State cost estimate was 'worst case'

By Martha Stoddard, Omaha World Herald
September 17, 2010

LINCOLN — Only under a “worst case scenario” would the new federal health care law drive up Nebraska Medicaid spending by $766 million, a top state health official said Thursday.

Medicaid Director Vivianne Chaumont told state lawmakers the estimate represents the highest possible cost of the new federal law.

She also acknowledged that the figure does not account for potential savings to the state in other programs.

The estimate is from a controversial study by Milliman Inc., an independent actuarial and consulting firm based in Seattle.

Milliman analyzed the law's impact on Nebraska's Medicaid program at the request of Gov. Dave Heineman and the Department of Health and Human Services.

The Aug. 16 study concluded that the law would leave Nebraska with $526 million to $766 million in unfunded Medicaid costs over the next decade.

Heineman called the figures “staggering” and “shocking.”

He has used the study results to demand repeal or changes in the federal law, including in a letter asking the state's major education groups to support repeal or face a likely reduction in education funding.

State Sen. Jeremy Nordquist of Omaha said Chaumont's comments put the cost estimates in a different light.

“The high end number is a case that nobody envisions will happen,” Nordquist said.

Chaumont faced a barrage of questions about the study during a legislative hearing on health care.

Nordquist cited an assessment of the Milliman study by Leighton Ku, a health policy expert from George Washington University.

Ku questioned many of the study's assumptions. Among them:

Ÿ That every person eligible for Medicaid coverage would enroll. The program currently has about 85 percent participation. No voluntary program ever gets 100 percent participation, Ku said.

Ÿ That some 60,000 people would drop their health insurance to go on Medicaid, accounting for 40 percent of the increase in Medicaid participants. Massachusetts saw “no measurable” movement out of private insurance when that state enacted changes similar to the federal law, Ku said.

Ÿ That under the high cost estimate, Nebraska would pay both primary care doctors and specialists at Medicare rates. Ku said the law requires the state to pay such rates to primary care doctors only for two years.

Ku also noted that the study did not mention several potential benefits to the state.

One such benefit is the $180 million that Nebraska could save between 2014 and 2020 by being able to disband the state program for hard-to-insure people.

Under the federal law, people now covered by the program would be able to buy private insurance.

Chaumont defended the Milliman study, however, saying the Ku study was done for First Focus, a national nonprofit group that backs the health care law.

“We stand by the Milliman report,” she said.

The daylong legislative hearing also included reports from national and local experts about various aspects of the law.