Chapter 2: Medicaid and CHIP in Context

2 Part I. Medicaid and CHIP: An Overview 2 Chapter 2: Medicaid and CHIP in Context

The Health Insurance In This Chapter: Landscape The Health Insurance Landscape Who Are the Uninsured? Who Are the Uninsured? An estimated 5.0 million Texans, or Unemployment 19.1 percent of the state population, Poverty had no health insurance in 2014.1 Texas has the highest rate in the Health Insurance Mandate nation for people without insurance.2 Private Coverage In 2014, approximately 800,000, or Medicare 11.0 percent, of Texas children under Medicare Parts A-D age 18 had no insurance (down from 15.6 percent in 2012).3 The national State Role in Medicare average uninsured rate for children TRICARE/Veterans was 6.0 percent.4 Administration

Most of the uninsured in Texas Medicaid and CHIP History are adults under age 65. Most Medicaid Enrollment Over adults over age 65 have Medicare. Time Figure 2.1 depicts the uninsured Linked to Financial Assistance population in Texas by age group in Programs 2014. Temporary Assistance for Data indicates 62 percent of Needy Families uninsured, non-retired Texans age Supplemental Security 18 and older have a job. Uninsured Income adults may work in jobs that do not De-Linking Medicaid and Financial Assistance 1  U.S. Census Bureau, 2014 American Affordable Care Act Community Survey (ACS) for Texas. History of CHIP and CHIP 2 Ibid. Perinatal 3 Ibid. 4 Ibid.

Texas Health and Human Services Commission • February 2017 17 Part I. Medicaid and CHIP: An Overview

2 offer employer-sponsored coverage, disabilities that qualify them for 2 or they may not be able to afford Supplemental Security Income (SSI), the coverage offered. Unless they most of these adults are ineligible are caretakers of children eligible for Medicaid. for Medicaid, are pregnant, or have

Figure 2.1: Total Uninsured Population in Texas by Age Group, CY 2014

Ages 65+ Ages 6 and Younger 1% 4% Ages 7-17 11% Ages 45-64 24%

Ages 18-24 17%

Ages 35-44 19%

Ages 25-34 24% Source: U.S. Census Bureau. 2014 ACS for Texas.

Unemployment The unemployment rate varies Since Medicaid primarily serves among regions of the state, low-income individuals, a rise in as shown in Figure 2.2. In unemployment can result in an June 2016, the Metropolitan increase in the number of people Statistical Area (MSA) with the eligible for Medicaid due to their lowest unemployment rate was income level. Austin-Round Rock, with a rate of 3.3 percent. The highest In June 2016, Texas’ seasonally unemployment rate was in the adjusted unemployment rate was McAllen-Edinburg-Mission MSA, with 4.5 percent, which was lower than a rate of 8.2 percent.5 the national rate of 4.9 percent. The percentage of working-age persons (ages 16 through 64) in Texas who had a job in June 2016 was 69 percent. 5 Texas Workforce Commission, http://www. twc.state.tx.us/ (July 2016).

18 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 Figure 2.2: Unemployment Rates in Selected Texas Metropolitan 2 Areas, June 2016

9.0% 8.2% 8.0%

7.0% 6.9%

6.0% 5.5% 5.2% 5.3% 5.0% 4.6% 4.0% 4.0% 4.0% 3.3%

Unemployment Rate Unemployment 3.0%

2.0%

1.0%

0.0%

Source: Texas Workforce Commission

Poverty living at or below the FPL in 2014.6 Since Medicaid primarily serves Approximately 24.9 percent of low-income individuals, poverty Hispanics and 23.2 percent of African in the state affects the number Americans in Texas were living at or of people eligible for the Medicaid below the FPL in 2014, along with program. In 2014, about 4.5 million 9.3 percent of White Non-Hispanics. Texans (17.2 percent of the state’s Table 2.1 lists the Federal Poverty population) lived at or below Guidelines by family size for 2014- the federal poverty level (FPL), 2016. and approximately 38 percent of these were children under age 18. Approximately 24.6 percent of all Texas children under age 18 were

6 U.S. Census Bureau, 2014 ACS for Texas.

Texas Health and Human Services Commission • February 2017 19 Part I. Medicaid and CHIP: An Overview

2 Table 2.1: Federal Poverty Guidelines, 2014-2016 2 Size of 2014 Annual 2015 Annual 2016 Annual Family Unit Income Income Income 1 $11,670 $11,770 $11,880

2 15,730 15,930 16,020 3 19,790 20,090 20,160 4 23,850 24,250 24,300 5 27,910 28,410 28,440 6 31,970 32,570 32,580 7 36,030 36,730 36,730 8 40,090 40,890 40,890 For each additional $4,060 $4,160 $4,160 person, add

Source: U.S. Department of Health and Human Services, Health and Human Services Poverty Guidelines, 2014-2016 http://aspe.hhs.gov/poverty/ (July 2016).

Note: Federal poverty guidelines are applicable to the 48 contiguous states and are effective March 1st of each year.

Health Insurance of the ACA, insurance companies Mandate cannot deny coverage or charge more for those who have a pre- As required by the Affordable Care existing condition. Act (ACA), beginning in 2014, most people must have health Individual plans can be insurance that meets minimum purchased directly from insurance federal coverage standards or pay companies and insurance a tax penalty. Health benefit plans agents or brokers. The Texas provided by employers and most Department of Insurance’s website, state or federal government health www.texashealthoptions.com, is a plans satisfy the requirement. resource to help understand how to find and use health insurance. Persons who do not have access to Coverage can also be purchased employer or government-sponsored online through the federally- health coverage can buy an operated insurance marketplace at individual plan to cover themselves www.HealthCare.gov. and their families. Also as a result

20 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 Figure 2.3: U.S. Personal Health Care Expenditures by 2 Source of Funding, 2014

Other Private 5% Other Public 3%

Out-of-Pocket 13%

Private Health Insurance 39%

Medicaid 17%

Medicare 23%

Source: Centers for Medicare & Medicaid Services (CMS) Office of the Actuary, National Health Expenditures Accounts.

Private Coverage source of coverage and type of service, respectively. The limits of private insurance affect Medicaid. In 2014, 66 percent of In Texas, the proportion of the the non-elderly U.S. population population covered by employer- had private health insurance sponsored health insurance is lower coverage, most often in the form than the national average. Fifty-four 7 of employer-sponsored coverage. percent of Americans under age 65 That same year, private insurance were covered by employer-sponsored paid for 39 percent of total national health coverage in 2014, compared 8 personal health care expenditures. with 50 percent of Texans.9 In 2014, Figure 2.3 and Figure 2.4 show 16 percent of working adults age 18 national health care spending by to 64 in the U.S. were uninsured, compared with 26 percent in Texas.10 Certain working uninsured individuals 7 U.S. Census Bureau, 2014 ACS for Texas. with low incomes may turn to 8 CMS, Historical National Health Expenditures By Type of Service and 9 U.S. Census Bureau, 2014 ACS for Texas. Source of Funds. National Health Statistics Expenditures Accounts. 10 Ibid.

Texas Health and Human Services Commission • February 2017 21 Part I. Medicaid and CHIP: An Overview

2 Medicaid to meet their health care or health coverage through a 2 needs or those of their dependents health insurance marketplace is not when employer-sponsored coverage, available or affordable.

Figure 2.4: U.S. Personal Health Care Expenditures by Category, 2014

Home Health Nursing Home 3% 6%

Prescription Drugs 12%

Hospital Care 37%

Other 18%

Physician and Clinical Services 24%

Source: CMS Office of the Actuary, National Health Statistics Expenditures Accounts.

The passage of the ACA prohibited program. As of September 2016, it health plans from denying or limiting covered 57.2 million Americans.11 coverage for pre-existing conditions for children under age 19 effective Medicare Parts A-D September 23, 2010, and for adults Most Americans age 65 and over starting January 1, 2014. automatically qualify for Medicare Part A (hospital insurance for Medicare inpatient hospital services) in the same way they qualify for Social The Social Security Act of 1965 Security based on their work history created both Medicaid and Medicare. and their payroll deductions while Medicare is a federally-paid and they were working. Qualifying administered health insurance

11 CMS, “Medicare Enrollment Dashboard,” http://www.cms.hhs.gov/MedicareEnRpts/ (December 2016).

22 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 individuals receive Part A coverage may offer additional benefits not 2 with no premium payment, but some available in the traditional Medicare cost-sharing through coinsurance program, or charge lower premiums. and deductibles is required. People Part D, the Medicare prescription who do not qualify may purchase drug benefit, was implemented in the hospital coverage. The federal 2006. Previously, Medicare did not government finances the hospital cover any outpatient prescription insurance program primarily through drugs, except for a few drugs a payroll tax on employers and covered under Part B. For those employees. Medicare beneficiaries who qualified Medicare Part B is a voluntary for Medicaid (called dual eligibles), program covering physician and Texas and other states offered related health services. Medicare prescription drugs through Medicaid. Part A beneficiaries may choose The major impact of Part D on the to enroll in Part B. In addition, Texas Medicaid program was that, as individuals age 65 and over may of early 2006, dual eligibles began enroll in Part B, even if not eligible receiving prescription drugs from for Part A. Part B requires payment Medicare, rather than Medicaid. In of a monthly premium. For low- state fiscal year 2015, approximately income seniors who qualify, Medicaid 374,000 dual eligibles in Texas pays the monthly premium. In received prescription drug coverage addition to enrollee premiums, through Medicare Part D.12 federal revenue finances the cost Once of the Medicare program. Both Part determined eligible for Medicare, A and Part B have cost-sharing CMS requires dual eligible clients requirements where enrollees must to enroll in a Medicare prescription pay coinsurance and deductibles. drug plan for all their prescription The Texas Medicaid program covers drugs. However, Texas Medicaid these costs for eligible low-income continues to provide some limited beneficiaries. drug coverage to dual eligibles for a few categories of drugs not covered Part C establishes a managed under Medicare Part D. care delivery option in Medicare called Medicare Advantage. Part Although the new benefit shifted C combines Part A and Part B prescription drug coverage from coverage. Beneficiaries who live in Medicaid to Medicare, it did not an area in which Medicare managed provide full fiscal relief to states. As care plans operate may choose to receive their Medicare services 12 Health and Human Services Commission through such a plan. These plans (HHSC), Monthly Medicare Modernization Act Dual Eligible Counts.

Texas Health and Human Services Commission • February 2017 23 Part I. Medicaid and CHIP: An Overview

2 described below, a significant share D “clawback.” Taken together, 2 of the cost of providing the Part D this accounts for approximately benefit to dually eligible clients is six percent of the Texas Medicaid financed through monthly payments program budget, excluding made by states to the federal disproportionate share hospital and government. upper payment limit funds.

State Role in Medicare Medi­care only covers skilled nursing care required following a Medicare is financed and hospitalization. Coverage is limited administered wholly at the federal to 100 days per “spell of illness” level. Historically, states played no following a three-night stay in the role in Medicare administration. hospital. Admission to the nursing However, since 1988, federal law has facility (NF) must occur not more required state Medicaid programs to than 30 days after the hospital pay Medicare deductibles, premiums, discharge date. Medicare covers and coinsurance for some low- payment at 100 percent for the income Medicare beneficiaries. first 20 days only and pays 80 Medicare also impacts Medicaid percent for days 21-100. Medicaid because of its coverage scope and covers the 20 percent coinsurance limitations. For instance, Medicare for dual eligibles. The Medicare NF does not currently cover some benefit does not cover long-term categories of medications covered by institutional services and supports. Medicaid, including some cough and Medicaid, however, covers long-term cold products, vitamins and minerals, institutional services and supports and over-the-counter medications. and thus covers the cost of NF care The Texas Medicaid program pays all for dually eligible clients not paid of the cost of these drugs for dual by Medicare. Medicaid also covers eligibles. a broad range of community-based The Texas Medicaid program also long-term services and supports not pays the federal government to covered under Medicare. provide Medicare drug coverage for individuals who are dually eligible TRICARE/Veterans through what is commonly known as “clawback” payments. It is estimated Administration that in state fiscal year 2015, TRICARE is a health care plan Texas Medicaid paid approximately available through the Department of $1.13 billion for Medicare premiums Defense for those in the uniformed and deductibles (Part A and Part B), services and their families, as well as and another $375 million (all general for retired members of the military. revenue funds) for Medicare Part The plan contracts with both military

24 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 health care providers and a civilian (TANF). In 2002, the number of 2 network of providers and facilities. children enrolled in Medicaid grew The Veterans Health Administration sharply due to Medicaid application offers a wide range of health care simplification and six-month services for U.S. military veterans continuous eligibility as required by through a health care system S.B. 43, 77th Legislature, Regular consisting of Veterans Administration Session, 2001. In 2003, Texas medical centers and outpatient Medicaid’s TANF populations began clinics. declining due to sanctions against adults not complying with the Medicaid and CHIP Personal Responsibility Agreement (PRA). The PRA is a document a History child’s parent or relative who is also approved for TANF must sign and Medicaid Enrollment follow. Over Time In state fiscal year 2015, an average Congress established the Medicaid of 4.06 million Texans were served program under Title XIX of the each month by Medicaid. Figure 2.5 Social Security Act of 1965 to pay illustrates Texas Medicaid enrollment medical bills for low-income persons trends by category for September who have no other way to pay for 1979 through September 2015. care. Texas began participating in the Medicaid program in September 1967.

During the late 1980s and early 1990s, Congress expanded Medicaid eligibility to include a greater number of people with disabilities, children, pregnant women, and older persons. These changes helped fuel the growth of the Medicaid program, and the Texas Medicaid population tripled in just a decade, adding more than one million people between 1990-1995 alone. In the mid- to late-1990s, caseloads declined in part due to the de-linking of Medicaid from cash assistance and stricter eligibility requirements for Temporary Assistance for Needy Families

Texas Health and Human Services Commission • February 2017 25 Part I. Medicaid and CHIP: An Overview

2 Figure 2.5: MedicaidFigure 2.5: CaseloadTexas Medicaid Caseload by by Group, Group 1979–2015 2 September 1979 - September 2015

Medicaid Caseload shifts beginning January 2014, with increased lengths of stay for all 4500000 income-eligible children and parents (TANF). Caseload categories (Risk Groups) also January 2014 ACA change, to align more closely with age categories and our Texas Healthcare (categories merged and changed; Transformation and Quality Improvement (1115) Waiver Groups ACA-related overall growth) 4000000

3500000 ALL Poverty- S.B. 43, Medicaid Related 3000000 Simplification, Children, January 2002 Ages 0 - 21 (includes CHIP / CHIP outreach, TANF Summer 2000 - 2001. and 2500000 Increases clients Newborns) July 1991: Poverty- identified as Medicaid. Related Children ages 6 - 18 Recipient Months Recipient 2000000 Poverty-Related Children, Between 1986 and 1991, Congress Ages 1 - 18 gradually extended Medicaid to 1500000 new groups of Poverty-Related Pregnant Women and Children

Pregnant Women / Newborns 1000000 Adults & Pregnant Women Income Assistance: TANF Adults and Children

500000 Aged & Disability- Related, Original Medicaid Population: Aged and Disability-Related Adults and Children no change 0

Source: HHSC, Financial Services, HHS System Forecasting Source: HHSC, Financial Services, HHS System Forecasting.

HHSC Financial Services 1/6/2017 8:47 AM Linked to Financial assistance program for low-income Assistance Programs people age 65 and older or those who have disabilities. In Texas, As originally enacted, Medicaid SSI recipients are automatically coverage was available only to eligible for Medicaid. For this reason, persons eligible for Aid to Families Medicaid has also been “linked” to with Dependent Children, now SSI in Texas. referred to as TANF. TANF is the federal-state cash assistance Temporary Assistance for program for low-income families, Needy Families usually headed by a single parent. Prior to the Personal Responsibility To be able to receive Medicaid, and Work Opportunity Act of 1996 individuals were required to be (PRWORA), children under age 19 receiving cash assistance (or and their related caretakers who welfare). In this sense, Medicaid qualified for TANF cash assistance was “linked” to welfare. Historically, automatically qualified for Medicaid. Medicaid coverage has also been With the passage of PRWORA, cash available to persons eligible for assistance and Medicaid are no SSI in Texas. SSI is a federal cash

26 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 longer “linked.” If households need eligible for SSI beginning as early 2 both TANF cash assistance and as the date of birth – there is no Medicaid, they must apply for both. age requirement. The individual’s Otherwise, they may only apply for income must be below the federal TANF cash assistance or Medicaid. benefit rate (FBR). In 2017, the limit for an individual is $735 a month Each state sets its income eligibility in countable income and no more guidelines for TANF cash assistance. than $2,000 in countable resources. Texas has historically maintained The limit for couples is $1,103 a lower TANF income caps compared month with no more than $3,000 in to other states. In 2016, the TANF countable resources. The amount of income cap for a parent with two the SSI payment is the difference children was $188 per month. The between the person’s countable TANF monthly cap is based on a set income and the FBR. dollar amount and is not determined by the FPL. De-Linking Medicaid and Supplemental Security Income Financial Assistance In 1972, federal law established Historically, all Medicaid enrollees the SSI program, which provides were either on SSI or welfare. federally-funded cash assistance to Federal laws passed in the late 1980s low-income people age 65 and older mandated Medicaid coverage for and those with disabilities. The Social groups of people ineligible for TANF Security Administration determines or SSI. This resulted in a major the eligibility criteria and cash expansion of the eligible population. benefit amounts for SSI. States may Members of working families and supplement SSI payments with state others with low incomes were now funds, and many states choose to do also eligible to receive Medicaid. so. Texas does not, but does allow for a slightly higher personal needs The following program expansions allowance (PNA) for SSI clients in resulted from federal mandates: long-term care facilities. The PNA is • Coverage of prenatal and delivery the amount of the SSI check clients services for certain pregnant may keep for personal use while women and their infants; living in a long-term care facility. • Expansion of services to low- To be eligible for SSI, an individual income families who do not receive must be at least 65 years old or TANF cash assistance; have a disability, and have limited assets and income. A child may be • Expansion of Medicaid to fill gaps in Medicare services for low-income

Texas Health and Human Services Commission • February 2017 27 Part I. Medicaid and CHIP: An Overview

2 people age 65 and older and those marketplace. States that initially 2 with disabilities; and opted for a federally-run marketplace may request to move to a state- • Coverage of the full array of based marketplace over time. Texas federally-allowable Medicaid currently utilizes the Federally- services as medically necessary Facilitated Marketplace. and appropriate for all children on Medicaid. As of January 1, 2014, qualified individuals and employees of Affordable Care Act participating small employers can The Patient Protection and Affordable purchase health insurance coverage Care Act was signed into law on from qualified health plans on the March 23, 2010. The Health Care Marketplace. Individuals above and Education Reconciliation Act 100 percent up to and including 400 of 2010 was enacted on March 30, percent of the FPL may be eligible for 2010. Together they are called the premium subsidies and cost-sharing ACA and make significant changes reductions for coverage purchased to state health care programs and through the Marketplace. to the health insurance market. Among a number of other changes, History of CHIP and the ACA mandates all individuals to have health insurance coverage. CHIP Perinatal It also gives states the option to The Balanced Budget Act of 1997 expand Medicaid eligibility up to and created the State Children’s Health including 133 percent of the FPL for Insurance Program (SCHIP) under individuals under age 65. Title XXI of the Social Security Act and appropriated nearly $40 billion The ACA also required the for the program for federal fiscal establishment of health insurance years 1998-2007. Like Medicaid, marketplaces by January 1, 2014, SCHIP is administered by CMS and to assist individuals and small is jointly funded by the federal employers in accessing health government and the states. Also insurance. The marketplace must be like Medicaid, each state receives a operated by a governmental entity or different federal match for SCHIP. For non-profit organization. federal fiscal year 2016, the federal match for Texas’ SCHIP program States had the option to establish was 69.99 percent, while the state a state-based marketplace, partner funded the remaining 30.01 percent. with the federal government to Through SCHIP, states can provide establish a marketplace, or have the health coverage to low-income, federal government run the state’s uninsured children in families with

28 Texas Medicaid and CHIP in Perspective • 11th Edition Chapter 2: Medicaid and CHIP in Context

2 incomes too high to qualify for of SCHIP, which created Texas’ 2 Medicaid. Children’s Health Insurance Program (CHIP). S.B. 445 specified that SCHIP offers states three options coverage under CHIP be available to when designing a program. States children in families with incomes up can: to 200 percent of the FPL. Coverage • Use SCHIP funds to expand under Phase II of the program Medicaid eligibility to children who began on May 1, 2000. The Health were previously ineligible for the and Human Services Commission program; (HHSC) was given overall authority for the program. By February 2002, • Design a separate state children’s 516,000 children were enrolled. As health insurance program; or of June 2016, 374,280 children were • Combine both the Medicaid and enrolled in CHIP. separate program options. The Children’s Health Insurance States that choose to expand their Program Reauthorization Act of Medicaid programs are required 2009 (CHIPRA) reauthorized CHIP to provide all mandatory benefits by appropriating nearly $69 billion and all optional services covered in federal CHIP funding for states under their Medicaid state plan, and for federal fiscal years 2009-2013.13 they must follow the Medicaid cost- CHIPRA simplified the original name sharing rules. States that choose of the program from “SCHIP” to to implement a separate program “CHIP,” and made numerous policy have more flexibility. Within federal changes to state CHIP programs, guidelines, they may determine their including: own SCHIP benefit packages. • States must verify a CHIP Texas originally opted to expand applicant’s citizenship. Medicaid eligibility using SCHIP funds. In July 1998, Texas • States may cover pregnant women implemented Phase I of SCHIP, above 185 percent of the FPL up providing Medicaid to children ages to the income eligibility level for 15 to 18 whose family income was children in CHIP. under 100 percent of the FPL. Phase • States may provide Medicaid I of SCHIP operated from July 1998 and CHIP coverage to qualified through September 2002. The program was phased out as Medicaid 13 Kaiser Family Foundation, The Kaiser expanded to cover those children. Commission on Medicaid and the Uninsured, “CHIP Financing Structure,” S.B. 445, 76th Legislature, Regular June 2009, http://www.kff.org/medicaid/ Session, 1999, enacted Phase II upload/7910.pdf (November 2014).

Texas Health and Human Services Commission • February 2017 29 Part I. Medicaid and CHIP: An Overview

2 immigrant children and/or pregnant HHSC, Rider 70), authorized HHSC 2 women without the previously to expend funds to provide unborn required five-year delay. children with health benefit coverage under CHIP. The result was CHIP In 2010, the passage of the ACA Perinatal, which began in January made the following changes to CHIP: 2007. CHIP Perinatal services are • Extends federal funding for for the unborn children of pregnant CHIP through federal fiscal year women who are uninsured and 2015. Prior to the ACA, CHIP was do not qualify for Medicaid due to authorized through federal fiscal income or immigration status. year 2013. • Prohibits states from restricting CHIP eligibility standards, methodologies, or procedures through September 30, 2019. Medicaid payments are contingent upon meeting this CHIP maintenance of effort requirement. • As of January 1, 2014, shifts from CHIP to Medicaid children ages 6 to 18 with incomes between 100 and 133 percent of the FPL. • Applies new federal rules for determining financial eligibility for CHIP (known as modified adjusted gross income rules). The ACA eliminates assets tests and most income disregards for CHIP. • Increases the federal CHIP match rate for federal fiscal years 2016- 2019. The Medicare Access and CHIP Reauthorization Act of 2015 extended federal funding for CHIP through federal fiscal year 2017.

The 2006-07 General Appropriations Act, S.B. 1, 79th Legislature, Regular Session, 2005 (Article II,

30 Texas Medicaid and CHIP in Perspective • 11th Edition