AUGUSTA, Maine — A state analysis of the impact of the new federal health reform law indicates it will cost Maine in the near term, but will save the state tens of millions of dollars a year after it is fully implemented in 2014.
“This is a far-reaching projection and it assumes what we know today,” Department of Health and Human Services Commissioner Brenda Harvey said. “There are also some policy decisions that will need to be made that will impact these estimates.”
If the state adopts all of the changes assumed in the analysis, which was conducted by DHHS, the net savings to the state in 2014 is an estimated $31.8 million.
The new health law makes major changes in the Medicaid system that provides health insurance coverage to the poor — including the working poor. The changes are funded through several changes in tax law and a requirement that drug companies rebate a larger percentage of the cost of drugs sold to the Medicaid program.
Trish Riley, director of the Governor’s Office on Health Policy, said Maine has done a good job in obtaining drug rebates through the program, but the feds are not sharing any part of the increase in rebate revenue. It will cost Maine an estimated $3.5 million a year.
“It takes effect in this year so we will be submitting a change in the supplemental budget to reflect this and we will make changes in the budget proposal going forward,” Harvey said.
The drug rebate is the one area that costs the state over the implementation period of the new health law and continues to cost the state as the new law takes effect.
In total, there are three program areas that will increase state costs by about $6.4 million a year after 2014, according to the DHHS analysis. Those areas are the drug rebates, the cost of covering new Mainers served by Medicaid, and a provision in the law that extends health insurance coverage for people in the state’s foster care system to age 26.
But, depending on decisions made by the next governor and Legislature on how to offer health care to children, childless adults and parents with incomes over 133 percent of the federal poverty level, the state could save tens of million of dollars a year. The current 133 percent of poverty income cap for a family of four is about $29,000 a year.
For example, Riley said, continuing the Children’s Health Insurance Program will save the state nearly $13 million in 2014 because the matching rate for the program will be far better under the new federal law.
Under the new law, the federal government will pay 98 percent of the cost. Were it not for the temporary increase in matching rates under the recovery act, Maine would get about two federal dollars for every dollar it spends on Medicaid.
Expanding Medicaid to cover all childless adults under the new federal health law increases the state’s match rate for those Mainers and would save the state over the current program that caps enrollment. The estimated savings in 2014 are $14.6 million.
Another major area of savings would be if the state shifts its coverage of parents with incomes over 133 percent of the federal poverty level from Medicaid to the new health insurance exchange set up under federal law. In 2014, that change is projected to save the state $10.6 million by shifting those costs.
Riley stressed that the state analysis uses conservative assumptions, and that the state could realize significantly larger savings based on other estimates.