other considerations that might influence the decision to opt-out. The compiled sources were used as the basis for our analysis.

The New Hampshire Medicaid program has witnessed increased enrollment correlated to economic stagnation, but decreased costs per enrollee over the past three fiscal years. Although the program has, as a whole, become more expensive, the state funded share of the program’s expenditures has actually decreased over the past three years due to increases in federal dollars under the American Recovery and Reinvestment Act. According to available research, the PPACA provides short term cost savings and a lack of concrete future cost burdens to the state share of New Hampshire’s Medicaid program. Importantly, the estimates used in calculating savings and costs under federal legislation are subject to significant variation and noteworthy future uncertainty. With respect to the legality of opting out, a chief obstacle would be to what extent the State Funded Safety Net would reduce services to the mentally and physically disabled, and whether this would constitute a violation of the Americans with Disabilities Act. We also raise the question of whether a state funded safety net would be sustainable under current eligibility requirements for the physically and mentally disabled, which make up the largest plurality of NH Medicaid expenses. We have bulleted a list of considerations that could have substantial consequences for the sustainability of the NH Medicaid program, but were not factored in to the analysis on costs and savings from the PPACA.

The decision to opt out of the Medicaid program would require giving up over $800 million in annual federal matching funds; whereas the health care needs of the poor would not go away. Moreover, the federal government has absorbed the majority of the up front costs of enrolling the new adult population coming into the Medicaid program, and has absorbed a significantly greater percentage of the costs of providing care to Medicaid eligible children and the mentally disabled. Additionally, the degree to which health care reform and associated private sector initiatives will correct misaligned incentives, reduce waste, and increase value in the health care industry is of chief importance to the sustainability of the Medicaid program.