Malloy proposing state funds to help parents who would lose Medicaid coverage

Democratic legislators effectively rejected a plan by Gov. Dannel P. Malloy to cut about 37,500 poor parents from Medicaid and leave them to buy federally subsidized health insurance from a new marketplace being established as part of health reform.

Now the Malloy administration is taking another shot at the cut, with a twist: Using state dollars to help those parents buy private insurance.

Office of Policy and Management Secretary Benjamin Barnes, Malloy’s budget director, said Monday that state funds could reduce what poor parents have to pay to buy health insurance through the new marketplace, called the exchange. That would cost the state less than continuing to cover them through HUSKY, the state’s Medicaid program, while the parents would get improved access to care through private coverage, he said.

Barnes said it’s not yet clear what the plan would cost. Cutting the parents from Medicaid was projected to save $58.8 million in the first full year it was implemented, while one estimate suggested that private health insurance premiums would cost those losing HUSKY $41.7 million.

Advocates for Medicaid recipients were skeptical of the idea, noting that the parents would still face new out-of-pocket costs for deductibles and copayments, and would lose access to the dental, vision and medical transportation services Medicaid covers.

“It’s just completely antithetical to the entire point of health reform,” said Deb Polun, director of government affairs and media relations for the Community Health Center Association of Connecticut. “We’re trying to get more people covered, and the idea of saying ‘Let’s take 37,000 people and kick them off of health insurance coverage that they already have and just hope that they buy on the exchange,’ it just goes against the entire point of health reform.”

At issue is what the state’s Medicaid program will look like once federal health reform rolls out Jan. 1.

As part of health reform, Connecticut will expand Medicaid to cover all adults earning up to 133 percent of the poverty level.

Currently, the state’s Medicaid program covers parents of minor children at higher levels — up to 185 percent of the poverty level. The federal government reimburses the state for 50 percent of the cost of their coverage.

In the past, cutting people off Medicaid to save the state money would have meant swelling the number of people without health insurance. But the Affordable Care Act — the federal law known commonly as Obamacare — provides a new avenue for people with low incomes to get coverage: The exchange — a market for buying coverage — and federal subsidies to reduce the cost of premiums, copayments and deductibles.

Malloy’s budget proposal, released in February, called for lowering the eligibility for Medicaid to the minimum required under Obamacare — 133 percent of the poverty level. That would cut off an estimated 37,500 parents currently in HUSKY, saving $5.6 million this fiscal year and $58.8 million the next.

The proposal drew intense opposition from advocates. While Medicaid is free, buying coverage through the exchange will require premiums and cost-sharing that, even with federal subsidies, would average $1,800 a year, according to projections by researchers at the University of Massachusetts Medical School Center for Health Law and Economics.

Those costs could lead an estimated 7,500 to 11,000 parents who lose Medicaid coverage to forego buying insurance, the researchers wrote in a report prepared for the Connecticut Health Foundation.

The researchers estimated that for the parents who would lose HUSKY coverage under Malloy’s plan, premiums to buy insurance through the exchange would cost $41.7 million.

Democratic legislators opted against cutting the parents from Medicaid as part of their budget proposal, released by the Appropriations Committee last month. Instead, they forecasted other savings in Medicaid, including $60 million more than the governor estimated could be achieved by stopping fraud.

Barnes said Monday that the administration’s proposal, which had not yet been formally released, would limit “the affordability problems” poor parents would face buying insurance on the exchange.

He said the cost of helping them with premium costs would be less than maintaining the parents on Medicaid. It’s unlikely the federal government would permit the state to use Medicaid funds to provide the premium assistance, Barnes said, meaning the state probably wouldn’t be able to get federal matching funds for the costs.

Barnes said buying private insurance would mean the parents get better quality coverage and would help health care providers, who typically receive higher payment rates from private insurers than from Medicaid.

“The private health insurance system is better for the health industry and for providers,” he said. “They get better reimbursement rates. Frankly, the people who are in private insurance have better access to care. I think it’s a better system. I mean, Medicaid has some wonderful features, but access to care is not among them and also, its reimbursement rates are not well-regarded by providers.”

But Sheldon Toubman, an attorney with the New Haven Legal Assistance Association and a critic of the move, was skeptical that it would save money, since the state wouldn’t get federal reimbursement for the funds.

He also said premium assistance wouldn’t solve the affordability problem since people would still face copayments and deductibles that could be hard for them to afford, making them less likely to get needed care. And while Medicaid covers dental and vision care and nonemergency medical transportation, the private plans those parents would get help buying through the exchange won’t.

“It’s a really bad idea. It’s a waste of the taxpayers’ money when the better solution is to simply keep them where they are,” Toubman said. “As we’re trying to expand coverage, we should not bet setting up a system that’s going to take away essential benefits, which is what this would do.”

Polun, who represents health centers that treat more than 150,000 Medicaid recipients, said having parents on Medicaid makes it more likely that their children will receive the same coverage. Even if the parents lose Medicaid coverage, their children will remain eligible.

Sharon Langer, interim executive director of Connecticut Voices for Children, said the benefits and risks of Medicaid are known, in contrast to the exchange, which won’t launch until the fall, and any new state subsidies. That makes it harder to know what would happen if the parents are cut off Medicaid.

Senate Minority Leader John McKinney, a Fairfield Republican who is weighing a bid for governor, said Malloy’s original proposal — having the federal government pay the bulk of the cost of the parents’ health care coverage through the exchange — was not a bad one.

McKinney noted that his caucus has not been involved in budget negotiations, but said he’d want to know the extent of the premiums and copayments the exchange plans will require.

“There’s an argument to be made that his plan would not have unfairly hurt that community, and I guess I would have to see what the amount of the subsidy was,” McKinney said. “If it eliminates the savings that the governor proposed to achieve, then I would not be supportive of it.”