Martha Stoddard, Omaha World Herald
August 18, 2010

LINCOLN — Democratic U.S. Sen. Ben Nelson chastised Republican Gov. Dave Heineman in a made-for-the-campaign-trail exchange Wednesday.

At issue was a new state study that estimated federal health care reform will saddle Nebraska with $526 million to $766 million in unfunded Medicaid costs over the next decade.

Heineman released the analysis with strong words, delivered in often angry tones, about the law.

“They are staggering and they are shocking,” he said of the potential costs.

Heineman called for the federal law to be repealed or changed.

“This unfunded and unparalleled Medicaid expansion is an unfair and unsustainable mandate on the State of Nebraska,” he said.

Nelson responded by saying the study shows how much of a burden health care costs are to Nebraskans now.

“This report doesn't make the case against health care reform,” he said. “It makes the case for it.”

Nebraskans pay more for health care now to cover the cost of uncompensated care provided to the uninsured. Families also are forced into bankruptcy by medical bills, he said.

Nelson said that “if health care costs to state government are a greater concern than the overall cost of health care to Nebraskans,” the state could drop out of Medicaid entirely.

Heineman, asked about that possibility, dismissed it as unrealistic.

The governor is considered a potential challenger to Nelson in 2012, but he sidestepped questions about a possible U.S. Senate race Wednesday.

Heineman said he asked the Department of Health and Human Services to contract for the $47,000 study.

It was done by Milliman Inc., an independent actuarial and consulting firm that has worked with 24 states on various Medicaid issues. Actuary Robert Damler said the company has done similar analyses for Indiana and other states.

The Medicaid program is funded by both the federal and state governments. The Nebraska study concluded that state support for Medicaid would have to increase between 6.1 percent and 8.9 percent, starting with the current fiscal year and ending June 30, 2020, according to the analysis.

Without the federal law, Nebraska could be expected to spend $8.6 billion on Medicaid during that decade, the analysis showed.

Republican U.S. Sen. Mike Johanns jumped into the fray with a statement denouncing the “devastating” impact of the federal law.

Johanns said it will push nearly one in five Nebraskans into Medicaid and force the state to choose between cutting programs like K-12 education or raising taxes.

About 11.6 percent of Nebraska residents are now enrolled in Medicaid, or approximately one in nine residents.

The new provisions of the federal health care law will expand that to between 17.7 percent and 19.8 percent of residents, or approximately one in every five Nebraskans, the study said.

The higher figure assumes everyone eligible for Medicaid coverage would enroll. The program now has about 85 percent participation.

It also assumes that some 60,000 people would drop health insurance to take Medicaid, accounting for 40 percent of the increase in Medicaid participants.

State Sen. Jeremy Nordquist of Omaha, a Democrat, disputed Heineman's conclusions.

He said the study shows between 108,000 and 145,000 additional Nebraskans would get health coverage through the federally required changes.

“It's a significant amount (of cost to the state), but it's an amount that has significant benefit,” he said. “Nebraska has to have some skin in the game here.”

Nordquist said the analysis did not show the potential savings from having almost all Nebraskans covered by some form of health insurance.

A 2009 study by the White House Council of Economic Advisors estimated that state and local governments in Nebraska spend at least $36 million on care for uninsured residents.

Nelson and Nordquist cited a study by the Kaiser Commission on Medicaid and the Uninsured that concluded Nebraska would have to pay only 5 percent of the cost of expanding Medicaid to more adults.

A provision Nelson pushed for means the federal government will pay 100 percent of the increased cost of that and other Medicaid changes.

The provision originally would have applied only to Nebraska and was derided as a “Cornhusker kickback” included to win Nelson's vote.

The final version of the law extended that federal help to all states.

However, the help applies to only some of the potential increases in Medicaid costs.

It will cover additional adults but does not apply to children who might be added to the Medicaid rolls as a result of the reform, Damler said.

The federal government also will pay 100 percent of the cost for increasing reimbursements to primary care doctors for 2013 and 2014.

But unless the law is changed, the state would have to pay part of the cost for continuing those reimbursement levels.

It also would have to pay if it chose to raise reimbursements for specialists.

According to the study, Nebraska will see added costs starting in this fiscal year. The law will cost an estimated $5 million this year and $20.7 million in the next two-year budget period.

Administrative expenses and less money available through pharmacy rebates account for the increase during the three years.

The administrative expenses include costs for Medicaid to participate in a yet-to-be-developed state health insurance exchange.

Nebraska could get a $1 million federal grant this year and more in future years to defray the cost of developing an exchange.

Heineman said Wednesday he has not decided whether to apply for the initial grant, saying it doesn't do enough to offset the cost increases.