New estimate challenges report that health care reform will see Neb. Medicaid costs soar

By Margery A. Beck, AP
Thursday, September 16, 2010

New report: Neb.’s Medicaid costs overestimated

LINCOLN, Neb. — A report commissioned by the state forecasting that federal health care reform will increase the state’s Medicaid costs by hundreds of millions of dollars over the next decade was based on “an over-the-top assumption” and seriously flawed, a Medicaid expert said.

The prediction of skyrocketing state costs overestimates the number of new Medicaid participants and the cost per enrollee, said Dr. Leighton Ku, a professor at the School of Public Health and Health Services at George Washington University and director of the Center for Health Policy Research.

High-end estimates in the report by actuarial firm Milliman Inc. are based on the assumption that every Nebraska resident who is eligible will enroll in Medicaid — a scenario Ku said is “just ridiculous and should be ignored.”

“No voluntary program ever experiences 100 percent participation; that is just an over-the-top assumption which can only lead to overestimates,” he said.

Ku’s analysis of the Milliman report was done for First Focus, a nonprofit children’s advocacy group, which supports health care reform.

Republican Gov. Dave Heineman, a vocal critic of the health care overhaul passed earlier this year, has often cited the Milliman report in his call to repeal the law.

The Nebraska Department of Health and Human Services paid $47,000 to have Milliman compile the report, which came up with the overall cost estimates of $526 million to $766 million through 2020 on the assumption that between 108,000 and 145,000 more Nebraska residents will enroll in Medicaid. Currently, about 229,000 people are covered by Medicaid.

“Milliman was hired to provide an actuarial impact of health care reform to Medicaid in Nebraska. We believe it accurately reflects the costs,” said Kathie Osterman, a spokeswoman for the state health agency.

Ku said a national study released in May by the Kaiser Commission on Medicaid and the Uninsured — which has a much lower estimate of additional Medicaid costs — is more feasible. That report estimated that Nebraska’s state-funded portion of Medicaid would increase by between $106 million and $155 million from 2014 to 2019.

“One should also note that Kaiser and First Focus are liberal advocacy groups in favor of federal health care reform,” Osterman said.

State Sen. Jeremy Nordquist of Omaha, a Democrat who is chairman of the health committee for a national association of state legislatures, lauded Ku’s findings. Nordquist has criticized the Milliman report for not adequately accounting for Medicaid savings that could be prompted by federal reforms.

Nordquist has acknowledged the state will see “significant costs” from reforms, but has said that the federal government will cover most of the bill.

Medicaid is funded with both state and federal dollars. The program’s federally mandated expansion, allowing coverage of more adults starting in 2014, will be fully funded by the federal government for the first few years.

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